証券取引委員会に提出されたもの 2024 年 9 月 26 日
登録番号 333—
アメリカ合衆国
アメリカ証券取引委員会
ワシントンD.C.，20549
形式
登録声明
はい
1933 年の証券法
（ 登録者の正確な名称 チャーター ）
| 状態： | 2834 | 該当なし | ||
| (明またはその他の司法管轄権 設立 · 組織 ） | (主な標準工業 分類コード番号 ） | (国際税務署雇用主) 識別番号 ） |
電話：
（ 住所 （ 郵便番号、電話番号を含む ） 登録者の主要な執行役員事務所の地域コードを含む番号 ）
電話：
(Name住所 （ 郵便番号を含む ） 、電話番号 エリアコードを含むサービス代理店の番号 ）
すべての通信のコピーを送信してください ：
| シャチャール · ハダー、アドヴァー。 マシュー · ルドルフ （ 英語版 ） メイタール|法務事務所 16 Abba Hillel Silver Rd 。 Ramat Gan 52506 ， イスラエル ザ 合併 |
ザ
合併契約 契約事項 合併関連事項 MATTERS SCISPARC 株主の議決を付与すること SCISPARC ビジネス オートマックス ビジネス SCISPARC 経営陣による財務状況及び業績の検討 · 分析 |
オートマックス
経営陣による財務状況及び業績の検討 · 分析 |
PRINCIPAL
合併会社の株主 |
SciSparc デザイン
アミタイト · ワイスSciSparc 取締役会会長
アムノン · ベン · シェイディレクター
モシェ · レバチ
ディレクターシディ · リアト
ディレクターSciSparc の執行役員とは 合併直後の ？
直ちに SciSparc の経営陣は、以下のように構成される予定です。
名前.名前
現在の位置年齢
オズ · アドラー
最高経営責任者兼最高財務責任者
現在の位置
年齢
オズ · アドラー
最高経営責任者兼最高財務責任者
最高経営責任者兼最高財務責任者
アディ · ズロフ = シャニ博士
首席技術官
首席技術官
合併後の SciSparc の取締役 (seeページ 193 ）
At と immediately after SciSparc の取締役会およびその委員会は、合併の有効な時点で、個人で構成されるものと予想されます。 下の表に示されています取締役は、それぞれの後継者が適正に選出または任命され、資格を得るまで任職する。 早期の死、辞任または解任です
Designee
年齢
ポスト
AutoMax Designees
ヤラ · アルフィ
オートマックス最高財務責任者トマー · レヴィ
オートマックス事業開発 · 本社担当 VP 、ディレクターSciSparc デザインアミタイト · ワイス
●
| 製品または製品候補の開発および商業化に失敗すること | |
| ● | |
| 戦略的コラボレーションの失敗または SciSparc が行った買収の統合に失敗 |
●
SciSparc または戦略的コラボレーションパートナーが知的財産権を訴追、維持または執行しないこと。
●
将来の製品に適用される法令の変更
●
第三者メーカーを通じて製造能力を拡大できないこと、製品に対する適切な製品供給を得ることができないこと、または許容可能な価格で供給できないこと。●競合他社による新製品や新技術の導入
●
SciSparc が公表する財務見通しを満たさないことまたは上回らないこと。
●
SciSparc の計画された再編計画における失敗または遅延；
●
投資コミュニティの財政的期待を満たさないことまたは上回らないこと
●
競合他社による重要な買収、戦略的パートナーシップ、ジョイントベンチャーまたは資本コミットメントの発表
自営業を営む
●
納税者の 市場に対する税金会計規則の対象となります
●
免税 エンティティ；●政府が 機関やその手段です
●
保険会社 企業；●年金 資金；
●
相互 資金；
●
| 規制 投資会社 | |
| ● | |
| リアル 不動産投資信託 | |
| ● | |
| 人数 従業員株式インセンティブに関連して、従業員株式オプションの行使によりオートマックス普通株式を取得した 計画または補償として | |
| , 2024 |
●
説明と保証
ザ 合併契約には、 SciSparc 、 Merger Sub 、および AutoMax のこの種の取引に関する慣習的な表明および保証が含まれています。 とりわけ、●企業組織と権力その他類似の企業事項
●
子会社、●合併協定および関連協定を締結する権限
●
合併の完了に必要な票数と特別会に提出される提案の承認 オートマックスの株主承認の対象となる総会。
●
合併契約書に明記されている場合を除き、 合併が第三者の同意に違反しないこと、または必要としないこと。
●
| キャピタル化 | ||
| ● | ii | |
| 財務諸表に関して | 1 | |
| SciSparc | 10 | |
| ドキュメント、 SEC に提出された書類およびその書類に含まれる情報の正確性 | 11 | |
| ● | 86 | |
| 重大な変化や事象がないこと | 88 | |
| ● | 91 | |
| 負債と未開示負債の欠如 | 103 | |
| ● | 125 | |
| 資産に対する所有権 | 126 | |
| ● | 131 | |
| 不動産と賃借人 | 168 | |
| ● | 173 | |
| 知的財産権 | 183 | |
| ● | 189 | |
| 当事者またはその子会社が当事者である重要な契約および違反、デフォルトまたは そのような契約違反 | 196 | |
| ● | 202 | |
| 規制コンプライアンス、許可、制限 | 205 | |
| ● | 208 | |
| 法的手続と命令 | 216 | |
| ● | 219 | |
| 税務問題 | 221 | |
| ● | 223 | |
| 労働 · 雇用 · 従業員給付制度 | 224 | |
| ● | 224 | |
| 環境問題 | 224 | |
| カバレッジ | 225 | |
| オーストラリア | F-1 | |
| 授与する | F-56 | |
| 2016 年 04 月 19 日 | A-1 | |
| カンナビノイドと N— アシレタノラミンの組み合わせ | B-1 | |
| 2036年4月 | C-1 | |
| THX — 110 | D-1 | |
| THX—210 | E-1 |
i
オーストラリア
授与する
2021 年 07 月 19 日
カンナビノイドと N— アシレタノラミンの組み合わせ2036年4月THX — 110
THX—210
オーストラリア未定である2023 年 10 月 17 日
カンナビノイドと N— アシレタノラミンの組み合わせ
2036年4月
ii
THX — 110
THX—210
カナダ
授与する2016 年 4 月 19 日”
カンナビノイドと N— アシレタノラミンの組み合わせ
2036 年 5 月
THX — 110
THX—210
アメリカ合衆国
授与する
2016 年 04 月 19 日
カンナビノイドと N— アシレタノラミンの組み合わせ
2036 年 5 月
THX — 110
THX—210
アメリカ合衆国捨て置く2019 年 10 月 1 日
カンナビノイドと N— アシレタノラミンの組み合わせ
2036年4月
iii
THX — 110
THX—210
アメリカ合衆国授与する2019 年 10 月 10 日カンナビノイドと N— アシレタノラミンの組み合わせ2036年4月
THX — 110
THX—210
アメリカ合衆国
授与する
2019 年 08 月 30 日
カンナビノイドと N— アシレタノラミンの組み合わせ
2036年4月
| THX — 110 | THX—210 | アメリカ合衆国 | ||
| すでに出版された | ||||
| 2021 年 8 月 27 日 | 36 | カンナビノイドと N— アシレタノラミンの組み合わせ | ||
| 2036年4月 | 29 | THX — 110 | ||
| THX—210 | ||||
| 国 | 62 | 状態.状態 | ||
| 提出日 | 61 | タイトル | ||
| 推定数 | 48 | 有効期限 | ||
| 製品 | 49 | カバレッジ |
アメリカ合衆国
すでに出版された
| 2021 年 8 月 27 日 | カンナビノイドと N— アシレタノラミンの組み合わせ | 2036年4月 | THX — 110 | |||
| THX—210 | アメリカ合衆国 | 中国 （人民共和国） | 37 | |||
| 捨て置く | 2016 年 04 月 19 日 | カンナビノイドと N— アシレタノラミンの組み合わせ | 55 |
iv
2036年4月
THX — 110
THX—210中国”
すでに出版された
2023 年 06 月 08 日
| カンナビノイドと N— アシレタノラミンの組み合わせ | 2036年4月 |
| THX — 110 | THX—210 |
| 欧州特許条約 | 授与する |
| 2016 年 4 月 19 日 | カンナビノイドと N— アシレタノラミンの組み合わせ |
2036年4月
THX — 110
THX—210
欧州特許条約すでに出版された2016 年 04 月 19 日
カンナビノイドと N— アシレタノラミンの組み合わせ
2036年4月
THX—110
THX — 210
v
日本語
授与する
| 2016 年 4 月 19 日 | カンナビノイドと N— アシレタノラミンの組み合わせ2036年4月 |
| THX — 110 | THX—210日本語 |
| 捨て置く | 2021 年 03 月 30 日カンナビノイドと N— アシレタノラミンの組み合わせ |
2036年4月
THX — 110
THX—210
香港.香港
すでに出版された
2023 年 06 月 16 日
カンナビノイドと N— アシレタノラミンの組み合わせ
2036年4月
THX — 110
vi
THX — 210
国
状態.状態
提出日
タイトル
| 推定数 | 有効期限 | 製品 | ||
| 1. | カバレッジ | オーストラリア | ||
| 2. | 授与する | 2016 年 05 月 17 日
オピオイドと N— アシレタノラミンの組み合わせ | ||
| 3. | 2036 年 5 月 | オーストラリア
授与する | ||
| 4. | 2021 年 6 月 30 日 | オピオイドと N— アシレタノラミンの組み合わせ |
| (1) | 2036 年 5 月 |
vii
| (2) | オーストラリア |
未定である
2023 年 10 月 19 日
オピオイドと N— アシレタノラミンの組み合わせ
2036 年 5 月
イスラエル
捨て置く
2016 年 05 月 17 日
オピオイドと N— アシレタノラミンの組み合わせ
2036 年 5 月
イスラエル
未定である
2023 年 08 月 24 日
オピオイドと N— アシレタノラミンの組み合わせ
viii
2036 年 5 月
中国 （人民共和国）
捨て置く
2016 年 5 月 17 日
オピオイドと N— アシレタノラミンの組み合わせ
2036 年 5 月
中国
すでに出版された
2023 年 4 月 03 日
オピオイドと N— アシレタノラミンの組み合わせ
2036 年 5 月
日本語
授与する
2016 年 05 月 17 日
オピオイドと N— アシレタノラミンの組み合わせ2036 年 5 月日本語
ix
捨て置く
2021 年 4 月 30 日
オピオイドと N— アシレタノラミンの組み合わせ
2036 年 5 月
カナダ
許す
2016 年 05 月 17 日
オピオイドと N— アシレタノラミンの組み合わせ
2036 年 5 月
アメリカ合衆国
すでに出版された
2020 年 7 月 29 日
閉塞性睡眠無呼吸症の治療法と組成物
2039 年 01 月
1
THX — 110
ヨーロッパ特許条約
すでに出版された2020 年 08 月 28 日.”
閉塞性睡眠無呼吸症の治療法と組成物
2039 年 1 月
THX — 110
オーストラリア
未定である
2019 年 01 月 25 日
閉塞性睡眠無呼吸症の治療法と組成物
2039 年 01 月
2
THX — 110
オーストラリア
| 未定である | 2020 年 04 月 22 日4— アミノフェノールの誘導体の強化のための組成物および方法 | |
| 2040 年 4 月 | カナダ未定である | |
| 2020 年 04 月 22 日 | 4— アミノフェノールの誘導体の強化のための組成物および方法2040 年 4 月 | |
| 中国 | すでに出版された2020 年 04 月 22 日 | |
| 4— アミノフェノール誘導体の強化のための組成物および方法 | 2040 年 4 月日本語 | |
| すでに出版された | 2020 年 04 月 22 日4— アミノフェノールの誘導体の強化のための組成物および方法 | |
| 2040 年 4 月 | メキシコ |
未定である
2020 年 04 月 22 日
4— アミノフェノールの誘導体の強化のための組成物および方法
3
2040 年 4 月
国
状態.状態
提出日
タイトル
推定数
有効期限
製品
カバレッジ
| ロシア | すでに出版された |
| 2020 年 04 月 22 日 | 4— アミノフェノールの誘導体の強化のための組成物および方法 |
| 2040 年 4 月 | 香港.香港 |
| すでに出版された | 2022 年 03 月 20 日 |
4
| 4— アミノフェノールの誘導体の強化のための組成物および方法 | 2040 年 4 月 |
アメリカ合衆国
| すでに出版された | 2020 年 04 月 22 日 |
| 4— アミノフェノールの誘導体の強化のための組成物および方法 | 2040 年 4 月; |
| カナダ | 期限が切れる |
| 2013 年 03 月 12 日 | 分化クラスター 3 に対するヒト化抗体 （ CD 3 ）2033 年 3 月 ”. |
中国
未定である
2013 年 03 月 12 日
分化クラスター 3 （ CD 3 ） に対するヒト化抗体
2033 年 3 月
イギリス
未定である
2013 年 03 月 12 日
5
分化クラスター 3 （ CD 3 ） に対するヒト化抗体
2033 年 3 月
ドイツ
未定である
2013 年 03 月 12 日
分化クラスター 3 （ CD 3 ） に対するヒト化抗体2033 年 3 月フランス
未定である
2013 年 03 月 12 日
分化クラスター 3 （ CD 3 ） に対するヒト化抗体
2033 年 3 月
アメリカ合衆国授与する2013 年 03 月 12 日分化クラスター 3 （ CD 3 ） に対するヒト化抗体2033 年 3 月
アメリカ合衆国
捨て置く
2018 年 5 月 14 日分化クラスター 3 （ CD 3 ） に対するヒト化抗体203 3 年 3 月アメリカ合衆国授与する
6
2020 年 06 月 09 日
抗菌剤の組成と強化方法
203 7 年 7 月
アメリカ合衆国
捨て置く
2019 年 01 月 11 日
抗菌剤の組成と強化方法
203 7 年 7 月
| アメリカ合衆国 | すでに出版された | 2022 年 9 月 29 日 | 抗菌剤の組成と強化方法 | |||
| 2037 年 7 月 | 欧州特許条約 | 許す | 37 | |||
| 2019 年 01 月 11 日 | 抗菌剤の組成と強化方法 | 203 7 年 7 月 | 55 |
国
状態.状態
| 提出日 | タイトル | 推定数 | ||
| 有効期限日 | ||||
| 製品 | 36 | カバレッジ | ||
| 中国 | 29 | すでに出版された | ||
| 2019 年 01 月 11 日 | ||||
| 抗菌剤の組成と強化方法 | 62 | 2037 年 7 月 | ||
| カナダ | 61 | 捨て置く | ||
| 2017 年 07 月 13 日 | 48 | 抗菌剤の組成と強化方法 | ||
| 2037 年 7 月 | 49 | アメリカ合衆国 |
7
授与する
* Cb 受容体アゴニストを含む組成物、その用途およびその調製方法
2029 年 10 月
THX — 160
イギリス
授与する* cb 受容体アゴニストを含む組成物及びその用途2029 年 10 月
THX — 160
ドイツ
| 授与する | * cb 受容体アゴニストを含む組成物及びその用途 |
| 2029 年 10 月 | 2041 年 8 月 |
| 中国 | すでに出版された |
| 8 月 2 日 —21 | 微小血管の整合性を維持する方法 |
| 2041 年 8 月 | 欧州特許条約 |
| すでに出版された | 8 月 2 日 —21 |
微小血管の整合性を維持する方法2041 年 8 月イスラエル
8
未定である
8 月 2 日 —21
微小血管の整合性を維持する方法
2041 年 8 月
インド
未定である
8 月 2 日 —21
微小血管の整合性を維持する方法
2041 年 8 月日本語すでに出版された
9
8 月 2 日 —21
微小血管の整合性を維持する方法
2041 年 8 月
アメリカ合衆国
すでに出版された
8 月 2 日 —21微小血管の整合性を維持する方法2041 年 8 月
香港.香港
すでに出版された
2023 年 6 月 7 日
微小血管の整合性を維持する方法
2041 年 8 月
SciSparc CannAmideTM は米国で登録中である商標も取得されています。
10
検証状態は別々にリストされません。
販売 · 譲渡 知的財産資産について
前者との取引 子会社
研究 · 前臨床試験臨床試験:
化学 · 製剤
| 総額 | SciSparc 臨床試験の継続や新製品開発の計画により、研究開発費が大幅に増加すると予想しています。 |
| 一般と行政費用 | 将軍 管理費は主に給与、会計、法務、簿記、投資家関係のための専門サービス料で構成されています。 Amazon の取引手数料、 Amazon 上の広告およびプロモーション、規制およびその他の一般および管理費用。 |
| ザ 一般経費 · 管理経費の内訳は以下の表です。 | 十二月三十一日 |
| 千単位のドル | 給与 · 関連費用 |
| 株式支払 | Amazon 手数料 |
ストレージ
| プロフェッショナルおよび取締役の報酬 | 業務発展費 |
| 監督管理費 | オフィスメンテナンス、家賃、その他の費用 |
投資家関係 · 事業経費
| 総額 | その他の収入は 2023 年 12 月 31 日を末日とする年度は 155.7 万新シェル （ 約 43 万ドル ） でした。 |
増加する
| これは、 2022 年 12 月 31 日に終了した年度の 226，000 NIS （ 約 62，000 ドル ） と比較して 689% でした。増額は 補償の収入は | イスラエル · ハマス戦争 |
10 月の資金 2023.
| 営業利益 （ 損失 ） | 運用損失は 2023 年 12 月 31 日に終了した年度は 730.8 万 NIS （ 約 201.9 万ドル ） でした。 |
| 減少 | これは、 2022 年 12 月 31 日に終了した年度の利益 648.8 万 NIS （ 約 179 万 2 千米ドル ） と比較して、 213% 増です。減少する 主に前述の収益の減少によるものです |
11
財務費用、純額
| 財務経費、純構成 主に、外国通貨の評価再評価と、 AutoMax の銀行預金の利子収入に関連する収入または費用です。 | 12 月 31 日末の年度の比較 2023 年、 2022 年 |
| 以下の表は要約です。 2023 年 12 月 31 日および 2022 年 12 月 31 日を末日とする年度のオートマックスの業績は以下の通りです。 | 経営成果 |
十二月三十一日
| NIS 数千枚 | 売上高 |
販売原価
| 総利益 | 営業 · マーケティング |
株式会社
| 株式会社オートマックスモーターズ | 取引記録 |
| 経理 | 調整する |
形式的には
| 資産 | 流動資産： |
| 現金 | 預金制限 |
| 短期預金 | 売掛金 |
| その他売掛金 | 在庫品 |
| 流動資産総額 | 非流動資産： |
| 長期銀行預金 | 無形資産、純額 |
| 繰延税金 | 株式による企業への投資 |
12
| 総負債 | 株主権益： |
| 株式資本とプレミアム | 株式決済取引からの準備金 |
| 株式承認証 | 外貨換算備蓄 |
非制御的権益のある取引
| 赤字を累計する | 非制御的権益 |
| 株主総資本 ： | 総負債と株主権益 |
未監査プロフォームコンデンサド複合明細書 OF
総合損失
2023年12月31日までの年度
(U.S.数千ドル ）
| SciSparc | 株式会社 |
| 株式会社オートマックスモーターズ | 取引記録 |
| 経理 | 修正 |
| 形式的には | 売上高 | |
13
| 販売原価 | 総利益 |
| 研究開発費 | 営業 · マーケティング無形資産の減損. |
| 一般と行政費用 | 営業損失 |
SciSparc の会社の損失の割合は、純資本で占められました。
その他の収入財務収入財務費用
所得税前損失
所得税全面損失総額SciSparc の株主
14
非制御的権益
SciSparc の株式保有者に起因する普通株式当たりの基本損失 ：
| 現金 | 預金制限 |
| 短期預金 | 売掛金 |
| その他売掛金 | 在庫品 |
| 非流動資産： | 無形資産、純額 |
| 株式による企業への投資 | 金融資産への投資 |
| 財産と設備、純額 | 付属の注釈は、 連結財務諸表です |
| 株式会社スキスパーク （ 旧セラピックスバイオサイエンツ ） 株式会社 ） | 合併財務状況表 |
| 十二月三十一日 | 注記 |
| 千単位のドル | 負債と権益 |
流動負債：
貿易買掛金
他の売掛金
| 株式承認証 | リース責任 |
| 非流動負債： | リース責任 |
| 当社の持分者に帰属する持分 ： | 株式資本とプレミアム |
15
株式ベースの支払取引からの準備金
株式承認証
外貨換算備蓄
非制御的権益のある取引
赤字を累計する
非制御的権益
総株式
負債と資本総額
付属の注釈は、 連結財務諸表です
株式会社スキスパーク （ 旧 株式会社セラピックスバイオサイエンス
16
総合総合損失表
2013年12月31日までの年度
注記
千米ドル （ 1 株を除く ） データ）
売上高-販売原価
総利益
研究開発費
営業 · マーケティング
| 無形資産の減損 | 一般と行政費用 | |
| 営業損失 | 会社の損失に占める会社の割合は、純資本で計上されます。 | |
| 財務収入 | 財務費用 | |
| 所得税前損失 | 所得税 | |
| 全面損失総額 | なぜなら： | |
| 当社の持分所有者 | 非制御的権益 | |
| 当社の株式保有者に起因する普通株式 1 株当たりの基本損失 ： | 当社の株式保有者に帰属する普通株式 1 株当たり希釈損失 ： | |
| 1 株当たり損失は、「逆分割」を反映して連結損失計算書において遡及調整したものです （ 注釈 18a 参照 ） 。 | 業界の一般的な慣行と相関し、損益をより良く反映するために再分類。 |
17
付属の注釈は、 連結財務諸表です
株式会社スキスパーク （ 旧 株式会社セラピックスバイオサイエンス
| 自己資本の変動に関する連結報告書 | 属性 当社の株式保有者へ |
| シェア | 資本 |
| and | プレミアム |
| 備蓄する | シェアから — |
| ベース | 支払い |
| 取引取引 | 株式承認証 |
| 取引記録 | Non— と |
| 制御する | 利己 |
| 外国 | 通貨 |
| 翻訳 | 予備 |
積算
18
赤字
総額
| ノン | 制御する | |
| 利己 | 総額 | |
| エクイティ | USD 数千人 | |
| バランス 2021 年 1 月 1 日 | 損 |
運動 令状の
課題 株式資本の発行費用を差し引いた
有効期限 シェアオプションの
コスト 株式ベースの支払い
19
バランス 2021 年 12 月 31 日
損
運動 令状の
コスト 株式ベースの支払い
バランス 2022 年 12 月 31 日
損
販売 子会社の少数権益
テーマ 関連会社への投資に対する株式資本
20
テーマ 株式資本 （ 発行費用を差し引いた ） （3）
| コスト 株式ベースの支払い | バランス 2023 年 12 月 31 日に |
| 付属の注釈は、 連結財務諸表です | 株式会社スキスパーク （ 旧 株式会社セラピックスバイオサイエンス |
| 統合現金フロー表 | 2013年12月31日までの年度 |
| 千単位のドル | 経営活動のキャッシュフロー： |
| 損 | 営業活動における純現金に対する損失の調整 ： |
| 損益項目の調整： | 減価償却 · 償却 |
無形資産の減損損失
株式ベース支払のコスト
財務費用 （ 収入 ） 、純
グループにおける会社の損失の割合は、純資本で計上されます。
金融資産への投資の再評価による損失
運転資本調整 ：
21
その他売掛金の減少 （ 増加 ）
貿易未払いが増加する
その他買掛金の増減
貿易債権の減少 （ 増加 ）
在庫が増える
22
経営活動のための現金純額
付属の注釈は、 連結財務諸表です
株式会社スキスパーク （ 旧セラピックスバイオサイエンツ ） 株式会社 ）
| 統合現金フロー表 | 2013年12月31日までの年度 | |
| 千単位のドル | 投資活動によるキャッシュフロー： | |
| 制限預金への投資 | 短期預金への投資 | |
| 財産と設備を購入する | 株式による企業への投資 | |
| 金融資産への投資の公正価値の変化 | 子会社の少数株分売却 | |
| 利益を通じて公正価値で金融資産を購入すること 損失 | 無形資産を購入する | |
| 投資による純現金 （ 使用 ） 活動 | 資金調達活動のキャッシュフロー： | |
| 株式資本の発行収益 （ 発行費用を除く ） | 令状の行使 （ a ） | |
| 前期に係る発行費用の支払 | リース負債の利子 | |
| リース負債の返済 | 短期信用の返済 | |
| 融資活動が提供する現金純額 | 現金を増やす(減らす) | |
| 期初の現金 | 期末現金 | |
| 付属の注釈は、 連結財務諸表です | 株式会社スキスパーク （ 旧セラピックスバイオサイエンツ ） 株式会社 ） |
23
| 連属 | 上の実体 当社は、 IAS 28 に定義されているように、重要な影響力を有している。 | |
| 関連会社 · 合弁会社への投資 | 」と 子会社ではない。 | |
| 関連先 | IAS 24 に定義されているように、 | |
| 関連 パーティーの開示 | 国際会計基準 |
国際会計学 国際会計基準委員会 （ IASB ） が発行した基準。
国際財務報告基準.
インターナショナルファイナンシャル IASb が発行した報告基準。
株式会社スキスパーク （ 旧セラピックスバイオサイエンツ ） 株式会社 ）
連結財務諸表への注記
24
千米ドル （ シェアデータを除く ）
注記 2 ： —
重大会計政策
以下の会計方針 特に明記されていない限り、財務諸表に一貫して適用されています。
財務諸表の列報基礎：
これらの財務諸表は IASb が発行した IFRS に従って作成されています。
会社の財務諸表 別段の記載がない限り、費用ベースで作成されています。
25
十二月三十一日
即時引き出しのための現金 — 米ドル
|
|
即時出金用現金 —NIS | 株式会社スキスパーク （ 旧セラピックスバイオサイエンツ ） 株式会社 ） |
| 連結財務諸表への注記 | 千米ドル （ シェアデータを除く ） | |
| 注5：- | 棚卸しをする | |
| 十二月三十一日 | トランジット貨物 | |
| 完成品 | 注6：- |
その他受領可能口座
十二月三十一日
政府当局
その他売掛金
26
前払い費用
|
|
注 7 ： — | 関連会社への投資 |
| Orimmune Bio Ltd. の売却 ： | %.上記にかかわらず、 会社と MitoCare X は追加 $に合意しました | |
| 2024 年 3 月 25 日に延期。この報告書の執筆時点で、 $ | 分割払いが済んだ | |
| 12 月 31 日に終了した年度は 2023 年、当社は MitoCareX への投資による株式損失を $ | (for 2022 年 12 月 31 日期末の年度 - $ | |
| 下表はフェアをまとめたものです。 MitoCareX への投資価値 ： | 2022年1月1日の残高 | |
| 出資日 2022 年 3 月 31 日 | MitoCareX への投資による株式損失 | |
| 2022年12月31日の残高 | 最初のマイルストーン達成後の投資 |
MitoCareX への投資による株式損失
2023年12月31日の残高
株式会社スキスパーク （ 旧セラピックスバイオサイエンツ ） 株式会社 ）
連結財務諸表への注記
27
千米ドル （ シェアデータを除く ）
注8：-
金融への投資 資産
2022 年 11 月 17 日、同社は $
Clearmind Medicine Inc. の株式公開で（ 「クリアマインド」 ） と受け取った。
平方メートルで、会社は 約占め
28
イスラエルのテルアビブの地区にある当社のオフィスのための平方メートル。会社と第三者 党はさらに 3 年間の任期を延長するオプションがあります年間リース料は約 $に設定されました。
NIS にリンクしています。 2023 年 7 月 7 日、リースは 2025 年 6 月 30 日まで延長された。
株式会社スキスパーク （ 旧セラピックスバイオサイエンツ ） 株式会社 ）
連結財務諸表への注記
千米ドル （ シェアデータを除く ）
注記 10 ： —
29
プロパティと設備、 NET
当社が所有 · 使用する資産
右 — オフ —
使用資産
コンピューター
実験室
機器
オフィス
30
家具
そして
設備
賃借権
オフィス
31
総額
コスト：
2023年1月1日の残高
新規リース
2023年12月31日の残高
減価償却累計：
2023年1月1日の残高
| 減価償却 | 2023年12月31日の残高 | |
| 2023 年 12 月 31 日時点の減価償却原価 | 2022年1月1日の残高 |
32
| 購入 | 2022年12月31日の残高 | |
| 減価償却累計： | 2022年1月1日の残高 | |
| 減価償却 | 2022年12月31日の残高 | |
| 2022 年 12 月 31 日時点の減価償却原価 | 年間の減価償却費 2023 年 12 月 31 日、 2022 年、 2021 年 12 月 31 日、 | |
| と $ | 注12：- | |
| トレードペイヤブル | 十二月三十一日 | |
| 発生経費 | オープン債務 |
株式会社スキスパーク （ 旧セラピックスバイオサイエンツ ） 株式会社 ）
連結財務諸表への注記
千米ドル （ シェアデータを除く ）
注記 13 ： —
その他支払可能口座
33
十二月三十一日
従業員と給与課税項目
休暇発生
|
|
その他の支払い | 注記 14 ： — |
| 金融商品 | 金融の分類 資産と財務負債 | |
| 金融資産と金融 連結財務諸表の負債は、 IFRS 9 に基づき金融商品のグループ別に分類されています。 “ | 金融商品 | |
| 」 （ 「 IFRS 9 」 ） | 十二月三十一日 |
| 金融資産： | 現金 · 制限預金 | |
| 短期預金 | 政府当局 |
| その他売掛金 | 金融資産への投資 | |
| 償却原価による金融資産総額 | 財務負債： | |
| 他者からの信用 | 責任を担保する | |
| リース責任 | 財務 · リース負債総額 | |
| 株式会社スキスパーク （ 旧セラピックスバイオサイエンツ ） 株式会社 ） | 連結財務諸表への注記 | |
| 千米ドル （ シェアデータを除く ） | 注記 14 ： — |
34
金融商品 （ CONT. ）
金融の分類 資産と財務負債 ： （ 続き ）
以下の表は比較です。 当社の金融商品の帳簿金額と、 2023 年 12 月 31 日および 2022 年 12 月 31 日時点の公正価値の間、 公正価値でない財務諸表に記載されているもの （ 償却原価が公正価値の合理的な近似であるものを除く ） 値 ）
帳簿金額
35
フェア 価値
十二月三十一日
2023年12月31日
レベル一
36
レベル 2
レベル 3
現金 · 制限預金
短期預金
政府当局
その他売掛金
金融資産への投資
償却原価による金融資産総額
37
他者からの信用
責任を担保する
リース責任
財務 · リース負債総額
帳簿金額
公正価値
38
十二月三十一日
2023年12月31日
レベル一
レベル 2
レベル 3
現金 · 制限預金
39
短期預金
政府当局
その他売掛金
金融資産への投資
償却原価による金融資産総額
他人からの信用
責任を担保する
40
リース責任
財務 · リース負債総額
株式会社スキスパーク （ 旧セラピックスバイオサイエンツ ） 株式会社 ）
連結財務諸表への注記
千米ドル （ シェアデータを除く ）
注記 14 ： —
金融商品 （ CONT 。
デケル
発行済株式資本及び発行済株式資本 ：
41
数字 オフ
普通の
株
2023年1月1日の残高
株式資本の発行 — 投資に関して 関連会社 （ 注 18 f ）
コンサルタントに対する株式発行 （ 注 19 （ a ） （ 5 ） ）
42
株式資本の発行 — 棚目論見書について
株式資本の発行 — 2023 年 8 月の資金調達ラウンド （ 注 18i ）
株式資本の発行 — 四捨五入誤差に関して
株式資本の発行 — 2023 年 10 月の資金調達ラウンドについて (Note 18 j ）
2023年12月31日の残高
株式会社スキスパーク （ 旧セラピックスバイオサイエンツ ） 株式会社 ）
連結財務諸表への注記
43
千米ドル （ シェアデータを除く ）
注釈 18 ： —
| エクイティ （ CONT. ） | 株式に付随する権利 ： | |
| 株主の議決権 総会、配当を受ける権利、会社の清算時の権利、会社の取締役を指名する権利。 | キャピタルマネジメントにおける 会社 ： | |
| 株式オプションの公正価値 コンサルタントに付与された額は、 Black—Scholes OPm を用いて以下のパラメータで推定されました。 | 2 月 10 日、 | |
| 1 月 3 日 | 基礎普通株価 | |
| 配当率(%) | 期待変動率(%) | |
| 無リスク金利(%) | 株価オプションの期待寿命 （ 年 ） | |
| 株価オプションの公正価値 2022 年 1 月 3 日に授与され、 | 1 株予約権あたり、および 2022 年 2 月 10 日に付与された株式予約権の公正価値、 設定は $ | |
| 株式オプションごとに。株式オプションの付与期間は、 2021 年 4 月 21 日から遡及的に開始されます。 2024 年 4 月 21 日終了。 | 2023 年 12 月 31 日期に当社はコンサルタントに発行しました。 | |
| 提供されたサービスに関する普通株式普通株式は割引率で発行されました。 | 各助成日の株式価格に% を割引します。コンサルタントに付与された普通株式の公正価値の総額は $ | |
株式会社スキスパーク （ 旧セラピックスバイオサイエンツ ） 株式会社 ）
連結財務諸表への注記
千米ドル （ シェアデータを除く ）
|
|
注 19 ： — | シェアベースの支払い トランザクション （ CONT. ） |
| 年間での動き ： | 以下の表は、 2023 年 12 月 31 日および 2022 年 12 月 31 日を末日とする年度における株式オプションの数、株式オプションの加重平均行使価格および取締役 （ および元取締役 ） 、役員、従業員およびコンサルタントの株式オプションの変更を示しています。 | |
| 量 | シェア | |
| オプション | 重みをつける |
44
| 平均 | 運動 | |
| 価格 | ドル |
株式オプションの初めに未払いの 年
年中にキャンセルされた株式オプション
年末の株式オプションの残高
年末行使可能な株式オプション
年初時点の株式オプションの発行状況
年間付与された株式オプション
株式オプションの終了時の未払い 年
45
期末に行使可能な株式オプション 年
株式オプションの付与なし 2023 年の間
株式オプションの加重平均残存契約期間は
年間と
46
連結財務諸表への注記
千米ドル （ シェアデータを除く ）
注記 21 ： —
追加情報 利益または損失の項目へ
2013年12月31日までの年度
研究研究 開発費 ：
賃金 関連経費
シェアベース 支払い
規制、 専門費その他の経費
研究研究 臨床前試験は
47
臨床 研究
化学 製剤や
将軍 管理費 · 経費
賃金 関連経費
シェアベース 支払い
アマゾン 手数料
ストレージ
プロフェッショナル 役員 · 役員報酬
48
事業 開発費用
規制 経費
オフィス メンテナンス、家賃、その他の費用
投資家 関係と事業費
その他 経費：
会社概要 会社の損失のシェアを自己資本で占め、純
金融 収入：
ネットチェンジ 損益を通じた公正価値で指定された金融負債の公正価値
49
交換 レート差異、ネット
金融 経費：
発行 令状に関する費用
交換 レート差異、ネット
損失数 金融資産への投資の再評価から
50
金融 リースに関する費用
金融 利子と手数料による費用
一般的な慣行と相関するように再分類 業界で損益を反映しています
株式会社スキスパーク （ 旧セラピックスバイオサイエンツ ） 株式会社 ）
連結財務諸表への注記
千米ドル （ シェアデータを除く ）
注22：-
51
1 株あたりの損失 / 広告
| 1 株当たり損失の計算に使用される株式数と損失の詳細 ： | 2013年12月31日までの年度 | |
| 基本損失および希釈損失の計算に使用される金額 | 重みをつける | |
| 数量 | 株式 | |
| 損 | 重みをつける | |
| 数量 | 株式 (*) | |
| 損 | 重みをつける | |
| 数量 | 株式 (*) |
損
入り
数千人
ドル
入り
数千人
52
ドル
グループの CODm は CEO です 会社のものです
2023年12月31日までの年度
薬効.薬効
開発
線上
営業
53
総額
売上高
外外
総額
セグメント損失 （ 利益 ）
会社の損失に占める会社の割合は、純資本で計上されます。
無形資産の減損損失
財務費 （ 収入 ） 、純
54
税金支出
ロス
2022年12月31日までの年度
薬効.薬効
開発
線上
販売
55
総額
売上高
外外
総額.
セグメント 損失
会社の損失の分担は株式で計上され、 網
財務費 （ 収入 ） 、純
税金支出
ロス
株式会社スキスパーク （ 旧セラピックスバイオサイエンツ ） 株式会社 ）
連結財務諸表への注記
| 千米ドル （ シェアデータを除く ） | 注釈 23 ： — | |
| オペレーティングセグメント （ CONT. ） | 2021 年 12 月 31 日期末 | |
| 薬効.薬効 | 開発 | |
| 線上 | 販売 | |
| 総額 | 売上高 | |
| 外外 | 総額 | |
| セグメント 損失 | 財務費用 （ 収入 ） 、純 | |
| 損 | 2023年12月31日まで | |
| 薬効.薬効 | 開発 |
56
| 線上 | 販売 | |
| 総額 | 資産を細分化する | |
| セグメント負債 | 2022年12月31日まで | |
| 薬効.薬効 | 開発 | |
| 線上 | 販売 | |
| 総額 | 資産を細分化する | |
| セグメント債務 | 株式会社スキスパーク （ 旧セラピックスバイオサイエンツ ） 株式会社 ） | |
| 連結財務諸表への注記 | 千米ドル （ シェアデータを除く ） | |
| 注釈 24 ： — | 取引と残高 関係者との取引 | |
| 関連者とのバランス ： | 十二月三十一日 | |
| 十二月三十一日 | 鍵.鍵 | |
| 経営 | 人事 | |
他にも
関連
パーティー
鍵.鍵
57
経営
人事
他にも
関連
パーティー
流動資産
非流動資産
経常負債
58
関連当事者との取引 （ 注釈 24 c の金額を除く ） ：
2013年12月31日までの年度
研究開発費
子会社の少数株分売却について
59
主要経営陣 （ 取締役を含む ） へのメリット ：
2013年12月31日までの年度
短期的利益
管理手数料 （ 注釈 25 a も参照 ）
株式ベース支払のコスト
2023 年 2 月 23 日、 Jeffs ’ Brands および Jeffs ’ Brands Holdings Inc. と契約を締結しました。（ 「 NewCo Inc. 」 ）Jeffs ’ Brands の完全子会社です。当社の最高経営責任者兼最高財務責任者である Oz Adler 氏は、 Jeffs 'Brands の取締役会会長を務めています （ 注釈 25a も参照 ） 。
当社は、 2022 年 3 月 7 日に、当社の最高技術責任者である Adi Zuloff—Shani 博士、当社の社長である Weiss 氏、および当社の最高経営責任者および最高財務責任者である Adler 氏が役員および取締役を務める Clearmind と協力協定 （ 以下、「協力協定」 ） を締結しました。
2023 年 12 月 31 日および 2022 年 12 月 31 日を末日とする年度において、当社は協力協定に関する費用を $
60
と $
それぞれ。
現金 · 現金同等物
61
売掛金
売掛金 · 借方残高
経常税債権
車両在庫
補償資産
非流動資産
帳簿価額法による企業への投資
|
|
使用権資産、純額 | 財産·工場·設備·純価値 |
| 無形資産、純額 | 損益による公正価値計上による金融資産 | |
| 長期前払い費用 | 銀行会社の長期預金 | |
| 繰延税金 | 総資産 | |
| 付属の注釈は 財務諸表の不可欠な部分です | オートマックス · モーターズ株式会社 |
62
| 合併財務状況表 | (in数千 ILS ） | |
| 12 月 31 日現在 | 注記 |
流動負債
銀行 · 金融機関からの短期信用
リース契約に関する負債の現在の満期
サプライヤー · サービスプロバイダー
63
買掛金 · 信用残高
支払可能な経常税
債券に対する負債
非流動負債
銀行企業からの長期信用
64
長期償還小切手
リースに関する長期債務
非支配株主からの融資
債券に対する負債
帳簿価額法による企業への投資
従業員福利厚生に関する負債、純
65
総株
株主に帰属する出資総額
資本金
株式プレミアム
オプション
| 資本備蓄 | 株式支払 |
| 損失を残す | 当社の株主に帰属する株式総額 |
| 非支配権益 | 総株式 |
| 負債と資本総額 | 再分類。 |
| / S / ダニエル · レヴィ | / S / アミタイ · ワイス |
| / S / Yaarah Alfi | 承認日 |
| ダニエル · レヴィー | アミタイト · ワイス |
| ヤアラ · アルフィ | 金融業界の |
| 最高経営責任者 | 会長 |
| 解雇に関する純負債の再計算 | その他総合利益 （ 損失 ） 合計 |
66
| 年間総合利益 （ 損失 ） | 年間総合利益 （ 損失 ） 配分 |
| 会社の株主 | 非持株株主 |
総額
付随する注釈は、 財務諸表
オートマックス · モーターズ株式会社
株主変更の連結報告書」 エクイティ
(in数千 ILS ）
株価資本
67
株価プレミアム
オプション
資本備蓄
株式ベース決済
損失を残す
68
株主に帰属する出資総額
マイノリティ株式
総額
無形資産への投資
不動産 · 設備の購入
短期預金の （ 投資 ） 引き出し
投資活動による （ 使用 ） 純現金
融資活動によるキャッシュフロー株式の発行銀行法人からの短期信用の受領 （ 返済 ）
69
リース契約に関する責任の返済
銀行法人からの長期借入金の返済
統合会社の関係者への融資
（ 返済 ） 債券の発行
資金調達活動による純現金 （ 使用 ）
現金 · 現金等価額の減少 年初時点の現金及び現金同等物年末時点の現金及び現金同等物
再分類。
付属の注釈は 財務諸表の不可欠な部分です
オートマックス · モーターズ株式会社
連結キャッシュフロー計算書
70
(in数千 ILS ）
付録 A— ネットの提示に必要な調整 営業活動からのキャッシュフロー
この年度までに
十二月三十一日
収支非関与キャッシュフロー
| 減価償却 · 償却 | 繰延税金費用 （ 所得 ） |
| その他の収入 | 株式支払 |
| 帳簿価額法で処理した企業の業績に占めるグループシェア、純 | IFRS 16 実施効果 |
資金調達費用、純
貿易登録費用
71
資産 · 負債の変動 商品
車両在庫の増加
売掛金 · 借方残高の減少 （ 増加 ）
売掛金が増加する
サプライヤー · サービス提供者の増加 （ 減少 ）
買掛金 · 与信残高の増加 （ 減少 ）
長期前払い費用の増加
従業員福利厚生および従業員関連規定の増額
現行課税の増加 （ 減少 ）
72
付属の注釈は 財務諸表の不可欠な部分です
オートマックス · モーターズ株式会社
連結キャッシュフロー計算書
(in数千 ILS ）
附録 b— 統合開始
この年度までに
十二月三十一日
現金を除く運転資本
73
在庫品
財産、工場と設備、無形資産
リースに対する残高、ネット
関係者が借金をする
グッドウィル
再分類。
74
付属の注釈は 財務諸表の不可欠な部分です
オートマックス · モーターズ株式会社
連結財務諸表付記
(in数千の NIS ）
75
注 1— 概要
以下に具体的な収入確認基準を示します 収入を確認する前に完了します
新車販売収入
新車販売収入と販売収入 備品は，新しい車両や備品に対する制御権を顧客に移譲する際に確認する.通常は支配権が移行されます 車が顧客に渡されると。
中古車販売収入中古車販売の収入は譲渡時に確認します。 販売された中古車の制御。信用取引記録
会社は救済を選択した この基準によって提供され、その上で、以下のクレジット条項を有する取引においてクレジット構成要素を分離する必要はない。 12ヶ月未満で、契約書に規定されている対価格金額に従って収入を確認し、いなくても お客様は製品またはサービス交付日の前または後に支払います。
所得税
報告書に含まれる所得税 損益には当期税項、例年に関連する税項及び繰延税項目が含まれる。
76
税金には当期または繰延が含まれている 税金は損益で確認しますが、他の全面収益が確認された項目から生じる税項は除外します。 株式の形で。この場合、税額も権益内の該当項目で確認される。
現行税
当面の納税義務を確定した 同時に、報告日までに公布または実質的に公布された税率、および根拠を使用する。 数年前の納税義務について。
オートマックス · モーターズ株式会社
連結財務諸表付記
(in数千の NIS ）
付記2--会計政策原則(続)
77
繰延税金
繰延税金は臨時税額で計算される 財務諸表に記載されている金額と税務目的で調整された金額との差額。繰延税金残高 資産の現金化や負債を解消する際に適用される期待税率を用いて計算されます 現在の報告日が公布されたか、または実質的に公布された税法に関する。
各報告日に税金を繰延する 資産の期待用途に応じて資産を審査する。繰り越し損失と差し引くことができる一時的な差額 未確認納税資産は、報告日毎に審査され、以下の場合に適切な繰延税金資産が確認される それらが利用されることが予想される。繰延税額を計算する際に 会社は保有実体の投資現金化時に適用されるいかなる税収も考慮していない。 予測可能な未来に持っている実体が売られない限り。修正案 2024 年 1 月 1 日からの報告期間で実施され、早期実施のオプションがあります。改正は IFRS 16 の採択後に発生した売却およびリースバック取引について、比較の修正を含む遡及的に適用されます。 数字だ
グループとは 早期実施を意図せずに財務諸表の修正の影響を検討すること。
オートマックス · モーターズ株式会社
連結財務諸表付記
78
(in数千 ILS ）
注記 5— 現金および現金等価物
12 月 31 日現在
現金
イスラエルの通貨による銀行会社の現金
79
銀行法人の外貨現金
外貨短期預金
現金と現金等価物の合計注記 6 — お客様
12 月 31 日現在
A 。構成 ：
オープン債務
クレジットカードの小切手
より少ない — 疑わしい債務引当金.
80
総ネット顧客数
顧客の負債は利子なし。
以下は、疑わしい債務の引当の動きです。
数千人が
of NIS
残高 2022 年 1 月 1 日現在年間供給量不良債権の償却の認識
徴収済担保債務の帳消し
2022 年 12 月 31 日現在の残高年間供給量負債の償却の認識
81
2023 年 12 月 31 日現在の残高
オートマックス · モーターズ株式会社
連結財務諸表付記
(in数千 ILS ）
注 6— お客様 （ 続き ）
当社の信用エクスポージャーに関する情報 顧客残高に関するリスク ：
期限が過ぎたお客様
収集の遅れは
82
顧客
誰の
返済
日付は
到着した
（ なし
延滞
83
コレクション ）
60 まで
日々
日々
超過
90 日間
総額
2023 年 12 月 31 日現在
数千の NIS
84
供給前の顧客残高
疑わしい負債
疑わしい債務引当の残高
納期が過ぎたお客様
収集の遅れは
顧客
|
誰 返済 |
日付は 到着した | （ なし | ||||||||||
| 延滞 | ||||||||||||
| コレクション ）(1) | $ | 13.57 | $ | 0.09 | 13.65 | |||||||
| 60 まで | 407,681 | 77,377,503 | 776,535 | |||||||||
| 日々 | $ | 14.43 | $ | 0.06 | 6.70 | |||||||
日々
| (1) | 更に |
85
90 歳以上
日々
総額
2022 年 12 月 31 日現在
| 数千の NIS | 供給前の顧客残高 |
| 疑わしい負債 | 疑わしい債務引当の収支 |
| オートマックス · モーターズ株式会社 | 連結財務諸表付記 |
| (in数千 ILS ） | 注記 7— 売掛金と借方残高 |
| 12 月 31 日現在 | サプライヤーへの前払い; |
| 関連団体 | 事前経費 |
| 売掛金 | 売掛金その他の借方残高 |
| 付加価値税 | 評価役員 — 企業 |
| 将来の取引のための資産 （ フォワード ） | 注記 8— 車両在庫 |
86
| 12 月 31 日現在 | A 。構成 ： |
| 新車 | 中古車 |
| 添付ファイル | 上記注記 2 （ i ） に記載したように、当グループは在庫を測定します。 コストベースと純実現可能価値の低い方に従ってグループでは、在庫の実現可能価値を定期的に検討しています。 多くの要因や特徴、特に在庫の年齢や状態を考慮しています。について 新車在庫の実現可能価値の検討について考慮した考慮事項については、注釈 3 b 1 も参照。 |
| オートマックス · モーターズ株式会社 | 連結財務諸表付記 |
| (in数千 ILS ） | 注記 9— 企業への投資は、残高に応じて扱われる シート値方法 |
注釈 1 （ c ） と注釈 1 （ c ） に記載されていることに加えて 合併および逆買収に関する 2 （ u ） ： 前述の通り、 Metomy は Global AutoMax および両子会社の法的購入者です。 以下のように報告する子会社の追加情報 会社の報告書にまとめられています。国/地域
設立ザ 会社概要
権利は
87
資本と
投票
権利
数量
進歩した
会社へ
統合
会社名
The scope of
投資投資
で、
| 首都の | 統合 会社名総額 |
| 何千もの NIS | 2023 年 12 月 31 日現在オートマックス · ハシャロン （1）イスラエル |
88
| 株式会社オートマックス · トレードイン （2） | イスラエル株式会社オートマックスリース （3）イスラエル |
| オートマックス · ネタニャ株式会社 （ 4 ） | イスラエル |
2022 年 12 月 31 日現在
オートマックス · ハシャロン （1）
イスラエル
株式会社オートマックス · トレードイン （2）
イスラエル
| 属性化 | グッドウィル |
| 下記注釈 21 b （ c ） を参照。 | 同社は 2022 年 6 月 1 日に設立されました。 リース活動を行う可能性を検討しています |
| 下記注釈 21 b （ g ） を参照。 | オートマックスの車隊 2019 年 2 月に設立。2020 年 9 月 24 日現在、オートマックス艦隊は非アクティブです。2023 年 7 月 30 日、オートマックスフリート、グローバル · オートマックス、および I. V. ドライブ株式会社 （以下、「 I. V. ドライブ」） との間で、オートマックスフリート株式会社の株式資本の 50% を I. V. ドライブに移転する契約を締結し、オートマックスフリートは、下記注釈 210 億 （17） に詳述されているように、リース取引の仲介業務を開始しました。 |
| Matomy Germany GmbH は前四半期に解散しました。 2023 年の。 | オートマックス · モーターズ株式会社 |
連結財務諸表付記
(in数千 ILS ）
89
注 9 — 企業への投資は残高に従って処理します シート値法 （ 続き ）
B 。当社が保有する関連会社の詳細 ：
会社
権利は
資本と
12 月 31 日現在
関連会社への投資
量
推薦
90
議決権
オートマックス カーフリート株式会社：
12 月 31 日現在
資本金
借方 · 貸方
持分損失
なお、下記注釈 21 b （ p ） を参照。
オートマックス ネタニヤ株式会社：
12 月 31 日現在
資本金
借方 · 貸方
持分損失額は 0.1 万 ILS 未満です。下記注釈 21 b （ g ） を参照。
ヒテヒロ 株式会社モーターズ
12 月 31 日現在資本金
借方 · 貸方
91
持分損失
額は 0.1 万 ILS 未満です。
2021 年 5 月 27 日、グローバル · オートマックスは契約を締結 Hi Biz Ltd. と、自動車関連事業を展開する合弁会社を設立し、 Hitechi コンシューマークラブの運営者 自動車のマーケティングと販売、とりわけ Hite türlü 消費者クラブのためのウェブベースのプラットフォームになり、全国に参加します 新会社のマーケティング · 販売ネットワーク （ 以下、「 Hi Biz 」、「本契約」および「合弁会社」の場合 ） かもしれない ） 。
2023 年 7 月 18 日、グローバル · オートマックスは 合弁会社の権利をハイ · ビズに譲渡しました株式の譲渡は、一切の検討なしに行われました。
期末残高
総額
構成 リース契約の責任 ：
92
12 月について 31
数千人 NIS の
オープン残高
年内の転換：
統合への進出
追加
年間の変化
リースによる支払 · 変更
93
総額
リース関連負債の現在の満期
長期リース関連債務
総額
オートマックス · モーターズ株式会社
連結財務諸表付記
(in数千 ILS ）
注記 10— リース契約の資産 · 負債 （ 続き ）
数量 損益で認識されます
Global Automaxは第三者とリース契約を締結し、この契約に基づいて 545平方メートルの土地を借りて、その上に面積約545平方メートルの建物を建てました。 アフラにいます。レンタル契約の有効期限は2021年12月1日から2024年12月1日までで、Global Automaxは延期の選択権を得ることになります。 2030年12月1日までです。Global Automaxは、毎年指定された時間にレンタル者に短縮および/または終了を通知する権利があります 3ヶ月前に書面通知を出します。
毎月のレンタル料は27，250 ILSとし、付加価値税と 連鎖的な違い。Global Automax支店はこの物件内にあり、展示センターを含み、その中に販売待ち展示室が含まれています。 Global Automaxが輸入した車両の中で。
この賃貸契約の固有金利は 2.9%
アシュドゥド事務室に関する賃貸契約
その子会社は賃貸契約を持っている 第三者によると、同社はアシュドゥドで80平方メートルのオフィスを借りた。レンタル契約の有効期限は4月です。 3，2023，2023年4月2日まで。
94
毎月のレンタル料は合計3900 ILSで、付加価値税と連動料金がかかります。 違うところです。
この不動産は機関の顧客の販売事務室です。 子会社とのチームは，リース期間が終了すると，その活動は会社の他の支店に移行する。
この賃貸契約の固有金利は 2%です。
レンタカーを経営しております
Global Automaxは2023年に19年の運営リース契約を締結しました 車両は、3年間です。上記の車両は、コストプラス一度設置コストから取引コストを引いて提案されています 減価償却をしなければならない。これらの車両はレンタル期間内に車ごとの個別計算に基づいて償却を行う.
本賃貸契約の固有金利は 4.53%と6.9%です
オートマックス · モーターズ株式会社
連結財務諸表付記
| (in数千 ILS ） | 注11--固定資産、純額 |
95
| 12月31日まで | 車両 |
| コンピューター | オフィス |
| 機器 | そして |
| 家具 | 賃借権 |
| 改良 | エレクトロニック |
| 機器 | 総額 |
| 費用 | 2023 年 1 月 1 日現在残高年間の 追加” |
年間の減算
| 2023 年 12 月 31 日現在の残高 | 減価償却累計 |
| 2023 年 1 月 1 日現在残高 | 年間の 追加 |
96
| 年間の減算 | 2023 年 12 月 31 日現在の残高 |
| 固定資産 （ 12 月現在 ） 2023 年 31 日 | オートマックス · モーターズ株式会社 |
| 連結財務諸表付記 | (in数千 ILS ） |
| 注 11 固定資産純 （ 続き ） | 12 月 31 日現在 |
オフィス
| 機器 | そして |
| 賃借権 | エレクトロニック |
| 車両 | コンピューター |
| 家具.家具 | 改善 |
| 機器 | 総額 |
| 費用 | バランスとして |
2022 年 1 月 1 日
| 統合への参入 | 年間の 追加 |
| 年間の減算 | 2022 年 12 月 31 日現在の残高 |
| 減価償却累計 | 残高 2022 年 1 月 1 日現在 |
97
| 統合への参入 | 年間の 追加 |
| 年間の減算 | 2022 年 12 月 31 日現在の残高 |
| 固定資産 （ 12 月現在 ） 2022 年 31 月 31 日 | オートマックス · モーターズ株式会社 |
| 連結財務諸表付記 | (in数千 ILS ） |
| 注記 12— 無形資産、純 | 2023 年 12 月 31 日現在 |
インポート
許可証
グッドウィル
ウェブサイト
| 総額 | 費用 |
| 2023 年 1 月 1 日現在残高 | 年間の 追加 |
| 2023 年 12 月 31 日現在の残高 | 累積減少 |
98
| 2023 年 1 月 1 日現在残高 | 年間の 追加 |
| 12 月の残高 2023 年 31 月 31 日 | 2023 年 12 月 31 日時点の原価削減 （ 正味 ） |
| 2021 年 12 月 31 日現在 | インポート |
| 許可証 | グッドウィル |
| ウェブサイト | 総額 |
費用
| 残高 2022 年 1 月 1 日現在 | 年間の 追加 |
| 2022 年 12 月 31 日現在の残高 | 累積減少 |
| 残高 2022 年 1 月 1 日現在 | 年間の 追加 |
| 株式承認証. 株式の権利： | 開ける 2021年2月28日、会社株主総会は合併協定を採択した。 |
開ける 2021年3月24日、合併取引が完了し、証券配分は以下の通り(資本合併前 1：5の割合で行う)：開発者は7，900，947株の自社普通株を獲得する 財政的な考慮は必要ありません
59，257，103 会社の株式証明書はすでに会社の高級者を担当しようとする候補者に割り当てられ、会社の株式証明書は3，394，549件の分配を受けた。 取締役会の現役会長を務める候補者に配属される
99
会社株式の168，105，258項の権利 Global Automax前株主に割り当てられ、サービス候補に会社6，738，368件の株式承認証を割り当てる 会社の取締役会の積極的な議長として、会社は次のマイルストーンを守ることに支配されています 合併協議で約束されました。これらの権利は2023年3月29日に会社で第2回会議を開催して普通株式に転換した 三番目のマイルストーン、これは合併協定で設定された。
オートマックス · モーターズ株式会社
連結財務諸表付記
(in数千 ILS ）
付記22-株及び株式割増(継続)
| ● | こちらです。 以下に支出の詳細を説明する |
| 名前.名前 | ポジション |
| 普通株式に転換する権利 | 株式承認証 |
| 株式権利(弁済)(1) | ハーレム·リーヴィ貿易有限公司 |
| A.億能2015有限会社 | ボジロフ投資有限公司 |
| イリヤフ·バロック有限公司 | ベルポート · インベストメント株式会社 |
| ダニエル · レヴィー | 最高経営責任者 |
| アミット · イノン | 首席商務官 |
エマヌエル · パズ · プザイロフ
100
株主と取締役
エヤル · バルク
株主と取締役
ハイム · レヴィ — Trade In Ltd.
貿易 · 調達担当副社長
ギャル · レヴィ
| 標準化担当副社長兼支店チェーンマネージャー | トマー · レヴィ |
101
| 事業開発 · 本社担当副社長 · 取締役 | ドロン · ショーラー |
| 元取締役会長 （ 2 ） | 総額 |
| これには、支配株主に対する約束による補償株式も含まれます （ 注釈 16 c 参照 ） 。 | 2021 年 12 月 29 日、 Doron Shorer は取締役会長を務めることを終了し、その結果、 2，54 5，912 。 シリーズ B 1 のオプション 2，79 9，014 シリーズ B 2 のオプションとシリーズ B 3 のオプション 3，93 9，354 のオプションが失効しました。2022 年 3 月 16 日、同社 取締役会は、満了したワラントに代わって、 Shorer 氏に 9，28 4，280 枚の非取引可能ワラント （ シリーズ B ） の配分を承認しました。 |
| 非リンク NIS | カナダドル |
| ドル | 欧州ユーロ |
スターリングポンド
ポーランドズロティ
総額
何千もの NIS
102
総資産
現金および現金等価物
売掛金
その他売掛金
長期預金
負債総額
貸越
銀行 · 金融機関からの信用
サプライヤー · サービスプロバイダー
他の売掛金
債券に対する負債
オートマックス · モーターズ株式会社
連結財務諸表付記
(in数千 ILS ）
注記 23— 金融商品 （ 続き ）
103
2022年12月31日までリンクなし”
NIS
カナダ人
ドル
ドル
ヨーロッパ人
ユーロ
ポンド
104
スターリング
ポーランド語
ズロティ
総額
数千の NIS
総資産
現金 · 現金同等物
売掛金
その他売掛金
105
長期預金
負債総額
銀行 · 金融機関からの信用
サプライヤー · サービスプロバイダー
他の売掛金
債券に対する負債
オートマックス · モーターズ株式会社
連結財務諸表付記
(in数千 ILS ）
106
注記 23— 金融商品 （ 続き ）
下の表は合理的に示しています。 他のすべての変数が変化しない場合の様々な為替レートの変化の可能性に対する感度テスト。企業への影響 税引前利益は、外国為替デリバティブを含む金融資産 · 負債の公正価値の変化によるものです。ザ 当社の為替リスクに対するエクスポージャーは、名目価額に基づいて以下の通りです。 （ 千 ILS ）
2023 年 12 月 31 日現在
増す
少量を減らす
注記
利益(損失)
| 資本 | 利益(損失) |
| 資本 | 第一に |
| 年 | 二番目 |
| 年 | 第三に |
| 5 年目 | 数千の NIS |
| 2023年12月31日 | サプライヤー · サービスプロバイダー |
107
| 買掛金 · 信用残高 | 銀行等からの信用 · 融資 |
| オートマックス · モーターズ株式会社 | 連結財務諸表付記 |
| (in数千 ILS ） | 注記 23— 金融商品 （ 続き ） |
| 本.本 | 値 |
| 予定されている | キャッシュフロー |
| 第一に | 従業員 |
| 携帯する | そして |
| 目に見えない | 転送 |
| その他」 | 他にも |
| 資産 | 損 |
| 利点 | 差異 |
| 総額 | 数千の NIS |
| 残高 2022 年 1 月 1 日現在 | 損益計算書に計上された変更 |
| 総合損益計算書に計上された変更 | 2022年12月31日現在の残高 |
損益計算書に計上された変更
総合損益計算書に計上された変更
108
2023 年 12 月 31 日現在の残高
オートマックス · モーターズ株式会社
連結財務諸表付記
(in数千 ILS ）
注記 24— 所得税 （ 続き ）
理論的税金
12 月 31 日
数千の NIS
所得税引前利益 （ 損失 ）
109
貸借対照表価額法で取り扱う会社の利益 （ 損失 ） に占める当社の割合
貸借対照表価額法により取り扱われる会社の損失に占める当社の分担を中和した場合の利益 （ 損失 ）
法定税率
法定税率による税金支出 （ 収入 ）
所得税の増税 （ 減税 ） 原因は ：
110
控除不可経費 · 免除所得
繰延税金を計上していない税務目的の一時差額及び損失
繰越損失により初めて繰延税が作成されました
測定の根拠の違いおよびその他の違い
損益計算書における税金支出 （ 収入 ）
注記 25 — 収入
終了した年について
111
注 27 営業 · マーケティング費用
終了した年について
12 月 31 日
営業担当者の給与
広告 · 販売促進
減価償却 · 償却
クレジットカード手数料
112
雑類
| 注釈 28— 一般経費及び管理経費 | 終了した年について |
| 12 月 31 日 | 給与 · 給与関連支払い |
| 専門サービス | オフィスメンテナンス |
| 減価償却 · 償却 | 雑類 |
税金 · 手数料
コンサルティング
海外旅行
帳簿を壊す
113
オートマックス · モーターズ株式会社
連結財務諸表付記
(in数千 ILS ）
注記 29. 資金調達費用、純
終了した年について
114
12 月 31 日
融資費用
銀行企業の利子
債券利子
銀行法人手数料
リース契約へのコミットメントの利子
雑類
為替レートの違い
雑類
資金調達収益
為替レートの違い
115
関連会社からの利子収入
関連会社からの利子収入
預金利息による収入
純資金調達費用
貿易担当副社長
賃金.賃金
オプション
利子
技術 · 標準化担当バイスプレジデント兼支店チェーンマネージャー
賃金.賃金
オプション
HQ および事業開発担当 VP
116
賃金.賃金
オプション
関係者であるサプライヤーへの支払 ：
オートマックス · ハシャロン （ 昨年に統合された会社 ）
手数料
利子
オートマックス · ハシェファラ （ 含 ）手数料利子
オートマックス · ネタニャ （ 昨年の統合会社 ）
手数料利子”.
SCISPARC 株式会社。
イスラエルの有限会社です
| SCISPARC MERGER SUB 株式会社 | イスラエルの有限会社です |
| オートマックス 株式会社モーターズ | イスラエルの有限会社 |
117
| 2024 年 4 月 10 日現在。 | 目次ページ |
| 取引の説明 | 合併する |
| 合併の影響 | 発効時間 |
| 定款、取締役及び役員 | 株式の転換 |
| 親の純現金の計算 | 会社の譲渡帳簿のクローズ合併対価総額の支払さらに行動する |
| 源泉徴収； 税務規則 | 会社の陳述と保証 |
| デュー組織； 子会社 | 書類を組織する |
| 権限； 契約の拘束力 | 投票が必要だ |
| 違反なし； 同意 | 大文字である |
| TASE ファイリング、財務諸表 | 変化はない |
| 未開示の負債はない | 資産所有権 |
| 不動産； 賃貸 | 知的財産権 |
| 契約 · 契約 · 約束 | コンプライアンス； 許可 |
| 法律の手続き | 税務の件 |
| 従業員 · 労働問題； 福利厚生計画 | 環境問題 |
| 保険 | ファイナンシャルアドバイザーなし |
| 関連会社との取引 | 保険 |
| ファイナンシャルアドバイザーなし | 贈収賄対策 |
| 有効発行 | 財務顧問の意見 |
| その他の声明 · 保証の免責事項 | 当事者の特定の契約 |
| 親会社業務の運営 | 会社の事業の運営面会と調査保護者の非勧誘企業非勧誘; |
| ある事柄の通知 | 閉店後のファイナンス当事者の追加協定裁判所の承認、登録申告書、取引報告書 |
| 会社総会 | 親株主総会、合併の承認 |
118
監督管理審査合併証明書会社のオプション
会社株式証明書
TASE 社普通株式の上場廃止その他の合意開示する
市場に出る税務の件役員および上級者
いくつかの合意と権利の終了協力する配分証明書、所有権証明書
会社財務諸表
株主訴訟
いくつかの調整
| 各当事者の義務に先立つ条件 | 制約なし |
| 株主承認 | 裁判所の承認 |
119
税収裁決合併証明書
法律で禁じられていない債券受託人付属書 A—親会社および合併サブ会社の義務に先行する追加条件申出の正確性キノの履行書類無会社物質的悪影響投資家協定の終了当社の義務に先行する追加条件申出の正確性
キノの履行書類母材に悪影響はない親の純現金市場に出る役員および上級者打ち切り端末.端末終了通知費用雑項条文表明および保証の無存続修正案免除する契約全体、取引相手、電子送信による交換適用法 · 管轄弁護士手数料分配可能性通達協力する分割可能性他の救済措置
第三者の受益者はいない
建設附属書 A—展示品：
| 添付ファイルA | 定義する添付ファイルB株主支援契約について |
| 添付ファイルC | 改定会社定款の形式 |
| 付属品D | 資金調達済みワラントの様式 （ 閉店前に合意 ）添付ファイルE会社配分スケジュール （ 閉店前に合意 ） |
| 付属品F | 合意の形式を達成する付属書 A—合併協定と合併計画 |
| 本契約および計画 MERGER | （ 展覧会とスケジュールとともに、これ ） |
| 協議 | 」と、 4 月に入場した。 10 、 2024 、 SciSparc Ltd. によって、イスラエルの有限会社 （ |
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| 父級 | 」）， SciSparc Merger Sub Ltd.，イスラエル人は 株式会社 · 株式会社 |
| 合併子 | 」と、 AutoMax Motors Ltd. 、イスラエルの限定 会社 （ The “ |
| 本節では何もない4.5 会社とその代表の通信、交渉、合意をある程度制限するとみなされるべきである。 本プロトコルで特別に許可された取引を行い、完了するために合理的に必要である。 | 通知する. いくつかのこと |
| (A)閉じる前に この間，次のいずれかの場合が発生した場合は，会社は直ちに親会社に通知しなければならない(書面で提供されるように)：(I)いかなる通知も または誰かの他の通信を受信して、その人の同意が必要であるか、またはその人の同意が以下の事項に関連することが必要であると主張する (Ii)当社に対して、当社に関連し、又は他の方法で当社に影響を与える法律手続きが展開されている。 あるいは、当社の知っている限りでは、当社を脅したり、当社の知る限り、取締役を脅したり、 (Iii)会社は、本契約で行われたいかなる陳述または保証にも不正確な点があることを認識しているか、または(Iv) 会社は会社のいかなる契約や義務も遵守していない；支店(Iii)と(Iv)については合理的である 次のいずれかの条件を直ちに満たすべきである | セグメント化する |
| 6または |
| | |
| 適用可能、不可能、または実質的に不可能だ。これに基づいて親に通知していません | 部分 |
| 変更、制限、または他の方法でいかなる陳述、保証、契約または義務に影響を与えてはならない 本契約又は会社開示明細書に含まれる会社の |
| セグメント化する | 6または |
| 7、7、 状況によります。 | (B)閉店前 この間，次のいずれかの場合が発生した場合は，親会社は直ちに会社に通知しなければならない(書面で提供されるように)：(I)いかなる通知も または誰かの他の通信を受信して、その人の同意が必要であるか、またはその人の同意が以下の事項に関連することが必要であると主張する (Ii)親、親、または他の方法で親に影響を与える任意の法的手続きが展開されているか、または 保護者の知る限り、保護者を脅かす、または保護者の知る限り、取締役または保護者のいずれか。 本プロトコルで行われた任意の陳述または保証のいずれかが不正確であることを認識すること、または(Iv)親会社が遵守できなかったこと 親会社又は合併子会社のいずれかの契約又は義務；支店(Iii)及び(Iv)の場合は、合理的に予想することができる 以下のいずれかの条件を直ちに満たす |
| セグメント化する |
| | それは.親会社、合併子会社又は会社がいかなる事件又は情報を知っている場合は、 取引報告の修正又は補充については，当該当事者は速やかに他の当事者に通知して協力しなければならない 当該等の改訂又は補充書類をISAに提出する場合や、適切な場合には、当該等の改訂又は補充書類を郵送する際には、当該等の他の当事者と協議しなければならない。 会社の株主へ。 |
| (D)当事者が合理的に 互いに協力し、提供し、それぞれの代表に相手とその代表に提供することを要求し、 法律は、締約国またはその子会社に関するすべての真、正確、完全な情報を格納することを要求する。 登録声明および/または取引報告または他の合理的な要件は、登録声明に含まれる および/または取引報告。 | 添付ファイルA- |
| 会社会議 | (A)会社同意：(I) 会社取締役会は、社債保有者及び/又は債権者に、会社株主及び(適用されるような)社債保有者を提案しなければならない 投票は会社の承認事項を承認し、合理的な最善を尽くして承認を求めなければならない。 会社取締役会は、会社の株主、債権者又は債券保有者(状況に応じて)に投票して本協定を可決及び承認する “と呼ばれる |
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会社取締役会の推薦“(Ii)会社の取締役会が提案してはならない 撤回または修正(会社取締役会は、会社取締役会の提案を撤回または修正することを公開してはならない) 親会社に不利な方法、及び会社取締役会又はそのいかなる委員会が会社取締役会の提案を撤回又は修正することを決議していない 親会社に不利な方法で、または採用、承認または推薦(または公開提案の採用、承認または推薦)の任意の買収 提案は、総称して採択または提出されなければならない(前述のIi)項に記載された行動を総称して会社の取締役会 不利な推薦変更(B)通知の一部として 会社会議では，会社はその各株主，並びに債権者及び債券保有者に通知を交付することができる 会議·裁判所の会議開催の命令，合併提案の申請を承認して提出する 裁判所と投票代行カード(“
| 代理材質 | “)”エージェント材料は説明を含みます 株主が合併に反対する権利について、裁判所及び会社が手配した公聴会の適用に関する情報 取締役会が推薦します。株主の承認を経て合併した後，適用される場合は，債権者及び債券保有者 上述したように、会社はこの手配、合併、および命令の承認を要求する第2の動議を適用裁判所に提出する。 合併によるすべての行動は，免除は以下の理由で募集規約を掲載する必要がある イスラエル証券法第15 A(A)(3)条(これらの承認が得られたら，総称して“と呼ぶ裁判所.裁判所 承認する(C)会社の責任 以下の規定により必要な会社の承認を求める部分 そして 部分 |
| | あるいは…部分 そのような違反の時点またはそのような表現の時点において満足されないでしょう 保証が不正確になった場合 提供 親がいかなる表明、保証、 本契約に基づく契約または合意； 提供; |
| さらに進む | 会社の表現におけるそのような不正確さがある場合、 当社による保証または違反が当社による終了日までに修復可能であれば、本契約は、 これは |
| 部分 | このような特定の違反または不正確の結果として 30 カレンダーの満了まで 当該違反又は不正確についての親から当社への書面による通知及びその終了意思の送付から始まる 1 日間 これに従い 部分 (it本契約は、本契約に従って終了しないことを理解し、 |
| 部分 | |
| 当社によるそのような違反が以前に修復された場合、そのような特定の違反または不正確の結果として 当該終了が有効になる場合 ） または | 提供しかし、それはつまり 一方の株主が本協定を承認した後，いかなる法律規定もさらなる承認を必要とする改正を行ってはならない 当該等株主の更なる承認を経ずに当該等株式を保有する。本協定は，次の書類を通過しない限り修正することはできない 会社、合併子会社、親会社がそれぞれ署名した書面を代表する。免除する(A)この部分に故障はない いずれか一方は本協定項のいかなる権力，権利，特権，または救済措置を行使し，いずれか一方は行使を遅延させてはならない. 本プロトコルの下の任意の権力、権利、特権または救済措置は、そのような権力、権利、特権または救済措置を放棄するものとみなされるべきである。 そのような権力、権利、特権、または救済策の単一または部分的行使は、その他のいかなるまたはさらなる行使を妨げることもない。 どんな他の権力、権利、特権、または救済策。(B)どちらともみなされてはならない 本プロトコルによって引き起こされる任意のクレームを放棄するか、または放棄しない限り、本プロトコルの下の任意の権力、権利、特権、または修復を放棄する。 このような要求、権力、権利、特権または救済方法は、正式な署名と交付の書面文書に明確に規定されている このような放棄は、その放棄が与えられた特定の場合でなければ、適用されないか、またはいかなる効力も有する。添付ファイルA- |
| 完全な合意。 電子転送による交換 | 本契約は、当社 開示明細書、親会社開示明細書及び本プロトコルで言及した他のプロトコルが合意全体を構成しています 関係者の間や関係者の間の その標品とその標品提供しかし、 |
| 秘密保持協定は代替されてはならず、 完全に効果的に維持され、その条項に基づいて機能する。本協定は式にいくつか署名することができ，各写しは必ず署名しなければならない. 正本とみなされ、このすべては同じ文書を構成しなければならない。完全に署名された協定(コピー)を交換する 各当事者がPDF形式で電子転送することは、各当事者が本条項と細則を遵守することを制約するのに十分でなければならない 本プロトコルの一部です。 | 法律を適用する。 管轄権(A)本協定 イスラエルの法律によって支配され、イスラエルの法律に従って解釈され、他の方法で支配される可能性のある法律は考慮されない。 適用された法律紛争の原則に基づいて。いずれかの当事者の間で次の理由により引き起こされるか、またはそれに関連する任意の訴訟または法的手続 本協定又はいかなる予想された取引も，双方とも無条件に同意して提出することはできない. イスラエルテルアビブに設置された裁判所の排他的管轄権と場所；および(B)このような行動に関するすべてのクレームに同意する。 又は訴訟は、本条項(A)の規定に従って完全に審理及び裁定を行わなければならない第10.5節弁護士の 費用.費用法律や訴訟のいずれの訴訟でも 本合意またはいずれか一方の権利を公平に実行するために、当該訴訟または訴訟で勝訴する側(以下、 管轄権のある裁判所は、その合理的な自己負担弁護士費とその他のすべての合理的なものを回収する権利がなければならない 訴訟費用このような訴訟または訴訟で発生する費用と支出分配可能性本プロトコルは拘束力がある 当事者及びそのそれぞれの相続人及び許可された譲受人に対して強制的に執行され、当事者及びそのそれぞれの相続人及び譲受人の利益のためにのみ実行されなければならない。 |
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| 提供 | ブロードウェイ1633号 |
| ニューヨーク市、郵便番号：10019 | 電話 番号 ： （ 212 ） 6 60 - 3000 |
| 注目 ： Od ed ハ ー · エ ヴェ ン 、 Es q 。ハ ワード · E 。ベル ケン ブリ ット | メール アドレス ：ohareven@sullivanlaw.com, hberkenblit@sullivanlaw.com |
| 会社にそうすれば | オ ート マ ックス モ ーター ズ 株式 会社15 Ha Re cha vim St . ， エルサレム注目 ： ト マー リー ヴィ |
| メール アドレス ：tomer@automax.co.il | コ ピー して 通知 （ 通知 を 構成 しない ） ： |
| リ パ · メ イル & 株式 会社法 務 事務所 | 2 ヴァ イツ マン 通り |
| Tel - A viv 64 23 90 2 ， イスラエルの | 電話 番号 ： + 97 3 （3） 60 70 600注目 ： グレ ゴ リー エル ゴ · ア ド ヴァ ー 。メール アドレス ：gregory@lipameir.co.il |
| そして | グ リーン バーグ · ト ラ ディ グ P . A .ワン · ア ズ リー リ センター); |
| オズ · アドラー | タイトル： |
| ディレクター | 株式会社オートマックスモーターズ |
| 投稿者： | / s / トマー · レヴィ |
| 名前： | トマー · レヴィ |
| タイトル： | ディレクター |
投稿者：
/ s / Yaarah Alfi名前：ヤラ · アルフィタイトル：最高財務責任者
| 【合併へのサインアップページ】 契約書] | 付属書 A— |
| 付録第 1 号 | へ |
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| 合併協定と合併計画 | この補遺、 2024 年 8 月 14 日付 （ “ |
| 発効日 | ^ a b c d e f g h i |
| 増編する | > 2024 年 4 月 10 日付の合併 （ 以下、「 |
| 協議 | ”）， by and between， SciSparc Ltd.，イスラエルの限定 会社 （ The “ |
| 父級 | 」）， SciSparc Merger Sub Ltd.，イスラエルの有限会社と完全子会社の 親 （ > >合併子」と、 AutoMax Motors Ltd. 、イスラエルの有限会社 （ “会社, かんがみて締約国は、協定に定められた特定の規定を修正し、改正することを希望する。 ここだ |
| 今、それゆえに、 | 当事者はここに合意する 以下のように協定を修正する。終了日の修正にもかかわらず 本協定の第 9.1 条 （ b ） に基づき、終了日は 2024 年 8 月 30 日から 2024 年 11 月 30 日まで延長されます。一般情報, 本契約に含まれるすべての条項、条件および / または条件は、 本明細書に明示的に規定されている範囲を除き、そのような規定に取って代わるものを除き、完全な効力を有し、 協定の条項です本契約の条項、以前の補足 / 修正間に矛盾または矛盾が生じた場合 (if本補遺の条項は、後者の条項が適用され、優先されるものとする。この補遺は、すべての意図及び目的において、 合意です |
| 本書で定義されていない用語は、その用語に割り当てられた意味を持つ。 協定で。 | [署名ページをフォロー] |
附属書 A—
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何かの証人として、
下記署名者は この付録は、施行日をもって施行されました。
株式会社 SCISPARC
投稿者：
/ s / Oz Adler
名前：
オズ · アドラー
タイトル：
最高経営責任者
株式会社スキスパーク · マーガー · サブ
投稿者：
/ s / Oz Adler
名前：
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オズ · アドラータイトル：ディレクター
株式会社オートマックスモーターズ
投稿者：
/ s / トマー · レヴィ名前：トマー · レヴィタイトル：ディレクター投稿者：/ s / ヤラ · アルフィ
名前：ヤラ · アルフィタイトル：最高財務責任者付属書 A—
添付ファイルB執行 コピー株主支援契約書
この株主支援契約、 2024 年 4 月 10 日付 （ 「この」 ）.
協議かんがみて一つの条件として 及び親会社に対する合併協定の締結及び進行しようとする取引を完了する意思の実質的誘因 したがって、合併を含めて、株主は本合意を締結することに同意し、この合意に基づいて、株主は同意する。 その他の事項を除いて、本協定の条項に基づいて、そのすべての保証株式に投票する。
そこで考えてみると
前述の内容および本プロトコルに記載され、法的制約を受けることを意図した相互陳述、保証、チノおよび合意
ここで，双方の合意は以下のとおりである
第一条
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一般情報
第一条第一条
定義済み 概要
それは.本プロトコルで用いる次のような大文字用語の意味は以下のとおりである. 学期です。本プロトコルで使用されるが別に定義されていない各大文字用語は，マージに与える意味を持つべきである. 合意する。
（ a ）
有益な 所有権
“会社株式の所有権は、株主が直接または間接的に保有する会社株式を含む 任意の契約、手配、了解、関係、または投票または投票を指導する権限、または権力を他の方法で所有または共有する 当該会社等の株式の処分又は処分を指示する。
（Ｂ）
会社 株“当社の普通株のことで、1株当たり0.05新シェケルです。覆う 株
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各株主の既存株式を指し、任意の会社の株式又は会社のその他の議決権を有する株式をいう。 日付が変更可能または行使可能な証券に変換、行使または交換されるときに発行される、または 会社の株式又は会社のその他の議決権を有する株式、並びに任意の他の会社の株式又はその他の議決権を有する株に交換することができる いずれの場合も、当該株主は、本契約日以降であるが、終了前に実益所有権を所有または取得する 本プロトコル(購入、配当または割り当てを含むか、または任意の株式オプション、株式承認証、または他の行使を含む) 権利)。
添付ファイルb-
現存している 株
“本契約日までに当該株主が実益して所有する当社株式をいう。すべての株主代表と この株主が所有しているすべての既存株式は添付ファイルB第二十一条
投票すべき(または同意する) 適切であることを保証するために，その株主がそれに関連する手続きに従って与えられるべきである 定足数に達したかどうかを決定するためのチケットを含む。
除 本文書に明記されているように
第二十一条
本プロトコルのいずれの内容も，各株主が賛成票を投じる権利を制限しない. 会社の株主に提出された他の任意の事項に賛成、反対、または棄権を示す
♪the the the 本協定に規定されている各株主の義務
第二十一条
発効日の影響を受けるべきではありません 任意の買収提案、買収調査、または任意の会社取締役会の不利な提案を会社に提案、開示、または会社に伝達する 変更を提案します。
添付ファイルb-第二十二条グラント！
取消不能な委任状；委任状。
（ a ）
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自自. 本協定の発効日から失効日まで、各株主はここで撤回できず、無条件に付与と委任を行うことができない。 “会社法”によると、親会社はその株主の代理人と事実代理人(完全な代理権を持つ)、 当社の株主の任意及びすべての会議に出席し、当該株主の名義、場所及びその株主の代わりに会議及び採決に出席する または本プロトコルに従ってカバーされた株式を投票する(依頼を含む)
提供
各株主の これにより所期の依頼書を授与する
第二十二条
その株主だけが 株主の義務に従って行動することはなく，すなわち根拠である
第二十一条
Amit / S / Yinon
名前：
アミット · イノンタイトル：
役員.取締役通知先：
【株主】
注意： [ ]
メール： [ ]
| コピー(構成通知を構成しない)を： | 注意： [ ] |
| メール： [ ] | 【株主への署名ページ】 サポート契約 ） |
| 付属書 b— | その証として、当事者は 本株主支援契約の履行 · 交付、または履行 · 交付を上記に記載された日付に起因するものとします。 |
株主：
129
Puzailov Investments Ltd.
| 差出人： | / S / エマヌエル · パズ · プザイロフ |
| 名前： | エヤル · バルク |
| タイトル： | ディレクター |
ベルポート · インベストメント株式会社
差出人：
/ S / エヤル · バルク
130
名前：エヤル · バルク
タイトル：
ディレクター通知先：【株主】
注意： [ ]
メール： [ ]
コピー(構成通知を構成しない)を：.
注意： [ ]
メールアドレス ： [ ]
【株主への署名ページ】 サポート契約 ）
附属書 b—
付表I
第五条
131
株主支援契約は、参照によりここに組み込まれます。
融通のきかない 融通がきかない
ページの残りをわざと空にする
付属書 b—
したがって、署名者は実行し、 このジョインダー契約は、 ________ の _____ 日をもって納品されました。
132
譲渡許可
名前：
通知情報
住所：
電話：
電子メール
付属書 b—
添付ファイルC
補償の形態 合意
本補償契約 （ 「
133
協議
”), 2024 年 ________ 日付で SciSparc Ltd. と間で締結されました。住所 20 Raul Wallenberg St. のイスラエルの会社 タワー A ， 2nd Floor ， Tel Aviv 6971916 ， イスラエル （ “
会社
|
|
） 、および下記署名した会社の取締役または役員 署名のページに記載されている役員 （ 「 | |
134
精算する
有効性
株主総会。
135
以下には別に規定がある。 当社単独又は他の同様の通知を受けた賠償者は それを弁護し、会社が弁護士を選ぶ権利がある。表彰される人 訴訟や訴訟や法律手続きで弁護士を雇う権利があります しかし会社がその仮説を通知した後、その弁護士の費用と支出は 抗弁の費用は(I)雇用しない限り，弁明者が負担しなければならない. 当社の書面による許可を受けました。 善意から合理的に結論を出しました 会社と受給者はその訴訟について抗弁する；または(Iii)会社 実際に弁護士を雇って合理的な時間内に訴訟を弁護するわけではありません この場合、弁済者弁護士の合理的な費用と支出は 会社の費用です。当社にはいかなる権利もありません 会社または会社を代表して、あるいはどの補償者について提起された訴訟、訴訟または手続 一方、会社は上記(Ii)項で述べた結論を達成しなければならない。
当社は賠償責任を負いません 本契約項の下の弁済者は、和解に係る任意の金額又は費用についての賠償 会社の事前書面の同意を得ずに行われたいかなる訴訟、クレーム又はその他の行為。
当社には権利がある それが適切だと思う場合には自己弁護する 和解の権利を含む誠実で勤勉な方法で弁護する 妥協したり同意したりしていません 謝罪者の同意を受けましたが条件はこのような和解や妥協や 判決は限度額を超えない(適用される場合)かつ根拠とすることができる 本プロトコル(本プロトコル1.2節の制約を受ける)および/または法律に適用される。 このような和解、妥協、または判決はいかなる罰や制限も加えない 被賠償者の事前書面の同意を得ずに、被賠償者に費用を支払う。被補償人の 和解に補償者の完全釈放が含まれていれば、同意する必要はない。 賠償者の不当行為に対する承認は含まれておらず，金銭制裁も含まれている 上述しただけである。刑事訴訟の場合には、会社及び/又はその法律 弁護士には罪を認める権利や賠償者に同意する権利はないだろう 被賠償者の事前書面での同意を得ていない名前。会社でもなく代償でもありません 提案された和解案に対する彼らの同意を不合理に拒否したり延期したりするだろう。
これに言及したものは
添付ファイルA
会社には 当社および被補償者が法人として勤務する事業体を含みます。
136
附属書 C—
付属品D
会社法、 1999
有限責任会社
改訂と再記述
“会社規約”
のです。
スキスパーク株式会社
2022 年 9 月 15 日採択
初歩的である
定義； 解釈
137
本規約において、以下の用語 （ 大文字を問わず ） は、主題又は文脈により別段の定めがない限り、それぞれ反対に定める意味を有する。
“共同経営会社”
特定者については、直接的又は間接的に、当該特定者を支配し、支配されているか、またはその特定者と共同の支配下にある者をいう。
“文章”
本改正および再定款は、随時改正されるものとみなします。
“取締役会”
(依頼書名)
(依頼書住所)
本人の代表として、于_
署名日：_年_月_日。
(委任者が署名する)“
通常の形や一般的な形で 取締役会が承認した他の形で。この委任状はその人の委任人が正式に署名しなければならない 権限のある受権者、又は委任者が会社又はその他の法人団体である場合は、拘束力のある文書に署名する方法で それは署名者の権威に関する権利者証明書と一緒にいる。
138
会社法の規定の下で、委任代表の文書正本または受権者が審査した文書のコピー(およびその文書に署名するために根拠となる授権書または他の許可文書(例えば、ある))は、大会指定時間前に48(48)時間以上(または通知によって指定されたより短い期間)に、当社(その事務所、主要営業場所、またはその登録所または名義変更代理人事務所、または会議通知指定された場所に通知)を送付しなければならない。上記の規定にもかかわらず、議長は、上記のすべての依頼書に関する時間要求を免除し、株主総会が開始されるまで委託書を受け入れる権利がある。代表を委任する文書は，その文書に関する延長ごとの株主総会に対して有効である.
添付ファイルD--
委任者の死去、株式譲渡及び又は委任撤回の影響
委任代表の文書に従って採決された場合，委任株主(またはその文書に署名したその事実の受権者(ある場合))が死亡または破産した場合，または議決された株式が譲渡された場合でも，当社または総会議長が採決前に関連事項の書面通知を受けない限り有効である。
会社法に別段の規定がある場合を除き，委任代表の文書は，(I)当社又は議長が当社で当該文書を受信した後，当該文書に署名した者又はその代表を委任した株主が署名した書面通知を受け，その文書による委任(又は当該文書に基づく権限に基づく権限)を取り消し，他方の代表を委任する文書(及び第33(B)条に規定する当該等の新たな委任に必要な他の文書)を取り消すものとする。ただし，当該等の取消通知又は異なる委任代表を委任する文書は，本定款第33(B)条に記載されている撤回文書が交付された場所及び時間内に受信しなければならない，又は(Ii)委任株主が自ら委任文書を交付する会議に出席した場合は，当該会議議長が当該株主の委任撤回に関する書面通知を受けた後，又は当該等の株主が当該会議で投票した場合には，その通知又は文書を受信した。委任代表の文書による採決は，委任が撤回されたり取り消されたり，委任株主が自ら出席したり，その出席した会議で投票したりしても有効であり，その委任文書が採決時または前に本細則第34(B)条に基づく前述の条文が撤回されない限り有効である.
ボード 取締役会
取締役会の権力
取締役会は法律で許可された取締役会或いは当社が許可されて行使したすべての権力及びそのような行為及び事を行うことができ、本定款又は法律は株主総会が行使しなければならない或いはそのような権力或いは事を行うことは規定されていない。本細則第35条に与えられた取締役会の権力は、会社法、本定款細則及び株主総会が時々採択した本定款細則と一致するいかなる法規又は決議の条文の規定に制限されなければならないが、当該等の法規又は決議は取締役会が下した又は取締役会の決定に基づいて下されたいかなる以前の行為を無効にしてはならないが、当該等の以前の行為が当該等の法規又は決議が採択されなかった場合は有効であるべきである。
139
上述した規定の一般的な原則を制限することなく、取締役会は、時々会社の利益から任意の額を支出することができ(S)、取締役会として適切な1つまたは複数の備蓄を絶対的に適宜決定することができる(S)、赤株を資本化および分配することを含むが、そのように予約された任意の金を任意の方法で投資し、そのような投資を随時処理し、変更し、そのすべてまたは任意の部分を処分し、そのような備蓄またはその任意の部分を会社の業務に運用することができ、そのような備蓄またはその任意の部分を会社の他の資産と分離して保存することなく、任意の部分を会社の業務に運用することができる(S)。また、準備金を細分化したり、再指定したり、備蓄金をログアウトしたり、備蓄金の資金を他の用途に適用したりすることができ、すべては取締役会が時々適切と判断することができる。
添付ファイルD--
取締役会権力の行使
第四十五条の規定により会議法定人数に出席する取締役会会議は、取締役会のすべての権力、権力及び適宜決定権を行使する権利がある。
いずれの取締役会会議で提出された決議は、出席して採決する権利のある役員の過半数が可決され、すなわち採択されたとみなされる。
取締役会は、取締役会会議を開催せず、書面または会社法で許可された他の方法で決議を採択することができる。
メ ル セ デス
シュ コ ダ
座 席
マ ツ ダ
ボ ル ボ
ミ ニ
ア ウ ディ
140
ランド ロー バー
フィアット
他にも
2023 年 1 月 から 9 月に かけて 、 オ ート マ ックス が 納 品 以 下の 内 訳 （ ライセンス データ による ） を ベース に 約 1，5 50 台 。
65 - 66 Bar eket Street ， Me vas ser et Zion 90 78 7 50 電話 番号 ： 02-5333857
Eメール：
ebrik10@gmail.com
セル ： 05 2 - 38 17 12 4
付 属 書 E -
141
E . D . b コンサ ル ティング · ア ンド · イン ベスト メント 株式 会社
株式 会社 番号 5 14 75 2 19 5
マ クロ 経済 要因 が 当社 に 与える 影響 2023 年の
操作 セ グ メント は 本質 的に 敏感 です 外 的 · マ クロ 経済 要因 ： これらの 要因 により 、 2023 年 度の 業績 に 悪 影響を 及ぼ しました 。 そして 、 私の 見解 では 、 それ （ および 市場 全体 ） は 、 販売 と 購入 の 価格 レベル を 調整 し 、 現在の 市場に 適応 する方法 を知 っていました 。 したがって 、 2023 年 は 営業 活動 にとって 代表 的な 年 ではなかった と 評価 します 。以下 は 概 要 です 。 関連する 動 向 と 当社 への 影響 ：
付属書 E—
E. D.b コンサルティング · アンド · インベストメント株式会社
株式会社番号 514752195以下は、範囲と範囲に関するデータです。 2023 年 1 月から 9 月にかけて中国からイスラエルに輸入された電気自動車の集団化する
製造業者
型番
配達量
9 月まで
インポート 価格 in NIS
142
（ エントリーモデル ）
総体積
Money in
NIS
輸入者
リープモーター
リープモーター
地下鉄
タルカーモーターズ
チェリー
チェリー
外国為替
カラソモーターズ
143
Geely
Geely
ジオメトリ C
ユニオンモーターズ
チェリー
チェリー
ティゴ 7 プロ
カラソモーターズ
EVeasy
エヴァーシー
リモ
144
カラソモーターズ
SAIC
MG
ZS SUV
ルビンスキー
BYD 自動車
BYD 自動車
アト 3シュロモ · シクスト
SAIC
MG
ルビンスキー
チェリー
145
チェリー
ティゴ 8 プロカラソモーターズ”
SAIC
| マクサス | e デリバリー 3 | チャイナモーターズ | 東風 | フォーシング 金曜日 |
UMI アイウェイズ | |||||
| アイウェイズ | Blilious グループ | SAIC | MG | HS | ルビンスキー SAIC | |||||
| マクサス | チャイナモーターズ | Wm | Wm | 自動車機器 （ AEV ） | BYD オート BYD オート | |||||
| ETP—3 | シュロモ · シクスト | SAIC | MG | マーベル R | ルビンスキー スカイウェル | |||||
| スカイウェル | ET 5 | カドゥリ | Aiways | アイウェイズ | Blilious グループ BYD 自動車 | |||||
| BYD 自動車 | 封印する | シュロモ · シクスト | XPENG | XPENG | カラソモーターズ Geely | |||||
| Lynk & Co 。 | メイヤー | SAIC | マクサス | サメレット | BYD 自動車 BYD 自動車 | |||||
| 唐 | シュロモ · シクスト | XPENG | XPENG | カラソモーターズ | BYD 自動車 BYD 自動車 | |||||
| ハン | シュロモ · シクスト | NIO | NIO | eT5 | デレク Geely | |||||
| LEVC | TX | 自動車機器 （ AEV ） | 東風 | ヴォイヤ | 無料 地下鉄 |
| 弘吉 | 弘吉 | E—HS9 | サメレット | NIO NIO |
eS8 デレク | |||||
| NIO | NIO | eT7 | デレク | 総額 | 平均する 65 — 66 Bareket Street ， Mevasseret Zion 9078750 電話番号： 02-5333857 | |||||
| Eメール： | ebrik10@gmail.com | セル ： 05 2 - 38 17 12 4 | 付 属 書 E - | E . D . b コンサ ル ティング · ア ンド · イン ベスト メント 株式 会社 | 株式 会社 番号 5 14 75 2 19 5 全 車両 の 販売 データを 調べ ても 2023 年 1 月 から 9 月に かけて イスラエル では 、 10 の 主要 モデル で 市場の 革命 を 簡単に 見 ることができます 。中国 人が 3 人 いる 単 一の ヨーロッパ モデル ではなく 製造 された モデル“ 西洋 ” ブランド は 徐々に 消え てい っている と 慎重 に 言う ことができる 。 市場 から 。 | |||||
| データは 以下の とおり です 。 | 製造 業者 | 型番 | 1 月 ~ 9 月 | 1 月 ~ 9 月 | 1 月 ~ 9 月 BY D オ ート | |||||
| ア ト 3 | 起 亜 | ニ ロ | ヒ ュ ン ダイ | エ ラン タ | ト ヨ タ ヤ リス · ク ロス | |||||
| Geely | ジオ メ トリ C | 起 亜 | ピ カ ント | チェ リー | ティ ゴ 8 プロ ヒ ュ ン ダイ | |||||
| ツ ー ソン | マ ツ ダ | 三菱 | ア ウ ト ラン ダー | 第 C 章 “ Dal hom Aut oma x ” （ “ テ ム サ · ス コ ダ ” ブランド バ スの 直 輸入 ） | 2022 年 6 月 、 Dal hom と 共同 で
モ ーター ズ 株式 会社 （ 以下 、 “ ダル ホ ム ” ） は 、 T EM SA ブランド の バ スの 輸入 を 目的 とした SP V を 設立 しました 。当 社は 、
共同 会社は 、 イスラエル への T EM SA ブランド バ スの 直接 輸入 会社 として 機能 します 。T EM SA は 複数の 電気 、
ガ ソ リン または ディー ゼル エンジ ンの モデル バス および ミニ バ スは 、 観光 および 公共 交通 機関 に 役立つ ように 設計 されています 。
イスラエル で 販売 されています 同 社は 現在 、 ホ ド · ハ シャ ロン に 総 面積 4，000 平方 メート ルの 中央 バス サービス センター の 設立 を 完了 しています 。 | |||||
| 会社は グループの 成長 の 1 つ です 。 エン ジ ンは 、 計画 の下で 大きな 利益 を生み出す と 予想 されます 。(1) | 65 - 66 Bar eket Street ， Me vas ser et Zion 90 78 7 50 電話 番号 ： 02-5333857 | Eメール： | ebrik10@gmail.com | セル ： 05 2 - 38 17 12 4 | 附 属 書 E - E. D.b コンサルティング · アンド · インベストメント株式会社 | |||||
| 株式会社番号 514752195(1) | テムサ · シュコダ | テムサ · シュコダはバス生産のリーダーです 世界中のミニバス | * トルコで 500，000 平方メートルの製造計画 | * 電気バスのリーディング | * 生産能力 10，000 台、
モーターコーチ、ミディバス、ライトトラックを含む * 世界 66 カ国で販売 | |||||
| 以下は、仕様の概要です。 中央サービスセンターとガレージ ： | ● | 面積は 4，000 平方メートル。 | ● | バスサービスセンター 2，000 平方メートル。 | ● オフィス — 入り口に位置し、 2 階に分かれています ： 1 階 ： サービスセンター、オフィスフロント 待機エリアです2 階 ： オフィス + 従業員の休憩エリア。 | |||||
| ● | ワークステーション （ 診断 + メカニカル + 電気 + HVAC ） | ● | 6 つの作業ステーション （ 上部に作業するための「安全ライン」付きの 1 つのステーションを含む ） バスの屋根 ） + 別のワークステーション （ ピットジャック付き ） — 合計 7 ステーション。 | ● | ebrik10@gmail.com セル ： 05 2 - 38 17 12 4 | |||||
| 附 属 書 E - | E . D . b コンサ ル ティング · ア ンド · イン ベスト メント 株式 会社 | 株式 会社 番号 5 14 75 2 19 5 | 生産 年 別の バス 車両 の 区 分 、 タイプ 2019 年 度 末 現在 | 車 種 / |
年の 製造 |
146
| 総額 | 2008 年 まで | 特殊 交通 公共 バス | 観光 用 公共 バス | 公共 の ミニ バス ツアー 用の 公共 ミニ バス |
特殊 交通 用 公共 ミニ バス プライベート バス | |||||
| プライベート ミニ バス | ツ ー リング カー | 総額 | バ ス · 公共 交通 機関 ブランド の 販売 | 製造する | ||||||
| ボ ル ボ | ゴ ール デ ンド ラ ゴン | H IG ER | メ ル セ デス | オ ト カル | ||||||
| BY D 自動車 | イ ス ズ | テ ム サ | 忠 通 | イ リ ザ ル | ||||||
| 他にも | 総額 | 65 - 66 Bar eket Street ， Me vas ser et Zion 90 78 7 50 電話 番号 ： 02-5333857 | Eメール： | ebrik10@gmail.com | ||||||
| セル ： 05 2 - 38 17 12 4 | 付 属 書 E - | E . D . b コンサ ル ティング · ア ンド · イン ベスト メント 株式 会社 | 費用 | 費用 | ||||||
| 総 販売 および G & A 経 費 | 収入 の % | 営業利益 | 収入 の % | 資金 調達 費用 | ||||||
| 収入 の % | 税 引 前 所得 （ EB T ） | 収入 の % | 所得税 | 所 得 の % | ||||||
| 純収益/純損失 | 所 得 の % | 65 - 66 Bar eket Street ， Me vas ser et Zion 90 78 7 50 電話 番号 ： 02-5333857 | Eメール： | ebrik10@gmail.com | ||||||
| セル ： 05 2 - 38 17 12 4 | 附 属 書 E - | E . D . b コンサ ル ティング · ア ンド · イン ベスト メント 株式 会社 | ロット / 倉庫賃料 | 翻訳 & 編集 | ||||||
| モバイルユニットサービス | 牽引サービス | ガレージサービス | 保険会社 | 出張費用 | ||||||
| 車のメンテナンス(1) | 親切で客好きだ | 予期せぬ経費 | 一般管理費 （ G & A ） 合計 | 総運用コスト | ||||||
| G&A | 簿記 · 会計 · 監査 | 法律.法律 | レート （ 税金 ） | 予期せぬ経費 | ||||||
| 一般管理費 （ G & A ） 合計 | グロス利益 | 資金調達コスト （ FC ） | Eメール： | ebrik10@gmail.com | ||||||
| セル ： 05 2 - 38 17 12 4 | 附 属 書 E - | E . D . b コンサ ル ティング · ア ンド · イン ベスト メント 株式 会社 | 株式 会社 番号 5 14 75 2 19 5 | 以下 は 、 計画の 基礎 です 。 | ||||||
| 代表 年度 | 販売 台 数 （ 車両 数 ） | 車両 の C IF 平均 コスト （ 千 N IS ） | 税 後 · 関 税 コスト （ 電気 自動車 の 平均 税 40% 、 関税 7% ） | 平均 販売 価格 （ AS P ） | 毛収入 | |||||
| プロ フォーム バラン ス シ ート （ 千 N IS ）(1) | 自動車 在 庫 | スペ ア パー ツ の 在 庫 | 固定 資産 （ ガ レ ージ 、 ショ ール ーム ） | デ モ 車 | 総資産 | |||||
| プロ フォーマ の 損 益 計算 書 （ 千 単位 ） N IS ） | 車両 販売 収入 | 販売コスト | スペ ア パー ツ · ガ レ ージ サービス 販売 による 純 利益 | 総利益 | マー ケティング · 広告 | |||||
| 指定 H Q | レン タル & レン タル 請求 書 （ ガ レ ージ と ショ ール ーム ） | 海外 の 旅 費 · 生活 費 | 減価償却および償却 | 融資する 総費用 |
税 引 前 利益 65 - 66 Bar eket Street ， Me vas ser et Zion 90 78 7 50 電話 番号 ： 02-5333857 | |||||
| Eメール： | ebrik10@gmail.com | セル ： 05 2 - 38 17 12 4 | 附 属 書 E - | E . D . b コンサ ル ティング · ア ンド · イン ベスト メント 株式 会社 | 株式 会社 番号 5 14 75 2 19 5 | |||||
| 明らかに 、 同 社の 目標は 既存 車両 を 主に 活用 して 、 4 年 以内に 年間 約 2， 400 台の H Y C AN 販売 台 を達成 する 。 プラットフォーム （ ショ ール ーム 、 営業 担当 者 など ） 、税 引 前 年間 利益 は約 73 00 万 IL S を 達成 することを 意味します 。 | Eメール： | ebrik10@gmail.com | セル ： 05 2 - 38 17 12 4 | 付 属 書 E - | E . D . b コンサ ル ティング · ア ンド · イン ベスト メント 株式 会社 | |||||
| 株式 会社 番号 5 14 75 2 19 5 | 権益コスト | 資本 コスト は 、 要求 される リ ター ン です 。 会社の 株 主 です 。会社 への 投資 に 伴う リスク を含む 要因 に基づいて 設立 されます 。 代替 投資 の 可能な リ ター ン です | 資本 コスト を 評価 する 方法は 様々な 方法 があります 。 含 め ： | ● | ||||||
| 資本 資産 価格 モデル （ CAP M ） | ● | 内部 レ ート · オ ブ · レ ート モデル （ IR R ） | ● | 平均 レ ート モデル （ AR R ） | ||||||
| 負債コスト | 負 債 の コスト は 、 要求 される リ ター ン です 。 会社の 貸 し 手 。類似 債 券 の 現在の 金 利 に基づいて 設定 されます 。 | 負 債 の コスト は 税 率 によって 削減 できます 。 会社は 課 税 所得 から 利 子 費用 を 控 除 できる からです | 重みをつける | 重 み 付け は 相対 的な 割合 を指 します 。 あらゆる 種類の 資本 会社の 負 債 と 資本 の 総 額 | ||||||
| セル ： 05 2 - 38 17 12 4(1) | 付 属 書 E - | E . D . b コンサ ル ティング · ア ンド · イン ベスト メント 株式 会社 | 株式 会社 番号 5 14 75 2 19 5 | 資本 資産 価格 モデル （ CAP M ） | ||||||
| 投資 の 自己 資本 コスト を 評価 するために 使用 されます 。 これは 、 株 主が リスク の高い 投資 に対して より 高い リ ター ンを 要求 するという 仮定 に基づ いています 。 | 以下 は a の 計算 式 です 。 会社の 資本 コスト 。 | RE = R f + β * （ R m - R f ） | どこにあるの | ● | ||||||
| について | 持 分 コスト は | ● | R f | 国 債 などの リスク フリー 資産 に必要な リ ター ン 率 です | ||||||
| ● | ベ ータ | 資産 の リスク パラ メ ータ です | ● | R m | ||||||
| 全体のパーセントを占める | 株式会社 | 資本金 | 株式プレミアム | オプション | ||||||
| 株式ベースの支払い | 総額 | 負債 | 債券.債券 | リース負債 |
147
| 長期信用 | 短期信用 | 現在の満期 | 総額 | 総合 加重平均コストの計算 資本 （ WACC ） ： |
権益コスト 負債のコスト | |||||
| 税率.税率 | 株式の重み | 債務 の 重 み | WAccess | 資本 コスト 加 重 | ||||||
| 予測 キャ ッシュ フ ロー モデル を 提示 できます モデ ルの 加 重 金 利 を 10. 22% に 設定 した後 | 65 - 66 Bar eket Street ， Me vas ser et Zion 90 78 7 50 電話 番号 ： 02-5333857 | Eメール： | ebrik10@gmail.com | セル ： 05 2 - 38 17 12 4 | ||||||
| 付 属 書 E - | E . D . b コンサ ル ティング · ア ンド · イン ベスト メント 株式 会社 | 株式 会社 番号 5 14 75 2 19 5 | 評価 モデルは 以下の 通り です 。 | 平均する | ||||||
| 予報 | 総売上高 | 変化 率 （ RO C ） | 販売 原 価 * | グロス利益 | ||||||
| 利益 率 | 営業 経 費 （ Op Ex ） | 他にも | 料率率 | 販売 · 広告 | ||||||
| 料率率 | G&A | 料率率 | 総額 | 料率率 | ||||||
| 営業利益 | 利益率 | 税率.税率 | 運営資金 | 運転資本比率 | ||||||
| 純営業利益 | 減価償却および償却 | 固定資本 | 資本化キャッシュフロー | 資本比率レート | ||||||
| 生長 | 運用価値 | 日取り | / s / オズ · アドラー | チーフ 執行役員兼最高財務責任者 | ||||||
| 2024 年 9 月 26 日 | オズ アドラー | （ 校長 執行役員、最高財務責任者、最高会計責任者 ） | / s / アミタイト · ワイス | 代表取締役 取締役会について | ||||||
| 9 月 26 、 2024 | 阿弥泰 ワイス | / s / アムノン · ベン · シェイ | ディレクター | 9 月 26 、 2024 | ||||||
| アムノン ベン · シェイ | / s / アロン · ダヤン | ディレクター | 9 月 26 、 2024 | アロン ダヤン | ||||||
| / s / モシェ · レバチ | ディレクター | 9 月 26 、 2024 | モシェ レヴァッハ | / s / イツチャック · シュレム | ||||||
| ディレクター(1) | 9 月 26 、 2024 | イツチャク シュレム | / s / シディ · リアト | ディレクター | ||||||
| 9 月 26 、 2024 | リアット シディ | / s / リオール · ヴィダー | ディレクター | 9 月
26 、 2024 リオル ヴァイダー |
代理人による署名
アメリカ合衆国の 有価証券法に基づく 改正された 1933 年の法律、下記署名する Puglisi & Associates は、 SciSparc Ltd. の米国における正当な代理人です。 2024 年 9 月 26 日にこの登録声明に署名しました。 | |||||
| PUGLISI & アソシエイツ | / s / ドナルド · J · プグリシ | ドナルド·J·プリシー | 経営役員 | II-7 | ||||||
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ISO 4217：ILS
SciSparc, its affiliates, and its and their operations around the world are subject to the FCPA because SciSparc is an ‘issuer’ as defined in the statute. The U.S. Department of Justice aggressively enforces the FCPA and has, at times, focused its enforcement attention to the pharmaceutical sector.
Grants from the IIA
SciSparc’s research and development efforts mainly with respect to its past activities (with respect to immunotherapy programs such as the Anti-CD3) were financed in part through royalty-bearing grants from the IIA. As of December 31, 2023, SciSparc had received the aggregate amount of approximately $1.1 million from the IIA for the development of its abovementioned technologies. With respect to such grants, SciSparc is committed to pay royalties of up to an aggregate amount of approximately $1.1 million relating only to technologies in its possession and excluding any royalties for technologies that SciSparc sold to third parties. SciSparc is further required to comply with the requirements of the Research Law, with respect to those past grants. In addition, any change of control and any change of ownership of SciSparc’s ordinary shares that would make a non-Israel citizen or resident an “interested party” as defined in the Research Law requires prior written notice to the IIA. Non-Israeli citizens and residents are required to execute an undertaking in favor of the IIA, in the form prescribed by the IIA. When a company develops know-how, technology or products using IIA grants, the terms of these grants and the Research Law restrict the transfer or licensing of such know-how inside or outside of Israel, and the transfer or licensing outside of Israel of manufacturing or manufacturing rights of such products, technologies or know-how, without the prior approval of the IIA. None of its current projects in the field of cannabinoid therapeutics are supported by the IIA, yet if eligible, SciSparc might apply for such support in the future.
165
Current Regulatory Status of SciSparc’s Pharmaceutical Products
United States
The active ingredient in SciSparc’s pharmaceutical product candidate SCI-110 is a Schedule I controlled substance. Other drug candidates in its portfolio are either not controlled or as yet to be scheduled.
SciSparc’s drug candidate SCI-110 is being developed, among others, for the treatment of TS. TS may be considered a serious condition with a potentially disabling nature. Thus, it may be eligible for a fast-tracked submission. However, a request for eligibility may be filed by SciSparc later in the development of this molecule. In June 2016, SciSparc submitted a request for orphan drug designation to the FDA for SCI-110 for the treatment of TS. In a letter dated September 29, 2016, the FDA informed SciSparc that its request could not be granted at such time and is being held in abeyance until and subject to it providing additional information pertaining to the overall prevalence of TS in both children and adults, and further clinical data to support its scientific rationale for its request for orphan drug designation within 12 months. In September 2017, SciSparc responded to such FDA letter within the designated time frame and provided the FDA with its articulated and reasoned responses including documentation and clinical data that supports it. On December 26, 2017, SciSparc received the FDA’s response to SciSparc’s response. The FDA accepted that there is adequate scientific rationale for the treatment of TS with SCI-110 mainly through the preliminary results of ongoing clinical trials, suggesting that SCI-110 may provide benefit in treating TS. However, the FDA stated that it was unable to grant SciSparc’s request and indicated that it did not provide adequate prevalence estimates, and any evidence to support its statement that only moderate to severe TS patients would require pharmacological treatment. SciSparc further responded in January 2018 by providing the requested information. On January 23, 2020, following additional correspondence with the FDA, the FDA still did not grant SciSparc’s request due to fact that it has not yet provided adequate prevalence estimates. However, the FDA did agree with SciSparc’ s position that it could potentially qualify for orphan drug designation with respect to the moderate-to-severe TS sub-group population only rather than the entire population. After SciSparc had provided additional prevalence estimates, the FDA raised a concern in its letter, dated December 7, 2020, about its ability to limit the use of the pharmaceutical product to the subset of patients SciSparc is pursuing. Due to the fact that SciSparc disagrees with this concern, it requested a clarification call. In the clarification call conducted on February 2, 2021, SciSparc agreed with the FDA concern about its ability to limit the use of the pharmaceutical product to the subset of patients in addition to a safety concern associated with THC treatment in pediatrics population so SciSparc suggested to amend its preliminary request and asked to include only adults in the treated population. An amendment letter was discussed and the FDA described what it would want to see in such an amendment. In March 2021, SciSparc sent its response to the FDA. In June 2021, SciSparc received a response from the FDA explaining that they are unable to grant the request until new information becomes available to support the request for orphan drug designation. SciSparc will re-visit the application after it obtains clinical results from its phase IIb clinical study in TS.
Canada
NNHPD Approval
Pursuant to a non-traditional class III Product License Application, CannAmide™, or TheraPEA, received Health Canada approval (NPN 80093504) from the NNHPD on July 23, 2019. In the approval letter, the NNHPD confirmed that the application was in compliance with section 7 of the NHPR. The dosage of 1 x 400 mg tablet 3 times daily was approved for the following use: “Studies show that PEA may be used as an anti-inflammatory to help relieve chronic pain”.
Any labels used in the marketing of TheraPEA must reflect the information outlined on the product license and must comply with the labelling requirements as per Part 5 of the NHPR. In addition, natural health products, such as TheraPEA, must be manufactured, packaged, labelled, imported, distributed and stored in accordance with GMP as required by NHPR or in accordance with equivalent requirements if the natural health product is imported. Furthermore, in accordance with Section 44 of the NHPR, each product for sale in Canada must comply with the finished product specifications submitted to Health Canada.
Pursuant to the NHPR, companies are required to provide the NNHPD with the Canadian site information prior to commencing the importation and/or sale of the natural health products in Canada.
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Changes made in respect of a licensed product require the submission of an amendment, notification or a new product license application as per sections 11, 12 and 13 of the NHPR.
Organizational Structure
SciSparc Nutraceuticals Inc. is SciSparc’s majority-owned subsidiary (approximately 51%), a company focused on e-commerce operations of Wellution™, a top- seller account of Amazon, which sells hemp-based products. Brain Bright Ltd. is an inactive wholly-owned subsidiary. SciSparc also own 100% of the issued and outstanding share capital of Evero Health Ltd., a company focused on the development and commercialization of SCI-110 sleep technology.
On November 17, 2022, SciSparc invested $1.5 million in Clearmind in connection with its initial public offering on the Nasdaq Capital Market, in exchange for 230,769 ordinary shares of Clearmind, representing 9.33% of the outstanding share capital of Clearmind. As of September 26, 2024, following a reverse stock split of Clearmind’s outstanding shares, SciSparc holds 7,692 ordinary shares of Clearmind, representing less than 0.1% of the outstanding share capital of Clearmind.
SciSparc also holds 52.73% of MitoCareX Bio Ltd., an Israeli private company.
SciSparc holds a minority interest in AutoMax of approximately 4.82% and a minority interest of approximately 1.14% of Jeffs’ Brands.
Property, Plants and Equipment
SciSparc’s offices are located at 20 Raul Wallenberg Street, Tower A, 2nd Floor, Tel Aviv 6971916, Israel, where it currently occupies approximately 120 square meters, under a joint lease with a third-party for a total of 240 square meters. The lease ends on June 30, 2025. SciSparc’s current monthly rent payment is NIS 10,200 (approximately $3,300).
SciSparc considers that its current office space is sufficient to meet its anticipated needs for the foreseeable future and is suitable for the conduct of its business. However, it is currently assessing its future needs and has not renewed its lease as of the date hereof.
Legal Proceedings
In connection with a joint venture transaction, entered on May 15, 2020, by and between SciSparc, Capital Point and Evero Health Ltd., one of SciSparc’s subsidiaries, it issued a warrant to Capital Point to purchase $340,000 of SciSparc ordinary shares, or the Warrant Shares, with an exercise price per ordinary share equal to the closing price of SciSparc’s ordinary shares on the trading day on which the notice of exercise is actually received by SciSparc. Such warrant was exercisable for 12 months starting from May 15, 2021.
On November 4, 2021, SciSparc received from Capital Point a notice of exercise with respect to the Warrant Shares, which was rejected by SciSparc. On May 2, 2023, Capital Point filed a lawsuit in the Tel Aviv-Jaffa District Court against SciSparc as the sole defendant in connection with the Warrant Shares. The lawsuit includes allegations of breaches of contract under the Israeli Contracts Law (General Part), 1973, unjust enrichment under the Israeli Unjust Enrichment Law, 1979 and breaches under the Israeli Torts Ordinance (New Version), 1968. The lawsuit claims damages in the amount of NIS 10,000,000 (approximately $2.75 million), which accounts for, as of the date of the filing of the lawsuit, liquidated damages according to the provisions set forth in the warrant, and seeks as well for the court to order a mandatory injunction order for SciSparc to issue a warrant to Capital Point to purchase $340,000 of SciSparc ordinary shares to Capital Point, the return of any unlawful profits received by us and punitive damages.
As of September 26, 2024, in connection with the aforementioned litigation, the shares of Evero Health Ltd. held by Capital Point are dormant and were forfeited by Evero Health Ltd. As of the date of this prospectus, SciSparc cannot predict the likelihood of its success in the lawsuit.
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AUTOMAX BUSINESS
This section sets forth certain information about AutoMax’s business and certain of AutoMax’s financial and operating information appearing elsewhere in this proxy statement/prospectus. It may not contain all the information about AutoMax that may be important to you, and we urge you to read the entire proxy statement/prospectus carefully, including the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of AutoMax,” and AutoMax’s financial statements included elsewhere in this proxy statement/prospectus. Unless otherwise noted, all references in this subsection to “we” or the “Company” are to AutoMax.
Business Overview
Overview
AutoMax imports and markets a variety of private vehicle models, from various categories such as small vehicles, crossovers, executive vehicles, premium vehicles, work vehicles, and buses manufactured by Temsa. AutoMax’s operations are conducted in Israel. AutoMax believes there are several primary factors that contribute to the success of vehicle importers in Israel, including: (i) innovative vehicle models and the manner in which these are branded among customers; (ii) trade conditions, especially the exchange rates of the foreign currencies in which the importer imports in comparison to the currency exchange rates of competitors; (iii) the existence of good relations with the manufacturer and/or the agent which is also reflected in import prices; (iv) the technological quality of the imported vehicles; (v) high marketing ability of the importer, which is also reflected in the adjustment of the vehicle and the prices to market demands; (vi) the level of provided service and the reputation of the importer; (vii) good geographical layout of purchasing agencies across the world (especially true for parallel importers); and (viii) the geopolitical situation in the countries from which the vehicles are imported. AutoMax’s clients range from private customers to institutional customers, including companies that lease, rent, and operate vehicle fleets, and car dealerships.
AutoMax operates through various subsidiaries which include Dalhom Automax Ltd., in which it holds 50% of the voting rights, or Dalhom Automax; AutoMax Trade-In Ltd., in which it holds 80% of the voting rights, or AutoMax Trade-In; Automax Leasing Ltd., a wholly owned subsidiary, or Automax Leasing; and Global AutoMax Ltd., a wholly owned subsidiary, or Global AutoMax.
Global AutoMax holds a number of subsidiaries: Automax HaShfela Ltd., in which it holds 50% of the voting rights; Automax Netanya Ltd., a wholly owned subsidiary; Automax Fleet Vehicles Ltd., in which Global AutoMax holds 50% of the voting rights; and Automax HaSharon Ltd., in which Global AutoMax holds 67% of the voting rights.
Industry Overview
The vehicle market in Israel differs from most vehicle markets in the world due to its geographical isolation (the absence of open land borders for free trade in vehicles) and the existence of high import duties. The percentage of vehicle ownership in Israel is relatively low compared to various Western countries, due to, among other things, the relatively high price of vehicles, mainly due to high taxation, inferior road infrastructure compared to other Western countries, and high population density.
Furthermore, the vehicle market in Israel includes a relatively large number of vehicle importers (compared to other sectors in the economy), who import vehicles that are manufactured in different countries around the world. Most vehicle importers import several brands and products.
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The development of the automotive market in Israel is characterized by fluctuations resulting from changes in the macroeconomic environment of the economy, among other factors. The main characteristics of the automotive market that affect the group’s activity and the competitors in this market are:
| ● | High dependence on suppliers. The success of vehicle importers depends mainly on the relationship with manufacturers of the vehicles imported and the strategy of the manufacturers’ activity in relation to the launch of new products, brand positioning in the world, model policy, trade conditions, price policy and marketing support. It should be noted that the dependence on the vehicle manufacturers is mainly relevant to the direct importers who have, in practice, exclusive franchise agreements with manufacturers whose products they import to Israel. AutoMax believes that it has no significant reliance on the activity of a particular vehicle manufacturer. |
| ● | Changes in consumer preferences. The vehicle preferences in Israel are subject to frequent changes, resulting from the preference of certain models by consumers, and due to a variety of factors, including but not limited to, engine type (diesel, oil, electric, hybrid or gasoline), the size of the vehicle, its design, technological advantages, environmental rating, fuel economy, safety standard, price and marketability on the resale market. |
| ● | Taxation of vehicles. The importing of most private vehicles in Israel is subject to purchase taxes, Value Added Tax and customs imposed at cumulative rates of approximately 30%-130% (or, oftentimes, more), of the cost of the vehicles. The aforementioned tax rates are among the highest in the world. Changes in tax rates, or benefits given to vehicles of a certain type, have a direct impact on the preferences of customers in the area of activity. In addition, changes in taxation on vehicles provided to employees as part of their employment conditions may affect their preference in relation to receiving vehicles from the workplace versus purchasing. |
| ● | Fuel and electricity prices. Changes in fuel and electricity prices may have an impact on consumer preferences in the long term. Vehicle model preferences vary depending on the type of energy used (i.e., diesel, gas, gasoline, or electricity) and each such energy price. |
| ● | Regulation. The automotive industry in Israel is characterized by vast regulation and strict regulatory requirements, including the standardization requirements, which may affect the Company’s expenditure and the results of its operations. |
| ● | Infrastructure levels and density of the roads. According to research conducted by the Bank of Israel, the roads in Israel are characterized by high levels of density, especially in the areas with greater population concentration. This affects the scope of vehicle purchases and is expected to affect it in the future as well. |
| ● | Changes in currency and interest rates as well as the economic environment. |
Based on data provided for AutoMax, within the private vehicle market in Israel, taking into account only importers that imported 20 vehicles or more as of June 2024, there are approximately 41 different vehicle importers, of which approximately 19 are direct importers and 22 parallel importers.
The vehicle market in Israel is characterized by vast regulations, one of which is the Committee for Increasing Competitiveness in the Economy under the Ministry of Finance of the State of Israel. In order to increase the competitiveness in the field of the automotive industry and decrease the price of vehicles and spare parts, while increasing the existing variety in the Israeli market, one of the laws that was adopted for this purpose was the Vehicle Services Licensing Law, which purpose was to regulate the licensing of automotive services in the industry. The law came into effect by supervisory orders by virtue of the Supervision of Commodities and Services Law, 5717-1957, or the Vehicle Services Law.
The Vehicle Services Law defined three types of importers: (i) Direct importers – an importer operating according to an agreement with the vehicle manufacturer; (ii) parallel importer – an importer operating according to an agreement with an authorized agent of the vehicle manufacturer; and (iii) small importer – an importer who imports up to 20 vehicles per year, operating according to an agreement with an individual in a foreign country. The Vehicle Services Law further mandates that when granting an import license, the director of the Vehicle and Maintenance Services Department at the Ministry of Transportation, may consider, inter alia, aspects related to promoting competition in the automotive industry, after consulting with the competition commissioner.
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Competition
AutoMax operates in two highly competitive industries, the vehicle industry in Israel as an importer and seller and in the international vehicle industry as a purchaser of vehicles.
The value chain in the automotive industry includes international vehicle manufacturers, vehicle importers, vehicle dealers (over 8,000 authorized vehicle dealers), financing entities and end users: households, corporate firms and public organizations. According to the Automotive Industry Review published by Dun & Bradstreet in February 2024, or the Automotive Industry Review, there are approximately 20 official import groups representing various manufacturers in Israel, which are responsible for approximately 97% of the automotive imports to Israel. Alongside these, there are several dozen parallel importers who are collectively responsible for approximately 3% of the imports. Additionally, there are vehicle leasing and rental companies, consisting of approximately five primary companies, alongside smaller companies.
According to the Automotive Industry Review, as of mid-2023, there were approximately 4.1 million vehicles on the roads in Israel, of which, approximately 86% are private vehicles. According to the State of Israel Central Bureau of Statistics, despite a relatively low level of vehicle ownership in Israel, based on the number of vehicles per 1,000 residents, the traffic density remains among the highest in the world. Based on studies conducted in previous years, as detailed in Automotive Industry Review, the density is 3.5 times higher than the Organization for Economic Co-operation and Development, or the OECD, average. The main contributors are the concentration of population in central Israel, an underdeveloped public transportation system and the lack of correlation between the construction of roads and the increase in population.
Operating and growth Strategy
According to the Automotive Industry Review, the total number of motorized vehicles in Israel consists of approximately: 3.5 million private vehicles (representing approximately 86%), 310,000 trucks (representing approximately 8%), 169,000 motorcycles (representing approximately 4%), and 64,000 buses and taxis in aggregate (representing approximately 2%). The Automotive Industry Review – 2023, published in Dun & Bradstreet detailed that in the first part of the year 2023, the volume of automobile deliveries resembled that of the peak year in 2021; however, commencing from June 2023 there was a slowdown in the volume of deliveries. This deceleration was a result of events that impacted the economy in 2023, adversely affecting the purchasing power of households, high interest rates prevailing in the economy in 2023, peaking at 4.75% in the latter half of the year, diminished both purchasing power and financing capabilities, the proposed judicial reforms in Israel creating significant uncertainty in the economy and threatening Israel’s credit rating, also affecting the shekel-dollar exchange rate and increasing the cost of imported goods, including automobiles; and the outbreak of Israel’s current war against Hamas that became known as the ‘Iron Swords’ war in Israel (for more information, see “Risk Factors – Risks Related to AutoMax’s Operations in Israel – Conditions in Israel, including the ongoing war between Israel and Hamas, and other conflicts in the region, may adversely affect AutoMax’s operations and limit its ability to market its products, which would lead to a decrease in revenues”), which resulted in reduced demand.
According to an article titled Taxation of Vehicles in Israel for the Year 2023 published on the Israel Transportation Managers website on February 18, 2024, in the year 2023, there was an aggregate of 270,023 passenger vehicles imported to Israel, compared to 268,131 in the year 2022 -- representing an increase of 0.7%. Based on AutoMax’s financial results, the import of vehicles in the first three quarters of 2023 showed an increase compared to the first three quarters of 2022 and declined in the last quarter due to the outbreak of the ‘Iron Swords’ war, which resulted in reduced demand, delays, and increased transportation costs, coupled with security threats associated with transportation in the Red Sea.
Additionally, the ‘Iron Swords’ war that began in the fourth quarter of 2023 created market uncertainties and weakened consumer sentiment. At the onset of the war, numerous employees were put on unpaid leave, many businesses in the commercial sector reduced their workforce or at least halted recruitments, reducing the inclination to acquire new cars. Due to the reduction in manpower, the number of employed individuals in the commercial sector holding leased vehicles on behalf of the employer, who constitute major clients of leasing services, has slowed down, and according to Automotive Industry Review, this is expected to further dampen the demand for leasing services in the year 2024.
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AutoMax currently operates eight branches, five of which are operated directly by Global AutoMax, two are operated through joint companies of Global AutoMax and third parties, one that is located in Acre, Israel, is operated by authorized representatives. AutoMax agreements with its authorized representatives are typically for a term between three and five years.
AutoMax’s main strategies to help enable its growth include:
| ● | Building and preserving an inventory of products and models in accordance with customer preferences, and technological advancements and market developments. AutoMax frequently monitors trend changes and consumer preferences, in order to expand the range of products and services it offers. |
| ● | Integrating activity sectors in the vehicle industry synergistic to its activity and the deployment of supply sources on sales centers, while examining their contribution to its profitability. |
| ● | Obtaining a leasing license and entering the leasing market. |
| ● | Forming partnerships and/or collaborations with representatives and manufacturers of internationally leading brands in the automotive industry as well as investment fields. |
AutoMax’s Competitive Advantages
Unlike direct importers who are guaranteed a certain vehicle inventory, pursuant to agreements with manufacturers, AutoMax is required to purchase its vehicle inventory from authorized dealers and various suppliers in various international markets, under more competitive conditions. AutoMax is able to operate in a larger number of markets with different characteristics, with a variety of products, while aiming to increase its geographical purchase sources.
While direct importers are bound to agreements with manufacturers, and therefore subject to such manufacturers’ framework with a predetermined model cascade, which limits the vehicle models they can import. Parallel importers, such as AutoMax, have greater flexibility with regards to the brands and models selected for import. The number of parallel importers remains relatively low in Israel, reducing AutoMax’s competition in this category. The high profit margins characterized by vehicles sold by direct importers allow AutoMax to sell its imported vehicles at competitive prices, thus gaining consumer preference. Furthermore, its ability to find convenient procurement sources in terms of price and transportation, distribution, and sales network provides AutoMax with a competitive advantage over other parallel importers. AutoMax is currently the leading and largest company in the indirect sectors in terms of product licenses, volume of vehicle imports and sales.
Employees and Human Capital
The following table presents the number of employees employed by AutoMax as of December 31, 2021, 2022, and 2023, by departments. None of AutoMax’s employees are represented by a labor union.
| Number of employees (including part-time positions) | ||||||
| Department | December 31, 2021 | December 31, 2022 | December 31, 2023 | |||
| Management, headquarters and finances | 12 | 16 | 14 | |||
| Pre-delivery inspections | 12 | 17 | 14 | |||
| Sales | 41 | 93 | 43 | |||
| Total | 65 | 126 | 71 | |||
Environmental Matters
In recent years, as part of the global trend, there has also been a trend in Israel aimed at reducing the environmental damage caused by the use of vehicles. As part of this trend, the global automotive industry is investing in increasing alternative sources of propulsion, starting with hybrid vehicles and ending with vehicles powered by gas or electricity. Similarly, governments around the world have joined the environmental effort, by way of activating regulatory tools to encourage the development, production and purchase of vehicles with less environmental damage.
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According to an article published on the website Walla vehicles, titled Summary 2023: 1,000 New Cars Every Day. What Was the Most Sold Vehicle, published on January 1, 2024, in the course of 2023, approximately 276,500 new vehicles were supplied in Israel, representing an increase in 2% compared to 2022. Based on an article published on the Israel Transportation Managers’ website, approximately 40% of these vehicles were environmentally friendly, which are therefore eligible for a reduced tax rate. This figure indicates the continuation of the trend of the public preference to switch regular petrol vehicles to electric vehicles.
Over the last two years, the electric vehicle market began to develop in Israel. As of the date of this prospectus, the electric vehicle category is mainly dominated by Chinese brands. From the data of the automobile industry for the year 2023, it is evident that electric technology was widely implemented in the market during this year, as 48,000 electric cars were delivered, accounting for approximately 18% of all deliveries, compared to 2022 in which approximately 27,600 electric cars were delivered. According to the Automotive Industry Review, there is currently a high adoption rate of electric vehicles, represented by a growth of approximately 74%.
Seasonality
There is usually a seasonality in vehicle sales in Israel that is manifested in a decrease in vehicle sales towards the end of the calendar year (in the fourth quarter of the year) and an increase in sales at the beginning of the calendar year (in the first quarter of the year). This trend stems, to the best of AutoMax’s knowledge, from the consumers’ preference to postpone the purchase of the vehicle until the beginning of the next calendar year, so that the registration, as will appear on the vehicle license, will be of a more advanced calendar year.
However, in the years 2020 through 2023, the Israeli government decided to reduce the purchase tax discounts for hybrid vehicles starting from the beginning of the first quarter of the following year. Therefore, buyers of this type of vehicle chose to purchase the vehicles at a lower price in the fourth quarter of that year. At the same time, importers preferred to release from ports and bonded warehouses a large number of vehicles for inventory at a lower cost.
Governmental Regulations
AutoMax operates in a highly regulated environment and is subject to many governmental regulations and laws that can impact its competitive position and earnings. These regulations are designed to increase competition in the local market and protect consumers. AutoMax is subject to consumer protection laws, laws regulating the import of spare parts, laws regulating services and recall obligations and regulations by the Committee for Increasing Competitiveness in the Economy under the Ministry of Finance of the State of Israel.
Furthermore, governments across the globe, including in Israel, have started adopting new regulations aimed at environmental matters in an attempt to slow climate change. Over the years AutoMax has seen certain tax repercussions on vehicles pursuant to these regulations, for example the Green Tax as adopted in Israel in 2009, pursuant to which the taxation on a vehicle is set by the level of pollution for such vehicle. This Green Tax was adopted to encourage consumers to lean towards ecofriendly vehicles. Additionally, AutoMax is subject to governmental regulations in the countries from which it imports its vehicles. The European union has adopted the Worldwide Harmonized Light Vehicle Test Procedure, or WLTP, which is used to measure fuel consumption and CO2 emissions. All vehicles imported to Israel are subject to the WLTP test to determine the Green Tax for such model.
In order to increase the competitiveness in the field of the automotive industry and decrease the price of vehicles and spare parts, while increasing the existing variety in the Israeli market, the Vehicle Services Licensing Law was enacted to regulate the licensing of automotive services in the industry. The law came into effect by supervisory orders by virtue of the Supervision of Commodities and Services Law, 5717-1957, or the Vehicle Services Law.
The Vehicle Services Law defined three types of importers: (i) direct importer – an importer operating according to an agreement with the vehicle manufacturer; (ii) parallel importer – an importer operating according to an agreement with an authorized agent of the vehicle manufacturer; and (iii) small importer – an importer who imports up to 20 vehicles per year, operating according to an agreement with an individual in a foreign country. The Vehicle Services Law further mandates that when granting an import license, the director of the Vehicle and Maintenance Services Department at the Ministry of Transportation may consider, inter alia, aspects related to promoting competition in the automotive industry, after consulting with the competition commissioner.
In addition, AutoMax is subject to various advertising, sales, employment, financing and privacy laws, all of which could affect its ability to obtain the required licenses and permits to operate its business.
Intellectual Property and Proprietary Rights
AutoMax’s business name and brand image are critical elements to its business strategy. In Israel, it holds a registered tradename “AUTOMAX” in English, and “Global AutoMax” in Hebrew, which is set to expire on November 25, 2029. AutoMax’s business is also affected by innovation and technology which have become increasingly important. AutoMax relies on its tradename, domain names and certain copyrights to protect its branding and differentiate it from other brands in Israel.
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SCISPARC MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of SciSparc’s financial condition and results of operations together with SciSparc’s financial statements and the related notes appearing elsewhere in this proxy statement/prospectus. In addition to historical information this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. SciSparc’s actual results may differ materially from those results described in or implied by the forward-looking statements discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors — Risks Related to SciSparc” appearing elsewhere in this proxy statement/prospectus.
Overview
SciSparc is a specialty clinical-stage pharmaceutical company. SciSparc’s focus is creating and enhancing a portfolio of technologies and assets based on cannabinoid therapies. With this focus, SciSparc is currently engaged in the following pharmaceutical compositions comprising N-acylethanolamines and cannabinoids, such as Palmitoylethanolamide and/or Δ9-tetrahydrocannabinol and/or non-psychoactive cannabidiol and/or other cannabinoid receptor agonists: SCI-110 for the treatment of Tourette syndrome and Alzheimer’s disease and agitation; SCI-160 for the treatment of pain; and SCI-210 for the treatment of Autism Spectrum Disorder and Status Epilepticus. SciSparc also currently holds a 50.86% controlling interest in its subsidiary, SciSparc Nutraceuticals Inc., whose business focuses on the sale of hemp-based products on the Amazon.com marketplace.
Operating Results
To date, SciSparc has not generated revenue from its drug development segment from the sale of any pharmaceutical product candidates, and it does not expect to generate significant revenue in this business within the next year at least. As of December 31, 2023, SciSparc had an accumulated deficit of approximately $69 million. Its operating activities are described below under “Operating Expenses.”
Revenues
In the year ended December 31, 2023, SciSparc generated revenues in the amount of $2,879 thousand.
Cost of goods sold
The cost of goods sold comprises mainly purchase of products and transportation costs to SciSparc’s warehouse. In the year ended December 31, 2023, the cost of goods sold amounted to $683 thousand.
Operating Expenses
SciSparc’s current operating expenses consist of four components - research and development expenses, sales and marketing expenses, impairment of intangible assets and general and administrative expenses.
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Research and Development Expenses, net
SciSparc’s research and development expenses consist primarily of salaries and related personnel expenses, research and preclinical studies, chemistry and formulations, regulatory, professional and other related research and development expenses.
The following table discloses the breakdown of research and development expenses:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| USD in thousands | ||||||||
| Wages and related expenses | 392 | 436 | ||||||
| Share-based payments | 34 | 264 | ||||||
| Regulatory, professional and other expenses | 719 | 750 | ||||||
| Research and preclinical studies | 101 | 703 | ||||||
| Clinical studies | 254 | 369 | ||||||
| Chemistry and formulations | 141 | 281 | ||||||
| Total | 1,641 | 2,803 | ||||||
SciSparc expects that its research and development expenses will materially increase as it plans to continue clinical trials and develop new products.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, professional service fees for accounting, legal, bookkeeping, investor relations, Amazon transaction fees, advertising and promotion on Amazon, regulatory and other general and administrative expenses.
The following table discloses the breakdown of general and administrative expenses:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| USD in thousands | ||||||||
| Wages and related expenses | 415 | 437 | ||||||
| Share-based payment | 68 | 633 | ||||||
| Amazon fees | 1,042 | 424 | ||||||
| Storage | 145 | 90 | ||||||
| Professional and directors’ fees | 2,594 | 2,499 | ||||||
| Business development expenses | 86 | 161 | ||||||
| Regulatory expenses | 202 | 162 | ||||||
| Office maintenance, rent and other expenses | 110 | 224 | ||||||
| Investor relations and business expenses | 369 | 1,486 | ||||||
| Total | 5,031 | 5,972 | ||||||
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Comparison of the year ended December 31, 2023 to the year ended December 31, 2022
Results of Operations
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| USD in thousands | ||||||||
| Revenues | 2,879 | 1,347 | ||||||
| Cost of goods sold | 683 | 322 | ||||||
| Gross profit | 2,196 | 1,025 | ||||||
| Research and development expenses | 1,641 | 2,803 | ||||||
| Sales and marketing | 1,297 | 537 | (1) | |||||
| Impairment of intangible asset | 1,042 | - | ||||||
| General and administrative expenses | 5,031 | 5,972 | (1) | |||||
| Operating loss | 6,815 | 8,287 | ||||||
| Company’s share of losses of company accounted for at equity, net | 210 | 109 | ||||||
| Financial expense (income), net | (1,164 | ) | (5,818 | ) | ||||
| Net loss | 5,883 | 2,592 | ||||||
| Net loss attributable to holders of ordinary shares | 5,122 | 2,592 | ||||||
| (1) | Reclassified for the year ended December 31, 2022 related to certain activities carried out by Wellution in the year ended December 31, 2023. This reclassification correlates with common practice in the industry to better reflect profit and loss across the periods presented. For further information regarding Wellution, see “Business Overview -- Other Programs -- Acquisition of Wellution™”. |
Research and Development Expenses
SciSparc’s research and development expenses for the year ended December 31, 2023, amounted to $1,641, representing a decrease of $1,162, or 41%, compared to $2,803 for the year ended December 31, 2022. The decrease resulted primarily from a decrease in research and preclinical studies expenses, chemistry and formulations expenses and share-based compensation expenses, which amounted for $101 thousand, $141 thousand, and $34 thousand, respectively, in the year ended December 31, 2023 (compared to $703 thousand, $281 thousand, and $264 thousand, respectively, in the year ended December 31, 2022).
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General and Administrative Expenses
SciSparc’s general and administrative expenses totaled $5,031 thousand for the year ended December 31, 2023, representing a decrease of $941 thousand, or 16%, compared to $5,972 thousand for the year ended December 31, 2022. The decrease resulted primarily from a decrease in investor relation and business expenses and share-based compensation expenses, which amounted to $369 thousand and $68 thousand, respectively, in the year ended December 31, 2023 (compared to $1,486 thousand and $633 thousand, respectively, in the year ended December 31, 2022).
Sales and marketing expenses
SciSparc’s sales and marketing expenses totaled $1,297 thousand for the year ended December 31, 2023, representing an increase of $724 thousand, or 135% compared to $537 thousand for the year ended December 31, 2022. All sales and marketing expenses are generated by SciSparc Nutraceuticals, which owns the Wellution™ brand. SciSparc Nutraceuticals commenced activities in September 2022.
Impairment of intangible asset
SciSparc’s impairment of intangible assets totaled $1,042 thousand for the year ended December 31, 2023, representing an increase of $1,042 thousand compared to $nil for the year ended December 31, 2022. The increase resulted primarily from an impairment of an intangible asset related to the decline of the Wellution brand and its goodwill in the amount of $1,042 thousand for the year ended December 31, 2023 (compared to $0 in the year ended December 31, 2022).
Operating Loss
SciSparc’s operating loss for the year ended December 31, 2023, was $6,815 thousand, representing a decrease of $1,472, or 18%, as compared to an operating loss of $8,287 thousand for the year ended December 31, 2022. The decrease resulted primarily from the decrease in research and development expenses.
Financial Expense and Income
Financial expenses and income consist of revaluations of instruments measured at fair value, exchange rate differences, bank fees, loans interest and other transactional costs.
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SciSparc recognized financial income in the amount of $2,219 thousand for the year ended December 31, 2023, as compared to financial income of $7,832 thousand for the year ended December 31, 2022. The decrease of financial income for the year ended December 31, 2023 resulted mainly due to the decrease in the fair value of SciSparc’s warrant liability.
SciSparc recognized financial expenses for the year ended December 31, 2023, of $1,055 thousand, as compared to financial expense of $2,014 thousand for the year ended December 31, 2022. The decrease of financial expenses for the year ended December 31, 2023 resulted mainly due to the decrease in the fair value of SciSparc’s financial assets.
Total Comprehensive Loss
SciSparc’s total comprehensive loss for the year ended December 31, 2023, was $5,883 thousand, representing an increase of $3,291 thousand, or 127%, as compared to $2,592 thousand for the year ended December 31, 2022. The increase resulted primarily from the decrease in financial income in the year ended December 31, 2023.
Liquidity and Capital Resources
Overview
Since its inception in 2004, and through December 31, 2023, SciSparc has funded its operations principally with $64.5 million from the issuance of ordinary shares and ADSs, warrants and pre-funded warrants. As of December 31, 2023, SciSparc had $2.1 million in cash, $22 thousand in trade receivables, $540 thousand in other accounts receivable, $742 thousand in inventory, and an additional amount of $3 million in short-term bank deposits. In the event that additional financing is required from outside sources, it may not be able to raise such financing on terms acceptable to us or at all. If SciSparc is unable to raise additional capital when desired, its business, operating results, and financial condition would be adversely affected, and there is substantial doubt about its ability to continue as a going concern.
The table below presents SciSparc’s cash flows for the periods indicated:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| USD in thousands | ||||||||
| Operating activities | (5,887 | ) | (7,917 | ) | ||||
| Investing activities | (1,109 | ) | (7,084 | ) | ||||
| Financing activities | 5,498 | 11,700 | ||||||
| Net increase in cash | (1,498 | ) | (3,301 | ) | ||||
Operating Activities
Net cash used in operating activities was $5,887 thousand during 2023 in comparison to $7,917 thousand during 2022. The decrease resulted primarily from the decrease in operating expenses.
Investing Activities
Net cash used in investing activities was $1,109 thousand during 2023 in comparison to $7,084 thousand during 2022. Net cash used in investing activities during 2023 resulted mainly from the investment in short-term bank deposits in the amount of $3,000 thousand, investment in financial asset in the amount of $687 thousand, and an investment in a company accounted for at equity in the amount of $400 thousand, offset by cash generated from the sale of a minority interest in the Wellution brand in the amount of $2985 thousand.
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Net cash used in investing activities during 2022 resulted mainly from the purchase of the Wellution brand in the amount of $4,861 thousand, the purchase of financial assets in the amount of $1,500 thousand, and an investment in a company accounted for at equity in the amount of $700 thousand.
Financing Activities
Net cash provided by financing activities of $5,498 thousand in the year ended December 31, 2023, primarily consisted of $5,547 thousand of net proceeds from the issuance of share capital, pre-funded warrants and warrants.
Net cash provided by financing activities of $11,700 thousand in the year ended December 31, 2022, primarily consisted of $9,005 thousand of net proceeds from the issuance of share capital, pre-funded warrants and warrants and $2,770 thousand from warrant exercises.
June 2022 Securities Purchase Agreement
On May 27, 2022, SciSparc announced the entrance into a securities purchase agreement, which closed on June 1, 2022, with a single healthcare-focused institutional investor for aggregate gross proceeds of approximately $10,000, before deducting fees to the placement agent and other offering expenses payable by SciSparc, or the 2022 Private Placement. In connection with the 2022 Private Placement, SciSparc issued 3,546,100 units and pre-funded units at a purchase price of $2.82 per unit (or $0.001 less per pre-funded unit). Each unit and pre-funded unit consisted of one Ordinary Share (or Ordinary Share equivalent) and two non-tradable warrants each exercisable for one Ordinary Share for $2.57 (for a total of 7,092,200 shares underlying the warrants). The warrants have a term of five years from the issuance date. No actual units were issued in the 2022 Private Placement. Aegis Capital Corp. was the exclusive placement agent in connection with the 2022 Private Placement.
June 2022 Letter Agreement
On June 30, 2022, SciSparc and the institutional investor entered into a letter agreement and agreed, among other things, to amend: (i) the warrants to: (a) extend the termination date for exercising the warrants from June 1, 2027 to June 1, 2029; and (b) amend the exercise price from $2.57 per share to $2.63 per share; and (ii) the securities purchase agreement to reflect a new purchase price of $2.88 per unit (or $0.001 less per pre-funded unit), resulting in additional gross proceeds to SciSparc of $212,766. On August 19, 2022, 3,211,100 of the pre-funded warrants were fully exercised at a nominal exercise price of $0.001 per share, which resulted in an issuance of 3,211,100 ordinary shares.
Wellution Acquisition Agreement
On September 14, 2022, SciSparc entered into the Wellution Acquisition Agreement, pursuant to which it acquired the Wellution™ brand, or the Brand. SciSparc established SciSparc Nutraceuticals, a wholly owned subsidiary, to hold the new assets, which is also a party to the Wellution Acquisition Agreement. On September 30, 2022, SciSparc closed the acquisition of the Brand and paid $4.59 million for the Brand. In addition, at the closing SciSparc issued the M.R.M. Warrant to M.R.M., to purchase up to 82,418 of SciSparc’s ordinary shares On March 26, 2024, M.R.M. agreed with SciSparc to waive all its rights under the M.R.M. Warrants and have the M.R.M. warrants cancelled for no consideration.
Wellution Sales Agreement
On February 23, 2023, SciSparc entered into the Wellution Sale Agreement with Jeffs’ Holdings and Jeffs’ Brands, pursuant to which, at the closing, which occurred on March 28, 2023, Jeffs’ Holdings acquired from SciSparc 57 shares of common stock of SciSparc Nutraceuticals, which equals approximately a 49% interest in SciSparc’s wholly owned subsidiary, SciSparc Nutraceuticals, which owns the WellutionTM brand, for a consideration of $2.5 million in cash, and additional deferred cash payments of approximately $489 thousand.
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In connection with the closing, SciSparc and Jeffs’ Brands undertook a mutual share exchange in the amount of approximately $288 of ordinary shares from each of SciSparc and Jeffs’ Brands. The number of shares in the share exchange was calculated based on the average closing price of the relevant company’s shares for 30 consecutive trading days ending on the third trading day immediately prior to the closing. Accordingly, SciSparc acquired 35,345 ordinary shares of Jeffs’ Brands and Jeffs’ Brands acquired 13,858 ordinary shares from SciSparc having an aggregate value of $288,238.
Following the closing of the transaction, which included an equity conversion of the financing amounts of approximately $700 previously provided by the Company to SciSparc Nutraceuticals for working capital, into shares of common stock at the price per share of the Wellution Sale Agreement, SciSparc holds approximately 51% of SciSparc Nutraceuticals.
In connection with the Wellution Sale Agreement, at the closing, Jeffs’ Brands and SciSparc Nutraceuticals entered into the Wellution Management Agreement for management services of the WellutionTM brand by Jeffs’ Brands, for a monthly fee of $20, Jeffs’ Brands also received a one-time signing bonus in the amount of $51.
At-The-Market Issuance Sales Agreement
On May 16, 2023, SciSparc entered into an At-the-Market Issuance Sales Agreement with Aegis Capital Corp., or the ATM Agreement, pursuant to which it may offer and sell up to $1,729,964 of SciSparc’s ordinary shares. Between May 16, 2023 and August, 9, 2023, SciSparc sold approximately $4,779 of ordinary shares. On August 9, 2023, the ATM Agreement was terminated.
AutoMax SPA
On June 25, 2023, SciSparc entered into a securities purchase agreement with AutoMax, pursuant to which, at the closing and upon the terms and conditions set forth in the securities purchase agreement with AutoMax, or the AutoMax SPA, it invested NIS 2,500 thousand (approximately $691) in cash, in exchange for ordinary shares of AutoMax based on a price per share of NIS 0.5. Following the closing, SciSparc held approximately 5.6% of the issued and outstanding share capital of AutoMax.
On January 14, 2024, SciSparc entered, as lender, into the Bridge Loan, further to the previously-announced non-binding letter of intent for it to acquire AutoMax. On June 9, 2024, SciSparc entered, as lender, into the Amended Bridge Loan, pursuant to which AutoMax received an additional bridge loan in the amount of $1.0 million, for an aggregate amount of $2.4 million. On September 5, 2024, SciSparc entered, into the Second Amendment, pursuant to which SciSparc extended an additional loan in the amount of $1.85 million to AutoMax under terms similar to the Amended Bridge Loan, bringing the total bridge loan amount to $4.25 million. In consideration for the Loan Amount, AutoMax established a first ranking fixed charge security interest on AutoMax’s shares of its wholly-owned subsidiary AutoMax Leasing Ltd. in favor of SciSparc. This subjects SciSparc to additional risk in the event of a default or partial default on payment of the Bridge Loan. Moreover, there can be no assurance regarding the ultimate timing of the Acquisition or any other restructuring plans.
Underwritten Public Offering
On August 14, 2023, SciSparc closed an underwritten public offering, or the Public Offering, of 212,500 ordinary shares, at a purchase price of $5.20 per ordinary share and pre-funded warrants to purchase up to 37,500 ordinary shares at a purchase price of $5.174 per pre-funded warrant, for aggregate gross proceeds of approximately $1.3 million, pursuant to an underwriting agreement between SciSparc and Aegis, or the Underwriter, on August 10, 2023. Pursuant to the terms of the Underwriting Agreement, SciSparc also granted the Underwriter a 45-day option to purchase up to an additional 37,500 ordinary shares solely to cover over-allotments, if any, at the Public Offering share price less underwriting discounts and commissions.
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The pre-funded warrants were exercisable immediately upon issuance and have an exercise price of $0.026 per share. Following the Public Offering and as of September 26, 2024, SciSparc issued 25,000 ordinary shares in respect of the exercise of 25,000 pre-funded warrants.
October 2023 Private Placement
On October 12, 2023, SciSparc closed a private placement transaction, or the 2023 Private Placement, pursuant to a securities purchase agreement and a registration rights agreement with an institutional investor for aggregate gross proceeds of approximately $5 million (representing a 30% original issue discount to the aggregate purchase price of $7,180,000), before deducting fees to Aegis, the placement agent and other expenses payable by SciSparc in connection with the transaction. SciSparc sold units to the investors at a purchase price of $3.72 per unit, consisting of 1,930,108 pre-funded Ordinary Share purchase warrants to purchase up to 1,930,108 ordinary shares, and an additional accompanying pre-funded warrant to purchase up to 1,930,108 ordinary shares.
The pre-funded warrants were exercisable immediately upon issuance and have an exercise price of $0.001 per share. Following the transaction and as of September 26, 2024, SciSparc has issued 1,078,991 ordinary shares in respect of the exercise of 1,078,991 pre-funded warrants.
January 2024 Standby Equity Purchase Agreement
On January 21, 2024, SciSparc entered into a standby equity purchase agreement, or the SEPA, with YA II PN, LTD, or YA. Pursuant to the SEPA, SciSparc will be able to sell up to $20.0 million of SciSparc’s ordinary shares, at SciSparc’s sole option, any time during the three-year period following the execution date of the SEPA. Of the $20.0 million eligible to be sold pursuant to the SEPA, to date SciSparc has sold 980,452 ordinary shares, which includes 55,293 of SciSparc’s ordinary shares, which it issued in satisfaction of the payment of the commitment fee amount of $200,000 to YA pursuant to the SEPA. Pursuant to the terms of the SEPA, any ordinary shares sold to YA will be priced at 97% of the market price, which is defined as the lowest daily volume weighted average price of the ordinary shares during the three consecutive trading days commencing on the trading day immediately following SciSparc’s delivery of an advance notice to YA, or the Advance Price. Any sale of ordinary shares pursuant to the SEPA is subject to certain limitations, including that YA is not permitted to purchase any shares that would result in it owning more than 9.99% of SciSparc’s ordinary shares.
Share Buyback Program
On July 6, 2022, SciSparc announced that its board of directors authorized a $1 million buyback program for SciSparc ordinary shares. However, as of the date of this prospectus it has not proceeded with the buyback program and do not currently intend to do so. If it wishes to effectuate the buyback program in the future, Israeli law requires it to file a motion seeking a court approval in Israel for the buyback program and the effectiveness of the buyback plan, if formally approved, will be contingent upon such approval. However, as a company listed on an exchange outside of Israel, court approval is not required, provided SciSparc notifies its creditors of the proposed buyback and allow such creditors an opportunity to initiate a court proceeding to review the buyback. If within 30 days such creditors do not file an objection, then SciSparc may proceed without obtaining court approval.
Current Outlook
SciSparc has financed its operations to date primarily through proceeds from sales of its ordinary shares and ADSs as well as exercises of warrants and options to purchase ordinary shares or ADSs, as the case may be. SciSparc has incurred losses and generated negative cash flows from operations since August 2004. Since August 2004, it has not generated any revenue from the sale of pharmaceutical product candidates and it does not expect to generate revenues from sale of its pharmaceutical product candidates in the next few years.
As of December 31, 2023, SciSparc’s cash, including short-term bank deposits, was $5,076 thousand.
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SciSparc believes that its existing cash resources will not be sufficient to finance its operating activities in the foreseeable future; however, it expects that it will require substantial additional capital to complete the development of, and to commercialize, its product candidates. If it does seek to raise additional capital, there can be no guarantee or assurance that it will be successful in raising such additional capital or that the term of such capital raise will be on terms favorable to it.
In September 2022, SciSparc purchased Wellution™, a business and brand which sells hemp-based products on the Amazon.com marketplace.
On January 25, 2023, SciSparc announced that its board of directors resolved to pursue a Restructuring Plan which may involve transferring its pharmaceutical activities to NewCo. As part or independent of the Restructuring Plan, it intends to examine the possibility of listing NewCo on a leading stock exchange, while maintaining its controlling interest in NewCo such that it will continue to control its current business activities. SciSparc also intends to explore other potential new opportunities, activities and investments in a variety of sectors.
Any Restructuring Plan and possible listing of NewCo on a stock exchange may be subject to, among other things, market conditions, tax or other business analyses, regulatory approvals, receipt of any necessary consents, final approvals from its board of directors and shareholders and satisfaction of any closing conditions to effectuate such corporate Restructuring Plan and listing of NewCo. There can be no assurance regarding the ultimate timing of the Restructuring Plan and listing of NewCo or that they will be completed at all.
Going Concern
As of December 31, 2023, SciSparc’s cash and cash equivalents totaled $2.1 million. In the period ended December 31, 2023, SciSparc had an operating loss of $5.9 million and negative cash flows from operating activities of $5.9 million. Its current cash and cash equivalents position is not sufficient to fund its planned operations for at least a year beyond the date of the filing date of the financial statements. The ability to continue as a going concern is dependent upon SciSparc obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. While SciSparc has successfully raised funds in the past, there is no guarantee that it will be able to do so in the future. The inability to borrow or raise sufficient funds on commercially reasonable terms, would have serious consequences on its financial condition and results of operations. In addition, SciSparc has started recognizing revenues from sales. However, its pharmaceutical operations are dependent on its ability to raise additional funds from existing and/or new investors. This dependency will continue until SciSparc is able to completely finance its operations by generating revenue from its products. These above-mentioned factors raise substantial doubt about its ability to continue as a going concern.
Intangible Assets
Separately acquired intangible assets are measured on initial recognition at cost including directly attributable costs. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Expenditures relating to internally generated intangible assets, excluding capitalized development costs, are recognized in profit or loss when incurred.
Intangible assets with a finite useful life are amortized over their useful life and reviewed for impairment whenever there is an indication that the asset may be impaired. The amortization period and the amortization method for an intangible asset are reviewed at least at each year end.
Contingent Liabilities
The evaluations of provisions and contingent liabilities are based on best professional judgment, taking into consideration the stage of the proceedings, as well as cumulative legal experience in the various topics. Whereas the results of the lawsuits shall be determined by the courts, these results may differ from these evaluations.
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Quantitative and Qualitative Disclosure About Market Risk
SciSparc is exposed to market risks in the ordinary course of its business. Market risk represents the risk of loss that may impact its financial position due to adverse changes in financial market prices and rates. Its current investment policy is to invest available cash in bank deposits with banks that have a credit rating of at least A-minus. However, a substantial majority of SciSparc’s cash is held in current bank accounts that do not bear interest. In the future, SciSparc intends to hold most of its cash in deposits that bear interest. Given the current low rates of interest SciSparc receives, once it begins to hold most of its cash in deposits that bear interest, it does not expect to be adversely affected if such rates are reduced. SciSparc’s market risk exposure is primarily a result of NIS/U.S. dollar exchange rates, which is discussed in detail in the following paragraph.
Foreign Currency Exchange Risk
SciSparc’s results of operations and cash flow are subject to fluctuations due to changes mainly in NIS/U.S. dollar currency exchange rates. As of December 31, 2023, the vast majority of its liquid assets are held in U.S. dollars, and the majority of its expenses are denominated in U.S. dollars. Changes of both 5% and 10% in the U.S. Dollar/NIS exchange rate would decrease/increase SciSparc’s loss for 2023 by less than 1%, respectively. However, these historical figures may not be indicative of future exposure, as SciSparc expects that the percentage of its NIS denominated expenses will materially decrease in the near future, therefore reducing its exposure to exchange rate fluctuations. Beginning October 1, 2018, SciSparc’s functional currency is the U.S. dollar.
SciSparc does not hedge its foreign currency exchange risk. In the future, SciSparc may enter into formal currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rates of its principal operating currencies. These measures, however, may not adequately protect SciSparc from the material adverse effects of such fluctuations.
Share-Based Compensation
SciSparc’s employees and other service providers are entitled to benefits by way of share-based compensation settled with company options to shares. The cost of transactions with employees settled with capital instruments is measured based on the fair value of the capital instruments on the granting date. The fair value is determined using an accepted options pricing model. The model is based on share price, grant date and on assumptions regarding expected volatility, expected lifespan, expected dividend, and a no risk interest rate.
The cost of the transactions settled with capital instruments is recognized in profit or loss together with a corresponding increase in the equity over the period in which the performance and/or service takes place, and ending on the date on which the relevant employees are entitled to the benefits, or the Vesting Period. The aggregate expense recognized for transactions settled with capital instruments at the end of each reporting date and until the Vesting Period reflects the degree to which the Vesting Period has expired and SciSparc’s best estimate regarding the number of options that have ultimately vested. The expense or income in profit or loss reflects the change of the aggregate expense recognized as of the end of the reported period.
SciSparc selected the Black-Scholes option-pricing model as a fair value method for its options awards. The option-pricing model requires a number of assumptions:
Expected dividend yield - The expected dividend yield assumption is based on SciSparc’s historical experience and expectation of no future dividend payouts. SciSparc has historically not paid cash dividends and have no foreseeable plans to pay cash dividends in the future.
Volatility - The expected volatility is based on fluctuations in the price of SciSparc’s ordinary share prices on the Nasdaq.
Risk free interest rate - The risk free interest rate is based on the U.S. Treasury yield curve, in accordance with the option’s contractual term.
Contractual term - An option’s contractual term must at least include the Vesting Period and the employees’ historical exercise and post-vesting employment termination behavior for similar grants. If the amount of past exercise data is limited, that data may not represent a sufficiently large sample on which to base a robust conclusion on expected exercise behavior.
Share price - The share price is determined according to the last known or above closing price of SciSparc’s ordinary shares at the grant date.
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AUTOMAX’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of AutoMax’s financial condition and results of operations together with AutoMax’s financial statements and the related notes appearing elsewhere in this proxy statement/prospectus. In addition to historical information this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. AutoMax’s actual results may differ materially from those results described in or implied by the forward-looking statements discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors — Risks Related to AutoMax” appearing elsewhere in this proxy statement/prospectus.
Overview
AutoMax is an authorized parallel importer of vehicles and spare parts in Israel and is engaged in importing and marketing a variety of vehicles in Israel (including trade-in), and buses manufactured by Temsa. AutoMax has a parallel importer’s license for 30 vehicle brands and a variety of models, holding twelve branches in Acres, Haifa, Afula, Netanya, Ra’anana, Rishon Lezion, Ashdod, and Jerusalem. AutoMax operates as a holding company through its’ subsidiaries, mainly Global AutoMax Ltd., a wholly owned subsidiary, Dalhom Automax Ltd., in which it holds an 50% controlling interest; Automax Trade-In Ltd., in which it holds an 80% controlling interest; and Automax Leasing Ltd., a wholly owned subsidiary.
The main factors to the financial condition and results of operations for the year ended December 31, 2023 were the: (i) issuance of additional ordinary shares to AutoMax controlling shareholders upon fulfillment of the milestones according to the merger with Global AutoMax; (ii) reverse stock split at a ratio of 5:1, following which every five (5) ordinary shares of AutoMax became one (1) ordinary share; (iii) new credit lines in a total of NIS 15,000,000 (approximately $4.1 million) issued to Dalhom Automax in September 2023; (iv) private placement in June 2023 in a total NIS 4,000,000 (approximately $1.1 million); (v) executed memorandum of understanding and negotiations for a merger with SciSparc; (vi) private placement in December 2023 in a total NIS 10,000,000 (approximately $2.7 million); and (vii) receipt of a state guaranteed loan in a total NIS 15,000,000 (approximately $4.1 million).
Components of AutoMax’s Results of Operations
Revenues
AutoMax revenues stem from the import of vehicles mainly from North America and Europe and sales in Israel in New Israeli Shekels (NIS). Therefore, the generated revenues are dependent mainly on the exchange rate between NIS, the U.S. Dollar (USD), the Euro, and other European currencies.
The revenues for the year ended December 31, 2023, were NIS 418,932 thousand (approximately $115,791 thousand), a decrease of 8%, compared to NIS 453,617 thousand (approximately $125,377 thousand) for the year ended December 31, 2022. The decrease in revenues was due to a change in consumer preference and a decrease in private consumption due to a recession in Israel and inflation rates. Furthermore, there was a significant decrease in the revenues in October 2023, due to the Israel – Hamas war. For further details, see Note 1E to AutoMax financial statements for the year ended December 31, 2023, included elsewhere in this prospectus.
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Operating Expenses
Cost of Sales
The cost of sales for the period ended December 31, 2023 were NIS 381,089 (approximately $105,331), a decrease of 3%, compared to NIS 392,918 (approximately $108,600) for the period ended December 31, 2022. The decrease in cost of sales relative to revenue was due to the exchange rate between the NIS and Euro which decreased by 7.8% over the course of 2023 and a decrease of 13.5% in the exchange rate between the NIS and the Polish Zloty. The depreciation of the NIS along with the increase in the inventory purchase costs lead to a decrease in gross profits.
Gross Profit
The gross profit for the year ended December 31, 2023, were NIS 37,843 thousand (approximately $10,460 thousand), a decrease of 38%, compared to NIS 60,699 thousand (approximately $16,768 thousand) for the year ended December 31, 2022. The decrease in gross profit is mainly due to the depreciation of the exchange rates of the NIS compared to the currencies in which AutoMax purchase its vehicle inventory. The devaluation of the exchange rate of the NIS compared to the currencies in which AutoMax purchase its vehicle inventory has a negative effect on AutoMax profitability. AutoMax act to reduce the effect of currencies on its profitability, among others, by purchasing in different currencies according to the volatility of currency rates.. For further details, see Note 1D to AutoMax financial statements for the year ended December 31, 2023.
Selling and Marketing Expenses
The selling and marketing expenses for the year ended December 31, 2023, were NIS 27,194 thousand (approximately $7,516 thousand), an increase of 2%, compared to NIS 27,612 thousand (approximately $7,631 thousand) for the year ended December 31, 2022. The increase was due to increase of media marketing and the establishment of a sales representative training center.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, related benefits, computer systems, travel and share-based compensation expenses for personnel in executive and administrative functions. General and administrative expenses also include professional fees for legal, consulting, accounting and audit services.
The general and administrative expenses for the year ended December 31, 2023, were NIS 16,965 thousand (approximately $4,686 thousand), an increase of 1%, compared to NIS 16,849 thousand (approximately $4,654 thousand)for the year ended December 31, 2022. The increase was primarily due to updating AutoMax computer systems. The decrease of 26% in the fourth quarter of 2023 compared to the fourth quarter of 2022, was due to actions taken by AutoMax to reduce its ongoing expenses due to the Israel-Hamas War.
Granting options to employees
The expenses for granting options to employees for the year ended December 31, 2023, were NIS 2,549 thousand (approximately $704 thousand), a decrease of 74%, compared to NIS 9,976 thousand (approximately $2,755 thousand) for the year ended December 31, 2022. The decrease was due to options granted an AutoMax officer in the scope the merger agreement with Global AutoMax completed in March 2021, for which the recording of expenses ended in the first quarter of 2023 (except for options to an AutoMax’s consultant).
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Other income
The other income for the year ended December 31, 2023, were NIS 1,557 thousand (approximately $430 thousand), an increase of 689%, compared to NIS 226 thousand (approximately $62 thousand) for the year ended December 31, 2022. The increase was due to revenues for compensations under the Israel – Hamas War fund for the month of October 2023.
Operational profit (loss)
The operational loss for the year ended December 31, 2023, were NIS 7,308 thousand (approximately $2,019 thousand), a decrease of 213%, compared to profit of NIS 6,488 thousand (approximately $1,792 thousand) for the year ended December 31, 2022. The decrease was mainly due to decrease in revenues, as set forth above.
Financial expenses, net
Financial expenses, net consist primarily of income or expenses related to revaluation of foreign currencies and interest income on AutoMax’s bank deposits.
Comparison of the Years Ended December 31, 2023, and 2022
The following table summarizes AutoMax’s results of operations for the years ended December 31, 2023, and 2022:
Results of Operations
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| NIS in thousands | ||||||||
| Revenues | 418,932 | 453,617 | ||||||
| Cost of goods sold | (381,089 | ) | (392,918 | ) | ||||
| Gross profit | 37,843 | 60,699 | ||||||
| Sales and marketing | (27,194 | ) | (27,612 | ) | ||||
| Impairment of intangible asset | - | - | ||||||
| General and administrative expenses | (16,965 | ) | (16,849 | ) | ||||
| Granting options to employees | (2,549 | ) | (9,976 | ) | ||||
| Other income | 1,557 | 226 | ||||||
| Operating profit or loss | (7,308 | ) | 6,488 | |||||
| AutoMax’s share of losses of company accounted for at equity, net | (600 | ) | (585 | ) | ||||
| Financial (expense) income, net | (9,109 | ) | (5,232 | ) | ||||
| Profit or loss before tax | (17,017 | ) | 671 | |||||
| Tax | (358 | ) | (1,931 | ) | ||||
| Net loss | (17,375 | ) | (1,260 | ) | ||||
| Net loss attributable to holders of ordinary shares | (16,384 | ) | (1,104 | ) | ||||
Liquidity and Capital Resources
AutoMax has generated its revenue and funded its activities through independent financing, such as issuing bonds, financing from banks and financing entities, credit lines provided by the suppliers to AutoMax. As of December 31, 2023, AutoMax had a total of approximately NIS 3,811 thousand (approximately $1,053 thousand) outstanding government guaranteed loans. As of December 31, 2023, the interest rate on such loans was prime plus 1.5%.
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On January 11, 2024, Global AutoMax received a government guaranteed loan from a bank in the amount of NIS 16 million (approximately $4.42 million), bearing an annual interest rate of prime plus 1.5%. The loan was granted for a period of 60 months, to be repaid in 57 equal monthly installments of principal amount with interest, with a three months grace period. As customary in government guaranteed loans, Global AutoMax deposited in the bank an interest-accumulating deposit, in the aggregate amount of 5% of the loan principal, which will be encumbered by a first-class permanent lien in favor of the bank.
Cash in excess of immediate requirements is invested primarily with a view to liquidity and capital preservation.
Cash Flows
The following table summarizes AutoMax’s cash flows for each of the periods presented:
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| NIS in thousands | ||||||||
| Net cash from (used in) operating activities | 3,142 | (98,042 | ) | |||||
| Net cash used in investing activities | (353 | ) | (18,453 | ) | ||||
| Net cash (used in) provided by financing activities | (3,471 | ) | 115,891 | |||||
| Net increase (decrease) in cash and cash equivalents | (682 | ) | (604 | ) | ||||
Operating Activities
Net cash from operating activities for the year ended December 31, 2023, was NIS 3,142 thousand (approximately $868), and included AutoMax’s net loss of NIS 17,375 thousand (approximately $4,786 thousand), and adjustments of non-cash amounts. Most of the non-cash amounts are due to share-based payments (NIS 2,549 thousand), depreciation of import licenses and fixed assets (NIS 4,642 thousand) and non-cash financing expenses (NIS 2,939 thousand) as well as changes in the property and liability items on the balance sheet of NIS 3,800 thousand.
Net cash used in operating activities for the year ended December 31, 2022, was NIS 98,042 thousand (approximately $27,098), and included AutoMax’s net loss of NIS 1,260 (approximately $348), and adjustments of non-cash amounts. Most of the non-cash amounts are due to a share-based payments (NIS 9,976 thousand (approximately $2,757 thousand)), depreciation of import licenses and fixed assets (NIS 3,663 thousand (approximately $1,012 thousand)) as well as an increase in vehicle inventory of NIS 97,082 thousand (approximately 26,833 thousand).
Investing Activities
During the year ended December 31, 2023, net cash used in investing activities was NIS 353 thousand (approximately $98 thousand), which reflected purchases of fixed assets.
During the year ended December 31, 2022, net cash used in investing activities was NIS 18,453 thousand (approximately $5,098 thousand), which mainly reflected investments in subsidiaries.
Financing Activities
During the year ended December 31, 2023, net cash used in financing activities was NIS 3,471 thousand (approximately $959 thousand), consisting of a payment of NIS 4,567 thousand (approximately $1,261 thousand) to the Series B bondholders, repayment of long-term loans from banks of NIS 1,969 thousand (approximately $545 thousand), and repayment of obligations for lease agreements of NIS 5,272 thousand (approximately $1,456 thousand), partially offset by NIS 8,879 thousand (approximately $2,453 thousand) of proceeds from the private placements conducted in June and December 2023 for ordinary shares of AutoMax.
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On June 25, 2023, AutoMax entered into a private placement agreement with certain investors, for an aggregate amount of NIS 4.0 million (approximately $1.1 million), in exchange for the sale and issuance of 8,000,000 ordinary shares, at a purchase price of NIS 0.5 per share.
On December 19, 2023, AutoMax entered into a private placement agreement with an investor for an aggregate amount of NIS 10.0 million (approximately $2.8 million), in exchange for the sale and issuance of 14,284,714 ordinary shares, at a price per shares of NIS 0.7 per share.
During the year ended December 31, 2022, net cash provided by financing activities was NIS 115,891 thousand (approximately $32,014 thousand), consisting of net proceeds from the issuance of AutoMax’s Series B debentures in the amount of NIS 45 million (approximately $12.4 million), as well as receiving on-call loans in an aggregate amount of NIS 78 million (approximately $21.5 million) from several banks in Israel.
According to the terms of the Series B Bonds and the Trust Deed, the Series B Bonds will be due for principal repayment in four (4) unequal annual installments, which will be paid annually as of February 28, 2023 until 2026, inclusive, such that the first payment that was made on February 28, 2023 constituted 10% of the aggregate principal amount of the Series B Bonds, the second payment, that was made on February 28, 2024, constituted 15% of the aggregate principal amount of the Series B Bonds, the third payment, due on February 28, 2025, will constitute 30% of the aggregate principal amount of the Series B Bonds, and the fourth and final payment, due on February 28, 2026, will constitute 45% of the aggregate principal amount of the Series B Bonds. Following the closing of the Merger the Series B Bonds will remain outstanding and subject to repayment in accordance with the terms of the Trust Deed. The Series B Bonds bear interest at a rate of 5.9% per annum. As of September 1, 2024, NIS 34,245 (approximately $9,460 thousand) in principal amount of Series B Bonds remains outstanding and will therefore become a liability of the combined company following the completion of the Merger.
Funding Requirements
AutoMax believes that its existing cash and cash equivalents, will enable it to fund its operating expenses and capital expenditure requirements for at least the next 12 months. It has based these estimates on assumptions that may prove to be wrong, and it could utilize AutoMax’s available capital resources sooner than it expects.
Critical Accounting Policies and Significant Judgments and Estimates
AutoMax’s financial statements are prepared in accordance with the IFRS. The preparation of AutoMax’s financial statements and related disclosures requires it to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in AutoMax’s financial statements. AutoMax bases its estimates on historical experience, known trends and events and various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. AutoMax evaluates its estimates and assumptions on an ongoing basis. AutoMax’s actual results may differ from these estimates under different assumptions or conditions.
While AutoMax’s significant accounting policies are described in more detail in Note 2 to AutoMax’s financial statements, AutoMax believes that the following accounting policy is the most critical to the judgments and estimates used in the preparation of its financial statements.
Share-Based Compensation
AutoMax’s employees and other service providers are entitled to benefits by way of share-based compensation settled with company options to shares. The cost of transactions with employees settled with capital instruments is measured based on the fair value of the capital instruments on the granting date. The fair value is determined using an accepted options pricing model. The model is based on share price, grant date and on assumptions regarding expected volatility, expected lifespan, expected dividend, and a no risk interest rate.
The cost of the transactions settled with capital instruments is recognized in profit or loss together with a corresponding increase in the equity over the period in which the performance and/or service takes place, and ending on the date on which the relevant employees are entitled to the benefits, or the Vesting Period. The aggregate expense recognized for transactions settled with capital instruments at the end of each reporting date and until the Vesting Period reflects the degree to which the Vesting Period has expired and our best estimate regarding the number of options that have ultimately vested. The expense or income in profit or loss reflects the change of the aggregate expense recognized as of the end of the reported period.
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AutoMax selected the Black-Scholes option-pricing model as a fair value method for its options awards. The option-pricing model requires a number of assumptions:
Expected dividend yield - The expected dividend yield assumption is based on our historical experience and expectation of no future dividend payouts. AutoMax has historically not paid cash dividends and have no foreseeable plans to pay cash dividends in the future.
Volatility - The expected volatility is based on fluctuations in the price of AutoMax’s ordinary share prices on the TASE.
Risk free interest rate - The risk free interest rate is based on the U.S. Treasury yield curve, in accordance with the option’s contractual term.
Contractual term - An option’s contractual term must at least include the Vesting Period and the employees’ historical exercise and post-vesting employment termination behavior for similar grants. If the amount of past exercise data is limited, that data may not represent a sufficiently large sample on which to base a robust conclusion on expected exercise behavior.
Share price - The share price is determined according to the last known or above closing price of our ordinary shares at the grant date.
Quantitative and Qualitative Disclosures about Market Risks
Interest Rate Risk
As of December 31, 2023, AutoMax had cash and cash equivalents, restricted cash and long-term bank deposits of NIS 1,961 thousand (approximately $542 thousand), which consisted of cash, restricted cash and long-term bank deposits.
As of December 31, 2022, AutoMax had cash and cash equivalents, restricted cash and long-term bank deposits of NIS 2,769 thousand (approximately $765 thousand), which consisted of cash, restricted cash and long-term bank deposits.
Foreign Currency Exchange Risk
AutoMax is exposed to foreign exchange rate risk. AutoMax is located in Israel, where the majority of its general and administrative expenses costs are incurred in New Israeli Shekels. During each of the years ended December 31, 2023 and 2022, AutoMax recognized foreign currency transaction income NIS 6,971 thousand (approximately $1,926 thousand) and NIS 3,511 thousand (approximately $970 thousand), respectively. AutoMax’s functional currency is NIS. These foreign currency transaction gains and losses were recorded in financial expenses, net in its statements of comprehensive loss.
As AutoMax continues to grow its business, its results of operations and cash flows will be subject to fluctuations due to changes in foreign currency exchange rates, which could adversely impact AutoMax’s results of operations. AutoMax enters into hedging contracts from time to time, to mitigate AutoMax’s exposure to foreign currency exchange risk, subject to its need and according to market conditions.
Off-Balance Sheet Arrangements
AutoMax did not have, during the periods presented, and it does not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
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DIRECTORS AND OFFICERS OF SCISPARC FOLLOWING THE MERGER
Resignations of Current Executive Officers and Directors of SciSparc
Pursuant to the Merger Agreement, two (2) of the directors of SciSparc who will not continue as member of the board following the Merger will resign effective immediately prior to the completion of the Merger.
Directors of the Combined Company Following the Merger
The SciSparc board of directors is currently composed of seven directors. The following information sets forth the names, ages, director classes, and proposed titles of each of the proposed directors of the combined company upon consummation of the Merger, their present principal occupation and their recent business experience. During the last five years, neither we nor the proposed directors of the combined company have been (i) convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or (ii) a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining such person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.
| Designee | Age | Position(s) | ||
| AutoMax Designees | ||||
| Yaarah Alfi* | 36 | Chief Financial Officer of AutoMax | ||
| Tomer Levy* | 29 | VP Business Development and Headquarters, director of AutoMax | ||
| SciSparc Designees | ||||
| Amitay Weiss | 62 | Chairman of SciSparc’s board of directors | ||
| Amnon Ben Shay | 61 | Director | ||
| Moshe Revach | 48 | Director | ||
| Liat Sidi | 49 | Director | ||
| * | Subject to the approval of the shareholders of SciSparc at the Special Meeting. |
Mr. Amitay Weiss has served on SciSparc’s board of directors since August 2020 and as its chairman since January 2022. Mr. Weiss served as SciSparc’s Chief Executive Officer from August 2020 to January 2022. Mr. Weiss also currently serves as chairman of the board of directors of AutoMax, as a director of Jeffs’ Brands Ltd. (Nasdaq: JFBR) and as an external director of Cofix Group Ltd. (TASE: CFCS). Mr. Weiss also chairs and serves as director on the board of directors of several public and private companies, including Clearmind Medicine Inc. (Nasdaq: CMND), Maris Tech Ltd. (Nasdaq: MTEK) and Save Foods, Inc. (Nasdaq: SVFD). In 2016, Mr. Weiss founded Amitay Weiss Management Ltd. and now serves as its chief executive officer. From 2001 until 2015, Mr. Weiss served as vice president of business marketing & development and in various other positions at Bank Poalei Agudat Israel Ltd. from the First International Bank of Israel group. Mr. Weiss holds a B.A. in economics from New England College, an M.B.A. in business administration from Ono Academic College in Israel, an Israeli branch of University of Manchester and an LL.B. from the Ono Academic College.
Mr. Amnon Ben Shay has served as a member of SciSparc’s board of directors since January 2021 and served as an external director under the Companies Law between January 2021 and January 2022. Mr. Ben Shay has been chief financial officer of Aerodrome Group Ltd since October 2022. Mr. Ben Shay previously served on the board of directors of Azorim Investments and Building Development Company Ltd. (TASE: AZRM), Value Capital One Ltd. (TASE: VALU) and B.G.I. Investments (1961) Ltd. (TASE: BGI). Mr. Ben Shay was chief financial officer of Hadar Hasharon Marketing and Distributions Ltd. from February 2019 to October 2022. From February 2017 to January 2019, Mr. Ben Shay served as the chief financial officer of Fridenson Air & Ocean Ltd. From January 2014 to January 2017, Mr. Ben Shay served as the chief financial officer of Abetrans Logistics Ltd. Prior to that, Mr. Ben Shay served as the chief financial officer of Isline Export and Import Services Ltd. from 2010 to 2013. Prior to the year 2009, Mr. Ben Shay served as the chief financial officer of several Israeli real estate investment groups. Mr. Ben Shay holds a B.A. in economics and business and an M.B.A in business, both from The Hebrew University of Jerusalem, Israel, and an accounting certificate from The College of Management Academic Studies, Israel.
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Mr. Moshe Revach has served as a member of SciSparc’s board of directors since September 2022. Mr. Revach also previously served as a director since August 2020 until his resignation on March 13, 2022. Mr. Revach has served as vice-counselor of the Ramat Gan municipality and has been on its financial committee since March 2024. Mr. Revach serves as a director of L.L.N IT solutions, a wholly owned subsidiary of the Jewish Agency for Israel, RPG Economic Society, ParaZero Technologies Ltd. (Nasdaq: PRZO), Plantify Foods Inc (CVE: PTFY), and Jeffs’ Brands Ltd. (Nasdaq: JFBR). Mr. Revach previously served as a director of Biomedico Hadarim, and Jewish Experience Company on behalf of the Jewish Agency and also served as deputy mayor of Ramat Gan, Israel from 2013 to 2023, while also heading the sports and government relations departments in the Ramat Gan municipality. Mr. Revach holds an LL.B from the Ono Academic College, Israel, and a B.A. in management and economics from the University of Derby.
Ms. Liat Sidi has served as a member of SciSparc’s board of directors since August 2020. Ms. Sidi serves as the manager of the accounting department for Foresight Autonomous Holdings Ltd. (Nasdaq and TASE: FRSX) and has served as director for Save Foods Inc. (Nasdaq: SVFD) since November 2023. Ms. Sidi previous served as director for Plantify Foods Inc (CVW: PTFY) from September 2023 to January 2024. Ms. Sidi previously served as an accountant for Panaxia Labs Israel Ltd. (TASE: PNAK) from 2015 to 2020 and as an accountant for Soho Real Estate Ltd. from 2015 to 2016. Ms. Sidi also served as an accountant for Feldman-Felco Ltd. from 2006 to 2010 and as an accountant for Eli Abraham accounting firm from 2000 to 2006. Ms. Sidi completed tax, finance and accounting studies in Ramat Gan College of Accounting.
Mr. Tomer Levy has been serving as VP Business Development and Headquarters and director of AutoMax since March 2021. Prior to that, between May 2017 and March 2021, Mr. Levy served as Global AutoMax’s VP Business Development and Headquarters. Mr. Levy has experience in a wide variety of managerial roles.
Ms. Yaarah Alfi has been serving as chief financial executive of AutoMax and its subsidiaries since March 2021. Ms. Alfi previously served as controller for Global AutoMax from January 2018 until March 2021. Between 2015 and 2018, Ms. Alfi was employed as a certified public accountant at Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global. Additionally, Ms. Alfi has experience in a wide variety of managerial, financial, tax and accounting roles. Ms. Alfi holds a B.A. in Accounting and Business management from The College of Management, Israel and is a certified public accountant.
Composition of the Board of Directors
Pursuant to the Merger Agreement, each of the directors and officers of SciSparc who will not continue as directors or officers of SciSparc or the combined company following the consummation of the Merger shall resign immediately prior to the effective time of the Merger. In connection with the Merger, the size of SciSparc’s board of directors will be consist of six (6) directors. Pursuant to the terms of the Merger Agreement, two (2) of such directors will be designated by AutoMax and four (4) of such directors will be designated by SciSparc. Effective as of the effective time of the Merger, it is anticipated that Amnon Ben Shay, Moshe Revach, Liat Sidi and Amitay Weiss will remain on SciSparc’s board of directors. Subject to the approval of the SciSparc shareholders of Proposal 4 at the Special Meeting and the election thereof, Tomer Levy and Yaarah Alfi will serve on SciSparc’s board of directors as AutoMax’s designees. It is anticipated that these directors will be appointed to the three staggered director classes of the combined company’s board of directors as follows:
Class I will consist of Ms. Liat Sidi and Ms. Yaarah Alfi, each with a term expiring at the 2024 annual meeting of shareholders.
Class II will consist of Mr. Amnon Ben Shay and Mr. Moshe Revach, each with a term expiring at the 2025 annual meeting of shareholders.
Class III will consist of Mr. Amitay Weiss and Mr. Tomer Levy, with a term expiring at the 2026annual meeting of shareholders.
The division of SciSparc’s board of directors into three classes with staggered three-year terms may delay or prevent a change of management or a change of control of SciSparc, or, following the completion of the Merger, the combined company.
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Director Independence
The SciSparc board of directors has determined that all current members of the board of directors are independent, as determined in accordance with the rules of The Nasdaq Stock Market.
The SciSparc board of directors has also determined that each current member of the compensation committee is independent as defined under Nasdaq listing standards and the Companies Law, and that each current member of the audit committee is independent as defined under Nasdaq listing standards and applicable SEC rules and Israeli laws. In making this determination, SciSparc’s board of directors found that none of these directors had a material or other disqualifying relationship with SciSparc.
Based upon information requested from and provided by each proposed director concerning their background, employment and affiliations, including family relationships, SciSparc’s board of directors has determined that neither of the proposed AutoMax directors is independent as defined under Nasdaq listing standards. SciSparc’s board of directors also determined that Amnon Ben Shay, Moshe Revach and Liat Sidi, who will comprise the compensation committee, all satisfy the independence standards for such committees established by the SEC and Nasdaq listing standards, as applicable. With respect to the audit committee, SciSparc’s board of directors has determined that Amnon Ben Shay, Moshe Revach and Liat Sidi satisfy the independence standards for such committee established by Rule 10A-3 under the Exchange Act, the SEC and Nasdaq listing standards, as applicable. The board of directors considered the relationships between such directors and certain of the investors of the combined company and determined that such relationships did not affect such directors’ independence under the standards of Nasdaq, or, where applicable, under SEC rules.
Board Committees
The SciSparc board of directors has established two standing committees to assist it in fulfilling its responsibilities to SciSparc and its shareholders: the audit committee and the compensation committee. Each committee acts pursuant to a written charter. Each committee reviews its charter on an annual basis. In addition to the three standing committees, the SciSparc board of directors may approve from time to time the creation of other committees to assist the board in carrying out its duties.
Immediately following the consummation of the Merger, the committees of the board of directors of the combined company will operate pursuant to and apply SciSparc’s written charters and corporate governance policies currently in place. Thereafter, the board of directors of the combined company intends to review the written charters and corporate governance policies of SciSparc and, in the discretion of the board of directors of the combined company, adopt or amend such charters and policies, as may be necessary.
Audit Committee
The functions of the audit committee under the Companies Law include identifying and addressing flaws in the business management of SciSparc, reviewing and approving related party transactions, establishing whistleblower procedures, overseeing SciSparc’s internal audit system and the performance of its internal auditor, and assessing the scope of the work and recommending the fees of SciSparc’s independent accounting firm. In addition, the audit committee is required to determine whether certain related party actions and transactions are “material” or “extraordinary” for the purpose of the requisite approval procedures under the Companies Law and to establish procedures for considering proposed transactions with a controlling shareholder.
In accordance with U.S. law and Nasdaq requirements, SciSparc’s audit committee is also responsible for the appointment, compensation and oversight of the work of its independent auditors and for assisting the board of directors in monitoring financial statements, the effectiveness of internal controls and compliance with legal and regulatory requirements. The audit committee of the combined company is expected to retain these duties and responsibilities following completion of the Merger.
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SciSparc’s audit committee currently consists of Amnon Ben Shay, Alon Dayan and Lior Vider. The SciSparc board of directors has determined that Amnon Ben Shay is an “audit committee financial expert” as defined in the SEC rules.
Following the consummation of the Merger, the members of the audit committee are expected to be Amnon Ben Shay, Moshe Revach and Liat Sidi. Amnon Ben Shay is expected to be the chairperson of the audit committee and is a financial expert under the rules of the SEC. The SciSparc board of directors has concluded that the composition of the audit committee meets the requirements for independence under the rules and regulations of Nasdaq and SEC. SciSparc and AutoMax believe that, after completion of the Merger, the functioning of the audit committee will comply with the applicable requirements of the rules and regulations of Nasdaq and the SEC.
Compensation Committee
The functions of the compensation committee under the Companies Law include recommending to the board of directors, for ultimate shareholder approval by a special majority, a policy governing the compensation of directors and officers based on specified criteria, reviewing modifications to and implementing such compensation policy from time to time, and approving the actual compensation terms of directors and officers prior to approval by the board of directors. The compensation committee of the combined company is expected to retain these duties and responsibilities following completion of the Merger.
SciSparc’s compensation committee currently consists of Amnon Ben Shay, Alon Dayan and Lior Vider.
Following the consummation of the Merger, the members of the compensation committee are expected to be Amnon Ben Shay, Moshe Revach and Liat Sidi. Amnon Ben Shay is expected to be the chairperson of the compensation committee. The SciSparc board of directors has determined that each member of the compensation committee is independent within the meaning of the independent director guidelines of Nasdaq. SciSparc and AutoMax believe that, after the completion of the Merger, the composition of the compensation committee will meet the requirements for independence under, and the functioning of such compensation committee will comply with, any applicable requirements of the rules and regulations of Nasdaq and the SEC.
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Executive Officers of the Combined Company Following the Merger
Subject to and effective upon the closing of the Merger, the current executive officers of AutoMax will be the executive officers of SciSparc. The following information sets forth the names, ages, and proposed titles of each of the executive officers of the combined company upon consummation of the Merger, their present principal occupation and their recent business experience. During the last five years, neither we nor the proposed executive officers of the combined company have been (i) convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or (ii) a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining such person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.
| Name | Age | Position(s) | ||
| Oz Adler | 37 | Chief Executive Officer and Chief Financial Officer | ||
| Dr. Adi Zuloff-Shani | 55 | Chief Technology Officer |
Mr. Oz Adler, CPA, was appointed to serve as SciSparc’s Chief Executive Officer in January 2022 and has served as SciSparc’s Chief Financial Officer since April 2018 and previously held served as its VP Finance from March 2018 until April 2018 and as SciSparc’s Controller from September 2017 to March 2018. Mr. Adler has experience in a wide variety of managerial, financial, tax and accounting roles. Mr. Adler currently serves on the board of directors of numerous private, such as Polyrizon Ltd., and public companies, including Jeffs’ Brands Ltd. (Nasdaq: JFBR), Rail Vision Ltd. (Nasdaq: RVSN) and Clearmind (Nasdaq: CMND), (FSE: CWY), and previously served as the chief financial officer of Medigus Ltd. (Nasdaq: MDGS) from December 2020 to April 2021. From 2012 until 2017, Mr. Adler was employed as a certified public accountant at Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global. Mr. Adler holds a B.A. in Accounting and Business management from The College of Management, Israel.
Dr. Adi Zuloff-Shani, PhD, has served as SciSparc’s Chief Technologies Officer since February 2016. Dr. Zuloff-Shani has more than 20 years of experience as a research and development executive. Prior to joining us, and from 2012 to 2016, Dr. Zuloff-Shani served as a vice president development at Macrocure Ltd. (Nasdaq: MCUR) where besides leading all research and development activities, she interacted and was involved with the activities of all departments including clinical, operations, quality assurance, quality control, finance, and regulatory affairs. Dr. Zuloff-Shani currently serves as the Chief Executive Officer of Clearmind (Nasdaq: CMND), (FSE: CWY). She has served as the Chairman of Orsus Therapeutics, Inc. since November 2022, as a member of the scientific advisory board of Save Foods Inc. (Nasdaq: SAFD) since October 2021 and as a director of MitoCareX since May 2022. Dr. Zuloff-Shani holds a Ph.D. in human biology and immunology from Bar-Ilan University, Israel.
DIRECTOR AND OFFICER COMPENSATION
AutoMax Director Compensation
AutoMax currently compensates its chairperson of the board with monthly fee of NIS 25,000 (approximately $6,910), plus VAT for 50% position. In addition, the chairperson is entitled to annual bonus subject to fulfillment of predetermined targets. AutoMax currently compensates certain of its non-executive, non-employee directors with annual and participation fees at the rate of the maximum amount as specified in the second and third supplements to the Companies Regulations (Rules Concerning the Compensation and Expenses of an External Director) Regulations, 5760-2000, or the Compensation Regulations, and its external directors with annual and participation fees at the rate of the maximum amount as specified in the fourth supplement to the Companies Regulations, which totaled together to NIS 302,742 (approximately $83,677) in the year 2023.
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AutoMax Executive Compensation
The aggregate amounts of salaries, consulting and director fees, pension, retirement and other similar benefits, and share-based compensation, that were payable to AutoMax’s executive officers and directors and/or to their respective affiliates in respect of employment, consulting and directorship agreements and arrangements (which includes other amounts described in this “Director and Officer Compensation” section of this proxy statement/prospectus) during the year ended December 31, 2023 is set forth in the below table. The table does not include any amounts that AutoMax paid to reimburse any of such persons for costs incurred in providing it with services during that period.
| (in thousands) | Salary, Fees and Related Benefits |
Pension, Retirement and Other Similar Benefits |
Share Based Compensation | |||
| All directors and senior management as a group, consisting of 14 persons | NIS 4,378,277 (approximately $1,210,137) | NIS 2,548,903 (approximately $704,506) |
Following the Merger, SciSparc will compensate its directors and senior management team in accordance with the recommendation of its compensation committee and, generally, subject to the approval of the SciSparc board of directors and shareholders. That compensation will generally need to be consistent with the terms of the compensation policy, which will require periodic approval, in accordance with the requirements of the Companies Law (as described below under “Related Party Transactions of Directors and Executive Officers of the Combined Company—Director and Officer Compensation”). Therefore, the future compensation practices of SciSparc following the Merger may differ from the historical practices of AutoMax.
In accordance with the Companies Law, beginning with SciSparc’s first annual general meeting of shareholders that takes place following the Merger, the combined company will be required to disclose the compensation paid to its five most highly compensated officers on an individual basis for the previous fiscal year, or as otherwise required under SEC rules. Consequently, we will be required to include that information in all annual reports on Form 20-F or Form 10-K that we file with the SEC, just as SciSparc has done until the current time.
Employment Agreements
AutoMax has entered into a service agreement with Haim Levy – Trade In Ltd. for CEO services rendered by Daniel Levy, on March 24, 2021, or the CEO Agreement. According to the CEO agreement, Daniel Levy, through Haim Levy Trade In Ltd. receives a monthly payment of NIS 50,000 (approximately $13,820), and additional payments for expenses. The CEO Agreement contains a customary provision regarding confidentiality of information. The CEO Agreement is in effect for three years following its signing, and terminable by either party upon 90 days’ prior written notice. On March 24, 2024, the shareholders of AutoMax voted in favor of extending the CEO Agreement for an additional period of three years. The total amount paid under this agreement for the year ended December 31, 2023, (including share based compensation) is NIS 1,050,632 (approximately $290,390).
AutoMax has entered into a service agreement with A. Ynon (2015) Ltd. for Chief Business Officer services rendered by Ynon Amit, on March 24, 2021, or the Chief Business Officer Agreement. According to the Chief Business Officer Agreement, Ynon Amit, through A. Ynon (2015) Ltd., receives a monthly payment of NIS 50,000 (approximately $13,820), and additional payments for expenses. The Chief Business Officer Agreement contains a customary provision regarding confidentiality of information. The Chief Business Officer Agreement is in effect for three years following its signing, and terminable by either party upon 90 days’ prior written notice. On March 24, 2024, the shareholders of AutoMax voted in favor of extending the Chief Business Officer Agreement for additional period of three years. The total amount paid under this agreement for the year ended December 31, 2023, (including share based compensation) is NIS 1,029,479 (approximately $284,544).
AutoMax has entered into an employment agreement with Haim Levy, Trade and Procurement Officer, or the Trade and Procurement Officer Agreement. According to the Trade and Procurement Officer Agreement, Haim Levy receives a monthly payment of NIS 45,000 (approximately $12,438), and additional payments for expenses. The Trade and Procurement Officer Agreement contains a customary provision regarding confidentiality of information. The Chief Business Officer Agreement is in effect for three years following its signing, and terminable by either party upon 90 days’ prior written notice. The total amount paid under this agreement for the year ended December 31, 2023, (including share based compensation) is NIS 751,681 (approximately $207,761).
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AutoMax has entered into an employment agreement with Gal Levy, Regulation and Branch Manager Officer, or the Regulation and Branch Manager Officer Agreement. According to the Regulation and Branch Manager Officer Agreement, Gal Levy receives a monthly payment of NIS 45,000 (approximately $12,438), and additional payments for expenses. The Regulation and Branch Manager Officer Agreement contains a customary provision regarding confidentiality of information. The Regulation and Branch Manager Officer is in effect for three years following its signing, and terminable by either party upon 90 days’ prior written notice. The total amount paid under this agreement for the year ended December 31, 2023, (including share based compensation) is NIS 748,806 (approximately $206,967).
AutoMax has entered into an employment agreement with Tomer Levy, Vice President Business Development Officer, or the Vice President Business Development Officer Agreement. According to the Vice President Business Development Officer Agreement, Tomer Levy receives a monthly payment of NIS 45,000 (approximately $12,438), and additional payments for expenses. The Vice President Business Development Officer Agreement contains a customary provision regarding confidentiality of information. The Vice President Business Development Officer is in effect for three years following its signing, and terminable by either party upon 90 days’ prior written notice. The total amount paid under this agreement for the year ended December 31, 2023, (including share based compensation) is NIS 750,610 (approximately $207,465).
In relation to Amitay Weiss’s service as chairperson of AutoMax, he is entitled to a monthly retainer of NIS 25,000 (approximately $6,909) and VAT, and payment for expenses. In addition, Mr. Weiss is entitled to certain cash bonuses, contingent on pre-determined milestones of the Company. The total amount paid to Amitay Weiss for the year ended December 31, 2023 is NIS 450,000 (approximately $124,378).
Directors in the Company are entitled to payment as applicable under the Companies Law and its regulations. In sum, during the year ended December 31, 2023, the Company has paid its directors (in total) approximately NIS 303,000 (approximately $83,748). It is clarified that the board members Emanuel Paz Puzailov and Eyal Baruch do not receive cash compensation for their service as directors of AutoMax. Mr. Puzailov and Mr. Baruch previously received equity compensation.
Share Incentive Plans
AutoMax maintains one incentive plan — 2021 Share Incentive Plan, or the AutoMax Plan —which will be cancelled upon the effectiveness of the Merger. At that time, outstanding options under the AutoMax Plan will be terminated.
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RELATED PARTY TRANSACTIONS
OF DIRECTORS AND EXECUTIVE OFFICERS
OF THE COMBINED COMPANY
Described below are any transactions occurring since January 1, 2021, and any currently proposed transactions to which either SciSparc or AutoMax was a party and in which:
| ● | The amounts involved exceeded or will exceed the lesser of (i) $120,000 and (ii) one percent of the average of SciSparc’s or AutoMax’s total assets at year end for the last two completed fiscal years; and |
| ● | A director, executive officer, holder of more than 5% of the outstanding share capital of SciSparc or AutoMax, or any member of such person’s immediate family had or will have a direct or indirect material interest. |
SciSparc Transactions
Employment Agreements
SciSparc has entered into written employment agreements with Oz Adler, its Chief Executive Officer and Chief Financial Officer, and Dr. Adi Zuloff-Shani, its Chief Technologies Officer. Each of these agreements contains customary provisions regarding noncompetition, confidentiality of information and assignment of inventions. However, the enforceability of the noncompetition provisions may be limited under applicable law. These agreements are terminable by either party upon 30 days’ prior written notice. In addition, SciSparc has entered into agreements with each executive officer and director pursuant to which it has agreed to indemnify each of them up to a certain amount and to the extent that these liabilities are not covered by directors and officers insurance. Members of SciSparc’s senior management are eligible for bonuses each year. The bonuses are payable upon meeting objectives and targets that are set by SciSparc’s Chief Executive Officer and approved annually by SciSparc’s board of directors that also set the bonus targets for SciSparc’s Chief Executive Officer.
Options
Since SciSparc’s inception, it has granted options to purchase SciSparc’s ordinary shares to its employees, officers, service providers and certain of its directors. Such option agreements may contain acceleration provisions upon certain merger, acquisition, or change of control transactions. SciSparc’s option plans are described above under “Director and Officer Compensation”. If the relationship between SciSparc and an executive officer or a director is terminated, except for cause (as defined in the various option plan agreements), options that are vested will generally remain exercisable for 90 days after such termination.
Commercial Agreements
Clearmind
On March 7, 2022, SciSparc entered into the Cooperation Agreement with Clearmind, a company in which Dr. Adi Zuloff-Shani, SciSparc’s Chief Technologies Officer, Mr. Weiss, SciSparc’s chairman of the board of directors, and Mr. Adler, SciSparc’s Chief Executive Officer and Chief Financial Officer serve as officers and directors.
On November 17, 2022, SciSparc invested $1.5 million in Clearmind in connection with its initial public offering on the Nasdaq Capital Market, in exchange for 230,769 common shares of Clearmind, representing 9.33% of the outstanding share capital of Clearmind.
Polyrizon
On May 31, 2022, SciSparc entered into the Polyrizon Collaboration Agreement with Polyrizon. Mr. Adler, SciSparc’s Chief Executive Officer and Chief Financial Officer, serves as a director in Polyrizon.
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On August 13, 2024, SciSparc entered into a termination agreement with Polyrizon to terminate the Polyrizon Collaboration Agreement.
Additionally, on August 13, 2024, SciSparc entered into the License Agreement, for the out-licensing of its SCI-160 program with Polyrizon. Pursuant to the License Agreement, SciSparc granted Polyrizon the License.
Jeffs’ Brands
On November 15, 2022, SciSparc entered into a letter of intent with Jeffs’ Brands, to establish the Jeffs’ Joint Venture.
On February 23, 2023, SciSparc entered into the Secondary Purchase Agreement with Jeffs’ Brands and Jeffs’ Holdings.
Mr. Oz Adler, SciSparc’s Chief Executive Officer and Chief Financial Officer, is the chairman of the board of directors of Jeffs’ Brands, Mr. Amitay Weiss, SciSparc’s chairman of the board of directors and Mr. Moshe Revach, a member of SciSparc’s board of directors, are both directors in Jeffs’ Brands.
AutoMax
As part of the restructuring initiative, on February 23, 2023, SciSparc’s board of directors held a meeting in which an external consultant presented market research conducted on the car and bus market in Israel. Following a general overview of the market opportunity, the external consultant presented SciSparc’s board of directors with a potential transaction in which it would purchase a controlling interest in a profitable target company. The external consultant provided an overview of AutoMax, its competition in the vehicle import market, as well as its growth potential.
Between the months of June and November 2023, the management of AutoMax met with the management of SciSparc to negotiate and discuss a potential transaction structure.
On June 22, 2023, SciSparc’s board of directors held a meeting in which it approved an investment in the aggregate amount of NIS 4 million (approximately $1.1 million) in AutoMax.
On June 25, 2023, SciSparc entered into the AutoMax SPA.
On November 22, 2023, SciSparc announced the signing of a non-binding letter of intent, to acquire AutoMax, with certain new negotiated terms as announced on December 7, 2023.
On January 14, 2024, SciSparc entered into the Bridge Loan with AutoMax.
On April 10, 2024, SciSparc signed the Merger Agreement with AutoMax.
On June 9, 2024, SciSparc entered into the Amended Bridge Loan with AutoMax.
On August 14, 2024, SciSparc signed the Merger Agreement Addendum with AutoMax.
On September 5, 2024, SciSparc entered into the Second Amendment with AutoMax.
Mr. Amitay Weiss, SciSparc’s chairman of the board of directors is the chairman of the board of directors of AutoMax.
Related Party Transactions
Under the Companies Law, a related party transaction in which an “office holder” has a personal interest may be approved only if it is for the benefit of the company. An office holder is defined in the Companies Law as a director, a general manager, chief business manager, deputy general manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of such person’s title, and any other manager directly subordinate to the general manager. A transaction that is not an extraordinary transaction in which an office holder has a personal interest requires the approval of the board of directors, unless the articles of association of the company provide otherwise. If the transaction is an extraordinary transaction, it must be approved by the audit committee and the board of directors, and, under certain circumstances, by the shareholders of the company. An “extraordinary transaction” is a transaction other than in the ordinary course of business, other than on market terms or that is likely to have a material impact on the company’s profitability, assets or liabilities.
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Pursuant to the Companies Law, extraordinary transactions in which a controlling shareholder has a personal interest require the approval of the audit committee, or the compensation committee if the transaction is in connection with employment or service with the company, the board of directors and the shareholders of the company. The shareholder approval must be by a simple majority of all votes cast, provided that (i) such majority includes a simple majority of the votes cast by non-controlling shareholders having no personal interest in the matter or (ii) the total number of votes of shareholders mentioned in clause (i) above who voted against such transaction does not exceed 2% of the total voting rights in the company.
In most cases, the Companies Law prohibits any director who has a personal interest in a transaction from being present for the discussion or voting pertaining to such transaction in the audit committee or board of directors. Nevertheless, a director who has a personal interest may be present at the meeting and vote on the matter if a majority of the directors or members of the audit committee have a personal interest in the approval of such transaction; in this case, however, the transaction also requires shareholder approval.
Director and Officer Compensation
Under the Companies Law, SciSparc is required to approve, at least once every three years, a compensation policy with respect to office holders. Following the recommendation of SciSparc’s compensation committee, the compensation policy must be approved by the board of directors and shareholders. The shareholder approval must be by a simple majority of all votes cast, provided that (i) such majority includes a simple majority of the votes cast by non-controlling shareholders having no personal interest in the matter or (ii) the total number of votes of shareholders mentioned in clause (i) above who voted against such transaction does not exceed 2% of the total voting rights in the company. In general, the terms of compensation of directors, the chief executive officer and any employee or service provider who is considered a controlling shareholder must be approved separately by the compensation committee, the board of directors and the shareholders. The compensation terms of other officers who report directly to the chief executive officer requires the approval of the compensation committee and the board of directors.
AutoMax Transactions
Material Agreements
The Merger Agreement
On April 10, 2024, AutoMax signed the Merger Agreement with SciSparc, as amended on August 14, 2024 pursuant to the Merger Agreement Addendum, as further detailed in this this proxy statement/prospectus.
Founder Agreement to establish a joint company in connection with the Company’s branches in Petah Tikva and Ra’anana
On April 25, 2021, Global AutoMax entered into a founders’ agreement, or the HaSharon Founders’ Agreement with A.V.A. Motors Ltd., which acts as an authorized reseller of vehicles imported by AutoMax and operated a branch in Petah Tikva, or A.V.A. Reseller. Pursuant to the HaSharon Founders’ Agreement, the parties founded a joint company, Automax HaSharon Ltd., or Automax Hasharon, which until October 2022, engaged in operating marketing and sales centers for vehicles imported by AutoMax in the cities of Petah Tikva and Ra’anana. According to the HaSharon Founders’ Agreement, Global AutoMax was to hold 1/3 of AutoMax Hasharon’s share capital, while A.V.A. held the remaining 2/3. The HaSharon Founders’ Agreement also stipulated that certain decisions would require a 100% majority of the directors.
The HaSharon Founders’ Agreement included customary provisions that limit the possibility of transferring shares in Automax HaSharon, including the right of first refusal (except in the circumstances stipulated in the Founders’ Agreement), the right to join the sale of shares (Tag Along) and forced sale (Bring Along).
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On June 23, 2022, an agreement was signed between Global AutoMax, A.V.A. and Automax HaSharon. Pursuant to the agreement, Global AutoMax purchased from A.V.A shares that constitute 1/3 of the issued share capital of Automax HaSharon, in addition to providing Automax HaSharon with an owner’s loan in accordance with the agreement established between the parties. Following the provision of the aforementioned owner’s loan, Automax HaSharon paid off an owner’s loan in the same amount provided to it by A.V.A. Simultaneously with the signing of the aforementioned agreement, an amendment to the HaSharon Founders’ Agreement was signed according to which Global AutoMax shall be entitled to appoint two directors to Automax HaSharon board of directors, and A.V.A. will be entitled to appoint one director. With the completion of the aforementioned agreement, Global AutoMax owns 2/3 of the issued share capital of Automax HaSharon, and the A.V.A. owns the remaining 1/3, and two directors are appointed by Global AutoMax, and one director is appointed by A.V.A., to serve on the board of directors of Automax HaSharon.
In October 2022, in accordance with the agreement between Global AutoMax and the Reseller, Global AutoMax commenced operating the branch in Petah Tikva directly, while Automax HaSharon continues to operate the branch in Ra’anana. As of the date of this report, due to the ongoing Israel – Hamas war, AutoMax closed the Petah Tikva branch.
Exclusive Distribution Agreement for Chargers and Charging Stations for Electric Vehicles in Israel
On November 23, 2021, Automax entered into an exclusive distribution agreement with Dongfeng Liuzhou Motor Co., Ltd., a company incorporated under the laws of China, or the Manufacturer, allowing Automax to distribute, sale and market chargers and charging stations for electric vehicles produced by the Manufacturer in Israel, or the Distribution Agreement. Pursuant to the Distribution Agreement, Automax offers such chargers and charging stations to customers who purchased electric and plug-in vehicles marketed by it, and also market the products to customers and other resellers, by itself or through a dedicated company established for this purpose.
Pursuant to the Distribution Agreement, Automax will exclusively distribute, market and sell the chargers and charging stations in Israel, subject to AutoMax meeting monthly quotas for orders placed with the Manufacturer, as stipulated in the Distribution Agreement. Subject to the successful completion of such quotas, the Distribution Agreement shall be valid for a period of 12 months from its execution, and will be automatically extended for an additional 12 month period, unless one of the parties provides the other with a notice of termination. As of the date hereof, AutoMax and the Manufacturer continue transacting business in accordance with the agreement as signed on November 23, 2021.
Direct Import Agreement with Automobile Plant GAZ Ltd.
On November 26, 2021, Global AutoMax entered into an agreement with Automobile Plant GAZ Ltd., a company incorporated under the laws of Russia, or GAZ, for the purpose of distribution, sales, and marketing of the GAZ’s commercial vehicles and trucks in Israel, or the GAZ Agreement.
Pursuant to the GAZ Agreement, Gaz sells heavy category vehicles to the designated subsidiary, based on orders placed by Global AutoMax from time to time, without Global AutoMax committing to a minimal number of orders. In addition, GAZ provides the subsidiary with warranty services for the vehicles purchased. Furthermore, GAZ will provide Global AutoMax with spare parts, in accordance with the GAZ Agreement.
It should be clarified that the import of vehicles and their distribution in Israel require approvals granted by the Ministry of Transportation and other regulatory institutions, which have not yet been granted as for the date of this report. In addition, the large-scale import and distribution of vehicles in Israel are subject to obtaining relevant European certifications by GAZ. Due to the Russia – Ukraine war, there has been significant delays on GAZ’s side to obtain the required certificates from the European Union, and to the best of the Company’s knowledge as of the date of the report, there has been no progress. The GAZ Agreement shall remain in effect until December 31, 2026.
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Trade-In Activity in Israel
On March 13, 2022, Global AutoMax signed a founders agreement, as amended with Av Yo Holdings Ltd., or the Partner, to establish a joint entity, Automax Trade-In Ltd., or Automax Trade-In, which engages in the purchase and sale of used vehicles (trade-in), or the Trade-In Agreement. Pursuant to the Trade-In Agreement, Global AutoMax grants Automax Trade-In exclusivity in the purchase of trade-in vehicles, as purchased by Global AutoMax from its customers, according to pricing determined at Global AutoMax’s discretion, subject to fulfilment of certain quotas as agreed in the Trade-In Agreement.
Pursuant to the Trade-In Agreement, Global AutoMax owns approximately 80% of the issued and paid-up capital of Automax Trade-In, while the remaining 20% is held by the Partner. The Partner was given options, with a vesting schedule subject to the completion of milestones, as established in the Trade-In Agreement, which, assuming their full exercise, may increase the holdings of the Partner in Automax Trade-In up to 48% of its issued and paid-up capital.
Prior to the signing of the Trade-In Agreement, Global AutoMax entered into a sublease agreement in connection with offices with an area of approximately 100 square meters as well as land with an area of approximately 1,000 square meters in the “Pi Glilot” complex, which has been assigned to AutoMax Trade-In and from the date of its establishment it is used for its activities, or the Lease Agreement. The lease period according to the Lease Agreement is from February 1, 2022 to August 6, 2023, and AutoMax Trade-In was given an option to extend it for another identical period (subject to the extension of the lease period of the main tenant). The Lease Agreement can be terminated with a 6-months notice, upon request from the competent authorities. On July 24, 2023, Automax Trade-In exercised its option right and extended the lease for an additional 24 months, set to expire in August 2025.
As of the date of this prospectus, AutoMax has terminated the sublease agreement in respect to the lease in “Pi Glilot” complex, and its trade-in activity is being conducted within AutoMax’s existing branches.
Founders’ agreement in relation with the branches in Ashkelon and Ashdod
On July 19, 2022, Global AutoMax entered into a founders agreement with an authorized reseller, A.S Mobility Ltd., that operates AutoMax’s branch in Ashkelon pursuant to which Global AutoMax and the authorized reseller founded a joint company, Automax HaShefela Ltd., or Automax Hashfela, which operates as a vehicle distribution and sales center in Ashdod and Ashkelon. Pursuant to the foregoing agreement, Global AutoMax owns half of the Automax HaShefela and the authorized reseller holds the other half. The board of directors of Automax HaShefela consists of four directors, two of which were appointed by the authorized reseller and two which were appointed by Global AutoMax.
The parties also entered into a distribution agreement, pursuant to which, Automax HaShefela became the authorized reseller of vehicles imported by Global AutoMax in the cities of Ashkelon and Ashdod, replacing the previously existing agreement between the parties.
Prior to the founders agreement, Global AutoMax entered into a lease agreement for a property of approximately 500 square meters in Ashdod, Israel, which was assigned to Automax HaShefela and serves as a branch of Global AutoMax in Ashdod. The lease period is from September 15, 2022 for a period of three years, with an option to extend the lease agreement for three additional periods of two years, each, in total up to September 19, 2031. The lease agreement in the name of Global AutoMax in Ashkelon was also assigned to Automax HaShefela.
As of the date hereof, due to the Israel-Hamas war, AutoMax closed the Ashkelon branch, while the Ashdod branch remains operational.
Founders’ agreement in relation with the branches in Netanya
On July 28, 2022, Global AutoMax entered into a distribution agreement with an authorized reseller. On November 8, 2022 Global AutoMax and the authorized reseller signed the Netanya Founders Agreement and cancelled the distribution agreement, pursuant to which Global AutoMax and the authorized reseller formed a joint company, Automax Netanya Ltd., or Automax Netanya. In the third quarter of 2023, the authorized reseller transferred all its holdings in Automax Netanya to Global AutoMax, and the Netanya Founders’ Agreement was canceled, and Global AutoMax is operating the Netanya Branch.
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Prior to the Netanya Founders’ Agreement, Global AutoMax entered into a lease agreement for a property of approximately 750 square meters in Netanya, Israel, which was assigned to Automax Netanya and serves as a branch of Global AutoMax in Netanya. The lease period is from September 1, 2022 for a period of three years, with an option to extend the lease agreement for two additional periods of three years, each, in total up to August 30, 2031. To guarantee the lease, Global AutoMax provided a guarantee in the amount of up to 5 months rent, plus VAT.
Import and Marketing of Buses in Israel
On June 19, 2022, AutoMax entered into a founders agreement with Dalhom Motors Ltd., or Dalhom, which owns a franchise for importing buses of the Temsa brand, manufactured in Turkey, pursuant to which the companies formed Dalhom Automax Ltd., a limited liability company formed under the laws of the State of Israel, or Dalhom AutoMax, and the Dalhom Automax Founders Agreement, respectively. The purpose of Dalhom Automax is to serve as a direct importer of Temsa buses in Israel and market these. The Dalhom Automax Founders Agreement closed on November 20, 2022, following which each of AutoMax and Dalhom held 50% of Dalhom Automax. Pursuant to the Dalhom Automax Founders Agreement, upon the closing, Automax was required to lend Automax Dalhom an aggregate amount of NIS 10 million (approximately $2.7 million), to enable Automax Dalhom to fulfill its obligations toward Dalhom, as prescribed in the Dalhom Automax Founders Agreement, or the Automax Dalhom Loan. Under the foregoing agreement, the Automax Dalhom Loan was provided at the same interest rate (back-to-back), as the loan received by Automax from its financing sources, so long as it does not exceed the rate stipulated in the Dalhom Automax Founders Agreement. The Automax Dalhom Loan is to be repaid subject to the terms and rates defined in the agreement, and among others, will bear interest of up to 5.9% per annum, and shall be fully repaid within six years from the closing, or exchanged into shares of Dalhom Automax.
The Dalhom Automax Founders Agreement includes provisions commonly accepted in franchise agreements, including sales goals agreed between the parties, failure to comply with the terms set forth in the Dalhom Automax Founders Agreement will grant Temsa the right to terminate the agreement, should Dalhom Automax fail to be in compliance by the end of the cure period. Furthermore, Dalhom Automax will not import or market in Israel products that compete with those of Temsa, during the time of the agreement, without obtaining a written approval. In addition, Dalhom Automax entered into a service and warranty agreement with Temsa, for a period of 3 years, under which Dalhom Automax would provide maintenance and warranty services for buses manufacture by Temsa in Israel.
The Turkish Trade Ministry has announced a trade embargo between Turkey and Israel. This trade stoppage could have a short-term impact on the supply of vehicles and on the prices of logistics and transportation of vehicles to Israel, in particular for Dalholm’s operations. However, AutoMax does not anticipate a significant impact on the group’s business as it holds (in Israel) a stock of Temsa buses and has taken steps to find alternative ways to continue the regular supply of Temsa vehicles and buses to Israel.
Agreement for Direct Import of Electric Vehicles to Israel
On March 13, 2023, Dalhom Automax entered into an agreement with Al Damani, a UAE vehicle manufacturer, subject to which Dalhom Automax would distribute, sell, and promote the Al Damani electric vehicles in Israel. This agreement remains subject to Dalhom Automax obtaining all the regulatory approvals as required by the ministry of transportation to import vehicles into Israel, a condition that has not yet been met.
Market Maker Agreement
On October 19, 2023, AutoMax entered into a market maker agreement with I.B.I Investment House Ltd., or IBI, pursuant to which IBI will serve as a market maker for AutoMax’s ordinary shares, effective as of October 22, 2023, subject to the Securities Laws. The agreement will be effective for a period of 12 months, following which it will be automatically renewed for an additional 12 months, unless terminated by one of the parties.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
As previously disclosed, on April 10, 2024, SciSparc Ltd., or the Parent Company or SciSparc entered into an Agreement and Plan of Merger with AutoMax Motors Ltd., an Israeli company traded on the TASE and the leading parallel importer and distributor of vehicles in Israel, or AutoMax, and SciSparc Merger Sub Ltd., an Israeli limited company and wholly-owned subsidiary of SciSparc, or the Merger Agreement. On August 14, 2024, the parties entered into an addendum to the Merger Agreement, or the Merger Agreement Addendum. Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement and the Merger Agreement Addendum, SciSparc Merger Sub Ltd. will be merged with and into AutoMax, with AutoMax surviving the merger as a wholly-owned subsidiary of the Parent Company, or the Merger.
The unaudited pro forma condensed combined balance sheet is based on the individual historical balance sheet of the Parent Company and AutoMax, prepared in accordance with IFRS as of December 31, 2023, and has been prepared to reflect the effect of the acquisition as if it had occurred on December 31, 2023. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023, gives effect to the acquisition as if it had occurred on January 1, 2023, the beginning of the Parent Company’s fiscal year. The historical condensed combined financial information has been adjusted to give effect to pro forma events that are: 1) directly attributable to the acquisition; 2) factually supportable; and 3) with respect to the statement of operations, expected to have a continuing impact on the combined results. The unaudited pro forma financial statements were prepared in accordance with Article 11 of U.S. Securities and Exchange Commission Regulation S-X. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma condensed combined financial information have been made, as further described in the accompanying notes.
The unaudited pro forma condensed combined financial information is derived from and should be read in conjunction with the Parent Company’s historical audited financial statements for the fiscal year ended December 31, 2023, which are available in SciSparc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2023, and the historical audited financial statements of AutoMax included as Exhibit 99.1 in this Report of Foreign Private Issuer on Form 6-K.
Estimated consideration of approximately $3.29 million is based on the Company’s 30 days average closing share price of $0.34 between 14 August 2024 and 25 September 2024. The value of purchase price consideration will change based on fluctuations in the share price of the Company’s ordinary shares and the number of ordinary shares of the Company’s outstanding on the closing date.
The allocation of the purchase price as reflected in the unaudited pro forma condensed combined financial information was based on a preliminary valuation of the assets acquired and liabilities assumed, and the accounting is subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available.
The unaudited pro forma combined condensed financial statements are presented for informational purposes only and are not necessarily indicative of the results of operations that would have resulted had the transaction described above been consummated at the dates indicated, nor are they necessarily indicative of the results of operations which may be realized in the future. Furthermore, the unaudited pro forma combined condensed financial statements do not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that may be associated with the integration of the two companies.
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL POSITION
As of December 31, 2023
(U.S. dollars in thousands)
| SciSparc Ltd. | AutoMax Motors Ltd. | Transaction Adjustments | Pro Forma | |||||||||||||||
| Assets | ||||||||||||||||||
| Current Assets: | ||||||||||||||||||
| Cash | $ | 2,076 | $ | 428 | $ | (386 | ) | 4(b) | $ | 2,118 | ||||||||
| Restricted deposit | 65 | - | - | 65 | ||||||||||||||
| Short-term deposit | 3,000 | - | - | 3,000 | ||||||||||||||
| Trade receivables | 22 | 7,321 | - | 7,343 | ||||||||||||||
| Other accounts receivable | 540 | 10,534 | - | 11,074 | ||||||||||||||
| Inventory | 742 | 50,633 | - | 51,375 | ||||||||||||||
| Total Current Assets | 6,445 | 68,916 | (386 | ) | 74,795 | |||||||||||||
| Non-current assets: | ||||||||||||||||||
| Long term bank deposits | - | 113 | - | 113 | ||||||||||||||
| Intangible asset, net | 3,189 | 3,065 | - | 6,254 | ||||||||||||||
| Deferred taxes | - | 832 | - | 832 | ||||||||||||||
| Investments in company accounted for at equity | 781 | 3,464 | - | 4,245 | ||||||||||||||
| Long term prepaid expenses | - | 53 | - | 53 | ||||||||||||||
| Investments in financial assets | 659 | 47 | (529 | ) | 4(b) | 177 | ||||||||||||
| Property and equipment, net | 108 | 7,818 | - | 7,926 | ||||||||||||||
| Total Non-current Assets | 4,737 | 15,392 | (529 | ) | 19,600 | |||||||||||||
| Total Assets | $ | 11,182 | 84,308 | (915 | ) | 94,575 | ||||||||||||
| Liabilities | ||||||||||||||||||
| Current liabilities: | ||||||||||||||||||
| Trade payables | $ | 802 | $ | 4,458 | $ | - | $ | 5,260 | ||||||||||
| Short term loans | - | 38,994 | - | 38,994 | ||||||||||||||
| Other accounts payable | 185 | 12,739 | 91 | 4(b) | 13,015 | |||||||||||||
| Warrants | 532 | 1,888 | - | 2,420 | ||||||||||||||
| Lease liability | 52 | 1,592 | - | 1,644 | ||||||||||||||
| Total Current liabilities | 1,571 | 59,671 | 91 | 61,333 | ||||||||||||||
| Non-current liabilities: | ||||||||||||||||||
| Lease liability | 24 | 4,502 | - | 4,526 | ||||||||||||||
| Long term loans | - | 498 | - | 498 | ||||||||||||||
| Loans from related parties | - | 272 | - | 272 | ||||||||||||||
| Warrants Liability | - | 9,539 | - | 9,539 | ||||||||||||||
| Employees | - | 39 | - | 39 | ||||||||||||||
| Total Current liabilities | 24 | 14,850 | - | 14,874 | ||||||||||||||
| Total Liabilities | $ | 1,595 | 74,520 | 91 | 76,207 | |||||||||||||
| Shareholders’ Equity: | ||||||||||||||||||
| Share capital and premium | $ | 64,526 | $ | 23,063 | $ | (6,457 | ) | 4(a) | $ | 81,132 | ||||||||
| Reserve from share-based payment transactions | 5,282 | 5,518 | - | 10,800 | ||||||||||||||
| Warrants | 5,190 | 509 | - | 5,699 | ||||||||||||||
| Foreign currency translation reserve | 497 | (86 | ) | - | 411 | |||||||||||||
| Transactions with non-controlling interests | 810 | - | - | 810 | ||||||||||||||
| Accumulated deficit | (68,691 | ) | (18,849 | ) | 5,451 | 4(b) | (82,089 | ) | ||||||||||
| 7,614 | 10,155 | (1,006 | ) | 16,763 | ||||||||||||||
| Non-controlling interests | 1,973 | (368 | ) | - | 1,605 | |||||||||||||
| Total Shareholders’ Equity: | 9,587 | 9,788 | (1,006 | ) | 18,369 | |||||||||||||
| Total Liabilities and Shareholders’ Equity | 11,182 | 84,308 | (915 | ) | 94,484 | |||||||||||||
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF COMPREHENSIVE LOSS
For the year ended December 31, 2023
(U.S. dollars in thousands)
| SciSparc Ltd. | AutoMax Motors Ltd. | Transaction Accounting Adjustments | Pro Forma | |||||||||||||||
| Revenues | $ | 2,879 | $ | 115,564 | $ | - | $ | 118,443 | ||||||||||
| Cost of goods sold | (683 | ) | (105,070 | ) | - | (105,753 | ) | |||||||||||
| Gross profit | 2,196 | 10,494 | 12,690 | |||||||||||||||
| Research and development expenses | 1,641 | - | - | 1,641 | ||||||||||||||
| Sales and marketing | 1,297 | 7,902 | - | 9,199 | ||||||||||||||
| Impairment of intangible asset | 1,042 | - | - | 1,042 | ||||||||||||||
| General and administrative expenses | 5,031 | 5,037 | 477 | 4(d) | 10,545 | |||||||||||||
| Operating loss | 6,815 | 2,445 | 477 | 9,737 | ||||||||||||||
| SciSparc’s share of losses of company accounted for at equity, net | 210 | 145 | - | 355 | ||||||||||||||
| Other income | - | (429 | ) | (6,457 | ) | 4(c) | (6,886 | ) | ||||||||||
| Finance income | (2,219 | ) | (2,130 | ) | - | (4,349 | ) | |||||||||||
| Finance expenses | 1,055 | 4,641 | 529 | 4(b) | 6,225 | |||||||||||||
| Loss before income taxes | 5,861 | 4,672 | (5,451 | ) | 5,082 | |||||||||||||
| Taxes on income | 22 | 95 | - | 117 | ||||||||||||||
| Total comprehensive loss | 5,883 | 4,767 | (5,451 | ) | 5,199 | |||||||||||||
| Equity holders of SciSparc | 5,122 | 4,442 | (5,451 | ) | 4,113 | |||||||||||||
| Non-controlling interests | 761 | 325 | - | 1,086 | ||||||||||||||
| 5,883 | 4,767 | (5,451 | ) | 5,199 | ||||||||||||||
| Basic loss per ordinary share attributable to equity holders of SciSparc: | 14.43 | 0.05 | 6.70 | |||||||||||||||
| Diluted loss per ordinary share attributable to equity holders of SciSparc | 14.43 | 0.05 | 6.70 | |||||||||||||||
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Notes to Unaudited Pro Forma Condensed Combined Consolidated Financial Statements
Note 1 - Basis of presentation
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023, was derived from the audited consolidated financial statements included in Parent Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2023, and was derived from the audited historical financial information of AutoMax for the year ended December 31, 2023, and has been prepared as if the Merger had occurred on January 1, 2023. The unaudited pro forma condensed combined financial information herein has been prepared to illustrate the effects of the Merger in accordance with IFRS.
The Parent Company has accounted for the Merger under the acquisition method of accounting in accordance with the authoritative guidance on business combinations under the provisions of IFRS 3 (“Business Combinations”). The purchase price allocation is considered preliminary, and additional adjustments may be recorded during the measurement period in accordance with IFRS 3. The purchase price allocation will be finalized as the Parent Company receives additional information relevant to the acquisition, including the final valuation and reconciliation of the assets purchased, including tangible and intangible assets, liabilities assumed. Differences between these preliminary estimates and the final purchase accounting may occur, and these differences could be material.
SciSparc has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:
| ● | SciSparc’s existing shareholders will have the greater voting interest in the combined entity. |
| ● | SciSparc’s directors will represent the majority of the board of directors of the combined company following the consummation of the Merger; and |
| ● | SciSparc’s senior management will be the senior management of the combined company following the consummation of the Merger. |
The unaudited pro forma condensed combined statement of financial position as of December 31, 2023 assumes that the Business Combination occurred on December 31, 2023. The unaudited pro forma condensed combined statements of comprehensive loss for the year ended December 31, 2023, presents pro forma effect to the Merger as if it had been completed on January 1, 2023.
The unaudited pro forma condensed combined statement of financial position as of December 31, 2023 has been prepared using, and should be read in conjunction with, the following:
| ● | SciSparc’s audited consolidated statement of financial position as of December 31, 2023 and the related notes filed with the SEC on Form 20-F, as amended; and |
| ● | AutoMax’s audited financial position as of December 31, 2023 and the related notes, included elsewhere in this Report of Foreign Private Issuer on Form 6-K. |
The audited pro forma condensed combined statement of comprehensive loss for the year ended December 31, 2023 have been prepared using, and should be read in conjunction with, the following:
| ● | SciSparc’ audited consolidated statement of comprehensive loss for the year ended December 31, 2023 and the related notes filed with the SEC on Form 20-F, as amended; |
| ● | AutoMax’s audited consolidated statement of comprehensive loss for the twelve months ended December 31, 2023 and the related notes included elsewhere in SciSparc’s Report of Foreign Private Issuer on Form 6-K, filed on May 2, 2024; |
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Information has been prepared based on these preliminary estimates, and the final amounts recorded may differ materially from the information presented. The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Merger.
Management has made significant estimates and assumptions in its determination of the pro forma adjustments. The pro forma adjustments reflecting the consummation of the Merger are based on certain currently available information and certain assumptions and methodologies that SciSparc believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material. SciSparc believes that these assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Merger based on information available to management at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information is presented solely for informational purposes and is not necessarily indicative of the combined results of operations or financial position that might have been achieved for the periods presented, nor is it necessarily indicative of the future results of the combined company.
The unaudited pro forma condensed combined financial information does not necessarily reflect what the combined company’s financial condition or results of operations would have been had the transactions occurred on the dates indicated. The unaudited pro forma condensed combined financial information also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
Note 2 - Adjustments to Unaudited Pro Forma Condensed Combined Financial Information
The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). SciSparc has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information.
Note 3 - Estimated purchase price consideration
On April 10, 2024, SciSparc entered into the Merger Agreement, by and among SciSparc, SciSparc Merger Sub Ltd. and AutoMax, pursuant to which AutoMax agreed to convert its share capital in exchange for the right to receive a number of validly issued, fully paid and nonassessable Parent ordinary shares, equal to the Exchange Ratio (as defined in the Merger Agreement), per each such Company Ordinary Share and up to 49.9% of SciSparc ordinary shares immediately after to the effective time (as defined in the Merger Agreement).
Estimated consideration of approximately $3.29 million is based on the Company’s 30 days average closing share price of $0.34 between 14 August 2024 and 25 September 2024. The value of purchase price consideration will change based on fluctuations in the share price of the Company’s ordinary shares and the number of ordinary shares of the Company’s outstanding on the closing date.
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The following is a summary of the components of the estimated consideration (in thousands except per-share information and the exchange ratio) if the acquisition of AutoMax had occurred on December 31, 2023:
| Estimated Company’s ordinary shares outstanding* | 10,828,251 | |||
| Exchange ratio | 0.475 | |||
| Total Company’s ordinary share issued | 9,796,989 | |||
| Company’s share price** | 0.34 | |||
| Total estimated consideration to be paid | 3,330,976 |
| * | Represents Company's outstanding shares as of September 25, 2024 |
| ** | Represents the Company's 30 days average closing share price between 14 August 2024 and 25 September 2024 |
The estimated consideration of the purchase price will depend on the market price of the Company’s ordinary shares when the acquisition is consummated. The Company believes that a 72% fluctuation in the market price of its ordinary shares is reasonably possible based on historical volatility, and the potential effect on estimated consideration would be:
| Company’s share price | Estimated consideration | |||||||
| As presented | $ | 0.34 | 3,330,976 | |||||
| 72% increase | $ | 0.58 | 5,729,279 | |||||
| 72% decrease | $ | 0.10 | 932,673 | |||||
Note 4 - Pro Forma Adjustments
The following describes the pro forma adjustments related to the acquisition that have been made in the accompanying unaudited pro forma condensed combined statements of comprehensive loss for the year ended December 31, 2023, giving effect to the Merger as if it had been consummated at the beginning of the period presented, and in the accompanying unaudited pro forma condensed combined financial position as of December 31, 2023, giving effect of the Merger as if it had occurred on December 31, 2023, all of which are based on preliminary estimates that could change significantly as additional information is obtained:
| (a) | Represents the consideration paid and the assets acquired, and liabilities assumed, as if the acquisition of AutoMax was consummated on December 31, 2023. |
| (b) | Represents cancellation of pre business combination’s investment of SciSparc in the shares of AutoMax. |
| (c) | Represents the estimated bargain purchase consideration. |
| (d) | represents the expected transaction costs. |
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Description of SHARE Capital
The following description of SciSparc’s share capital and provisions of its current Amended and Restated Articles of Association are summaries and do not purport to be complete.
Registration number and purposes of the Company
SciSparc’s registration number with the Israeli Registrar of Companies is 51-358165-2. SciSparc’s purpose as set forth in its Amended and Restated Articles of Association is to engage in any lawful activity.
Type and class of securities
SciSparc’s authorized share capital consists of 75,000,000 ordinary shares, of no par value, or the ordinary shares. All of its outstanding ordinary shares have been validly issued, are fully paid and non-assessable.
Preemptive rights
SciSparc’s ordinary shares are not redeemable and are not subject to any preemptive right.
Transfer of shares
SciSparc’s fully paid ordinary shares are issued in registered form and may be freely transferred under its Amended and Restated Articles of Association, unless the transfer is restricted or prohibited by another instrument, applicable law or the rules of a stock exchange on which the shares are listed for trade. The ownership or voting of its ordinary shares by non-residents of Israel is not restricted in any way by its Amended and Restated Articles of Association or the laws of the State of Israel, except for ownership by nationals of certain countries that are, or have been, in a state of war with Israel.
Liability to further capital calls
SciSparc’s board of directors may make, from time to time, such calls as it may deem fit upon shareholders with respect to any sum unpaid with respect to shares held by such shareholders which is not payable at a fixed time. Such shareholder has to pay the amount of every call so made upon him or her.
Election of directors
Under SciSparc’s Amended and Restated Articles of Association, its board of directors must consist of at least three (3) and not more than eight (8) directors, including, if applicable, two external directors appointed as required under the Companies Law. Other than SciSparc’s external directors (if any), its directors are divided into three classes with staggered three-year terms. Each class of directors consists, as nearly as possible, of one third of the total number of directors constituting the entire board of directors. At each annual general meeting of the SciSparc shareholders, the election or re-election of directors following the expiration of the term of office of the directors of that class of directors is for a term of office that expires on the third annual general meeting following such election or re-election, such that from 2020 and after, at each annual general meeting the term of office only one class of directors will expire. Each director, holds office until the annual general meeting of the SciSparc shareholders for the year in which his or her term expires and until his or her successor is duly appointed, unless the tenure of such director expires earlier pursuant to the Companies Law upon the occurrence of certain events or unless removed from office by a vote of the holders of at least 65% of the total voting power of the SciSparc shareholders at a general meeting of its shareholders in accordance with SciSparc’s Amended and Restated Articles of Association.
Further, SciSparc shareholders approved an approval mechanism similar to a mechanism that exists in the Delaware Generate Corporate Law, which requires an affirmative vote of the board of directors (by 75% of the members) in addition to the approval of its shareholders in order to amend such provisions.
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In addition, if a director’s office becomes vacant, the remaining serving directors may continue to act in any manner, provided that the number of the serving directors shall not be less than three (3). If the number of serving Directors is lower than their minimal one, the board of directors shall not be permitted to act, other than for the purpose of convening a general meeting of the Company’s shareholders for the purpose of appointing additional Directors. For further information on the election and removal of directors see “Directors, Senior Management and Employees—Board Practices”.
Contested election
Under the Amended and Restated Articles of Association, in the event of a contested election, the board of directors in its discretion, will set the method of calculation of the votes and the manner in which the resolutions will be presented to the SciSparc shareholders at the general meeting. In the event that the board of directors does not or is unable to make a determination on such matter, then the directors will be elected by a plurality of the voting power represented at the general meeting in person or by proxy and voting on the election of directors.
Dividend and liquidation rights
SciSparc may declare a dividend to be paid to the holders of SciSparc ordinary shares in proportion to their respective shareholdings. Under the Companies Law, dividend distributions are determined by the board of directors and do not require the approval of the shareholders of a company unless the company’s Articles provide otherwise. The Amended and Restated Articles of Association do not require shareholder approval of a dividend distribution and provide that dividend distributions may be determined by the board of directors.
Pursuant to the Companies Law, the distribution amount is limited to the greater of retained earnings or earnings generated over the previous two years, according to its then last reviewed or audited consolidated financial statements, provided that the date of the financial statements is not more than six months prior to the date of the distribution, or SciSparc may distribute dividends that do not meet such criteria only with court approval; as a company listed on an exchange outside of Israel, however, court approval is not required if the proposed distribution is in the form of an equity repurchase, provided that it notifies its creditors of the proposed equity repurchase and allow such creditors an opportunity to initiate a court proceeding to review the repurchase. If within 30 days such creditors do not file an objection, then it may proceed with the repurchase without obtaining court approval. In each case, SciSparc is only permitted to distribute a dividend if its board of directors and the court, if applicable, determines that there is no reasonable concern that payment of the dividend will prevent it from satisfying its existing and foreseeable obligations as they become due.
In the event of SciSparc’s liquidation, after satisfaction of liabilities to creditors, its assets will be distributed to the holders of SciSparc ordinary shares in proportion to their shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future.
Exchange controls
There are currently no Israeli currency control restrictions on remittances of dividends on SciSparc’s ordinary shares, proceeds from the sale of the shares or interest or other payments to non-residents of Israel, except for shareholders who are subjects of certain countries that are, or have been, in a state of war with Israel.
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Shareholder meetings
Under the Companies Law, SciSparc is required to hold an annual general meeting of its shareholders once every calendar year that must be held no later than 15 months after the date of the previous annual general meeting. All general meetings other than the annual meeting of shareholders are referred to in the Amended and Restated Articles of Association as special general meetings. SciSparc’s board of directors may call special general meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the Companies Law provides that the board of directors is required to convene a special meeting upon the written request of (i) any two of its directors or one-quarter of the members of the board of directors or (ii) as a company listed on an exchange in the U.S., one or more shareholders holding, in the aggregate, either (a) 10% or more of its outstanding issued shares and 1% or more of our outstanding voting power or (b) 10% or more of its outstanding voting power.
Under the Companies Law, one or more shareholders holding at least 1% of the voting rights at the general meeting may request that the board of directors include a matter in the agenda of a general meeting to be convened in the future, provided that it is appropriate to discuss such a matter at the general meeting. Notwithstanding the foregoing, as a company listed on an exchange outside of Israel, a matter relating to the appointment or removal of a director may only be requested by one or more shareholders holding at least 5% of the voting rights at the general meeting of the shareholders.
Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings are the shareholders of record on a date to be decided by the board of directors, which may be between four and 60 days prior to the date of the meeting. Furthermore, the Companies Law requires that resolutions regarding the following matters must be passed at a general meeting of the shareholders:
| ● | amendments to SciSparc’s Amended and Restated Articles of Association; | |
| ● | appointment or termination of its auditors; | |
| ● | appointment of external directors; | |
| ● | approval of certain related party transactions; | |
| ● | increases or reductions of its authorized share capital; | |
| ● | mergers; and | |
| ● | the exercise of its board of directors’ powers by a general meeting, if its board of directors is unable to exercise its powers and the exercise of any of its powers is required for its proper management. |
Under SciSparc’s Amended and Restated Articles of Association, it is not required to give notice to its registered shareholders pursuant to the Companies Law, unless otherwise required by law. The Companies Law requires that a notice of any annual general meeting or extraordinary general meeting be provided to shareholders at least 21 days prior to the meeting and if the agenda of the meeting includes the appointment or removal of directors, the approval of transactions with office holders or interested or related parties, or an approval of a merger, or as otherwise required under applicable law, notice must be provided at least 35 days prior to the meeting.
Voting rights
Voting rights
All SciSparc’s ordinary shares have identical voting and other rights in all respects.
Quorum requirements
Pursuant to SciSparc’s Amended and Restated Articles of Association, holders of SciSparc’s ordinary shares have one vote for each ordinary share held on all matters submitted to a vote before the shareholders at a general meeting. The quorum required for its general meetings of shareholders consists of at least two shareholders, present in person or by proxy, holding at least fifteen percent (15%) of the voting rights of the Company. A meeting adjourned for lack of a quorum will be adjourned for one day at the same time and place, or to such other day, time or place if such is stated in the notice of the meeting. At the reconvened meeting, if a quorum is not present within half an hour, any number of shareholders present in person or by proxy will constitute a lawful quorum.
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Vote requirements
SciSparc’s Amended and Restated Articles of Association provide that all resolutions of its shareholders require a simple majority vote, unless otherwise required by the Companies Law or by its Amended and Restated Articles of Association. Under the Companies Law, each of (i) the approval of an extraordinary transaction with a controlling shareholder and (ii) the terms of employment or other engagement of the controlling shareholder of the company or such controlling shareholder’s relative (even if not extraordinary) requires the approval described under “Approval of Related Party Transactions under Israeli Law—Disclosure of Personal Interests of a Controlling Shareholder” of this prospectus. Certain transactions with respect to remuneration of the SciSparc office holders and directors require further approvals described under “Approval of Related Party Transactions under Israeli Law— Disclosure of Personal Interests of an Office Holder” of this prospectus. Another exception to the simple majority vote requirement is a resolution for the voluntary winding up, or an approval of a scheme of arrangement or reorganization, of the company pursuant to Section 350 of the Companies Law, which requires the approval of the majority of the shareholders voting their shares, other than abstainees, holding at least 75% of the voting rights represented at the meeting, in person, by proxy or by voting deed and voting on the resolution.
Articles amendment
In order to amend the Articles, in addition and prior to the approval of a general meeting of shareholders, the approval of the board of directors with the affirmative vote of at least three-quarters (3/4) of the directors then in office and entitled to vote thereon is required in order to approve any amendment to the Articles.
Access to corporate records
Under the Companies Law, shareholders are provided access to minutes of SciSparc’s general meetings, its shareholder register and principal shareholder register, its Amended and Restated Articles of Association, its financial statements and any document that SciSparc is required by law to file publicly with the Israeli Companies Registrar or the Israel Securities Authority. In addition, shareholders may request to be provided with any document related to an action or transaction requiring shareholder approval under the related party transaction provisions of the Companies Law. SciSparc may deny this request if it believes it has not been made in good faith or if such denial is necessary to protect its interest or protect a trade secret or patent.
Modification of class rights
Under the Companies Law and the Amended and Restated Articles of Association, the rights attached to any class of shares, such as voting, liquidation and dividend rights, may be amended by adoption of a resolution by the holders of a majority of the shares of that class present at a separate class meeting, or otherwise in accordance with the rights attached to such class of shares, as set forth in SciSparc’s Amended and Restated Articles of Association.
Acquisitions under Israeli law
Full tender offer
A person wishing to acquire shares of an Israeli public company and who would as a result hold over 90% of the target company’s issued and outstanding share capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstanding shares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstanding share capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the relevant class for the purchase of all of the issued and outstanding shares of that class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital of the company or of the applicable class, and more than half of the shareholders who do not have a personal interest in the offer accept the offer, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law. However, a tender offer will also be accepted if the shareholders who do not accept the offer hold less than 2% of the issued and outstanding share capital of the company or of the applicable class of shares.
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Upon a successful completion of such a full tender offer, any shareholder that was an offeree in such tender offer, whether such shareholder accepted the tender offer or not, may, within six months from the date of acceptance of the tender offer, petition an Israeli court to determine whether the tender offer was for less than fair value and that the fair value should be paid as determined by the court. However, under certain conditions, the offeror may include in the terms of the tender offer that an offeree who accepted the offer will not be entitled to petition the Israeli court as described above.
If a tender offer is not accepted in accordance with the requirements set forth above, the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.
Special tender offer
The Companies Law provides that an acquisition of shares of an Israeli public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of 25% or more of the voting rights in the company. This requirement does not apply if there is already another holder of at least 25% of the voting rights in the company. Alternatively, such an acquisition may be approved pursuant to a private placement approved by the company’s shareholders with the purpose of approving the acquisition of 25% or more, or 45% or more of the company’s voting rights. Similarly, the Companies Law provides that an acquisition of shares in a public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of more than 45% of the voting rights in the company, if there is no other shareholder of the company who holds more than 45% of the voting rights in the company, subject to certain exceptions.
In the event that a special tender offer is made, a company’s board of directors is required to express its opinion on the advisability of the offer, or shall abstain from expressing any opinion if it is unable to do so, provided that it gives the reasons for its abstention. In addition, the board of directors must disclose any personal interest each member of the board of directors has in the offer or stems therefrom.
A special tender offer must be extended to all shareholders of a company but the offeror is not required to purchase shares representing more than 5% of the voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may be consummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares whose holders objected to the offer (excluding the purchaser and its controlling shareholder, holders of 25% or more of the voting rights in the company or any person having a personal interest in the acceptance of the tender offer or any other person acting on their behalf, including relatives and entities under such person’s control). If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or such controlling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with the target company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer.
Merger
The Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under the Companies Law are met, by a majority vote of each party’s shares, and, in the case of the target company, a majority vote of each class of its shares voted on the proposed merger at a shareholders meeting. The board of directors of a merging company is required pursuant to the Companies Law to discuss and determine whether in its opinion there exists a reasonable concern that as a result of a proposed merger, the surviving company will not be able to satisfy its obligations towards its creditors, such determination taking into account the financial status of the merging companies. If the board of directors has determined that such a concern exists, it may not approve a proposed merger.
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For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the votes of the shares represented at the shareholders meeting that are held by parties other than the other party to the merger, or by any person (or group of persons acting in concert) who holds (or hold, as the case may be) 25% or more of the voting rights or the right to appoint 25% or more of the directors of the other party, vote against the merger. If, however, the merger involves a merger with a company’s own controlling shareholder or if the controlling shareholder has a personal interest in the merger, then the merger is instead subject to the same special majority approval that governs all extraordinary transactions with controlling shareholders (as described under “Approval of Related Party Transactions under Israeli law—Disclosure of Personal Interests of a Controlling Shareholder” of this prospectus).
If the transaction would have been approved by the shareholders of a merging company but for the separate approval of each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value to the parties to the merger and the consideration offered to the shareholders of the company.
Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of the merging entities, and may further give instructions to secure the rights of creditors.
In addition, a merger may not be consummated unless at least 50 days have passed from the date on which a proposal for approval of the merger was filed by each party with the Israeli Registrar of Companies and at least 30 days have passed from the date on which the merger was approved by the shareholders of each party.
Special Majority Board Approvals
Under the SciSparc Amended and Restated Articles of Association, at least three-quarters (3/4) of its serving directors are required to vote in favor of certain transactions which may have a significant effect on its structure, assets or business, including mergers acquisitions, consolidations and issuance of equity securities or debt securities convertible into equity in each case that would reasonably be expected to result in change of beneficial ownership of above than fifteen percent (15%) in SciSparc, material changes to SciSparc’s principal business and any resolution to transfer SciSparc’s headquarters outside of Israel.
Approval of business combinations
SciSparc’s Amended and Restated Articles of Association restrict certain business transactions with any shareholder and/or its affiliates and/or investors for a period of three years following (i) with respect to any shareholder of the Company holding fifteen percent (15%) or more of the voting power of the ordinary shares as of September 15, 2022, the effective date of the Amended and Restated Articles of Association, and (ii) with respect to all SciSparc shareholders, each time as such shareholder and/or any of its affiliates and/or investors become(s) (other than due to a buyback, redemption or cancellation of shares by SciSparc) the holder(s) (beneficially or of record) of fifteen percent (15%) or more of the issued and outstanding voting power of the ordinary shares. The restricted business transactions include mergers, consolidations and dispositions of assets with an aggregate market value equal to 10% or more of SciSparc’s assets or outstanding shares.
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Borrowing powers
Pursuant to the Companies Law and SciSparc’s Amended and Restated Articles of Association, its board of directors may exercise all powers and take all actions that are not required under law or under its Amended and Restated Articles of Association to be exercised or taken by a certain organ of SciSparc, including the power to borrow money for company purposes.
Changes in capital
SciSparc’s Amended and Restated Articles of Association enable it to increase or reduce its share capital. Any such changes are subject to the provisions of the Companies Law and must be approved by a resolution duly adopted by SciSparc’s shareholders at a general meeting. In addition, transactions that have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings or profits, require the approval of both its board of directors and an Israeli court.
Forum for adjudication of disputes
According to the Amended and Restated Articles of Association, the federal district courts of the United States of America, shall be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act, including all causes of action asserted against any defendant to such complaint. The competent courts in Tel Aviv, Israel shall be the exclusive forum for (i) any derivative action or proceeding brought on behalf of SciSparc, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of SciSparc to SciSparc or SciSparc’s shareholders, or (iii) any action asserting a claim arising pursuant to any provision of the Companies Law or the Securities Law 5728-1968. SciSparc retains the ability to consent to an alternative forum in circumstances where SciSparc determines that its interests and those of its shareholders are best served by permitting a particular dispute to proceed in a forum other than the federal district courts or State of Israel, as applicable.
Transfer agent and registrar
SciSparc’s transfer agent and registrar is Vstock Transfer LLC, or Vstock. Vstock’s address is 18 Lafayette Place, Woodmere, New York 11598 and its telephone number is (212) 828-8436.
Rights to purchase ordinary shares
On November 27, 2023, SciSparc’s board of directors declared the issuance of one special purchase right, or a Right, for each outstanding ordinary share and in connection therewith has entered into that certain Rights Agreement, dated as of November 28, 2023, or the Rights Agreement, by and between SciSparc and Vstock, in its capacity as the Rights Agent, or the Rights Agent.
The Rights
SciSparc’s board of directors authorized the issuance of a Right with respect to each outstanding Ordinary Share on December 8, 2023 and with respect to each ordinary share that will become outstanding prior to the earlier of the expiration of the Rights or the redemption thereof. The Rights will initially trade with, and will be inseparable from, the corresponding ordinary share. The Rights are evidenced only by the balances indicated in the book-entry account system of the transfer agent for SciSparc ordinary shares or, in the case of certificated shares, the certificates that represent such ordinary shares. New Rights will accompany any new ordinary shares SciSparc issues after December 8, 2023 until the earliest of the Issuance Date described below, the Redemption Date and the Final Expiration Date.
Exercise Price
Each Right will allow its holder to purchase from SciSparc one (1) ordinary share, at a purchase price of $0.001 per one ordinary share, once the Rights become exercisable. Prior to exercise, the Right does not give its holder any dividend, voting, or liquidation rights. The number of ordinary shares into issued upon the exercise of a Right and the purchase price may be adjusted from time to time, as further detailed in the Rights Agreement.
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Exercisability
The Rights will not be exercisable until the tenth day after the first date of public announcement or public disclosure by SciSparc or an Acquiring Person (as such term is defined in the Rights Agreement) that an Acquiring Person has become such, including as a result of such person becoming a “beneficial owner” (as such term is defined in the Rights Agreement) of 10% or more of the ordinary shares then outstanding (we refer to such date as the “Issuance Date”). The definition of the term beneficial owner in the Rights Agreement captures also circumstances that are beyond the definition of beneficial ownership under the Exchange Act.
If a person’s beneficial ownership of the then-outstanding ordinary shares as of the time of the public announcement of the rights plan is at or above 10%, that person or group’s then-existing ownership percentage would be grandfathered, but the Rights would become exercisable if at any time after such announcement, such person increases its ownership percentage by 0.5% or more, or following the date hereof such person’s beneficial ownership of ordinary shares of SciSparc as a percentage of the then-outstanding ordinary shares of SciSparc is reduced to an amount that is less than 10% and thereafter such person becomes an Acquiring Person.
Until the Issuance Date, the balances in the book-entry accounting system of the transfer agent for SciSparc’s ordinary shares or, in the case of certificated shares, ordinary shares certificates will also evidence the Rights, and any transfer of ordinary shares or, in the case of certificated shares, certificates for ordinary shares will constitute a transfer of Rights. After that date, the Rights will separate from the ordinary shares and be evidenced solely by Rights certificates that SciSparc will mail to all eligible holders of ordinary shares; provided, however, that SciSparc may choose to use book-entry in lieu of physical certificates. Any Rights held by an Acquiring Person or any Associate or Affiliate (as such terms are defined in the Rights Agreement) thereof are void and may not be exercised.
Consequences of a Person or Group Becoming an Acquiring Person
Flip In
If a person or group becomes an Acquiring Person, all holders of Rights except the Acquiring Person or any Associate or Affiliate thereof may, for a purchase price of $0.001 per one ordinary share, purchase one (1) Ordinary Share.
Flip Over
If SciSparc is later acquired in a merger or similar transaction after the Issuance Date, all holders of Rights except the Acquiring Person or any Associate or Affiliate thereof may, for a purchase price of $0.001 per share, purchase one (1) time the number of shares of the acquiring corporation, that each shareholder of the Company is entitled for each ordinary shares.
Expiration
The Rights will expire on November 27, 2024.
Redemption
SciSparc’s board of directors may redeem the Rights for no consideration at any time prior to such time that any person or group becomes an Acquiring Person. If its board of directors redeems any Rights, it must redeem all of the Rights.
Exchange
After a person or group becomes an Acquiring Person, but before an Acquiring Person owns 50% or more of SciSparc’s outstanding ordinary shares, its board of directors may extinguish the Rights by exchanging one (1) Ordinary Share or an equivalent security for each Right, other than Rights held by the Acquiring Person.
Anti-Dilution Provisions
SciSparc’s board of directors may adjust the purchase price of the ordinary shares, the number of ordinary shares issuable and the number of outstanding Rights to prevent dilution that may occur from a share dividend, a share split, a reclassification of the ordinary shares.
Amendments
The terms of the Rights Agreement may be amended by SciSparc’s board of directors without the consent of the holders of the Rights. After a person or group becomes an Acquiring Person, SciSparc’s board of directors may not amend the Rights Agreement in a way that adversely affects holders of the Rights.
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COMPARISON OF SHAREHOLDER RIGHTS
Both SciSparc and AutoMax are incorporated under the laws of Israel and, accordingly, the rights of the shareholders of each are currently, and will continue to be, governed by Israeli law. If the Merger is completed, AutoMax shareholders will become SciSparc shareholders, and their rights will be governed by Israeli law and the Amended and Restated Articles of Association.
The table below summarizes the material differences between the current rights of AutoMax shareholders under AutoMax’s current articles of association and the rights of SciSparc’s shareholders, post-Merger, under SciSparc’s Amended and Restated Articles of Association, as in effect immediately following the Merger.
Although SciSparc and AutoMax believe that the summary tables cover the material differences between the rights of their respective shareholders prior to the Merger and the rights of SciSparc shareholders following the Merger, these summary tables may not contain all of the information that is important to you. These summaries are not intended to be a complete discussion of the respective rights of SciSparc shareholders and AutoMax shareholders and are qualified in their entirety by reference to Israeli law and the various documents of SciSparc and AutoMax that are referred to in the summaries. You should carefully read this entire this proxy statement/prospectus and the other documents referred to in this proxy statement/prospectus for a more complete understanding of the differences between being an SciSparc shareholder and a AutoMax shareholder before the Merger and being an SciSparc shareholder after the Merger. SciSparc has filed copies of its current Amended and Restated Articles of Association with the SEC and will send copies of the documents referred to in this proxy statement/prospectus to you upon your request. AutoMax will also send copies of its documents referred to in this proxy statement/prospectus to you upon your request. See the section entitled “Where You Can Find More Information” in this proxy statement/prospectus.
| Provision | AutoMax (Pre-Merger) | SciSparc (Post-Merger) |
| Authorized Share Capital | The authorized share capital of AutoMax consists of 400,000,000 ordinary shares, par value of NIS 0.05 per share. | The authorized share capital of SciSparc consists of 75,000,000 ordinary shares, no par value. |
| Number of Directors | Under the AutoMax articles of association, the number of directors shall be no less than three (3) and not more than ten (10), including external directors, as may be amended from time to time by resolution of general meeting. | Under the SciSparc Amended and Restated Articles of Association, the number of directors is not less than three (3) nor more than eight (8), including the external directors (if any were elected) as may be amended from time to time by resolution of the board of directors. |
| Shareholder Nominations and Proposals | Under the Companies Law, any shareholder(s) holding at least 1% of the voting rights of the company may request that the board of directors (i) include a matter on the agenda of a general meeting, provided that the board of directors determines that the matter is appropriate to be considered at a general meeting or (ii) include on the agenda of a general meeting a nomination of a person to be proposed for election as a director. | Any shareholder(s) holding at least the required percentage under the Companies Law of the voting rights of the company may request, subject to the Companies Law and the conditions set forth in the Amended and Restated Articles of Association, that the board of directors (i) include a matter on the agenda of a general meeting, provided that the board of directors determines that the matter is appropriate to be considered at a general meeting or (ii) include on the agenda of a general meeting a nomination of a person to be proposed for election as a director. |
| Classified Board of Directors | No equivalent provision. | The Amended and Restated Articles of Association provide that the directors (excluding the external directors if any were elected), are classified, with respect to the term for which they each severally hold office, into three classes, such that following the expiration of the term of office of the directors of that class of directors will be for a term of office that expires on the third annual general meeting following such election or re-election. Notwithstanding anything to the contrary, each director shall serve until his or her successor is elected and qualified or until such earlier time as such director’s office is vacated. |
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| Removal of Directors and Vacancies | Directors are appointed and removed by a resolution adopted at a general meeting or special meeting. In addition, the general meeting will have the right, from time to time: A. To dismiss any board member, provided that the director can reasonably present their position before the general assembly; and B. appoint additional director or a replacement for a director whose position was vacated for any reason.
The board of directors may appoint a director to fill a vacancy or as an addition to the board of directors. Such appointment will be valid until the next annual meeting or until the director ceases to serve in their position in accordance with the provisions of the articles of association or any applicable law, whichever occurs first.
Directors, at the exception of external directors, may appoint themselves a replacement (an “alternate director”). Any such appointment will be effective from the date stated in the appointment notice but not before the notice is sent to the company. |
The board of directors (and, if so determined by the board of directors the general meeting) may at any time and from time to time appoint any person as a director to fill a vacancy (whether such vacancy is due to a director no longer serving or due to the number of directors serving being less than the maximum number of directors set forth in the articles).
The SciSparc shareholders may, by vote of at least 65% of the total voting power of the SciSparc shareholders, remove any director (other than external director, if any were elected) from office. |
| Special Meeting of the Shareholders | Pursuant to the Companies Law and the AutoMax articles of association, the board of directors may whenever it deems fit convene an extraordinary general meeting, and, as provided in the Companies Law, it shall be obliged to do so upon the written request of (i) any two or more of its directors, (ii) one-quarter or more of the serving shareholders of its board of directors or (iii) one or more shareholders holding, in the aggregate, either 5% or more of AutoMax’s outstanding voting power. | The SciSparc board of directors may, at its discretion, convene a special general meeting at such time and place, within or outside of the State of Israel, as may be determined by the board of directors. |
| Quorum for General Meeting | Two or more shareholders present in person or by proxy, holding shares conferring in the aggregate at least one-third (1/3) of the voting power of the AutoMax, unless otherwise mandated by any applicable law. | Such number of shareholders present in person or by proxy and holding shares conferring in the aggregate at least thirty-three and one-third percent (33⅓%) of the voting power of SciSparc, provided, however, that if (i) such general meeting was initiated by and convened pursuant to a resolution adopted by the SciSparc board of directors and (ii) at the time of such general meeting is qualified to use the forms of a “foreign private issuer” under US securities laws, then the requisite quorum shall be shareholders present in person or by proxy and holding shares conferring in the aggregate at least fifteen percent (15%) of the voting power of SciSparc. |
| Voting Shares | Each shareholder present in person, by proxy, or through a written ballot is entitled to one vote for each share held by the shareholder of record, on every resolution. | Each shareholder is entitled to one vote for each share held by the shareholder of record, on every resolution. |
| Shareholder Action by Written Consent | Under the Companies Law, shareholders are not permitted to take action via written consent in lieu of a meeting. | Under the Companies Law, shareholders are not permitted to take action via written consent in lieu of a meeting. |
| Notice of Shareholder Meeting | According to AutoMax articles of association, a shareholders meeting requires prior notice provided in accordance with the Companies Laws. | SciSparc is not required to give notice of a general meeting, subject to any mandatory provision of the Companies Law. |
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| Conversion Rights and Protective Provisions | No equivalent provision in the AutoMax articles of association. | Without derogating from any other approvals required by the applicable law, the following actions shall require the affirmative consent of at least three-quarters (3/4) of the directors then in office and entitled to vote thereon: (i) Any resolution to enter a merger, consolidation, acquisition, amalgamation, business combination, issue equity securities or debt securities convertible into equity or other similar transaction. (ii) Any resolution to sell directly or indirectly, assign, convey, transfer, lease or otherwise dispose, in one or series of related transactions, of all or substantially all of the assets of SciSparc and its subsidiaries, taken as a whole, to any person. (iii) Any resolution to affect any material change to the principal business of SciSparc, or otherwise materially change the SciSparc strategy and/or policies with respect to its main lines of business. (iv) Any resolution to transfer the headquarters of SciSparc outside of Israel. |
| Forum Selection | No equivalent provision. | The Amended and Restated Articles of Association provide that unless SciSparc consents in writing to the selection of an alternative forum, (a) the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act; and (b), the competent courts in Tel Aviv, Israel shall be the exclusive forum for (i) any derivative action or proceeding brought on behalf of SciSparc, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of SciSparc to SciSparc or its shareholders, or (iii) any action asserting a claim arising pursuant to any provision of the Companies Law or the Securities Law. |
| Indemnification | The articles of association provide that AutoMax may, subject and pursuant to the provisions of the Companies Law or any other additionally applicable law, indemnify retroactively and in advance, a director or officer of the company for certain liabilities and expenses incurred by him or her arising from or as a result of any act (or omission) carried out by him or her as a director or officer of the company and which is indemnifiable pursuant to applicable law, to the extent permitted by law. The Companies Law provides that undertakings to indemnify a director or officer for such liabilities (but not for such legal expenses) be limited to specified foreseeable events and to reasonable maximum amounts as approved by the board of directors.
Under the Companies Law, indemnification of directors and officers must be approved by the compensation committee and the board of directors (and, with respect to directors and the chief executive officer, by the shareholders). |
The Amended and Restated Articles of Association provide that SciSparc may, subject and pursuant to the provisions of the Companies Law or any other additionally applicable law, indemnify, retroactively and in advance, a director or officer of the company for certain liabilities and expenses incurred by him or her arising from or as a result of any act (or omission) carried out by him or her as a director or officer of SciSparc and which is indemnifiable pursuant to applicable law, to the fullest extent permitted by law. The Companies Law provides that undertakings to indemnify a director or officer for such liabilities (but not for such legal expenses) be limited to specified foreseeable events and to reasonable maximum amounts.
Under the Companies Law, indemnification of directors and officers must be approved by the compensation committee and the board of directors (and, with respect to directors and the chief executive officer, by the shareholders). |
| Dividends Declaration and Payment of Dividends | The board of directors may, from time to time, declare, and cause, AutoMax to pay dividends as permitted by the Companies Law. The board of directors shall determine the time for payment of such dividends and the record date for determining the shareholders entitled thereto, and subject to any preferential rights held by shareholders of a particular class, if applicable, and the provisions of these regulations concerning a reserved fund, dividends will be distributed and paid to the shareholders recorded in the shareholders’ register on the designated “X” day set for determining the distribution of dividends. Dividend shall not be paid on shares that were not paid in full. | The board of directors may, from time to time, declare, and cause SciSparc to pay dividends as permitted by the Companies Law. The board of directors shall determine the time for payment of such dividends and the record date for determining the shareholders entitled thereto.
Any dividend paid by SciSparc shall be allocated among the shareholders entitled thereto on a pari passu basis in proportion to their respective holdings of the issued and outstanding shares in respect of which such dividends are being paid. |
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PRINCIPAL SHAREHOLDERS OF SciSparc
The following table and related notes present information on the beneficial ownership of SciSparc ordinary shares as of September 1, 2024 by:
| ● | each shareholder known by SciSparc to beneficially own more than 5% of the outstanding shares of SciSparc; |
| ● | each director and named executive officer of SciSparc; and |
| ● | all of SciSparc’s directors and named executive officers as a group. |
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. SciSparc ordinary shares that may be acquired by an individual or group within 60 days of September 1, 2024, pursuant to the exercise of options, warrants or restricted share units, are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table.
The percentage of ownership is based on 2,586,686 SciSparc ordinary shares outstanding as of September 1, 2024, adjusted as required by the rules promulgated by the SEC to determine beneficial ownership. SciSparc does not know of any arrangements, including any pledge by any person of securities of SciSparc.
Except as indicated in the footnotes to this table, SciSparc believes that the shareholders named in this table have sole voting and investment power with respect to all SciSparc ordinary shares shown as beneficially owned by them, subject to community property laws where applicable. Unless otherwise noted, the address of each director and current and former executive officer of SciSparc is 20 Raul Wallenberg St., Tower A, 2nd Floor, Tel Aviv 6971916, Israel.
Holders of more than 5% of SciSparc’s ordinary shares | Number of Ordinary Shares Beneficially Owned(1) | Percent of Class(2) | ||||||
| Officers and Directors who are not 5% holders: | ||||||||
| Itschak Shrem | 1,136 | (3) | * | % | ||||
| Amitay Weiss | 821 | (4) | * | |||||
| Oz Adler | 856 | (5) | * | |||||
| Dr. Adi Zuloff-Shani | 840 | (6) | * | |||||
| Amnon Ben Shay | 141 | (7) | * | |||||
| Alon Dayan | 141 | (7) | * | |||||
| Liat Sidi | 141 | (7) | * | |||||
| Lior Vider | 141 | (7) | * | |||||
| Moshe Revach | 141 | (7) | * | |||||
| All directors and executive officers as a group (9 persons) | 4,358 | * | % | |||||
| * | Less than 1%. |
| (1) | Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them. |
| (2) | The percentages shown are based on 2,586,686 ordinary shares issued and outstanding as of September 1, 2024, plus ordinary shares relating to options and warrants currently exercisable or exercisable within 60 days of September 1, 2024, which are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. |
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| (3) | Includes 340 ordinary shares and options to purchase 996 ordinary shares at an exercise price of $169 per share. In addition, Mr. Shrem holds options to purchase 200 ordinary shares that are not exercisable within 60 days. Mr. Shrem’s options have an expiration date of January 3, 2028, and a weighted average exercise price of $169. |
| (4) | Includes 25 ordinary shares and options to purchase 996 ordinary shares at an exercise price of $169 per share. In addition, Mr. Weiss holds options to purchase 200 ordinary shares that are not exercisable within 60 days. Mr. Weiss’s options have an expiration date of January 3, 2028, and a weighted average exercise price of $169. |
| (5) | Includes options to purchase 996 ordinary shares at an exercise price of $169 per share, and options to purchase 60 ordinary shares at an exercise price of $5,460 per share. In addition, Mr. Adler holds options to purchase 200 ordinary shares that are not exercisable within 60 days. Mr. Adler’s options have an expiration date of January 3, 2028 to October 10, 2029, and a weighted average exercise price of $422. |
| (6) | Includes options to purchase 6 ordinary shares at an exercise price of NIS 77,241 (approximately $20,876) per share, options to purchase 38 ordinary shares at an exercise price of $5,640 per share, and options to purchase 996 ordinary shares at an exercise price of $169 per share. In addition, Dr. Zuloff-Shani holds options to purchase 200 ordinary shares that are not exercisable within 60 days. Dr. Zuloff-Shani’s options have an expiration date of February 16, 2026 to October 10, 2029, and a weighted average exercise price of $207. |
| (7) | Includes options to purchase 176 ordinary shares at an exercise price of $169 per share. Each of Amnon Ben Shay, Alon Dayan, Moshe Revach, Liat Sidi and Lior Vider holds options to purchase 35 ordinary shares that are not exercisable within 60 days. The options have an expiration date of January 3, 2028, and a weighted average exercise price of $169. |
Changes in Percentage Ownership by Major Shareholders
To SciSparc’s knowledge, other than as disclosed in the table above and in its other filings with the SEC incorporated by reference, there has been no significant change in the percentage ownership held by any major shareholder during the past three years.
Voting Rights
No major shareholders listed above had or have voting rights with respect to their ordinary shares that are different from the voting rights of other holders of SciSparc ordinary shares.
Record Holders
As of September 26, 2024, there were 22 holders of record of SciSparc ordinary shares, 8 of which have a registered address in the United States.
These numbers are not representative of the number of beneficial holders of its shares nor is it representative of where such beneficial holders reside, since many of these shares were held of record by brokers or other nominees.
Change in Control Arrangements
SciSparc is not controlled by another corporation, by any foreign government or by any natural or legal persons except as set forth herein, and there are no arrangements known to SciSparc which would result in a change in control at a subsequent date.
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PRINCIPAL SHAREHOLDERS OF AutoMax
The following table and related notes present information on the beneficial ownership of AutoMax ordinary shares as of September 1, 2024 by:
| ● | each shareholder known by AutoMax to beneficially own more than 5% of the outstanding shares of AutoMax; |
| ● | each director and named executive officer of AutoMax; and |
| ● | all of AutoMax’s directors and named executive officers as a group. |
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. AutoMax’s ordinary shares that may be acquired by an individual or group within 60 days of September 1, 2024, pursuant to the exercise of options, warrants or restricted share units, are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table.
The percentage of ownership is based on 118,310,565 AutoMax ordinary shares outstanding as of September 1, 2024, adjusted as required by the rules promulgated by the SEC to determine beneficial ownership. AutoMax does not know of any arrangements, including any pledge by any person of securities of AutoMax.
Except as indicated in the footnotes to this table, AutoMax believes that the shareholders named in this table have sole voting and investment power with respect to all AutoMax ordinary shares shown as beneficially owned by them, subject to community property laws where applicable. Unless otherwise noted, the address of each director and current and former executive officer of AutoMax is 15 Harechavim St., Jerusalem, Israel.
| NAME OF BENEFICIAL OWNER | Total Beneficial Ownership | Percentage of Ordinary Shares Beneficially Owned (1) | ||||||
| 5% and Greater Shareholders | ||||||||
| Kool Car Rental Kft (2) | 14,285,714 | 12.07 | % | |||||
| Belporto Investments Ltd. (3) | 7,209,614 | 6.09 | % | |||||
| Eliyahu Baruch Ltd. (4) | 7,209,614 | 6.09 | % | |||||
| Directors and Executive Officers | ||||||||
| Daniel Levy, Chief Executive Officer (5) | 16,196,941 | 13.69 | % | |||||
| Haim Levy, Procurement and Trade Officer | 1,580,189 | 1.34 | % | |||||
| Gal Levy, Regulation and Branch Manager | 1,580,189 | 1.34 | % | |||||
| Ynon Amit, Chief Business Officer (6) | 16,196,941 | 13.69 | % | |||||
| Amitai Weiss, Chairman | 25,764 | * | ||||||
| Eyal Baruch, Director (7) | 1,777,713 | 1.50 | % | |||||
| Tomer Levy, Vice President Business Development, Director (8) | 1,580,189 | 1.34 | % | |||||
| Emanuel Paz Puzailov (9) | 16,226,941 | 13.72 | % | |||||
| All current executive officers and directors as a group (8 persons) | 38,937,926 | 32.91 | % | |||||
| * | Less than 1%. |
| (1) | The percentages shown are based on 118,310,565 ordinary shares issued and outstanding as of September 1, 2024, plus ordinary shares relating to options and warrants currently exercisable or exercisable within 60 days of September 1, 2024, which are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. |
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| (2) | Represents 14,285,714 ordinary shares held by Kool Car Rental Kft, a company incorporated in the State of Hungary, controlled by Nikas Kostantinos. |
| (3) | Represents 7,209,614 ordinary shares held by Belporto Investments Ltd., a company incorporated in the State of Israel. Belporto Investments Ltd. is controlled by Ms. Esther Zochovitsky. The address for this entity is 8 Hamenofim St., Herzliya, Israel. |
| (4) | Represents 7,209,614 ordinary shares held by Eliyahu Baruch Ltd., a company incorporated in the State of Israel. Eliyahu Baruch Ltd., is controlled by Mr. Eyal Baruch, Ms. Michal Baruch Kind, Mr. Oded Baruch, and Ms. Sima Baruch Hakim. The address for this entity is 8 Hamenofim St., Herzliya, Israel. |
| (5) | Includes 14,419,228 ordinary shares, held by Haim Levy – Trade In Ltd., a company incorporated in the State of Israel, plus 1,777,713 plus ordinary shares relating to options and warrants currently exercisable or exercisable within 60 days of September 1, 2024, held by Mr. Levy. Haim Levy – Trade In Ltd. is controlled by Daniel Levy. The address for this entity is 15 Harechavim St., Jerusalem, Israel. |
| (6) | Includes 14,419,228 ordinary shares, held by A. Ynon (2015) Ltd., a company incorporated in the State of Israel, plus 1,777,713 plus ordinary shares relating to options and warrants currently exercisable or exercisable within 60 days of September 1, 2024, held by Mr. Amit. A. Ynon (2015) Ltd. is controlled by Ynon Amit. The address for this entity is Moshe 15 Lerrer Ness Ziona, Israel. |
| (7) | Includes 1,777,713 ordinary shares relating to options and warrants currently exercisable or exercisable within 60 days of September 1, 2024. |
| (8) | Includes 1,580,189 ordinary shares relating to options and warrants currently exercisable or exercisable within 60 days of September 1, 2024. |
| (9) | Represents 14,449,228 ordinary shares held by Puzaylov Investments Ltd., a company incorporated in the State of Israel, plus 1,777,713 plus ordinary shares relating to options and warrants currently exercisable or exercisable within 60 days of September 1, 2024. Puzaylov Investments Ltd. is controlled by Emanuel Paz Puzailov. The address for these entities is 138 Yehuda St., Modi’in-Maccabim-Re’ut, Israel. |
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PRINCIPAL SHAREHOLDERS OF Combined company
The following table and the related notes present information on the beneficial ownership of the combined company’s ordinary shares immediately after the consummation of the Merger, applying an estimated exchange ratio, which may be adjusted based on the amount of SciSparc net cash and changes in the capitalization of SciSparc or AutoMax prior to the closing of the Merger, and based on beneficial ownership as of , 2024 by:
| ● | each shareholder expected by AutoMax and SciSparc to become the beneficial owner of more than 5% of the outstanding ordinary shares of the combined company; |
| ● | each director and named executive officer of the combined company; and |
| ● | all of the combined company’s directors and executive officers as a group. |
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Shares of the combined company ordinary shares that may be acquired by an individual or group within 60 days of , 2024, pursuant to the exercise of options or warrants, are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table.
The percentage ownership is based on ordinary shares of the combined company outstanding as of , 2024, adjusted as required by the rules promulgated by the SEC to determine beneficial ownership. Neither AutoMax nor SciSparc know of any arrangements, including any pledge by any person of securities of the combined company.
Immediately after the consummation of the Merger, based on the Exchange Ratio, AutoMax shareholders will own approximately 49.99% of the SciSparc ordinary shares with SciSparc shareholders holding approximately 50.01% of the SciSparc ordinary shares on a fully-diluted basis (subject to certain exceptions). The following table and the related notes assume that, at the effective time of the Merger, each share of AutoMax ordinary shares will convert into the right to receive an estimated [●] ordinary shares of SciSparc and to account for the occurrence of certain events discussed elsewhere in this proxy statement/prospectus. See “The Merger Agreement — Merger Consideration” for more information regarding the Exchange Ratio.
Except as indicated in footnotes to this table, AutoMax and SciSparc believe that the shareholders named in this table have sole voting and investment power with respect to all shares of ordinary shares of the combined company shown as beneficially owned by them, based on information provided to AutoMax and SciSparc by such shareholder.
| NAME OF BENEFICIAL OWNER | Total Beneficial Ownership |
Percentage of Ordinary Shares Beneficially Owned(1) |
||||||
| 5% and Greater Shareholders | ||||||||
| Haim Levy – Trade In Ltd. (2) | ||||||||
| A. Ynon (2015) Ltd. (3) | ||||||||
| Puzaylov Investments Ltd. (4) | ||||||||
| Kool Car Rental Kft (5) | ||||||||
| Directors and Executive Officers | ||||||||
| Amitay Weiss | ||||||||
| Oz Adler | ||||||||
| Dr. Adi Zuloff-Shani | ||||||||
| Amnon Ben Shay | ||||||||
| Liat Sidi | ||||||||
| Moshe Revach | ||||||||
| Tomer Levy | ||||||||
| Yaarah Alfi | ||||||||
| All current executive officers and directors as a group (persons) | ||||||||
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LEGAL MATTERS
The validity of the securities registered hereby and certain other matters of the laws of Israel will be passed upon for SciSparc by Meitar | Law Offices, Ramat Gan, Israel, and certain matters of U.S. law will be passed upon for SciSparc by Sullivan & Worcester LLP, New York, New York.
EXPERTS
The consolidated financial statements of SciSparc Ltd. at December 31, 2023 and 2022, and for each of the three years in the period ended December 31, 2023, included in the Proxy Statement of Scisparc Ltd, which is referred to and made a part of this Prospectus and Registration Statement have been audited by Kost Forer Gabbay & Kasierer, a member of EY Global, independent registered public accounting firm, as set forth in their report thereon (which contains an explanatory paragraph describing conditions that raise substantial doubt about the Company's ability to continue as a going concern as described in Note 1 to the consolidated financial statements) appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of AutoMax Motors Ltd. as of December 31, 2023 and 2022 and the Years ended December 31, 2023 and 2022, included in this prospectus have been audited by Ben David Shalvi Kop & Co, independent registered public accounting firm, as set forth in their report thereon, included herein. Such consolidated financial statements are included herein in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
SciSparc has filed a registration statement on Form F-4 to register the issuance of securities described elsewhere in this proxy statement/prospectus. This proxy statement/prospectus is a part of that registration statement.
Since AutoMax’s ordinary shares are traded on the TASE, AutoMax files periodic and immediate reports with, and furnish information to, the TASE and the ISA, or the ISA, as required under Chapter Six of the Israel Securities Law, 1968 and the regulations enacted pursuant thereof, as applicable to a public company in Israel. Copies of AutoMax’s filings with the ISA can be retrieved electronically through the MAGNA distribution site of the ISA (www.magna.isa.gov.il) and the TASE website (www.maya.tase.co.il).
SciSparc files reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”) as required by the Exchange Act, as applicable to foreign private issuers. You may access information on SciSparc at the SEC website containing reports, proxy statements and other information.
As a foreign private issuer, SciSparc is exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and its executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, SciSparc will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
Information and statements contained in this proxy statement/prospectus or any annex to this proxy statement/prospectus are qualified in all respects by reference to the copy of the relevant contract or other annex filed as an exhibit to this proxy statement/prospectus.
All information contained in this proxy statement/prospectus relating to SciSparc has been supplied by SciSparc, and all such information relating to AutoMax has been supplied by AutoMax. Information provided by one another does not constitute any representation, estimate or projection of the other.
If you would like additional copies of this proxy statement/prospectus or if you have questions about the business combination, you should contact via phone or in writing:
SciSparc Ltd.
20 Raul Wallenberg Street,
Tower A
Tel Aviv 6971916 IsraelAttn: Secretary
AutoMax Motors Ltd.
AutoMax Motors Ltd.
C/O Mishmeret Trust Company Ltd.
48 Derech Menachem Begin,
Tel Aviv 6618001, Israel
Attn: Adv. Daniel Bar-On
224
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for shareholder meeting materials with respect to two or more shareholders sharing the same address by delivering a single set of shareholder meeting materials addressed to those shareholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for shareholders and cost savings for companies.
A number of brokers with account holders who are SciSparc shareholders will be “householding” SciSparc’s proxy materials. A single set of meeting materials will be delivered to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate set of shareholder meeting materials, please notify your broker or SciSparc. Direct your written request to SciSparc Ltd., 20 Raul Wallenberg St., Tower A, 2nd Floor, Tel Aviv 6971916, Israel. Shareholders who currently receive multiple copies of the proxy statement at their address and would like to request “householding” of their communications should contact their broker. In addition, SciSparc will promptly deliver, upon written or oral request to the address or telephone number above, a separate copy of the proxy statement to such shareholders at a shared address to which a single copy of the documents was delivered.
225
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2023
U.S. DOLLARS IN THOUSANDS
INDEX
F-1
 |
Kost Forer Gabbay & Kasierer 144 Menachem Begin Road, Tel-Aviv 6492102, Israel |
Tel: +972-3-6232525 Fax: +972-3-5622555 ey.com |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
SCISPARC LTD. (formerly known as THERAPIX BIOSCIENCES LTD.)
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of SciSparc Ltd. (formerly known as Therapix Biosciences Ltd.) and its subsidiaries (the “Company”) as of December 31, 2023, and 2022, and the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2023, and 2022, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.
The Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, negative cash flows from operating activities and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
F-2
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
Liquidity and Capital Resources
| Description of the Matter | As discussed in Note 1 to the consolidated financial statements, the Company has incurred losses since inception, and expects to continue to incur losses for the foreseeable future. At December 31, 2023, the Company’s cash and cash equivalents position is not sufficient to fund the Company’s planned operations for at least a year beyond the date of the issuance of the consolidated financial statements. Those factors raise substantial doubt about the Company’s ability to continue as a going concern. | |
| We determined the Company’s ability to continue as a going concern is a critical audit matter due to the estimation and execution uncertainty regarding the Company’s future cash flows and the risk of bias in management’s judgments and assumptions in estimating these cash flows to conclude the Company would have sufficient liquidity to sustain itself for at least a year beyond the date of the issuance of the consolidated financial statements. This in turn led to a high degree of auditor subjectivity and judgment to evaluate the audit evidence supporting the liquidity conclusions. | ||
| How We Addressed the Matter in Our Audit | Addressing the matter involved performing procedures and evaluating audit evidence in connection with our overall opinion on the consolidated financial statements. Our audit procedures included, among others, testing the reasonableness of the forecasted revenue, operating expenses, and uses and sources of cash used in management’s assessment of whether the Company has sufficient liquidity to fund operations for at least one year from the consolidated financial statement issuance date. This testing included inquiries with management, consideration of positive and negative evidence impacting management’s forecasts, the Company’s financing arrangements in place as of the report date, market and industry factors, we evaluated management’s analysis of their impact on the forecasted cash flows.
We assessed the adequacy of the Company’s going concern disclosures included in Note 1 to the consolidated financial statements. |
| /s/ KOST FORER GABBAY & KASIERER | Tel Aviv, Israel | |
| KOST FORER GABBAY & KASIERER | April 1, 2024 |
A Member of Ernst & Young Global
We have served as the Company’s auditor since 2009.
F-3
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Note | USD in thousands | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash | 4 | $ | $ | ||||||||
| Restricted deposit | |||||||||||
| Short-term deposit | - | ||||||||||
| Trade receivables | |||||||||||
| Other accounts receivable | 6 | ||||||||||
| Inventory | 5 | ||||||||||
| NON-CURRENT ASSETS: | |||||||||||
| Intangible asset, net | 11 | ||||||||||
| Investments in company accounted for at equity | 7 | ||||||||||
| Investments in financial assets | 8, 24e | ||||||||||
| Property and equipment, net | 10 | ||||||||||
| $ | $ | ||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-4
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Note | USD in thousands | ||||||||||
| LIABILITIES AND EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Trade payables | 12 | $ | $ | ||||||||
| Other accounts payable | 13 | ||||||||||
| Warrants | 18h | ||||||||||
| Lease liability | 9 | ||||||||||
| NON-CURRENT LIABILITIES: | |||||||||||
| Lease liability | - | ||||||||||
| EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY: | 18 | ||||||||||
| Share capital and premium | |||||||||||
| Reserve from share-based payment transactions | 19 | ||||||||||
| Warrants | 18 | ||||||||||
| Foreign currency translation reserve | 2d | ||||||||||
| Transactions with non-controlling interests | |||||||||||
| Accumulated deficit | ( | ) | ( | ) | |||||||
| Non-controlling interests | |||||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-5
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
| Year ended December 31, | |||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||
| Note | USD in thousands (except per share data) | ||||||||||||||
| Revenues | 20 | $ | $ | $ | |||||||||||
| Cost of goods sold | 20 | ( | ) | ( | ) | ||||||||||
| Gross profit | |||||||||||||||
| Research and development expenses | 21 | a | |||||||||||||
| Sales and marketing | (**) | ||||||||||||||
| Impairment of intangible asset | |||||||||||||||
| General and administrative expenses | 21 | b | (**) | ||||||||||||
| Operating loss | |||||||||||||||
| Company’s share of losses of company accounted for at equity, net | 21 | c | |||||||||||||
| Finance income | 21 | d | ( | ) | ( | ) | |||||||||
| Finance expenses | 21 | e | |||||||||||||
| Loss before income taxes | |||||||||||||||
| Taxes on income | |||||||||||||||
| Total comprehensive loss | |||||||||||||||
| Attributable to: | |||||||||||||||
| Equity holders of the Company | |||||||||||||||
| Non-controlling interests | |||||||||||||||
| Basic loss per ordinary share attributable to equity holders of the Company: | 22 | (*) | (*) | ||||||||||||
| Diluted loss per ordinary share attributable to equity holders of the Company: | 22 | (*) | (*) | ||||||||||||
| (*) |
| (**) |
The accompanying notes are an integral part of the consolidated financial statements.
F-6
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| Attributable to equity holders of the Company | ||||||||||||||||||||||||||||||||||||
| Share capital and premium | Reserve from share- based payment transactions | Warrants | Transactions with non- controlling interests | Foreign currency translation reserve | Accumulated deficit | Total | Non- controlling interests | Total equity | ||||||||||||||||||||||||||||
| USD in thousands | ||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2021 | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Loss | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Exercise of warrants | ( | ) | ||||||||||||||||||||||||||||||||||
| Issue of share capital, net of issue expenses | ||||||||||||||||||||||||||||||||||||
| Expiration of share options | ( | ) | ||||||||||||||||||||||||||||||||||
| Cost of share-based payment | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Loss | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Exercise of warrants | ||||||||||||||||||||||||||||||||||||
| Cost of share-based payment | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||
| Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Sale of minority interest in subsidiary | ||||||||||||||||||||||||||||||||||||
| Issue of share capital in respect of investment in affiliate | ||||||||||||||||||||||||||||||||||||
| Issue of share capital, net of issue expenses (3) | ||||||||||||||||||||||||||||||||||||
| Cost of share-based payment | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-7
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| USD in thousands | ||||||||||||
| Cash flows from operating activities: | ||||||||||||
| Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Adjustments to reconcile loss to net cash used in operating activities: | ||||||||||||
| Adjustments to the profit or loss items: | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Loss on impairment of intangible asset | ||||||||||||
| Cost of share-based payment | ||||||||||||
| Finance expenses (income), net | ( | ) | ( | ) | ||||||||
| Group’s share of losses of company accounted for at equity, net | ||||||||||||
| Losses from remeasurement of investment in financial assets | ||||||||||||
| ( | ) | |||||||||||
| Working capital adjustments: | ||||||||||||
| Decrease (increase) in other accounts receivable | ( | ) | ||||||||||
| Increase (decrease) in trade payables | ( | ) | ||||||||||
| Increase (decrease) in other accounts payable | ( | ) | ||||||||||
| Decrease (increase) in trade receivables | ( | ) | ||||||||||
| Increase in inventory | ( | ) | ( | ) | ||||||||
| ( | ) | ( | ) | |||||||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
The accompanying notes are an integral part of the consolidated financial statements.
F-8
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| USD in thousands | ||||||||||||
| Cash flows from investing activities: | ||||||||||||
| Investment in restricted bank deposits | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Investment in short-term bank deposits | ( | ) | ||||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||||||
| Investment in a company accounted for at equity | ( | ) | ( | ) | ||||||||
| Change in fair value of investments in financial assets | ( | ) | ||||||||||
| Sale of minority interest in subsidiary | ||||||||||||
| Purchase of financial assets at fair value through profit or loss | ( | ) | ||||||||||
| Purchase of intangible asset | ( | ) | ||||||||||
| Net cash provided by (used in) investing activities | ( | ) | ( | ) | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds from issue of share capital (net of issuance expenses) | ||||||||||||
| Exercise of warrants (a) | ||||||||||||
| Payment of issuance expenses related to previous period | ||||||||||||
| Interest paid on lease liability | ( | ) | ( | ) | ||||||||
| Repayment of lease liability | ( | ) | ( | ) | ( | ) | ||||||
| Repayment of short-term credit | ( | ) | ||||||||||
| Net cash provided by financing activities | ||||||||||||
| Increase (decrease) in cash | ( | ) | ( | ) | ||||||||
| Cash at the beginning of the period | ||||||||||||
| Cash at the end of the period | $ | $ | $ | |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-9
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| USD in thousands | ||||||||||||
| (a) Significant non-cash transactions: | ||||||||||||
| Right-of-use asset recognized with corresponding lease liability | ||||||||||||
| Registration of warrants | ||||||||||||
| Investment in financial asset | ||||||||||||
| Unpaid issue expenses | $ | $ | $ | |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-10
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 1:- | GENERAL |
| a. | SciSparc Ltd. (formerly known as Therapix Biosciences Ltd.) (“SciSparc” or the “Company” or the “Group”), a pharmaceutical company, was incorporated in Israel and commenced its operations on August 23, 2004. Until March 2014, SciSparc and its subsidiaries at the time were mainly engaged in developing several innovative immunotherapy products and SciSparc’s own patents in the immunotherapy field. In August 2015, the Company decided to adopt a different business strategy and began focusing on developing a portfolio of approved drugs based on cannabinoid molecules. With this focus, the Company is currently engaged in development programs based on Δ9-tetrahydrocannabinol (“THC”) and/or non-psychoactive cannabidiol for the treatment of Tourette syndrome, Alzheimer’s disease and agitation, pain, autism spectrum disorder and Status Epilepticus. The headquarters of the Company are located in Tel Aviv, Israel. |
The Company’s ordinary shares are listed on Nasdaq and are trading under the symbol “SPRC”.
As of December 31, 2023, the Company had three private subsidiaries, including an inactive company incorporated under the laws of Israel: Evero Health Ltd (“Evero”); an inactive company incorporated under the laws of Israel: Brain Bright Ltd (“Brain Bright”); and a company incorporated under the laws of the State of Delaware: Scisparc US (together with Evero and Brain Bright, the “Subsidiaries”).
On September 14, 2023, the Company’s board of directors (“Board”) resolved that the final ratio for the Third Reverse Split (as defined below) will be 26:1, which became effective on September 28, 2023. Consequently, all share numbers, share prices, and exercise prices have been retroactively adjusted in these interim consolidated financial statements for all periods presented.
The consolidated financial statements of the Company for the year ended December 31, 2023, were approved on March 31, 2024, and signed on April 1, 2024 (the “Approval Date”).
F-11
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 1:- | GENERAL (CONT.) |
| b. | The Group incurred operating losses since its incorporation and expects to continue to incur operating losses for the foreseeable future. As of December 31, 2023, the Group had an accumulated deficit of approximately $ |
As of December 31, 2023, the Company’s
cash and cash equivalents totaled $
The accompanying consolidated financial statements were prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business. Such financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.
| c. | Definitions and Meanings: |
| The Company | - | SciSparc Ltd. (formerly known as Therapix Biosciences Ltd.) | |
| The Group | - | SciSparc Ltd. (formerly Therapix Biosciences Ltd.) and its Subsidiaries, as detailed in Note 1a. | |
| Subsidiaries | - | Companies that are controlled by the Company, as defined in IFRS 10, “Consolidated Financial Statements”, and whose accounts are consolidated with those of the Company (if active). | |
| Associates | - | An entity over which the Company has significant influence, as defined in IAS 28, “Investment in Associates and Joint Ventures” and is not a Subsidiary. | |
| Related Parties | - | As defined in IAS 24, “Related Party Disclosures”. | |
| IAS | - | International Accounting Standards issued by the International Accounting Standards Board (“IASB”). | |
| IFRS | - | International Financial Reporting Standards issued by the IASB. |
F-12
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES |
The following accounting policies have been applied consistently in the financial statements for all periods presented, unless otherwise stated.
| a. | Basis of presentation of the financial statements: |
These financial statements have been prepared in accordance with IFRS, as issued by the IASB.
The Company’s financial statements have been prepared on a cost basis, unless otherwise indicated.
The Company has elected to present the profit or loss items using the function of expense method.
The financial statements are presented in USD and all values are rounded to the nearest thousand (’000), except when otherwise indicated.
| b. | The operating cycle: |
The operating cycle of the Company
is
| c. | Consolidated financial statements: |
The consolidated financial statements comprise the financial statements of companies that are controlled by the Company (Subsidiaries). Control of a company is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Potential voting rights are considered when assessing whether an entity has control over the other entity. The consolidation of the financial statements commences on the date on which control is obtained and ends when such control ceases.
The financial statements of the Company and of the Subsidiaries are prepared as of the same dates and periods. The consolidated financial statements are prepared using uniform accounting policies by all companies in the Group. Significant intra-Group balances and transactions and gains or losses resulting from intra-Group transactions are eliminated in full in the consolidated financial statements.
Non-controlling interests in subsidiaries represent the equity in subsidiaries not attributable, directly or indirectly, to a parent. Non-controlling interests are presented in equity separately from the equity attributable to the equity holders of the Company. Profit or loss and components of other comprehensive income are attributed to the Company and to non-controlling interests. Losses are attributed to non-controlling interests even if they result in a negative balance of non-controlling interests in the consolidated statement of financial position.
F-13
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
| d. | Functional currency and foreign currency: |
The functional currency of the Company, which is the currency that best reflects the economic environment in which the Company operates and conducts its transactions is the U.S. Dollar (“USD” or “$”), since it’s the primary currency of the economic environment in which the Company operates. The consolidated financial statements are also presented in USD since the Company believes that preparing the consolidated financial statements in USD provides more relevant information to the users of the consolidated financial statements.
| e. | Acquisition of a single asset company: |
Upon the acquisition of a single asset company, the Group evaluates whether it is the acquisition of a business or of an asset. To be considered a business, the acquisition must include, at a minimum, an input and a substantive process that together can significantly contribute to the creation of outputs. The acquisition is accounted for as a business combination if the single asset company is a business. If it is not a business, the acquisition is accounted for as the acquisition of assets and liabilities. In such an acquisition, the cost of the acquisition includes transaction costs which are allocated to the identifiable acquired assets and liabilities proportionally based on their fair value on the acquisition date. In such case, goodwill and deferred taxes in respect of the temporary differences existing as of the acquisition date are not recognized.
| f. | Restricted deposits: |
A restricted deposit is cash invested in a short-term deposit (between three months and one year) or in a long-term deposit (with a maturity of more than one year from the date of investment). Restricted deposits are designated to secure the Company’s office facilities lease agreements and its credit cards.
| g. | Investment in joint arrangements: |
Joint arrangements are arrangements in which the Company has joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
| 1. | Joint ventures: |
In joint ventures the parties that have joint control of the arrangement have rights to the net assets of the arrangement. A joint venture is accounted for at equity
| 2. | Joint operations: |
In joint operations the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities relating to the arrangement. The Company recognizes in relation to its interest its share of the assets, liabilities, revenues and expenses of the joint operation.
The acquisition of interests in a joint operation which represents a business, as defined in IFRS 3, is accounted for using the acquisition method, including the measurement of the identifiable assets and liabilities at fair value, the recognition of deferred taxes arising from this measurement, the accounting treatment of the related transaction costs and the recognition of goodwill or bargain purchase gains. This applies to the acquisition of the initial interest and additional interests in a joint operation that represents a business.
F-14
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
| h. | Investments accounted for using the equity method: |
The Group’s investments in associates and joint ventures are accounted for using the equity method.
Under the equity method, the investment in the associate or in the joint venture is presented at cost with the addition of post-acquisition changes in the Group’s share of net assets, including other comprehensive income of the associate or the joint venture. Gains and losses resulting from transactions between the Group and the associate or the joint venture are eliminated to the extent of the interest in the associate or in the joint venture. The cost of the investment includes transaction costs.
Goodwill relating to the acquisition of an associate or a joint venture is presented as part of the investment in the associate or the joint venture, measured at cost and not systematically amortized. Goodwill is evaluated for impairment as part of the investment in the associate or in the joint venture as a whole.
The financial statements of the Company and of the associate or joint venture are prepared as of the same dates and periods. The accounting policies applied in the financial statements of the associate or the joint venture are uniform and consistent with the policies applied in the financial statements of the Group.
Upon the acquisition of an associate or a joint venture achieved in stages when the former investment in the acquiree was accounted for pursuant to the provisions of IFRS 9, the Group applies the principles of IFRS 3 regarding business combinations achieved in stages. Consequently, equity interests in the acquiree that had been held by the Group prior to achieving significant influence or joint control are measured at fair value on the acquisition date and are included in the acquisition consideration while recognizing a gain or loss resulting from the fair value measurement.
The equity method is applied until the loss of significant influence in the associate or loss of joint control in the joint venture or classification as investment held for sale.
F-15
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
| i. | Property and equipment, net: |
Property and equipment are measured at cost, including directly attributable costs, less accumulated depreciation, accumulated impairment losses and any related investment grants and excluding day-to-day servicing expenses.
| % | Mainly % | |||||
| Lab equipment | ||||||
| Computers | ||||||
| Office furniture and equipment | ||||||
| Leasehold improvements | ||||||
Leasehold improvements are depreciated on a straight-line basis over the shorter of the lease term (including the extension option held by a company and intended to be exercised) and the expected life of the improvement.
The useful life, depreciation method and residual value of an asset are reviewed at least each year-end and any changes are accounted for prospectively as a change in accounting estimate. Depreciation of an asset ceases at the earlier of: the date that the asset is classified as held for sale and the date that the asset is derecognized.
| j. | Intangible assets: |
Separately acquired intangible assets are measured on initial recognition at cost including directly attributable costs. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Expenditures relating to internally generated intangible assets, excluding capitalized development costs, are recognized in profit or loss when incurred.
Intangible assets with a finite useful life are amortized over their useful life and reviewed for impairment whenever there is an indication that the asset may be impaired. The amortization period and the amortization method for an intangible asset are reviewed at least at each year end.
| k. | Impairment of non-financial assets: |
The Company evaluates the need to record an impairment of non-financial assets whenever events or changes in circumstances indicate that the carrying amount is not recoverable. If the carrying amount of non-financial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverable amount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pre-tax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognized in profit or loss.
F-16
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
| l. | Financial instruments: |
| 1. | Financial assets: |
Financial assets are measured upon initial recognition at fair value plus transaction costs that are directly attributable to the acquisition of the financial assets, except for financial assets measured at fair value through profit or loss in respect of which transaction costs are recorded in profit or loss.
The Company classifies and measures debt instruments in the financial statements based on the following criteria:
| - | The Company’s business model for managing financial assets; and |
| - | The contractual cash flow terms of the financial asset. |
| a) | Debt instruments are measured at amortized cost when: |
The Company’s business model is to hold the financial assets in order to collect their contractual cash flows, and the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, the instruments in this category are measured according to their terms at amortized cost using the effective interest rate method, less any provision for impairment.
On the date of initial recognition, the Company may irrevocably designate a debt instrument as measured at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency, such as when a related financial liability is also measured at fair value through profit or loss.
| b) | Debt instruments are measured at fair value through profit or loss when: |
A financial asset which is a debt instrument does not meet the criteria for measurement at amortized cost or at fair value through other comprehensive income. After initial recognition, the financial asset is measured at fair value and gains or losses from fair value adjustments are recognized in profit or loss.
| c) | Equity instruments and other financial assets held for trading: |
Investments in equity instruments do not meet the above criteria and accordingly are measured at fair value through profit or loss.
Other financial assets held for trading such as derivatives, including embedded derivatives separated from the host contract, are measured at fair value through profit or loss unless they are designated as effective hedging instruments.
Dividends from investments in equity instruments are recognized in profit or loss when the right to receive the dividends is established.
F-17
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
| l. | Financial instruments: (Cont.) |
| 2. | Derecognition of financial assets: |
A financial asset is derecognized only when:
| - | The contractual rights to the cash flows from the financial asset have expired; |
| - | The Company has transferred substantially all the risks and rewards deriving from the contractual rights to receive cash flows from the financial asset or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset; or |
| - | The Company has retained its contractual rights to receive cash flows from the financial asset but has assumed a contractual obligation to pay the cash flows in full without material delay to a third party. |
| 3. | Financial liabilities: |
| a) | Financial liabilities measured at amortized cost: |
Financial liabilities are initially recognized at fair value less transaction costs that are directly attributable to the issue of the financial liability.
After initial recognition, the Company measures all financial liabilities at amortized cost using the effective interest rate method, except for financial liabilities at fair value through profit or loss such as derivatives.
| b) | Financial liabilities measured at fair value through profit or loss: |
At initial recognition, the Company measures financial liabilities that are not measured at amortized cost at fair value. Transaction costs are recognized in profit or loss.
After initial recognition, changes in fair value are recognized in profit or loss.
| 4. | Derecognition of financial liabilities: |
A financial liability is derecognized only when it is extinguished, that is when the obligation specified in the contract is discharged or cancelled or expires. A financial liability is extinguished when the debtor discharges the liability by paying in cash, other financial assets, goods or services, or is legally released from the liability.
| 5. | Offsetting financial instruments: |
Financial assets and financial liabilities are offset and the net amount is presented in the statement of financial position if there is a legally enforceable right to set off the recognized amounts and there is an intention either to settle on a net basis or to realize the asset and settle the liability simultaneously. The right of set-off must be legally enforceable not only during the ordinary course of business of the parties to the contract but also in the event of bankruptcy or insolvency of one of the parties. In order for the right of set-off to be currently available, it must not be contingent on a future event, there may not be periods during which the right is not available, or there may not be any events that will cause the right to expire.
F-18
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
| l. | Financial instruments: (Cont.) |
| 6. | Compound financial instruments: |
Convertible debentures which contain both an equity/derivative component and a liability component are separated into two components. This separation is performed by first determining the liability component based on the fair value of an equivalent non-convertible liability. The value of the conversion component is determined to be the residual amount. Directly attributable transaction costs are apportioned between the equity component and the liability component based on the allocation of proceeds to the equity and liability components.
| 7. | Issue of a unit of securities: |
The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on the following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each component pro rata to the amounts determined for each component in the unit.
| m. | Research and development expenditures: |
Research expenditures are recognized in profit or loss when incurred.
The conditions enabling capitalization of development costs as an asset have not yet been met and, therefore, all development expenditures are recognized in profit or loss when incurred.
| n. | Finance income and expenses: |
Finance income and expenses comprise interest income on amounts invested and exchange rate gains and losses. Interest income is recognized as it accrues using the effective interest method. Finance income and expenses derive also from changes in the fair value of financial liabilities measured at fair value through profit or loss. Borrowing costs are recognized in profit or loss using the effective interest method.
| o. | Fair value measurement: |
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurement is based on the assumption that the transaction will take place in the asset’s or the liability’s principal market, or in the absence of a principal market, in the most advantageous market.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
Fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
F-19
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
| o. | Fair value measurement: (Cont.) |
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based on the lowest level input that is significant to the entire fair value measurement:
| Level 1 | - | Quoted prices (unadjusted) in active markets for identical assets or liabilities. | |
| Level 2 | - | Inputs other than quoted prices included within Level 1 that are observable directly or indirectly. | |
| Level 3 | - | Inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observable market data). |
| p. | Taxes on income: |
Current or deferred taxes are recognized in profit or loss, except to the extent that they relate to items which are recognized in other comprehensive income or equity.
| 1. | Current taxes: |
A current tax liability is measured using the tax rates and tax laws that have been enacted or substantively enacted by the reporting date as well as adjustments required in connection with the tax liability in respect of previous years.
| 2. | Deferred taxes: |
Deferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributed for tax purposes.
Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized, or the liability is settled, based on tax laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductible carryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and a respective deferred tax asset is recognized to the extent that their utilization is probable.
Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as long as the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event of distribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividends does not involve an additional tax liability or since it is the Company’s policy not to initiate distribution of dividends from a subsidiary that would trigger an additional tax liability.
Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant to IAS 12, “Income Taxes”.
Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate to the same taxpayer and the same taxation authority.
F-20
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
| q. | Share-based payment transactions: |
The Company’s employees and other service providers may receive remuneration in the form of share-based payments (“Equity-settled transactions”).
Equity-settled transactions:
The cost of equity-settled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value is determined using an acceptable option pricing model (“OPM”). As for service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equity instruments granted.
The cost of equity-settled transactions is recognized in profit or loss together with a corresponding increase in equity during the period in which the performance and/or service conditions are to be satisfied ending on the date on which the relevant employees become entitled to the award (the “Vesting Period”). The cumulative expense recognized for equity-settled transactions at the end of each reporting period until the vesting date reflects the extent to which the Vesting Period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest.
No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied.
If the Company modifies the conditions on which equity-instruments were granted, an additional expense is recognized for any modification that increases the total fair value of the share-based payment arrangement or is otherwise beneficial to the employee/other service provider at the modification date.
If a grant of an equity instrument is cancelled, it is accounted for as if it had vested on the cancellation date and any expense not yet recognized for the grant is recognized immediately. However, if a new grant replaces the cancelled grant and is identified as a replacement grant on the grant date, the cancelled and new grants are accounted for as a modification of the original grant, as described above.
| r. | Earnings (loss) per share: |
Earnings (loss) per share are calculated by dividing the income (loss) attributable to equity holders of the Company by the weighted number of ordinary shares outstanding during the period.
Basic loss per ordinary share includes only ordinary shares that were outstanding during the period.
Potential ordinary shares are included in the computation of diluted loss per ordinary share when their conversion increases loss per ordinary share from continuing operations.
F-21
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
| s. | Employee benefit liabilities: |
The Company has several employee-benefit plans:
| 1. | Short-term employee benefits: |
Short-term employee benefits are benefits that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social security contributions and are recognized as expenses as the services are rendered. A liability in respect of a cash bonus or a profit-sharing plan is recognized when the Company has a legal or constructive obligation to make such payment as a result of past service rendered by an employee and a reliable estimate of the amount can be made.
| 2. | Post-employment benefits: |
The plans are normally financed by contributions to insurance companies and classified as defined contribution plans or as defined benefit plans.
The Company has defined contribution plans to its employees according to the specific laws per country.
| t. | Provisions: |
A provision in accordance with IAS 37, “Provisions, Contingent Liabilities and Contingent Assets”, is recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects part or all of the expense to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense is recognized in the statement of profit or loss net of any reimbursement.
Following are the types of provisions included in the financial statements:
Legal claims:
A provision for claims is recognized when the Company has a present legal or constructive obligation as a result of a past event, it is more likely than not that an outflow of resources embodying economic benefits will be required by the Company to settle the obligation and a reliable estimate can be made of the amount of the obligation.
| u. | Leases: |
The Company elected to apply the provisions of IFRS 16, “Leases” (“IFRS 16”) using the modified retrospective method (without restatement of comparative data).
The accounting policy for leases applied effective from January 1, 2019, is as follows:
The Company accounts for a contract as a lease when the contract terms convey the right to control the use of an identified asset for a period of time in exchange for consideration.
F-22
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
| u. | Leases: (Cont.) |
| 1. | The Company as a lessee: |
For leases in which the Company is the lessee, the Company recognizes on the commencement date of the lease a right-of-use asset and a lease liability, excluding leases whose term is up to 12 months and leases for which the underlying asset is of low value. For these excluded leases, the Company has elected to recognize lease payments as an expense in profit or loss on a straight-line basis over the lease term (see Note 9). In measuring the lease liability, the Company has elected to apply the practical expedient in IFRS 16 and separates the lease components from the non-lease components (such as management and maintenance services, etc.) included in a single contract.
On the commencement date, the lease liability includes all unpaid lease payments discounted at the interest rate implicit in the lease, if that rate can be readily determined, or otherwise using the Company’s incremental borrowing rate. After the commencement date, the Company measures the lease liability using the effective interest rate method.
On the commencement date, the right-of-use asset is recognized in an amount equal to the lease liability plus lease payments already made on or before the commencement date and initial direct costs incurred. The right-of-use asset is measured applying the cost model and depreciated over the shorter of its useful life and the lease term.
The Company tests for impairment of the right-of-use asset whenever there are indications of impairment pursuant to the provisions of IAS 36, “Impairment of Assets”.
| 2. | Lease extension and termination options: |
A non-cancelable lease term includes both the periods covered by an option to extend the lease when it is reasonably certain that the extension option will be exercised, and the periods covered by a lease termination option when it is reasonably certain that the termination option will not be exercised.
In the event of any change in the expected exercise of the lease extension option or in the expected non-exercise of the lease termination option, the Company remeasures the lease liability based on the revised lease term using a revised discount rate as of the date of the change in expectations. The total change is recognized in the carrying amount of the right-of-use asset until it is reduced to zero, and any further reductions are recognized in profit or loss.
| 3. | Lease modifications: |
If a lease modification does not reduce the scope of the lease and does not result in a separate lease, the Company remeasures the lease liability based on the modified lease terms using a revised discount rate as of the modification date and records the change in the lease liability as an adjustment to the right-of-use asset.
If a lease modification reduces the scope of the lease, the Company recognizes a gain or loss arising from the partial or full reduction of the carrying amount of the right-of-use asset and the lease liability. The Company subsequently remeasures the carrying amount of the lease liability according to the revised lease terms, at the revised discount rate as of the modification date and records the change in the lease liability as an adjustment to the right-of-use asset.
F-23
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
| v. | Amendment to IAS 1, “Disclosure of Accounting Policies”: |
In February 2021, the IASB issued an amendment to IAS 1, “Presentation of Financial Statements” (“the Amendment”), which replaces the requirement to disclose ’significant’ accounting policies with a requirement to disclose ‘material’ accounting policies. One of the main reasons for the Amendment is the absence of a definition of the term ’significant’ in IFRS whereas the term ‘material’ is defined in several standards and particularly in IAS 1.
The Amendment is applicable for annual periods beginning on January 1, 2023.
The application of the above Amendment had an effect on the disclosures of the Company’s accounting policies, but did not affect the measurement, recognition or presentation of any items in the Company’s consolidated financial statements.
| w. | Amendment to IAS 8, “Accounting Policies, Changes to Accounting Estimates and Errors”: |
In February 2021, the IASB issued an amendment to IAS 8, “Accounting Policies, Changes to Accounting Estimates and Errors” (“the Amendment”), in which it introduces a new definition of “accounting estimates”.
Accounting estimates are defined as “monetary amounts in financial statements that are subject to measurement uncertainty”. The Amendment clarifies the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors.
The Amendment is to be applied prospectively for annual reporting periods beginning on or after January 1, 2023, and is applicable to changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. Early application is permitted.
| x. | Inventories |
Inventories are stated at the lower of cost and or market based on net realizable value. Inventories are adjusted for estimated excess and obsolescence and written down to net realizable value based upon estimates of future demand, technology developments, and market conditions. Cost is determined in accordance with first-in, first-out Method (“FIFO”) and the cost of inventory includes shipment and freight costs.
| y. | Revenue recognition |
The Company sells products directly to customers mainly through its online Amazon stores.
Under the Company’s standard contract terms, customers have a right of return within 30 until 90 days. For contracts with rights of return, the Company recognizes revenue based on the amount of the consideration which the Company expects to receive for products which it is highly probable that a significant revenue reversal will not subsequently occur. The Company recognizes a refund liability for consideration received or receivable if it expects to refund some or all of the consideration to the customer. At the end of each reporting period, the Company updates its estimates of expected product returns and adjusts the refund liabilities with a corresponding adjustment in revenues. As of December 31, 2022, the allowance for returns was immaterial. The refund liability is recorded as a decrease in revenues against other payables. A right of return asset and corresponding adjustment to cost of sales is also recognized for the right to recover the goods from the customer.
In certain contracts, the Company evaluates the nature of its promise to the customer and determines whether it is a principal or agent for each contract. In determining the nature of its promise to the customer, the Company evaluates whether it is appropriate to recognize revenues on a gross or net basis based upon its evaluation of whether the Company obtains control of the specified goods by considering if it is primarily responsible for fulfillment of the promise, has inventory risk, and has the latitude in establishing pricing and selecting suppliers, among other factors. Based on its evaluation of these factors, management has determined that it is the principal in these arrangements; therefore, sales are recorded on a gross basis.
| z. | Cost of sales |
In accordance with Amazon’s terms of use, the Company is obligated to pay to Amazon incremental costs, such as sales fulfillment commissions which are contingent on making binding sales. Sales commissions would not have been incurred if the contract had not been obtained.
Cost of sales primarily consists of expenses related to Amazon’s commissions, storage costs and freight.
F-24
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 3:- | SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS |
In the process of applying the significant accounting policies, the Company has made the following judgments which have the most significant effect on the amounts recognized in the financial statements:
| a. | Judgments: |
| - | Discount rate for a lease liability: |
When a company in the Group is unable to readily determine the discount rate implicit in a lease in order to measure the lease liability, such company uses an incremental borrowing rate. That rate represents the rate of interest that the Company would have to pay to borrow over a similar term and with similar security, the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment. When there are no financing transactions that can serve as a basis, said company determines the incremental borrowing rate based on its credit risk, the lease term and other economic variables deriving from the lease contract’s conditions and restrictions.
| - | Effective control: |
The Company assesses whether it controls a company in which it holds less than the majority of the voting rights by, among others, reference to the size of its holding of voting rights relative to the size and dispersion of holdings of the other vote holders including voting patterns at previous shareholders’ meetings.
| - | Determining the fair value of share-based payment transactions: |
The fair value of share-based payment transactions is determined upon initial recognition by an acceptable OPM. The inputs to the model include share price, exercise price and assumptions regarding expected volatility, expected life of share option, risk-free interest and expected dividend yield.
| b. | Estimates and assumptions: |
The preparation of the financial statements requires management to make estimates and assumptions that have an effect on the application of the accounting policies and on the reported amounts of assets, liabilities, revenues and expenses. Changes in accounting estimates are reported in the period of the change in estimate.
The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Company that may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
| - | Legal claims: |
In estimating the likelihood of outcome of legal claims filed or threatened to commence against the Company and/or its Subsidiaries and/or affiliates, the Company relies on its management’s best knowledge and estimations and where applicable, on the opinion of their legal counsels. These estimates are based, among others, on management’s familiarity of and proximity to the circumstances, and also on the legal counsels’ best professional judgment, taking into account the stage of proceedings and legal precedents in respect of the different issues. Since the outcome of the claims might be determined in courts and/or other quasi-judicial tribunals, the results could differ from these estimates.
F-25
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 3:- | SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS (CONT.) |
| b. | Estimates and assumptions: (Cont.) |
| - | Lease extension and/or termination options: |
In evaluating whether it is reasonably certain that a company of the Group will exercise an option to extend a lease or not exercise an option to terminate a lease, the Company considers all relevant facts and circumstances that create an economic incentive for the Company to exercise the option to extend or not exercise the option to terminate such as: significant amounts invested in leasehold improvements, the significance of the underlying asset to the Company’s operation and whether it is a specialized asset, the company’s past experience with similar leases, etc.
After the commencement date, the Company reassesses the term of the lease upon the occurrence of a significant event or a significant change in circumstances that affects whether the company is reasonably certain to exercise an option or not exercise an option previously included in the determination of the lease term, such as significant leasehold improvements that had not been anticipated on the lease commencement date, sublease of the underlying asset for a period that exceeds the end of the previously determined lease period, etc.
| - | Fair value of financial instruments: |
When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using a variety of valuation techniques that include the use of valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required in establishing fair values. The models are tested for validity by calibrating to prices from any observable current market transactions in the same instrument when available.
| NOTE 4:- | CASH |
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash for immediate withdrawal - in USD | $ | $ | ||||||
| Cash for immediate withdrawal - in NIS | ||||||||
| $ | $ | |||||||
F-26
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 5:- | INVENTORY |
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Goods in transit | $ | $ | ||||||
| Finished goods | ||||||||
| $ | $ | |||||||
| NOTE 6:- | OTHER ACCOUNTS RECEIVABLE |
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Government authorities | $ | $ | ||||||
| Other receivables | ||||||||
| Prepaid expenses | ||||||||
| $ | $ | |||||||
| NOTE 7:- | INVESTMENT IN ASSOCIATES |
| a. | Sale of Orimmune Bio Ltd.: |
On June 22, 2016, the Company entered into a share transfer agreement (the “Transfer Agreement”) with its then wholly owned subsidiary, Orimmune Bio Ltd. (“Orimmune”) and Karma Link Ltd. (the “Buyer”), whereby the Company would sell its interests in Orimmune to the Buyer, and also use its best efforts to transfer to and assign Orimmune its rights in the Anti-CD3 technology.
On December 13, 2018, an additional amendment to the Transfer Agreement was signed between the parties, under which it was agreed that Orimmune will be assigned certain rights in intellectual property (“IP”) related to the licensed technology owned by the Company subject to certain conditions precedent which were still not met as of December 31, 2023. As of the Approval Date, the conditions precedent have not yet been completed and the assignment of the IP related to the licensed technology owned by us has not yet been transferred.
| b. | Coeruleus - Joint Venture Transaction |
On May 15, 2020, the Company entered
into a series of transactions (together, the “Joint Venture Transaction”), including a definitive share transfer agreement
with Capital Point Ltd. (“Capital Point”), an Israeli holding company traded on the TASE, and Evero, pursuant to which Capital
Point sold to Evero
As part of the Joint Venture Transaction,
the Company transferred to Evero its SCI-110 sleep technology, to be fully owned by Evero, under the terms and conditions of an asset
purchase agreement. In addition, the Company issued to Capital Point a warrant (the “Capital Point Warrant”) to purchase
$
F-27
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 7:- | INVESTMENT IN ASSOCIATES (CONT.) |
| b. | Coeruleus - Joint Venture Transaction (Cont.) |
On November 29, 2020, the shareholders
of Coeruleus approved an investment from its shareholders of approximately $
| c. | MitocareX - Joint Venture Transaction |
On March 10, 2022, the Company entered
into a Founders and Investment Agreement with Dr. Alon Silberman, or the MitoCareX Agreement. Pursuant to the MitoCareX Agreement, the
Company invested an initial amount of $
On February 17, 2023, MitoCareX achieved
its first milestone pursuant to the MitoCare X Agreement. As a result of MitoCareX meeting this milestone, the Company will invest an
additional $
On November 25, 2023, MitoCareX achieved
its second milestone pursuant to the MitoCare X Agreement. As a result of MitoCareX meeting this milestone, the Company will invest an
additional $
During the year ended December 31,
2023, the Company recorded equity losses from the investment in MitoCareX in the amount of $
| Balance at January 1, 2022 | $ | |||
| Investment date March 31, 2022 | ||||
| Equity losses from investment in MitoCareX | ( | ) | ||
| Balance at December 31, 2022 | $ | |||
| Investment following achievement of first milestone | ||||
| Equity losses from investment in MitoCareX | ( | ) | ||
| Balance at December 31, 2023 |
F-28
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 8:- | INVESTMENT IN FINANCIAL ASSETS |
| a. | On November 17, 2022, the Company invested $ |
| b. | On June 25, 2023, the Company entered into an investment agreement (the “Agreement”) with AutoMax Motors Ltd. (“AutoMax”), an Israeli company traded on the Tel Aviv Stock Exchange (“TASE”) and the leading parallel importer and distributor of vehicles in Israel, pursuant to which, at the closing and upon the terms and conditions set forth in the Agreement, the Company will invest NIS |
| NOTE 9:- | LEASES |
On September 1, 2020, the Company
entered into a one-year lease agreement with a third party for an area of approximately
On July 1, 2021, the Company entered
into a two-year joint lease agreement with a third party and for a total area of approximately
F-29
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 10:- | PROPERTY AND EQUIPMENT, NET |
| Assets owned and used by the Company | Right-of- use assets | |||||||||||||||||||
| Computers | Lab equipment | Office furniture and equipment | Leasehold office | Total | ||||||||||||||||
| Cost: | ||||||||||||||||||||
| Balance at January 1, 2023 | $ | | $ | $ | | $ | $ | |||||||||||||
| New lease | ||||||||||||||||||||
| Balance at December 31, 2023 | ||||||||||||||||||||
| Accumulated depreciation: | ||||||||||||||||||||
| Balance at January 1, 2023 | ||||||||||||||||||||
| Depreciation | ||||||||||||||||||||
| Balance at December 31, 2023 | ||||||||||||||||||||
| Depreciated cost at December 31, 2023 | ||||||||||||||||||||
| Balance at January 1, 2022 | $ | $ | $ | $ | $ | |||||||||||||||
| Purchases | ||||||||||||||||||||
| Balance at December 31, 2022 | ||||||||||||||||||||
| Accumulated depreciation: | ||||||||||||||||||||
| Balance at January 1, 2022 | ||||||||||||||||||||
| Depreciation | ||||||||||||||||||||
| Balance at December 31, 2022 | ||||||||||||||||||||
| Depreciated cost at December 31, 2022 | ||||||||||||||||||||
Depreciation expenses for the years
ended December 31, 2023, 2022 and 2021 amounted to $
| NOTE 11:- | INTANGIBLE ASSET |
On September 30, 2022, the Company announced the closing of the acquisition of WellutionTM, a top seller Amazon.com Marketplace account (the “Brand”), American food supplements and cosmetics brand and trademark (the “Acquisition”). In connection with the Acquisition, the Company incorporated a new wholly owned Delaware subsidiary, SciSparc Nutraceuticals Inc., to hold the new assets. The definitive agreement for the acquisition of the Brand was entered into with Merhavit M.R.M Holding and Management Ltd (“M.R.M”).
At the closing, the Company paid a
base cash payment of $
In addition, the Company issued to
M.R.M $
F-30
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 11:- | INTANGIBLE ASSET (CONT.) |
The Company reviewed the transaction
and deemed it to be the purchase of assets for accounting purposes under generally accepted accounting principles. The Company reviewed
the guidance under IFRS 3 for the transaction and determined that the fair value of the gross assets acquired was concentrated in a single
identifiable asset, a brand. Accordingly, the Company treated the transaction as an asset acquisition. On the closing date of the acquisition,
the Company fully recognized the acquisition amount total of $
In the years ended December 31, 2022,
and 2023, the Brand recorded significant losses. As of December 31, 2023, the Company has determined there are signs of decline in the
value of the Brand and recognized a loss as a result of impairment to its intangible asset of $
The impairment loss was determined
based on the revenue projections of the Brand, using the relief from royalty approach. Under the relief from royalty approach, the fair
value of a brand is determined based on discounted future royalty payments that owner of the asset would have been required to pay if
instead of purchasing the intangible asset it would have been licensed from a third party. Revenues were projected for a period of
| Balance at January 1, 2022 | $ | |||
| Purchase date September 30, 2022 | ||||
| Depreciation of intangible asset | ( | ) | ||
| Balance at December 31, 2022 | $ | |||
| Loss on impairment of intangible asset | ( | ) | ||
| Depreciation of intangible asset | ( | ) | ||
| Balance at December 31, 2023 | $ |
During the year ended December 31,
2023, the Company recognized depreciation expenses in respect to intangible asset in the amount of $
| NOTE 12:- | TRADE PAYABLES |
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Accrued expenses | $ | $ | ||||||
| Open debts | ||||||||
| $ | $ | |||||||
F-31
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 13:- | OTHER ACCOUNTS PAYABLE |
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Employees and payroll accruals | $ | $ | ||||||
| Accrued vacation | ||||||||
| Other payables | ||||||||
| $ | $ | |||||||
| NOTE 14:- | FINANCIAL INSTRUMENTS |
| a. | Classification of financial assets and financial liabilities: |
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Financial assets: | ||||||||
| Cash and restricted deposits | $ | $ | ||||||
| Short term deposits | ||||||||
| Government authorities | ||||||||
| Other receivables | ||||||||
| Investments in financial assets | ||||||||
| Total financial assets at amortized cost | ||||||||
| Financial liabilities: | ||||||||
| Credit from others | ||||||||
| Warrants liability | ||||||||
| Lease liability | ||||||||
| Total financial and lease liabilities | $ | $ | ||||||
F-32
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 14:- | FINANCIAL INSTRUMENTS (CONT.) |
| a. | Classification of financial assets and financial liabilities: (Cont.) |
| Carrying amount | Fair Value | |||||||||||||||
| December 31, | December 31, 2023 | |||||||||||||||
| 2023 | Level 1 | Level 2 | Level 3 | |||||||||||||
| Cash and restricted deposits | $ | $ | $ | $ | ||||||||||||
| Short term deposits | ||||||||||||||||
| Government authorities | ||||||||||||||||
| Other receivables | ||||||||||||||||
| Investments in financial assets | $ | $ | $ | |||||||||||||
| Total financial assets at amortized cost | $ | $ | $ | $ | ||||||||||||
| Credit from others | $ | $ | $ | $ | ||||||||||||
| Warrants liability | ||||||||||||||||
| Lease liability | ||||||||||||||||
| Total financial and lease liabilities | $ | $ | $ | $ | ||||||||||||
| Carrying amount | Fair Value | |||||||||||||||
| December 31, | December 31, 2023 | |||||||||||||||
| 2023 | Level 1 | Level 2 | Level 3 | |||||||||||||
| Cash and restricted deposits | $ | $ | $ | $ | ||||||||||||
| Short term deposits | ||||||||||||||||
| Government authorities | ||||||||||||||||
| Other receivables | ||||||||||||||||
| Investments in financial assets | $ | $ | $ | |||||||||||||
| Total financial assets at amortized cost | $ | $ | $ | $ | ||||||||||||
| Credit from others | $ | $ | $ | $ | ||||||||||||
| Warrants liability | ||||||||||||||||
| Lease liability | ||||||||||||||||
| Total financial and lease liabilities | $ | $ | $ | $ | ||||||||||||
F-33
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 14:- | FINANCIAL INSTRUMENTS (CONT.) |
| b. | Dekel |
On March 19, 2020, the Company entered
into a securities purchase agreement with Dekel Pharmaceutical Ltd. (“Dekel”) pursuant to which Dekel agreed to invest in
the Company through a private placement transaction (the “Private Placement”). At the time of the Private Placement, Dekel
was considered as a related party to the Company; however, it is no longer a related party to the Company. In connection with the Private
Placement, Dekel received convertible promissory notes (the “Notes”), with an aggregate original principal amount of approximately
$
General Overview of Valuation Approaches used in the Valuation:
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
F-34
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 14:- | FINANCIAL INSTRUMENTS (CONT.) |
| b. | Dekel (Cont.) |
Economic methodology:
| December 31, 2023 | December 31, 2022 | March 23, 2020 | ||||||||||
| Dividend yield (%) | ||||||||||||
| Expected volatility (%) | ||||||||||||
| Risk-free interest rate (%) | ||||||||||||
| Underlying Share Price ($) | ||||||||||||
| Exercise price ($) | ||||||||||||
| Warrants fair value ($) | ||||||||||||
| c. | Financial risk factors: |
The Company’s activities expose it to various financial risks such as market risks (foreign currency risk and interest risk), credit risk and liquidity risk. The Company’s comprehensive risk management plan focuses on activities that reduce to a minimum any possible adverse effects on the Company’s financial performance.
Risk management is performed by management in accordance with the policies approved by the Board. The Board establishes written principles for the overall risk management activities as well as specific policies with respect to certain exposures to risks such as exchange rate risk, credit risk and the investments of surplus funds.
| 1. | Market risks: |
Foreign currency risk:
The Company is exposed to exchange rate risk resulting from the exposure to different currencies, mainly from transactions in NIS. Exchange rate risk arises from recognized liabilities that are denominated in a foreign currency other than the functional currency.
| 2. | Credit risks: |
All cash and restricted deposits related to the Company are held in two banks in Israel which are considered financially solid.
| 3. | Liquidity risk: |
The Company monitors the risk of a shortage of funds on a regular basis and acts to raise funds to satisfy its liabilities. As of December 31, 2023, the Company expects to settle all of its financial liabilities in less than one year.
The carrying amounts of cash and restricted deposits, and all other financial assets and liabilities approximate their fair value.
Refer to Note 14a for more information.
F-35
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 15:- | EMPLOYEE BENEFIT LIABILITIES |
Employee benefits consist of short-term benefits and post-employment benefits.
Post-employment benefits:
According to the labor laws and the Israeli Severance Pay Law, 1963 (the “Severance Pay Law”), the Company is required to pay compensation to an employee upon dismissal or retirement or to make current contributions in defined contribution plans pursuant to Section 14 of the Severance Pay Law, as specified below. The Company’s liability is accounted for as a post-employment benefit. The computation of the Company’s employee benefit liability is made in accordance with a valid employment contract based on the employee’s salary and employment term which establish the entitlement to receive the compensation.
The post-employment benefits are normally financed by contributions classified as defined benefit plans or as defined contribution plans as detailed below.
Defined contribution plans:
Section 14 of the Severance Pay Law
applies to a substantial part of the compensation payments, pursuant to which the fixed contributions paid by the Company into pension
funds and/or policies of insurance companies release the Company from any additional liability to employees for whom said contributions
were made.
| Year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Expenses in respect of defined contribution plans | $ | $ | $ | |||||||||
| NOTE 16:- | TAXES ON INCOME |
| a. | Tax rates applicable to the Company: |
The Israeli statutory corporate tax
rate and real capital gains tax rate were
| b. | Tax assessments: |
The assessments of the Company are deemed final through the 2016 tax year.
| c. | Carryforward tax losses and other temporary differences: |
The Company has accumulated tax losses since its inception.
As of December 31, 2023, the Company’s
net carryforward tax losses are estimated to grow to approximately $
F-36
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 17:- | CONTINGENT LIABILITIES, COMMITMENTS, CLAIMS AND LIENS |
| a. | License Agreement with Dekel Pharmaceuticals Ltd.: |
In May 2015, the Company entered into an exclusive, irrevocable, worldwide license agreement with Dekel for certain technology and one granted U.S. patent related to compositions and methods for treating inflammatory disorders (the “Dekel License Agreement”). The Dekel License Agreement became effective in August 2015.
Pursuant to the Dekel License Agreement,
the Company is obligated to pay Dekel fees based on specific milestones and royalties upon commercialization. The milestone payments
include:
On July 14, 2019, an amendment to the Dekel License Agreement was signed (the “Amendment”), which encompasses the Company and Dekel’s original intention to exclude certain consumer packaged goods (meaning, inter alia, food, beverage, cosmetics, pet products and hemp based products, which are sources of nutrients or other substances which may have a nutritional effect) from the scope of the licensed products and the field of activity of the Company described in the Dekel License Agreement. The parties agreed to amend the Dekel License Agreement to reflect the foregoing clarification, as well as certain additional less material matters as discussed in the Amendment.
The Amendment also prescribes for
a specific development plan under the Dekel License Agreement requiring the Company to invest in the licensed technology (as defined
under the Dekel License Agreement) formulation development and maintenance a total annual investment to be capped at $
On November 13, 2019, an additional
milestone under the Dekel License Agreement, in the amount of $
F-37
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 17:- | CONTINGENT LIABILITIES, COMMITMENTS, CLAIMS AND LIENS (CONT.) |
| b. | License Agreement with Yissum Research Development Company of the Hebrew University of Jerusalem Ltd. (“Yissum”): |
On July 29, 2018, the Company entered into an exclusive, worldwide, sublicensable, royalty-bearing license with Yissum for a license to make commercial use of the licensed technology, in order to develop, obtain regulatory approvals, manufacture, market, distribute or sell products, all within the field and the territory only, as determined in the agreement (the “Yissum License Agreement”). According to the Yissum License Agreement, the Company shall pay Yissum royalties at the rates of future net sales, subject to the royalty reductions as described in the Yissum License Agreement. The Company is also obligated to pay sublicense fees out of the sublicense consideration. All right, title and interest in and to the Yissum License Agreement shall vest solely in Yissum, and the Company shall hold and make use of the rights granted. All rights in the development results shall be solely owned by the Company, except to the extent that an employee of Yissum, including the researcher, is considered an inventor of a patentable invention arising from the development results, in which case such invention and all patent applications and/or patents claiming such invention shall be owned jointly by the Company and Yissum, as appropriate, and Yissum’s share in such joint patents shall be automatically included in the Yissum License Agreement.
| c. | Agreement with Hannover Medical School: |
On April 11, 2017, the Company entered
into an investigator-initiated study contract with Hannover Medical School (“MHH”) to conduct during 2018 a phase IIb clinical
trial titled “A Randomized, Double-Blind, Placebo controlled study to Evaluate the Safety, Tolerability and Efficacy of Up to Twice
Daily Oral SCI-110 in Treating Adults with Tourette Syndrome” in treating approximately 20 Tourette syndrome subjects aged 18 to
65. Upon the execution of the agreement the Company paid the first installment in the amount of $
On August 13, 2018, the Company entered
into an agreement with MHH to conduct a clinical study to evaluate the safety, tolerability and efficacy of daily oral SCI-110 in treating
adults with Tourette syndrome, which agreement was subsequently updated on December 2, 2021, in an estimated amount of $
| d. | Agreement with Yale University:
On July 27, 2022, the Company entered into an agreement with Yale University to conduct a clinical investigation and laboratory services for a randomized, double-blind, placebo-controlled, cross over study to evaluate the safety, tolerability and efficacy of daily oral SCI-110 in treating adults with Tourette syndrome in treating approximately 10 Tourette syndrome subjects aged 18 to 65. The total estimated amount of the agreement is approximately $ |
F-38
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 17:- | CONTINGENT LIABILITIES, COMMITMENTS, CLAIMS AND LIENS (CONT.) |
| e. | On May 2, 2023, Capital Point Ltd. (“Capital Point”) filed with the Tel Aviv-Jaffa District Court (the “Court”) a suit against the Company, case number 2050-05-23 (the “Suit”). The Suit names the Company as the sole defendant and includes allegations of breaches of contract by the Company under the Israeli Contracts Law, 1973, unjust enrichment under the Israeli Unjust Enrichment Law, 1979 and breaches of the Company under the Israeli Torts Ordinance, 1968.
The Suit challenges a certain warrant issued by the Company to Capital Point (the “Capital Point Warrant”) to purchase $
The Suit claims damages in the amount of NIS
As of December 31, 2023, in connection with the aforementioned litigation, the shares of Evero Health Ltd. held by Capital Point are dormant and were forfeited by Evero Health Ltd.
As of the Approval Date, the Company cannot predict the likelihood of success of the Suit. |
| NOTE 18:- | EQUITY |
| a. |
| December 31, 2023 | December 31, 2022 | |||||||||||||||
| Authorized | Issued and outstanding | Authorized | Issued and outstanding | |||||||||||||
| Number of shares | ||||||||||||||||
| Ordinary shares | ||||||||||||||||
F-39
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 18:- | EQUITY (CONT.) |
| a. | Composition of share capital: (Cont.) |
Reverse Share Splits
On September 15, 2022, the Company
convened an annual general meeting of its shareholders, whereby the shareholders approved to increase the Company’s share capital
to
On August 18, 2023,
On September 14, 2023, the Company’s Board resolved that the final ratio for the Third Reverse Split will be 26:1, which became effective on September 28, 2023.
Consequently, all share numbers, share prices, and exercise prices have been retroactively adjusted in these consolidated financial statements for all periods presented.
| b. | Changes in share capital: |
Number
of shares | ||||
| Balance at January 1, 2023 | ||||
| Issuance of share capital – in respect of investment in affiliate (Note 18f) | ||||
| Share issued to a consultant (Note 19(a)(5)) | ||||
| Issuance of share capital – in respect of shelf prospectus | ||||
| Issuance of share capital – in respect of August 2023 financing round (Note 18i) | ||||
| Issuance of share capital – in respect of rounding errors | ||||
| Issuance of share capital – in respect of October 2023 financing round (Note 18j) | ||||
| Balance at December 31, 2023 | ||||
F-40
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 18:- | EQUITY (CONT.) |
| c. | Rights attached to shares: |
Voting rights at the shareholders meeting, right to dividends, rights upon liquidation of the Company and right to nominate the directors in the Company.
| d. | Capital management in the Company: |
The Company’s capital management objectives are to preserve the Company’s ability to ensure business continuity thereby creating a return for the shareholders, investors and other interested parties. The Company is not under any minimal equity requirements nor is it required to attain a certain level of capital return.
| e. | Additional issuance of ordinary shares: |
On August 2, 2022, the Company issued
a consultant
On November 1, 2022, the Company issued
a consultant
On March 22, 2023, the Company issued
F-41
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 18:- | EQUITY (CONT.) |
| f. | March 2021 Financing Round |
On March 4, 2021, the Company completed
a private offering with several accredited and institutional investors for gross proceeds of $
The 2021 Series A Warrants have an
exercise price of $
During the year ended December 31,
2021, the Company issued
During the year ended December 31,
2022, the Company issued
| g. | June 2022 Financing Round |
On June 1, 2022, the Company completed
a private offering with an investor for gross proceeds of $
The June 2022 Warrants have an exercise
price of $
F-42
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 18:- | EQUITY (CONT.) |
| g. | June 2022 Financing Round (Cont.) |
General Overview of Valuation Approaches used in the Valuation:
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Economic methodology:
| December 31, 2023 | December 31, 2022 | |||||||
| Dividend yield (%) | ||||||||
| Expected volatility (%) | ||||||||
| Risk-free interest rate (%) | ||||||||
| Underlying share price ($) | ||||||||
| Exercise price ($) | ||||||||
| Warrants fair value ($) | ||||||||
During the year ended December 31,
2022, the Company issued
| h. | August 2023 Financing Round |
On August 14, 2023, the Company closed
an underwritten public offering (the “2023 Public Offering”) of
| i. | October 2023 Financing Round |
On October 13, 2023, the Company announced
the closing of a private placement with an institutional investor with gross cash proceeds to the Company of approximately $
In connection with the private placement,
the Company issued an aggregate of
F-43
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 19:- | SHARE-BASED PAYMENT TRANSACTIONS |
| a. | The cost of share-based payment recognized in the financial statements: |
| Year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Research and development expenses | $ | $ | $ | |||||||||
| General and administrative expenses | ||||||||||||
| $ | $ | $ | ||||||||||
| 1. | The 2005 and 2015 ESOP and 2023 Plan of the Company: |
On December 28, 2023, the Board adopted an additional new plan, the 2023 Share Incentive Plan (the “2023 Plan”).
The Company no longer grants any awards under the 2015 ESOP as it was superseded by the 2023 Plan, although previously granted awards under the 2015 ESOP remain outstanding and subject to the 2015 ESOP. Under the 2023 Plan, the Company may grant its employees and other service providers equity based incentive awards (“Share Options”).
On December 28, 2023, the Board approved to reserve for issuance under the 2023 Plan Ordinary Shares. As of the date of this report, no shares were issued.
F-44
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 19:- | SHARE-BASED PAYMENT TRANSACTIONS (CONT.) |
| a. | The cost of share-based payment recognized in the financial statements: (Cont.) |
| 2. | On March 12, 2019, the Board approved and granted |
| Dividend yield (%) | ||||
| Expected volatility (%) | ||||
| Risk-free interest rate (%) | ||||
| Expected life of share options (years) |
The fair value of the Share Options
was set at $
| 3. | On October 10, 2019 (the “2019 Grant Date”), the Board approved the grant of 3 Share Options under the 2015 ESOP to directors, officers and employees, some of which required the approval of the general meeting of the Company’s shareholders (the “2019 General Meeting”), which occurred on January 15, 2020. Following the resignation of some directors and employees on December 31, 2019, 1 Share Options was not granted. Out of the 2 Share Options that were granted, 1 Share Options didn’t require the general meeting’s approval. The date of commencement for all Share Options granted, the date on which the vesting started, was the 2019 Grant Date. The exercise price was set at $ |
According to IFRS 2, “Share-based Payment”, the fair value of the Share Options was estimated using the Black-Scholes OPM, in which the fair value estimation for the Share Options which required the 2019 General Meeting’s approval was calculated based on parameters as of December 31, 2019.
| December 31, 2019 | October 10, 2019 | |||||||
| Underlying ordinary share price | ||||||||
| Dividend yield (%) | ||||||||
| Expected volatility (%) | ||||||||
| Risk-free interest rate (%) | ||||||||
| Expected life of Share Options (years) | ||||||||
The fair value of the Share Options
approved on October 10, 2019 by the Board, and on January 15, 2020 at the 2019 General Meeting (valuated as of December 31, 2019) was
set at $
F-45
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 19:- | SHARE-BASED PAYMENT TRANSACTIONS (CONT.) |
| a. | The cost of share-based payment recognized in the financial statements: (Cont.) |
| 4. | On January 3, 2022 (the “2022 Grant Date”), the Board approved the grant of |
| February 10, 2022 | January 3, 2022 | |||||||
| Underlying ordinary share price | ||||||||
| Dividend yield (%) | ||||||||
| Expected volatility (%) | ||||||||
| Risk-free interest rate (%) | ||||||||
| Expected life of Share Options (years) | ||||||||
The fair value of the Share Options
granted on January 3, 2022, was set at $
| 5. | During the year ended December 31, 2023, the Company issued to consultants |
F-46
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 19:- | SHARE-BASED PAYMENT TRANSACTIONS (CONT.) |
| b. | Movement during the year: |
| 1. |
| Number of Share Options | Weighted average exercise price | |||||||
| USD | ||||||||
| 2023: | ||||||||
| Share Options outstanding at the beginning of the year | ||||||||
| Share Options cancelled during the year | ( | ) | ||||||
| Share Options outstanding at the end of the year | ||||||||
| Share Options exercisable at the end of the year | ||||||||
| 2022: | ||||||||
| Share Options outstanding at the beginning of the year | $ | |||||||
| Share Options granted during the year | ||||||||
| Share Options outstanding at the end of the year | ||||||||
| Share Options exercisable at the end of the year | ||||||||
| 2. | No Share Options were granted during 2023. |
| 3. | The weighted average remaining contractual life of the Share Options outstanding was |
| 4. | The range of exercise prices of Share Options outstanding at the end of the year was $ |
F-47
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 20:- | REVENUES AND COST OF REVENUES |
The Company sells products directly to customers mainly through its online Amazon stores.
Under the Company’s standard contract terms, customers have a right of return within 30 until 90 days. For contracts with rights of return, the Company recognizes revenue based on the amount of the consideration which the Company expects to receive for products which it is highly probable that a significant revenue reversal will not subsequently occur. The Company recognizes a refund liability for consideration received or receivable if it expects to refund some or all of the consideration to the customer. At the end of each reporting period, the Company updates its estimates of expected product returns and adjusts the refund liabilities with a corresponding adjustment in revenues. As of December 31, 2023, the allowance for returns was immaterial. The refund liability is recorded as a decrease in revenues against other payables. A right of return asset and corresponding adjustment to cost of sales is also recognized for the right to recover the goods from the customer.
In certain contracts, the Company evaluates the nature of its promise to the customer and determines whether it is a principal or agent for each contract. In determining the nature of its promise to the customer, the Company evaluates whether it is appropriate to recognize revenues on a gross or net basis based upon its evaluation of whether the Company obtains control of the specified goods by considering if it is primarily responsible for fulfillment of the promise, has inventory risk, and has the latitude in establishing pricing and selecting suppliers, among other factors. Based on its evaluation of these factors, management has determined that it is the principal in these arrangements; therefore, sales are recorded on a gross basis.
| Year ended December 31, | ||||||||||||
| 2023 | 2022(*) | 2021 | ||||||||||
| Cost of goods sold | ||||||||||||
| Amazon fees | $ | $ | $ | |||||||||
| Purchased goods | ||||||||||||
| Storage | ||||||||||||
| Freight | ||||||||||||
| (*) |
F-48
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 21:- | ADDITIONAL INFORMATION TO THE ITEMS OF PROFIT OR LOSS |
| Year ended December 31, | |||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||
| a. | Research and development expenses: | ||||||||||||||
| Wages and related expenses | $ | $ | $ | ||||||||||||
| Share-based payment | |||||||||||||||
| Regulatory, professional and other expenses | |||||||||||||||
| Research and preclinical studies | |||||||||||||||
| Clinical studies | |||||||||||||||
| Chemistry and formulations | |||||||||||||||
| b. | General and administrative expenses: | ||||||||||||||
| Wages and related expenses | |||||||||||||||
| Share-based payment | |||||||||||||||
| Amazon fees | |||||||||||||||
| Storage | |||||||||||||||
| Professional and directors’ fees | |||||||||||||||
| Business development expenses | |||||||||||||||
| Regulatory expenses | |||||||||||||||
| Office maintenance, rent and other expenses | (*) |
||||||||||||||
| Investor relations and business expenses | |||||||||||||||
| c. | Other expenses: | ||||||||||||||
| Company’s share of losses of company accounted for at equity, net | |||||||||||||||
| d. | Finance income: | ||||||||||||||
| Net change in fair value of financial liabilities designated at fair value through profit or loss | ( |
) | ( |
) | |||||||||||
| Exchange rate differences, net | ( |
) | |||||||||||||
| ( |
) | ( |
) | ||||||||||||
| e. | Finance expenses: | ||||||||||||||
| Issuance expenses related to warrants | |||||||||||||||
| Exchange rate differences, net | |||||||||||||||
| Losses from remeasurement of investment in financial assets | |||||||||||||||
| Finance expense in respect of leases | |||||||||||||||
| Finance expenses from interest and commissions | |||||||||||||||
| $ | $ | $ | |||||||||||||
| (*) | Reclassified to correlate with common practice in industry and better reflect profit and loss. |
F-49
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 22:- | LOSS PER SHARE/ADS |
| a. |
| Year ended December 31, | ||||||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||||||
| Amounts used in the computation of basic and diluted loss | Weighted number of shares | Loss | Weighted number of shares (*) | Loss | Weighted number of shares (*) | Loss | ||||||||||||||||||
| In thousands | USD | In thousands | USD | In thousands | USD | |||||||||||||||||||
| Continuing operations: | ||||||||||||||||||||||||
| Basic loss per share | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Effect of potential dilutive ordinary shares | - | - | - | |||||||||||||||||||||
| Diluted loss per share | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| (*) |
| b. | The computation of diluted loss per share did not include the following convertible securities since their inclusion would decrease the loss per share (anti-dilutive effect): |
| 1. | Share Options to employees, officers, directors and consultants; and |
| 2. | Non-marketable warrants to investors. |
F-50
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 23:- | OPERATING SEGMENTS |
The Company applies the principles of IFRS 8, “Operating Segments” (“IFRS 8”), regarding operating segments. The segment reporting is based on internal management reports of the Company’s management, which are regularly reviewed by the Chief Operating Decision Maker (“CODM”) to make decisions about resources to be allocated and assess performance. According to the principles of IFRS 8, the Company’s management determined that it has two reportable segments – (1) development of drugs based on cannabinoid molecules to be approved by an official regulatory authority (the Company’s operation); and (2) online sales of a various range of hemp-based products including hemp gummies, hemp oil capsules, hemp gel, hemp cream, detox pills, height pills, antibacterial creams, and anti-aging creams, among other beauty and hair treatment products that are all manufactured in the United States.
The review of the CODM is carried out according to the results of the segment’s activity. His review does not include certain expenses that are not related specifically to the activity of each of the segments. Those expenses are presented as reconciliation between segments operating results to total operating results in financial statements.
| Year ended December 31, 2023 | ||||||||||||
| Drug Development | Online Sales | Total | ||||||||||
| Revenues | ||||||||||||
| External | $ | $ | $ | |||||||||
| Total | ||||||||||||
| Segment loss (gain) | ||||||||||||
| Company’s share of losses of company accounted for at equity, net | ||||||||||||
| Loss on impairment of intangible asset | ||||||||||||
| Finance expense (income), net | ( | ) | ||||||||||
| Tax expense | ||||||||||||
| Loss | ||||||||||||
| Year ended December 31, 2022 | ||||||||||||
| Drug Development | Online Sales | Total | ||||||||||
| Revenues | ||||||||||||
| External | $ | $ | $ | |||||||||
| Total | ||||||||||||
| Segment loss | ( | ) | ||||||||||
| Company’s share of losses of company accounted for at equity, net | ||||||||||||
| Finance expense (income), net | ( | ) | ||||||||||
| Tax expense | ||||||||||||
| Loss | ||||||||||||
F-51
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 23:- | OPERATING SEGMENTS (CONT.) |
| Year ended December 31, 2021 | ||||||||||||
| Drug Development | Online Sales | Total | ||||||||||
| Revenues | ||||||||||||
| External | $ | $ | $ | |||||||||
| Total | ||||||||||||
| Segment loss | ||||||||||||
| Finance expense (income), net | ||||||||||||
| Loss | ||||||||||||
| As of December 31, 2023 | ||||||||||||
| Drug Development | Online Sales | Total | ||||||||||
| Segment Assets | $ | $ | $ | |||||||||
| Segment Liabilities | $ | $ | $ | |||||||||
| As of December 31, 2022 | ||||||||||||
| Drug Development | Online Sales | Total | ||||||||||
| Segment Assets | $ | $ | $ | |||||||||
| Segment Liabilities | $ | $ | $ | |||||||||
F-52
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 24:- | TRANSACTIONS AND BALANCES WITH RELATED PARTIES |
| a. |
| December 31, 2023 | December 31, 2022 | |||||||||||||||
| Key management personnel | Other related parties | Key management personnel | Other related parties | |||||||||||||
| Current assets | $ | $ | $ | $ | ||||||||||||
| Non-current assets | $ | $ | $ | $ | ||||||||||||
| Current liabilities | $ | $ | $ | $ | ||||||||||||
| b. |
| Year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Research and development expenses | $ | $ | $ | |||||||||
| Sale of minority interest in subsidiary | $ | $ | $ | |||||||||
| c. |
| Year ended December 31, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Short-term benefits | $ | $ | $ | |||||||||
| Management fees (see also note 25a) | $ | $ | $ | |||||||||
| Cost of share-based payment | $ | $ | $ | |||||||||
| d. | On February 23, 2023, the Company entered into an agreement with Jeffs’ Brands and Jeffs’ Brands Holdings Inc. (“NewCo Inc.”), a newly-formed wholly owned subsidiary of Jeffs’ Brands. Mr. Oz Adler, our Chief Executive Officer and Chief Financial Officer, is the chairman of the board of directors of Jeffs’ Brands (see also note 25a). | |
| e. | On March 7, 2022, we entered into the Cooperation Agreement with Clearmind, a company in which Dr. Adi Zuloff-Shani, our Chief Technologies Officer, Mr. Weiss, our President, and Mr. Adler, our Chief Executive Officer and Chief Financial Officer serve as officers and directors (the “Cooperation Agreement”).
During the years ended December 31, 2023 and 2022, the Company recognized expenses in respect of the Cooperation Agreement in the amount of $
On November 17, 2022, we invested $ |
| f. | Mr. Amitai Weiss, our chairman of the board of directors, is the chairman of the board of directors of AutoMax (see Note 8b). |
F-53
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 25:- | SIGNIFICANT EVENTS DURING THE REPORTING PERIOD |
| a. | On February 23, 2023, the Company entered into an agreement with Jeffs’ Brands and Jeffs’ Brands Holdings Inc. (“NewCo Inc.”), a newly-formed wholly owned subsidiary of Jeffs’ Brands, pursuant to which, at the closing and upon the terms and conditions set forth in the Agreement, NewCo Inc. acquired from the Company a number of shares of stock equal to approximately a |
Pursuant to the agreement, at the
closing of the transaction, Jeffs’ Brands and SciSparc US. entered into a consulting agreement, pursuant to which Jeffs’
Brands provides management services to SciSparc US for the WellutionTM brand for a monthly fee of $
In addition, in connection with the
closing of the transaction, the Company and Jeffs’ Brands, engaged in a mutual share exchange in the amount of $
F-54
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
| NOTE 26:- | EVENTS AFTER THE REPORTING DATE |
On January 21, 2024, the Company entered
into a Standby Equity Purchase Agreement (“SEPA”), as amended on February 26, 2024, with YA II PN, LTD (“YA”),
which provided for the sale of up to $
In connection with the SEPA, the Company
may request pre-paid advances of the Commitment Amount, in an amount up to $
In addition, pursuant to the SEPA,
the Company issued to YA an aggregate of
YA will pay all brokerage fees and commissions and similar expenses in connection with the offer and sale of Ordinary Shares by YA pursuant to the SEPA The Company will pay the expenses (except brokerage fees and commissions and similar expenses) incurred to register under the Securities Act the offer and sale of the Ordinary Shares pursuant to the SEPA by YA.
- - - - - - - - - - - - - - - - - - - - - - - - -
F-55
Automax Motors Ltd.
Consolidated Financial Statements as for
December 31, 2023
F-56
Automax Motors Ltd.
Consolidated Financial Statements as for
December 31, 2023
Table of Contents:
F-57
Auditors’ Report
To the shareholders of
Automax Motors
We have audited the accompanying balance sheets of Automax Motors Ltd. (hereafter: “the Company”) as of December 31, 2023 and 2022, and the related statements of profit and loss, statements of changes in equity and statements of cash flow for the years then ended. These financial statements are the responsibility of the Company’s board of directors and management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the AICPA. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the board of directors and management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022 and the results of its operations, the changes in equity and cash flow for those years then ended, in conformity with International Financial Reporting Standards (IFRS) and the provisions of the Securities Regulations (Annual Financial Statements), 2010.
Without qualifying our above opinion, we refer to note 21(a) to the financial statements regarding the indictment that was filed against the company Global AutoMax Ltd. along with its officers, for suspicions of committing offenses as detailed in the note, and also to what is stated in note 1(d) regarding the company’s financial situation, the company’s losses and regarding the steps the company is taking in order to meet its obligations. The company estimates that its financial strength, together with its financial sources and taking the actions detailed in the note, will allow it to continue to finance its activities and meet its obligations in the foreseeable future.
Key matters in the audit
Key matters in the audit are matters that were communicated, or were required to be communicated, to the company’s board of directors and which, according to our professional judgment, were most significant in the audit of the consolidated financial statements for the current period. These matters include, among other things, any matter which: (1) relates, or may relate, to material sections or disclosures in the financial statements and (2) our judgment regarding it was particularly challenging, subjective or complex. These matters are answered as part of our audit and formation of our opinion on the consolidated financial statements as a whole. The communication of these matters below does not change our opinion on the consolidated financial statements as a whole and we do not use it to give a separate opinion on these matters or on the sections or disclosures to which they refer.
F-58
Vehicle inventory
As described in note 8 to the consolidated financial statements, as of December 31, 2023, the balance of the vehicle inventory amounts to approximately 183,647 thousand NIS and constitutes approximately 60% of the total assets in the company’s consolidated financial statements.
Also, as described in note 2(9), the company’s management measures the inventory according to the lower of cost or net realizable value. The inventory cost includes the expenses for purchasing the inventory and bringing it to its current location and condition. Net realizable value is the estimate of the sale price in the normal course of business minus the estimate of costs for completion and costs necessary to carry out the sale. Vehicle inventory cost is determined based on a specific cost.
Due to the materiality of the vehicle inventory balance in the consolidated financial statements and due to the fact that the audit of the inventory is an essential part of the audit work, we determined, according to our professional judgment, that the examination of the existence and evaluation of the inventory as of December 31, 2023 is a key matter in the audit.
The audit procedures carried out in response to the key matter in the audit
The audit procedures we performed, related to this key matter, included, among others, the following procedures: understanding the internal control environment regarding the vehicle inventory registration process; Attending the company’s inventory counts and sampling inventory details for the purpose of checking their existence; receiving direct counting approvals from external websites; checking vehicle inventory costs and their book value; Assessing the adequacy of the disclosure in the consolidated financial statements; Checking that inventory items are shown according to the lower of cost or net realizable value.
Examining the decline in value of the company’s assets
As a continuation of Notes 2(12) and 2(15), the company identified signs of asset impairment and performed an asset impairment assessment, in accordance with the requirements of International Accounting Standard IAS 36, through a comparison between the book value of the cash-generating unit and its recoverable amount. We identified the examination of the decline in value of the company’s assets, as of December 31, 2023, as a key matter in the audit. Determining the recoverable amount for the aforementioned cash-generating units involved a great deal of subjective judgment, since changes in the assumptions can have a material effect on the result of the examination of the decline in value of the cash-generating units.
The audit procedures carried out in response to the key matter in the audit
The audit procedures we performed, related to this key matter, included, among others, the following procedures: understanding of processes and the control environment, regarding the examination of impairment by the company; Examining the adequacy of the identification of the cash generating units; Examining the methodology used in determining the refundable amount; assessment of the skills, experience and independence of the valuer on behalf of the company’s management; Assessing the plausibility of the significant assumptions underlying the works to examine impairment; Performing a sensitivity analysis regarding the management’s significant assumptions used in the valuation; due diligence of the book value and value in use of the cash-generating units; Examination of the adequacy of the disclosures in the financial statements related to the examination of the decrease in value.
| Sincerely, | |
 |
|
| Ben David Shalvi, Kop & Co. | |
| Certified Public Accountants, (Isr.) | |
| Jerusalem, | |
| Jerusalem, March 31, 2024 |
F-59
Automax Motors Ltd.
Consolidated statements of financial position
(in thousands ILS)
| As for 31 December | ||||||||||
| Note | 2023 | 2022 | ||||||||
| Current Assets | ||||||||||
| Cash and cash equivalents | 5 | 1,552 | 2,234 | |||||||
| Trade receivables | 6 | 26,552 | 17,819 | |||||||
| Accounts receivable and debit balances | 7 | 34,801 | 48,331 | |||||||
| Receivable current taxes | 2,023 | 119 | ||||||||
| Vehicles inventory | 8 | 183,647 | 176,863 | |||||||
| Indemnity assets | 1,000 | 1,000 | ||||||||
| 249,575 | 246,366 | |||||||||
| Non-current assets | ||||||||||
| Investments in companies treated according to the book value method | 9 | 12,489 | 17,779 | |||||||
| Right-of-use assets, net | 10 | 20,485 | 16,797 | |||||||
| Property, plant and equipment, net | 11 | 7,871 | 7,430 | |||||||
| Intangible assets, net | 12 | 11,119 | 10,670 | |||||||
| Financial assets stated at fair value recognized through profit and loss | 172 | 172 | ||||||||
| Long-term prepaid expenses | 191 | - | ||||||||
| Long term deposits in banking corporations | 13 | 409 | 535 | |||||||
| Deferred taxes | 24 | 3,005 | 3,333 | |||||||
| 55,741 | 56,716 | |||||||||
| Total Assets | 305,316 | 303,082 | ||||||||
The accompanying notes constitute an integral part of the financial statements.
F-60
Automax Motors Ltd.
Consolidated statements of financial position
(in thousands ILS)
| As for 31 December | ||||||||||
| Note | 2023 | 2022 | ||||||||
| Current Liabilities | ||||||||||
| Short term credit from banking corporations and financing bodies | 14 | 141,430 | 141,392 | |||||||
| Current maturities of liabilities with respect to lease agreements | 5,775 | 4,177 | ||||||||
| Suppliers and service providers | 15 | 16,169 | 27,975 | |||||||
| Accounts payable and credit balances | 16 | 45,820 | 24,145 | (*) | ||||||
| Payable current taxes | - | 1,451 | ||||||||
| Liabilities with respect to bonds | 19 | 6,849 | 4,566 | |||||||
| 216,043 | 203,706 | |||||||||
| Non-current liabilities | ||||||||||
| Long term credit from banking corporations | 17 | 1,807 | 3,675 | |||||||
| Long-term redeemable checks | - | 2,143 | ||||||||
| Long-term liabilities with respect to lease | 16,329 | 13,855 | ||||||||
| Loans from non-controlling shareholders | 18 | 985 | 957 | (*) | ||||||
| Liabilities with respect to bonds | 19 | 34,598 | 42,543 | |||||||
| Investments in companies treated according to the book value method | - | 133 | ||||||||
| Liabilities with respect to employee benefits, net | 20 | 140 | 215 | |||||||
| 53,859 | 63,521 | |||||||||
| Total Equity | ||||||||||
| Total equity attributed to Company shareholders | ||||||||||
| Share capital | 22 | 5,184 | 2,389 | |||||||
| Share premium | 78,466 | 67,382 | ||||||||
| Options | 1,845 | 1,457 | ||||||||
| Capital reserves | (312 | ) | (430 | ) | ||||||
| Share-based payment | 20,014 | 17,465 | ||||||||
| Retained loss | (68,635 | ) | (52,252 | ) | ||||||
| Total equity attributable to Company’ shareholders | 36,562 | 36,011 | ||||||||
| Non-controlling interest rights | (1,148 | ) | (156 | ) | ||||||
| Total equity | 35,414 | 35,855 | ||||||||
| Total liabilities and equity | 305,316 | 303,082 | ||||||||
| (*) | Reclassified. |
| 31/03/2024 | /S/ Daniel Levy | /S/ Amitay Weiss | /S/ Yaarah Alfi | |||
| Date of approval | Daniel Levy | Amitay Weiss | Yaarah Alfi | |||
| of financial | CEO | Chairman of the | CFO | |||
| statements | Board |
The accompanying notes constitute an integral part of the financial statements.
F-61
Automax Motors Ltd.
Consolidated statements of profit and loss
(in thousands ILS)
| For the year ended December 31, |
||||||||||
| Note | 2023 | 2022 | ||||||||
| Revenues | 25 | 418,932 | 453,617 | |||||||
| Cost of sales | 26 | (381,089 | ) | (392,918 | ) | |||||
| Gross profit | 37,843 | 60,699 | ||||||||
| Sales and marketing expenses | 27 | (27,194 | ) | (27,612 | ) | |||||
| Administrative and general expenses | 28 | (16,965 | ) | (16,849 | ) | |||||
| Granting options to employees | (2,549 | ) | (9,976 | ) | ||||||
| Issuance related expenses | - | - | ||||||||
| Other incomes | 1,557 | 226 | ||||||||
| Operational profit (loss) | (7,308 | ) | 6,488 | |||||||
| Financing expenses | 29 | (16,831 | ) | (8,935 | ) | |||||
| Financing incomes | 29 | 7,722 | 3,703 | |||||||
| Financing expenses, net | (9,109 | ) | (5,232 | ) | ||||||
| Company’s share in losses of companies handled according to the book value method | (600 | ) | (585 | ) | ||||||
| Profit (loss) before taxes on income | (17,017 | ) | 671 | |||||||
| (Taxes on income) tax benefit | 24 | (358 | ) | (1,931 | ) | |||||
| Total profit (loss) for the year | (17,375 | ) | (1,260 | ) | ||||||
| Annual profit (loss) allocation: | ||||||||||
| Company’ shareholders | (16,384 | ) | (1,104 | ) | ||||||
| Non-controlling shareholders | (991 | ) | (156 | ) | ||||||
| (17,375 | ) | (1,260 | ) | |||||||
| Profit (loss) per share attributable to Company’ shareholders | ||||||||||
| Profit (loss) per share in ILS | 30 | (0.21 | ) | (0.02 | ) | |||||
The accompanying notes constitute an integral part of the financial statements.
F-62
Automax Motors Ltd.
Consolidated statements of comprehensive income
(in thousands ILS)
| For the year ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Loss for the year | (17,375 | ) | (1,260 | ) | ||||
| Other comprehensive income (loss): | ||||||||
| Items not reclassified to profit or loss: | ||||||||
| Recalculation of net liability with respect to employment termination | 118 | 98 | ||||||
| Total annual other comprehensive income (loss) | 118 | 98 | ||||||
| Total annual comprehensive income (loss) | (17,257 | ) | (1,162 | ) | ||||
| Annual comprehensive income (loss) allocation: | ||||||||
| Company’ shareholders | (16,266 | ) | (1,006 | ) | ||||
| Non-controlling shareholders | (991 | ) | (156 | ) | ||||
| Total | (17,257 | ) | (1,162 | ) | ||||
The accompanying notes constitute an integral part of the financial statements.
F-63
Automax Motors Ltd.
Consolidated statements of changes in shareholders’ equity
(in thousands ILS)
| Shares capital | Shares premium | Options | Capital reserves | Share- based payment | Retained loss | Total equity attributed to Company shareholders | Minority Shares | Total | ||||||||||||||||||||||||||||
| Balance as for January 1, 2023 | 2,389 | 67,382 | 1,457 | (430 | ) | 17,465 | (52,252 | ) | 36,011 | (156 | ) | 35,855 | ||||||||||||||||||||||||
| Issuance of shares and allocation of options | - | - | 388 | - | - | - | 388 | - | 388 | |||||||||||||||||||||||||||
| Issuance of shares via private offer | 1,114 | 12,765 | - | - | - | - | 13,879 | - | 13,879 | |||||||||||||||||||||||||||
| Issuance of shares according to milestones | 1,681 | (1,681 | ) | - | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Share-based payment | - | - | - | - | 2,549 | - | 2,549 | - | 2,549 | |||||||||||||||||||||||||||
| Other comprehensive income | - | - | - | 118 | - | - | 118 | - | 118 | |||||||||||||||||||||||||||
| Loss for the year | - | - | - | - | - | (16,383 | ) | (16,383 | ) | (992 | ) | (17,375 | ) | |||||||||||||||||||||||
| Balance as for December 31, 2023 | 5,184 | 78,466 | 1,845 | (312 | ) | 20,014 | (68,635 | ) | 36,562 | (1,148 | ) | 35,414 | ||||||||||||||||||||||||
| Shares capital | Shares premium | Options | Capital reserves | Share- based payment | Retained loss | Total equity attributed to Company shareholders | Minority Shares | Total | ||||||||||||||||||||||||||||
| Balance as for January 1, 2022 | 2,389 | 67,382 | 1,457 | (413 | ) | 7,488 | (51,148 | ) | 27,155 | - | 27,155 | |||||||||||||||||||||||||
| Share-based payment | - | - | - | - | 9,977 | - | 9,977 | - | 9,977 | |||||||||||||||||||||||||||
| Allocation of rights to shares | - | - | - | (115 | ) | - | - | (115 | ) | - | (115 | ) | ||||||||||||||||||||||||
| Other comprehensive income | - | - | - | 98 | - | - | 98 | - | 98 | |||||||||||||||||||||||||||
| Loss for the year | - | - | - | - | - | (1,104 | ) | (1,104 | ) | (156 | ) | (1,260 | ) | |||||||||||||||||||||||
| Balance as for December 31, 2022 | 2,389 | 67,382 | 1,457 | (430 | ) | 17,465 | (52,252 | ) | 36,011 | (156 | ) | 35,855 | ||||||||||||||||||||||||
The accompanying notes constitute an integral part of the financial statements.
F-64
Automax Motors Ltd.
Consolidated Statements of Cash Flows
(in thousands ILS)
| For the year ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Loss of the year | (17,375 | ) | (1,260 | ) | ||||
| Adjustments required for the presentation of net cash flows from operating activities (Appendix A) | 20,517 | 96,782 | (*) | |||||
| Net cash generated by (used for) operating activities | 3,142 | (98,042 | ) | |||||
| Cash flows from investing activities: | ||||||||
| Consolidation commencement (Appendix B) | - | 465 | ||||||
| Withdrawal from (investment in) affiliated companies | 5,268 | (14,534 | ) | |||||
| Acquisition of leasehold assets | (90 | ) | - | |||||
| Consideration with respect to realization of property, plant and equipment items, net | 1,703 | 460 | ||||||
| Investment in indemnity assets | - | - | ||||||
| Investment in financial asset measured at fair value, recognized through profit and loss | - | (172 | ) | |||||
| Investment in intangible assets | (3,416 | ) | (923 | ) | ||||
| Purchase of property, plant and equipment | (3,951 | ) | (3,810 | ) | ||||
| Withdrawal of (investment in) short-time deposit | 133 | 61 | ||||||
| Net cash generated by (used for) investing activities | (353 | ) | (18,453 | ) | ||||
| Cash flows from financing activities | ||||||||
| Issuance of equity | 8,879 | - | ||||||
| Receipt (repayment) of short-term credit from banking corporations | (391 | ) | 77,874 | |||||
| Repayment of liability with respect to lease agreements | (5,272 | ) | (3,785 | )(*) | ||||
| Repayment of long-term loans from banking corporations | (1,969 | ) | (2,446 | ) | ||||
| Provision of loans to related parties in consolidated companies | (151 | ) | (767 | ) | ||||
| (Repayment) issuance of bonds | (4,567 | ) | 45,015 | |||||
| Net cash generated by (used for) financing activities | (3,471 | ) | 115,891 | |||||
| Decrease in cash and cash equivalents | (682 | ) | (604 | ) | ||||
| Cash and cash equivalents as for the beginning of the year | 2,234 | 2,838 | ||||||
| Cash and cash equivalents as for year end | 1,552 | 2,234 | ||||||
| (*) | Reclassified. |
The accompanying notes constitute an integral part of the financial statements.
F-65
Automax Motors Ltd.
Consolidated Statements of Cash Flows
(in thousands ILS)
Appendix A - Adjustments required for the presentation of net cash flows from operating activities
| For the year ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Incomes and expenses non-involving cash flows | ||||||||
| Depreciation and amortization | 10,392 | 8,182 | ||||||
| Deferred tax expenses (income) | 293 | 421 | ||||||
| Other incomes | (104 | ) | (226 | ) | ||||
| Share-based payment | 2,549 | 9,976 | ||||||
| The group’s share in the results of companies treated according to the book value method, net | 600 | 585 | ||||||
| IFRS 16 implementation effects | - | - | (*) | |||||
| Financing expenses, net | 2,939 | 2,662 | ||||||
| Trade registration expenses | - | - | ||||||
| 16,669 | 21,600 | |||||||
| Changes in assets and liabilities items | ||||||||
| Increase in vehicles inventory | (6,551 | ) | (97,082 | ) | ||||
| Decrease (increase) in accounts receivable and debit balances | 9,806 | (21,238 | ) | |||||
| Increase in trade receivables | (8,733 | ) | (9,253 | ) | ||||
| Increase (decrease) in suppliers and service providers | (8,949 | ) | 6,403 | |||||
| Increase (decrease) in accounts payable and credit balances | 21,743 | 1,368 | ||||||
| Increase in long-term prepaid expenses | (191 | ) | - | |||||
| Increase in employee’ benefits and employee related provisions | 78 | 88 | ||||||
| Increase (decrease) in current payable taxes | (3,355 | ) | 1,332 | |||||
| 3,848 | (118,382 | ) | ||||||
| 20,517 | (96,782 | ) | ||||||
The accompanying notes constitute an integral part of the financial statements.
F-66
Automax Motors Ltd.
Consolidated Statements of Cash Flows
(in thousands ILS)
Appendix B - Consolidation Commencement
| For the year ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Working capital not including cash | - | 167 | ||||||
| Inventory | - | 613 | ||||||
| Property, plant and equipment and intangible assets | - | 938 | ||||||
| Balances with respect to lease, net | - | (167 | ) | |||||
| Loan from related parties | - | (2,780 | ) | |||||
| Goodwill | - | 764 | ||||||
| - | 465 | |||||||
| (*) | Reclassified. |
The accompanying notes constitute an integral part of the financial statements.
F-67
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 1 - General
| A. | Company description: |
The company has been incorporated in 2006, and until December 2019, offered and provided, together with its subsidiaries, a variety of proprietary programmatic data-driven platforms that focused on two main activities of domain monetization and mobile digital advertising for advertisers, advertising agencies, application developers and domain owners, mainly in the U.S.and European countries. Its shares were traded on the London Stock Exchange (“LSE”) and at the Tel Aviv Stock Exchange Ltd. (“TASE”).
On June 23, 2020, the trading in the Company’s shares on the LSE and TASE exchanges was suspended. On November 25, 2020, trading resumed on TASE as part of the list for limited trading (retention list) and on January 12, 2021, the Company’s shares returned to trading as part of general trading on the main list on TASE.
On November 23, 2020, the Company’s shares were delisted from trading on the LSE.
During the period between the middle of 2017 and up to December 2019, the Company sold all of its activities in the field of digital advertising.
As of the date of the completion of the merger transaction (as defined in Note 1(c) hereunder), the Company is engaged, through Global Auto Max Ltd, a fully controlled subsidiary in the import to Israel and marketing of a variety of private and commercial vehicles models. In addition, the Company is engaged in direct import and marketing in Israel of buses manufactured by Temsa (through Dalhom Automax (as defined below), as well as in the purchase and sale of used vehicles (trade-in) (through Automax Trade-in (as defined below). Regarding the merger with Global AutoMax Ltd. see Note 1(c) hereunder.
On April 22, 2021, the company changed its name from Matomy Media Group Ltd. to Automax Motors Ltd.
Following are details of companies held by the Company as for the balance sheet date:
| ● | Global Auto Max Ltd. - holding 100% of the issued and paid-up capital, a private company incorporated and registered in Israel (hereinafter: “Global Auto Max”) in 2014. |
| ● | Automax Trade In Ltd. (hereinafter: “Automax Trade In”) - holding 80% of the issued and paid-up capital, a private company incorporated and registered in Israel in 2022. |
| ● | Dalhom Automax Ltd. (hereinafter: “Dalhom”) - holding 50% of the issued and paid-up capital, a private company incorporated and registered in Israel in 2022. |
| ● | Automax Leasing Ltd. (hereinafter: “the leasing company”) - holding 100% of the issued and paid-up capital, a private company incorporated and registered in Israel in 2022. |
F-68
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 1 - General (continued)
| B. | Description of Global AutoMax Ltd.: |
Global AutoMax Ltd. was incorporated in Israel in 2014 as a private company in accordance with the provisions of the Companies Law, 2019-1999 (hereinafter: the Companies Law”).
The head offices of Global AutoMax are situated in Jerusalem. As of the day of its incorporation, Global AutoMax has been engaged in importing into Israel and marketing a variety of various vehicles intended for private use.
Global AutoMax is a licensed indirect importer, as defined in Paragraph 42 of the Services and Professions Licensing in the Automotive Industry Law, 5766-2016 (hereunder: “Automotive Services Licensing Law”). Said license covers 27 vehicle products in a variety of models.
As of the date of the financial statements, Global AutoMax conducts its operations through 12 car sale centers located in Jerusalem, Rishon Le-Zion, Petah Tikva, Afula, Be’er Sheva, Haifa, Ashkelon, Ra’anana, Akko, Netanya, Ashdod and Glilot, in addition to operating a series of storage facilities and PDI (pre-delivery inspection) service agencies for vehicles up for sale.
F-69
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 1 - General (continued)
Since the outbreak of the Iron Swords War, the Company’s branches in Ashkelon and Petah Tikva have been closed, and the Company is examining the continuance of their operation. The Company assesses that the impact of not operating these branches is immaterial to the group.
Following are details of companies held by Global AutoMax as for the balance sheet date:
| ● | EDV Car Importers Ltd. - holding 100% of the issued and paid-up capital, a private company incorporated and registered in Israel in 2019. In August 2023, the company changed its name to Automax Fleets Ltd. (hereinafter: “Automax Fleets”). |
| ● | Automax HaSharon Ltd. (hereinafter: “Automax HaSharon”) - holding of 67% of the issued and paid-up capital. A private company incorporated and registered in Israel in 2021. |
| ● | Automax Netanya Ltd. - holding 100% of the issued and paid-up capital, a private company registered and incorporated in Israel in 2022. |
| ● | Automax HaShfela Ltd. – holding 50% of issued and paid up capital, a private company incorporated and registered in Israel in 2022. |
| ● | Automax Leasing and Vehicle Fleets Ltd. (hereinafter: “Automax Leasing and Vehicle Fleets”) - holding 100% of the issued and paid-up capital, a private company incorporated and registered in Israel in 2023. |
| C. | Merger with Global AutoMax Ltd.: |
On November 9, 2020, the Company, Global AutoMax, and its (former) shareholders (controlling shareholders of the Company as for the date of the financial statements) and M.R.M. Merhavit Holdings and Management Ltd. (hereunder: “Transaction Initiator”) entered into a merger agreement by means of exchanging stock between the Company and the former shareholders of Global AutoMax (hereunder: the “Merger Agreement” or the “Merger Transaction” or the “Transaction”).
On March 24, 2021, the Merger Transaction has been finalized after the preconditions detailed within the Merger Agreement were met. As part of the transaction, the Company allocated ordinary shares to the shareholders of Global AutoMax (above and hereunder: (“Date of completion of the merger transaction”), which constituted immediately after their allocation 52.53% of the Company’s issued and paid-up share capital, as well as rights to the allocation of additional shares upon the fulfillment of milestones established in the Merger Agreement, which, if fully fulfilled, will increase the holdings of the former shareholders of Global AutoMax to 73% of the Company’s fully diluted issued and paid-up share capital.
In exchange, all shareholders of Global AutoMax at that time transferred their shares in Global AutoMax to the Company, so that after the completion of the transaction the Company owns 100% of Global AutoMax shares, fully diluted, as well as every right of any kind and type in Global AutoMax.
F-70
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 1 - General (continued)
In addition, a number of Global AutoMax officers who serve as Company officers after the completion of the transaction were assigned with options to purchase 59,257,103 ordinary shares of the Company, according to an employee, officers and service providers’ option allocation plan upon the time of completion of the merger by the Company.
At the time of completion of the Merger Transaction, the directors of the Company who were in term at that time ceased to hold office (with the exception of the external directors and Mr. Amitay Weiss), as well as the other officers of the Company, and replaced by directors and various officers proposed by the former shareholders of Global AutoMax.
In addition, it was determined that according to the Merger Agreement, the amount of cash in the Company’s “petty cash” account as on the date of the Merger Transaction completion should be approx. 22 million ILS. Despite the aforementioned, according to the reconciliation, as carried out subject to the provisions of the Merger Agreement, the “petty cash” balance at the date of the reconciliation amounted to just 21.5 million ILS. The entire amount of the difference (approx. 500 thousand ILS) is subject to the indemnification provision stipulated in the Merger Agreement, according to which the amount of the difference will be paid by way of allocating the indemnity shares against capital raising to be carried out by the Company. In accordance with the provisions of the merger agreement, to the extent that it is not possible for any reason to make the indemnification in shares in the manner stated above, the controlling owners will be given indemnification in cash.
F-71
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 1 - General (continued)
The Agreement also includes provisions regarding mutual compensation, instructions regarding the settlement of previous Company’ undertakings, preliminary terms and additional stipulations with respect to the completion of the Merger Transaction according to its terms as well as provisions regarding future issuance of securities subject to Company’ prospectus.
On March 28, 2023, in light of the Company’s compliance with milestones #2 and 3 stipulated in the merger agreement, the Company allocated to the controlling owners 168,105,258 additional ordinary shares of the Company, which constituted approx. 41% of the issued and paid-up capital of the Company after the allocation. As for the signature date of the financial statements, the controlling shareholders hold, jointly, about 55.65% of the Company’s issued and paid-up share capital.
| D. | Effect of changes in the business environment on the Group’s activities and the Group’s business situation: |
The Company imports its inventory of vehicles from various suppliers situated in Europe and North America. Its revenues derive from the sale of vehicles in Israel in ILS. Therefore, the Company is exposed to depreciation in the exchange rate of the shekel against the foreign currencies of the countries from which the vehicles are imported. From the beginning of 2023, there has been a depreciation in the exchange rate of the shekel against various currencies, and more specifically the various currencies to which the Company is exposed. According to the Bank of Israel, this trend, which began to moderate as of November 2023 and as for the date of the publication of the report, is mainly due to the legislative changes regarding the judicial system in Israel, as detailed below. The erosion trend in the exchange rate of the shekel against foreign currencies that the Company is exposed to, has a negative effect on the Company’s profitability, especially in the short term, if it is not possible for the Company to adjust the selling prices of the vehicles it sells.
In light of the erosion trend in the exchange rate of the shekel against foreign currencies that the Company is exposed to from the beginning of 2023, the Company has made a change in the mix of vehicles it imports and in the purchase currencies (in accordance with the changes in the market). In addition, the Company implements a currency risk’ management policy which is designed to reduce said exposures.
From the second quarter of 2022 and until the second quarter of 2023, inter alia due to the appearance of a number of economic and geopolitical events that affected price levels worldwide, there was a sharp increase in inflation (during the 12-months period between March 2022 and March 2023, the consumer price index in Israel rose by 5%). In the second quarter of 2023, there was a certain moderation in the rate of increase in the consumer price index, which continued in the third quarter of 2023, and moved to a decrease in the fourth quarter of 2023 (mainly in light of the effect of the Iron Swords War). The increase in the consumer price index in Israel in 2023 amounted to 3%.
F-72
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 1 - General (continued)
In response to the increase in prices and subsequently to the interest rate increases by the central banks in Europe and the USA, starting in April 2022, the Bank of Israel decided to raise the Bank of Israel’ interest rate, and it increased several times from a rate close to zero (which prevailed for about 7 years) to a rate of 4.75% per year, in the second quarter of 2023. In January 2024, the Bank of Israel decided to lower the annual rate by 0.25% to a level of 4.5%, which also prevails at the time of the publication of this report.
According to the Bank of Israel Research Department’s forecast published in January 2024, the inflation rate during 2024 is expected to be 2.4%, and the average Bank of Israel’ interest rate is expected to be 3.75%/4.00% in the fourth quarter of 2024.
The credit lines provided by banking corporations to the companies within the Group bear interest at the rate of the prime interest rate (which is the Bank of Israel’ interest plus 1.5%. At the time of the publication of the financial statements, the prime interest rate is 6%), plus a certain rate, as agreed during deliberations with the banking corporations upon actual takeout of the credit. Said rate is affected, inter alia, by the market interest rate, by the extent of credit and by the familiarity of the bank with the Company. Therefore, the increase in the Israeli interest rate has led to a rise in the Group’s financing costs (which are expected to continue increasing with the continued rise in interest), which might affect the financial results of the Group and its profitability. However, the Company does not expect that a higher interest rate environment will be a practical obstacle in taking credit from banks or other financing bodies. In addition, the Company does not anticipate that the continued increase in the market interest rate may harm the covenants established with the banking corporations, since most of the benchmarks that Group’ companies undertook with respect to the banking corporations are virtually unaffected by changes in interest rates.
F-73
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 1 - General (continued)
However, the high interest rate environment and the effects of the Iron Swards War are expected to slow down the growth rate of the market in general, and of the Company in particular, as well as harm private consumption. According to the Central Bureau of Statistics, the Israeli growth rate in 2023 was 2%, which is a 0.1% decrease in GDP per capita in comparison to 2022. In a forecast published in January 2024 by the Research Department of the Bank of Israel, the Israeli growth rate in 2024 is expected to be 2% as well, and the rate of growth in private consumption is expected to increase from a negative rate of 0.7% in 2023, to 3% in 2024, and 6% in 2025. The increase in inflation and interest have a negative effect on the Company’s sales rate and, as a result, on its profitability.
As described above, the rise in interest rates has a direct and indirect negative effect on the economy and the Company. Therefore, at the time when the monetary policy of raising interest rates moderates, it is expected to have a positive effect on the Company.
During the first quarter of 2023, the new government began promoting a plan to make fundamental changes to the judicial system in Israel, parts of which were approved by the Knesset in first reading of the bill. The proposed changes have aroused widespread controversy and criticism, which according to various publications by international credit rating companies (such as Moody’s), economic entities, senior economists in the market, heads of academic institutions and experts in the fields of law, economy, society and the humanities in Israel, may impact the robustness of the market and economy in Israel.
In April 2023, the international rating agency Moody’s lowered Israel’s rating forecast from “positive” to “stable”, and in May 2023, the International Monetary Fund lowered the growth rate forecast for the Israeli economy for 2023, while these bodies note that the crisis surrounding the changes in the judicial system constitute a cause of instability, and the lack of a broadly-agreed solution may cause an increase in the risk of Israel’s economy.
In July 2023, after the legislative proceedings were suspended for a certain period for negotiations between the coalition and the opposition, the Knesset approved in the second and third readings the Basic Law: The Judiciary (Amendment No. 3) (Reduction of the Reason for Reasonableness), without agreement with the opposition, in a manner that provoked public criticism and widespread protest. Following the aforementioned amendment, the credit rating agencies Moody’s and-S&P published outstanding reports in which they warned against the consequences of promoting changes in the judicial system without broad agreement on the Israeli economy. It should be clarified that petitions were submitted to the Supreme Court on its session as the High Court of Justice against the amendment to the Basic Law: the Judiciary, which were discussed in September 2023, for the first time before a full panel of 15 judges. On January 1, 2024, the Supreme Court, in its session as the High Court of Justice, rejected by a majority of votes the amendment to the Basic Law: the Judiciary (Reduction of the Reason for Reasonableness).
F-74
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 1 - General (continued)
At the beginning of August 2023, the Bank of Israel published a report regarding the financial stability for the first half of 2023, according to which the legislative changes regarding the judicial system in Israel caused a considerable increase in the economic uncertainty in the economy and the accelerated development of the negative sentiment in the markets. According to the aforementioned report, the uncertainty surrounding the legislative changes raised the risk premium of the economy and was accompanied by a devaluation of the exchange rates which contributed to an increase in inflation, a decrease in stock prices and increased volatility in the foreign exchange market and the financial markets. As of the date of the publication of this report, no further changes have yet been promoted in the judicial system in Israel, and it seems that in light of the outbreak of the Iron Swords War, there is no prospect of further changes being promoted in the foreseeable future.
Such changes may have a negative impact on the economic environment in which the Company operates, on the cost of funding sources, on the credit rating of the Israeli economy, and more. However, since these are changes most of which have not yet been enacted or entered into force, the extent of their impact on the Israeli economy and the automotive industry in general and the Company in particular, are unknown and cannot be assessed at this stage.
Starting at the beginning of 2023, the supply of vehicles in the intermediate category began to return to its normal level from before the corona crisis and the chip crisis in the automotive industry, and even the discount rates for the purchase of vehicles in the world began to rise during the second quarter of 2023. Therefore, the Company is gradually working to reduce the cost of vehicle inventory per vehicle it owns by increasing the supply of vehicles of the intermediate category and lower, that are marketed by the Company, with the aim of adjusting the Company’s vehicle inventory to the increased demand for vehicles of the intermediate category and lower, as a result of the economic and financial situation in the State of Israel.
F-75
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 1 - General (continued)
The Company is looking at expanding and diversifying the sources of supply of vehicles imported by it, including brands manufactured in China that have gained demand in the Israeli car market. In the Company’s estimation, the realization of this move will have a positive effect on its revenues.
In the second half of 2023, global economic trends, including the increase in inflation and interest rates in the countries where the Company purchases its vehicle inventory, led to opportunities to purchase vehicle inventory in larger volumes and at better prices compared to previous periods. This trend increased during the period that elapsed between the date of this report and until the signature date of the financial statements.
The changes in the business environment (including the outbreak of the Iron Swords War as detailed in Note 1E hereunder) caused a decrease in the Company’s revenues during the reported period to a total of approx. ILS 418.9 million compared to approx. ILS 453.6 million in the corresponding period last year, to an erosion of the Company’s gross profit during the reporting period to a total of approx. ILS 37.8 million compared to a total of approx. ILS 60.7 million in the corresponding period last year, as well as losses (before tax) in the amount of approx. ILS 17 million during the reporting period compared to a profit (before tax) of 0.6 million ILS in the corresponding period. The adjusted loss (before tax) for 2023, deducted by options granted to employees, non-cash-flow rate differences with respect to the Optimatic transaction (as detailed in Note 16(b) hereunder) as well as the “Iron Swords” grants for the months of November and December 2023 (which were not recognized during the reporting period), constitutes approx. ILS 8.6 million, compared to a profit of about ILS 11.8 million (before tax) in the corresponding period last year.
The Company builds its cash flow for the following periods on the basis of a consolidated cash flow, which takes into account the individual cash flows of the companies held by it, so that all of the Company’s liabilities with respect to bondholders (series B) and the held companies towards banking corporations and various third parties will be used.
To this end, the Group takes the following steps:
| 1. | Changing the mix of imported and sold vehicles in the Company’s branches according to the current demand of its customers. The changes in the business environment as mentioned above, caused a demand for vehicles in the intermediate and small vehicle categories. The Company’s management anticipates that as a result the inventory turnover rate will increase, which will lead to a positive cash flow from current operations, a trend that began in the second quarter of 2023, continued in the third quarter of 2023, and is expected to continue in the following quarters as well. After the date of the financial statements and until the date of approval of the financial statements, the Company sold mainly vehicles from the intermediate category, which corresponds with the Company’s plans to change its vehicle mix to vehicles in the intermediate and small category. As of the date of approval of the financial statements, the rate of orders for new vehicles in December 2023 is higher than the rate of orders in the corresponding period last year. |
F-76
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 1 - General (continued)
| 2. | The Group has flexibility regarding the financing of advances to suppliers and discount policies to customers according to the market situation, interest rates and exchange rates and the needs of the Company. |
| 3. | The financing that the Company provides to the companies within the Group is subject to the Company’s amortization schedule towards the bondholders (series B). |
| 4. | Strengthening the Company’s equity capital through capital raising (including the Merger Transaction (insofar completed) with the receiving company, as detailed in Note 21(S) below). |
It should be clarified that the Company’s assumption in relation to the repayment of loans provided by it to invested companies that have been provided credit lines from banking corporations, is based on the fact that at the said repayment date, the invested companies will comply with the financial covenants and other terms stipulated by said banking corporations.
The Company raised funds from the public via bonds (series B), as detailed in Note 19 below. As part of the shelf prospectus and the deed of trust, the Company undertook to comply with a number of financial covenants, detailed in note 21c hereunder. The Company’s policy and operations are aimed at meeting the principal and interest payments to bondholders (series B) as well as the financial covenants at any point in time. The Company has various instruments for implementing this policy, as detailed hereunder:
F-77
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 1 - General (continued)
| 1. | Selecting the mix of imported vehicles, the import currencies, the amount of advances to suppliers and the selling prices in Israel. This implementation began during the second quarter of 2023, continued during the third and fourth quarters of 2023, and is expected to continue in the following quarters as well. |
| 2. | Inventory management policy - the Group can increase or decrease the amount of vehicles as well as inventory value according to its operational plans and to the seasonality in the automotive industry. During the second quarter of 2023, the Company reduced its inventory of vehicles, based on seasonal planning that took into account the school holidays and the Tishrei holidays. During the third and fourth quarters of 2023, the Group prepared for the demands of the fourth quarter (which is traditionally characterized as the quarter with the highest sales in the automotive industry) by increasing the inventory of vehicles from the intermediate category and lower, while taking into account increased demand at the end of 2023 following the expected tax increase on plug-in and electric vehicles. |
As of the date of the publication of this report, the Company is unable to assess the full future effects, to the extent that they may be of all of the factors mentioned above on the automotive industry in Israel in general and on the Company’s activities in particular. However, the Company estimates that its financial strength, together with its financial sources and taking the actions detailed above, will allow it to continue to finance its activities and meet its obligations in the foreseeable future.
E. Effects of the Iron Swords War:
On October 7, 2023, the terrorist organization Hamas launched a murderous attack on the State of Israel, which included firing rockets and the infiltration of thousands of terrorists into its territory. The attack claimed many victims, including Israeli and foreign citizens who were abducted to the territory of the Gaza Strip. Following the attack, the Israeli government declared an “Iron Swords” war, mobilized approximately 300,000 reservists and launched an attack on the Gaza Strip (hereinafter: “the war”). At the same time, a conflict is taking place in the northern territory of the country against the terrorist organization Hezbollah, and attacks have also been carried out from other arenas aimed at the State of Israel. The immediate impact of the outbreak of the war on Israel’s economy was evident, and was reflected, inter alia, in the devaluation of the shekel against foreign currencies, declines in stock exchange rates, the closing of many businesses due to the directives of the Home Front Command and the extensive mobilization of reserves, a trend that was moderated until the publication of the report, with the release of reserve forces, appreciation of the shekel against foreign currencies, increases in exchange rates and a return to a certain routine in the shadow of the war.
F-78
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 1 - General (continued)
With the outbreak of the war, most of the Company’s branches were closed and there was no customers’ traffic. As of November 2023, the Company’s branches began to open in a partial format, in accordance with customer traffic and in accordance with the directives of the Home Front Command. As for the signature date of the financial statements, the Company’s branches in Ashkelon (operated by a joint venture with Global AutoMax and a third party) and in Petach Tikva (operated directly by Global AutoMax) are closed due to the lack of a protected space, and the lack of personnel. The Company is examining the continued operation of these branches. The Company assesses that the impact of not operating these branches is immaterial to the group. At the time of publication of the report, all other branches of the Company are operating as normal in accordance with the directives of the Home Front Command and a vibrant movement of customers is noticeable in them.
With the outbreak of the war, the Company worked to reduce its current expenses, as much as possible under the circumstances, including reducing advertising and marketing expenses, reducing other current expenses and reducing personnel related expenses. In addition, the Company also worked to reduce its fixed expenses, as much as possible under the circumstances, including partial or no payment of rent in some of its branches.
During the months of October and November 2023, the Group reduced about 10% of the workforce within the Group and about 30% of the Group’s employees were placed on layoff, while by the date of the publication of this report all Group’ employees who were placed on layoff returned to work. In addition, there are a small number of employees who were recruited into the reserves, and some of them returned to full-time.
During the fourth quarter of 2023, there was a significant decrease in the Group’s sales turnover compared to the corresponding period last year, attributed to the months of October and November 2023, in which most of the Company’s branches were closed and were not open to the public, while in December there was a significant increase in the amount of orders for vehicles compared to the corresponding period last year. The upward trend in vehicle orders from customers that began in December 2023 continued at the beginning of 2024 (not reviewed or audited), compared to the corresponding period last year.
With the outbreak of the war, the Houthis, an Islamic political and military organization in Yemen, declared war on Israel, and began to launch missiles at targets in Israel to support the terrorist organizations in the Gaza Strip and Hezbollah, to launch drones at Israel, and to attack vessels that supposedly have a connection to Israel. As a result of the vessel attacks, several shipping companies have announced the suspension of sailing through the Red Sea. The situation developed into an international crisis that has led to the establishment of an international coalition to guarantee freedom of navigation and to the announcement by the United States and its allies that Operation Prosperity Guardian has been launched against the Houthis in order to stop their attacks against vessels.
F-79
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 1 - General (continued)
The Company imports its vehicle inventory mainly from Europe and North America, and therefore it is not expected to be directly affected by the disruptions resulting from the Houthi organization’s attacks on vessels in the Red Sea region which have caused changes in sailing routes. At the same time, the changes and disruptions in the sailing routes as mentioned above have caused significant delays in delivery dates and an increase in logistics and transportation prices within Europe and from Europe to Israel. The delays in delivery dates and the increase in logistics and transportation prices within Europe and from Europe to Israel have had a negative impact on the Company’s financial results.
It should be noted that with the outbreak of the war and with its continuation, a number of government decisions were made which may have a positive effect on the Group’s activities. This includes providing compensation for the decrease in transaction volumes of businesses, and some of the Group’s companies are included in the standards established for this matter (a request for such compensation has been submitted), compensation for the full damage caused to businesses in frontier settlements (which is relevant to the Company’s branches in Ashkelon, Ashdod and Be’er Sheva) (a request for such compensation has been submitted), receiving a state-guaranteed loan, and granting a three-month grace period for the first registration of vehicles that must be registered for traffic for the first time from 11 October 2023 until 31 December 2023, which will allow them to be sold as new for an additional period.
The Company frequently reviews its eligibility and takes action in order to receive the benefits in respect of the aforementioned government decisions. In addition, in January the Company received a state-guaranteed loan from a banking corporation in the amount of NIS 16 million (for additional details, see Note 32(1) above). Additionally, for the month of October 2023 the Group companies are entitled to receive compensation from the state in the amount of approximately NIS 2.07 million (which was recognized in the financial statements), and for the months of November-December 2023 the Group companies are entitled to receive additional compensation in the amount of approximately NIS 5.9 million, which was not recognized during the report period in light of its approval by the government after the report period (and which will be recognized in the financial statements for the first quarter of 2024).
In light of the outbreak of the war and its effects on the Company’s financial results which can be assessed at the time of this report’s publication, the Company took action to raise capital by way of a private offering in the amount of NIS 10 million which was completed on 31 December 2023 and strengthened the Company’s equity and liquidity. For additional details, see Note 21b(20) below. In addition, the Company continues to negotiate a merger with a company that was incorporated in Israel and whose securities are traded on NASDAQ (“The Receiving Company”), and on 16 January 2024 signed an agreement to receive a bridging loan in the amount of USD 1.4 million from the Receiving Company. For additional details, see Note 32(2) below. This transaction, as soon as it is completed, is expected to strengthen the Company’s liquidity and equity.
In January 2024, the Bank of Israel published a report on financial stability for the second half of 2024, according to which the murderous terrorist attack that occurred on 7 October and the “Iron Swords” war that began as a result are the materialization of an extreme scenario for geopolitical turbulence. The materialization of the risk did not result in damage to the financial stability of the economy. This occurred, among other things, against the background of the high standards of the stabilising regulation implemented until the outbreak of the war and thanks to the preventive measures taken by the Bank of Israel when everything started and the government’s assistance plans. According to the Bank of Israel, the effect of the war is reflected all the main risk exposure channels. However, in light of the policy measures that moderated the turmoil transmission, the level of risk increased only in the macroeconomic channel, as reflected in the increase in the country’s risk premium. According to the Bank of Israel, as the duration of the war, its scope and its negative consequences on the economy intensify, additional challenges are expected for the financial system.
F-80
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 1 - General (continued)
On 9 February 2024, the international rating agency Moody’s announced the lowering of Israel’s credit rating to A2 (from a level of A1), and lowered the rating forecast from “stable” to “negative”. In the report, the rating agency estimated that the lateral consequences of the current conflict with Hamas, both when it still continues and after it ends, substantially increase the political risks in Israel, weaken its legislative and executive authorities, and significantly affect the budgetary stability of Israel in the foreseeable future.
As of the date of the publication of this report, in light of the war being a dynamic occurrence characterized by significant uncertainty, the Company is unable to assess the full future effects, if any, of the war and/or the expansion of its scope on the automotive industry in Israel in general and on the Company’s activities in particular. The Company estimates that its financial stability, along with its financial sources and taking the actions detailed above (including those covered in Note 1d above), will allow it to continue to finance its activities and meet its obligations in the foreseeable future.
f. Separate financial information:
The Company did not attach separate financial information to these financial statements due to the negligent value of such additional information. The Company fully owns Global AutoMax, and as of the date of the report on the financial position, most of the Group’s business activity is carried out in Global AutoMax, which is fully reflected in the Group’s consolidated report. As of the date of the report on the financial position, the Company has no business activity and therefore the publication of separate financial statements will not constitute additional material information for the reasonable investor.
g. Definitions:
| The Company | - | Automax Motors Ltd. | |
| The Group | - | The Company and its affiliates | |
| Consolidated companies | - | Companies controlled by the Company (as | |
| defined in IFRS 10), whose reports are | |||
| consolidated as part of the Company’s reports. | |||
| Related parties | - | As defined in IAS 24 | |
| Stakeholders and holders of controlling interest | - | as defined in the Securities Regulations (Annual Financial Statements), 5770-2010. |
F-81
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 2 - Principles of accounting policy
Unless stated otherwise, the principal accounting policies as detailed below have been consistently implemented by the Company during the preparation of the financial reports for all presented periods.
| a. | Statement regarding implementation of International Financial Reporting Standards (IFRS): |
The consolidated financial statements of the Group have been prepared in accordance with the International Financial Reporting Standards (hereunder: “IFRS”) and their interpretations as published by the International Accounting Standards Board (IASB).
| b. | Application of securities regulations: |
The financial statements have been prepared in accordance with Securities Regulations (Annual Financial Statements), 5770-2010 (hereunder: “Financial Statement Regulations”).
| c. | Operational turnover period: |
The operational turnover period of the Company is 12 months.
F-82
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 2 - Principles of accounting policy (continued)
| d. | Format of the analysis of expenses recognized in profit or loss: |
The Company elected to present profit or loss and other comprehensive income items using the “nature of business activity” method. The Group estimates that due to the organizational structure of the Group, the classification of expenses in such manner provides more reliable and relevant information.
| e. | Basis for preparation of financial statements: |
The financial statements of the Company have been prepared on a cost basis, excluding financial instruments measured at fair value through profit or loss. The Company elected to present its statement of comprehensive income based on the nature of business activity method.
| f. | Consolidated Financial Statements |
| (1) | General: |
The consolidated financial statements of the Group include the financial reports of the Company and of entities controlled by the Company, whether directly or indirectly. An investor company controls an investee company when it is exposed or when it has rights to any variable returns deriving from its holding of the investee, and when it has the ability to use its power to affect those returns. In determining whether control exists, the Company considers potential voting rights that could be exercised or converted to shares in the held company.
Potential voting rights shall be considered de-facto rights in the event that the Group has practical ability to realize such rights. When de-facto potential voting rights exist, such as: convertible instruments, options and forwards of the investee held by the Company or other investing parties, whose realization shall increase the number of voting rights in the investee - the Group considers whether the existence of said potential voting rights, together with other existing voting rights, amount to control.
The results of the operations of any subsidiaries acquired or sold during the reported periods are included in the Company’s consolidated statements of profit and loss, as of the date that control was attained or the date it ceased to exists, as applicable.
Financial statements of subsidiaries that were not prepared in accordance with the accounting policies of the Group have been adjusted, prior to consolidation, in compliance with the accounting policy implemented by the Group.
For consolidation purposes, all inter-company transactions, balances, incomes and expenses are fully cancelled.
| (2) | Business combinations: |
The Group implements the Acquisition method for all business combinations.
The acquisition date is the date when the purchaser attains control of the purchased. Control exists when the Group is exposed, or has rights to variable returns from its involvement in the purchased, and has the ability to influence these returns through its influence in the purchased. When examining control, actual rights held by the Group and by others are taken into account.
The Group recognizes goodwill as of the acquisition date according to the fair value of the consideration transferred, including amounts recognized with respect to any rights that do not confer control over the purchased, as well as the fair value as of the acquisition date of an equity interest in the purchased that was previously held by the Group, with deduction of the net amount attributed in the purchase of identifiable assets acquired and liabilities assumed.
On the purchase date, the purchaser recognizes a contingent liability it assumed as part of a business combination insofar as a liability arising from past events exists in the present, and its fair value could be reliably measured.
If the Group makes a bargain purchase (one that includes negative goodwill), it recognizes the resulting profit in the statement of profit and loss at the date of acquisition.
F-83
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 2 - Principles of accounting policy (continued)
Furthermore, goodwill that is not updated due to utilization of losses carried forward for tax purposes that existed at the time of the business combination.
The consideration transferred includes the fair value of assets transferred to the previous owners of the purchased, liabilities incurred by the buyer vis-à-vis the previous owners of the purchased and capital rights issued by the Group. In a business combination achieved in stages, the difference between the fair value at the time of the acquisition of capital rights in the purchased that were previously held by the Group and their book value at that time, is recognized in the statement of profit and loss under other income or expenses. In addition, the transferred consideration includes the acquisition-date fair value of the contingent consideration. Subsequently to the acquisition date, the Group recognizes changes in the fair value of contingent consideration classified as a financial liability in the profit and loss statement, while contingent consideration classified as an equity instrument is not measured once again.
| (3) | Subsidiaries: |
Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the day control is obtained until the day control is lost.
The accounting policy of subsidiaries has been changed, if necessary, in order to adjust it to the accounting policy adopted by the Group.
| (4) | Non-controlling interest: |
The share of non-controlling interest in the net assets (excluding goodwill) of combined subsidiaries is presented separately within the Group’s equity. Non-controlling interests include the balance of said interests on the date of business combination and the share of non-controlling interest in any changes in the combined company’s equity as of the date of business combination. Any losses of combined companies attributable to non-controlling interests, that exceed the non-controlling interest in the equity of the combined company, shall be assigned to non-controlling interests which do not confer control while disregarding their undertakings and the ability of said shareholders to make additional investments in the combined company.
For transactions with non-controlling shareholders with respect to acquiring additional shares in the combined company, following establishment of control, the excessive costs of acquisition, which exceed the book value of said non-controlling interests as of the date of acquisition, shall be recognized as part of equity attributable to the parent company.
The results of any transactions with non-controlling shareholders involving the sale of the Group’s investment in a combined company, while maintaining control, shall be recognized as part of equity attributable to the parent company.
| (5) | Investment in consolidated companies and joint ventures: |
Consolidated companies are entities in which the Group has a significant influence over the financial and operational policies, yet no control or joint control has been achieved. There is an assumption which can be refuted according to which holdings of 20% to 50% confer essential influence. In examining the existence of essential influence, potential voting rights that can be exercised or converted immediately into shares of the held company are taken into account.
Joint ventures are joint arrangements in which the Group has rights to the net assets of the arrangement.
F-84
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 2 - Principles of accounting policy (continued)
Investment in consolidated companies and joint ventures are handled according to the equity method and are initially recognized at cost. The investment cost includes transaction costs. Transaction costs directly related to the expected acquisition of a consolidated company or a joint venture are recognized as an asset. The deferred expenses item with respect of an expected acquisition of a consolidated company or a joint transaction is recognized as an asset in the deferred expenses item of the statement of financial position. These costs are added to the investment cost at the time of acquisition. When a company first obtains essential influence or joint control in an investment treated as a financial asset measured at fair value through other comprehensive income until the date of obtaining the essential influence or joint control, other comprehensive income accumulated in respect of the investment will be credited to the retained earnings balance at that time. The consolidated financial statements include the Group's share of the income and expenses in the profit or loss and of other comprehensive income of held companies that are handled according to the equity method, after adjustments required to adapt the accounting policy to that of the Group, from the day on which the essential influence or joint control exists and until the day on which the essential influence or joint control ceases to exist.
| (6) | Transactions eliminated during consolidation: |
Mutual balances within the Group and unrealized income and expenses, arising from inter-company transactions, were eliminated as part of the preparation of the consolidated financial statements. Unrealized profits arising from transactions with consolidated companies and joint transactions were eliminated against the investment, according to the Group's rights in these investments. Unrealized losses were eliminated similarly to the way in which unrealized gains were eliminated, as long as there were no indications of impairment.
| g. | Functional currency, presentation currency and foreign currency |
| (1) | Functional currency and presentation currency: |
The financial statements of each of the companies within the Group are prepared in the currency of the primary economic environment in which they operate (hereunder: “functional currency”). For the purpose of consolidation of the financial statements, the results and the financial position of each of the companies within the Group are converted into NIS, which constitutes the functional currency of the Company. The consolidated financial statements of the Group are presented in NIS.
| (2) | Conversion of transactions that are not in the functional currency: |
During the preparation of the financial statements of each of the companies within the Group, any transactions carried out in currencies which do not constitute the functional currency of said company (hereunder: “foreign currency”) are documented in accordance with the official exchange rates at the time they occur. At the end of each reporting period, monetary items denominated in foreign currency are translated in accordance with the official exchange rates at the time they occur.
| (3) | Recording exchange rate differences: |
Exchange rate differences are recognized in profit and loss during the period in which they occurred, except in the event that such exchange differences arise from receivable or payable monetary items originating in foreign operations whose settlement is not planned or expected to happen, which therefore constitute a part of net investment in foreign operations, in which case they are recognized under other comprehensive income as part of the adjustments deriving from translation of financial statements of foreign operations.
F-85
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 2 - Principles of accounting policy (continued)
| h. | Cash and cash equivalents |
Cash and cash equivalents are considered highly liquid investments. This includes short-term deposits in banking corporations that are non-restricted by liens, with original maturities that do not exceed three months as of the date of investment, or that exceed three months and yet can be withdrawn immediately without fines, and constitute a part of the Group’s cash flow management.
| i. | Inventory |
Inventory is measured at the lower of cost and net realizable value. Inventory cost comprises all costs of purchase and any other costs incurred in bringing the inventory to its present location and condition. Net realizable value constitutes the estimated selling price that would be established in a regular transaction, deducted of any completion costs and costs required in order to finalize the sale. The Company reviews the state and the age of its inventory on a periodical basis, and recognizes corresponding slow inventory allowances. For details regarding considerations taken into account during the review of net realizable value of the new vehicle inventory, see Note 3b1 below.
Inventory cost is determined as follows:
Vehicle inventory –based on specific cost.
Accessories – based on average cost.
| j. | Income Recognition |
Accounting policies implemented since 1 January 2018 with respect to income recognition are as follows:
Income deriving from contracts with customers are recognized in profit or loss upon the transition of control over the asset or the service to the customer. The price of the transaction equals the expected consideration amount as per the contract terms, deducted of any amounts collected in favor of third parties (e.g. taxes).
Following are the specific income recognition criteria to be fulfilled prior to income recognition:
Income from sales of new vehicles
Income from sales of new vehicles and spare parts is recognized upon transfer of control over the new vehicle or the spare parts to the customer. Usually, control is transferred when the vehicle is delivered to the customer.
Income from sales of used vehicles
Income from sales of used vehicles is recognized upon transfer of control over sold used vehicles.
Credit transactions
The Company elected to use the relief provided by the standard, based on which it would not be required to separate the credit component in transactions with credit terms of less than 12 months and would recognize income in accordance with the consideration amounts as set within the contract, even in the event the customer pays before or after the date the product or service are delivered.
| k. | Income Tax |
The taxes on income that are included in the statement of profit and loss include current taxes, taxes with respect to prior years and deferred taxes.
Tax expenses comprising current or deferred tax expenses are recognized in profit or loss, except in the event said taxes derive from items recognized in other comprehensive income or in equity. In such case, the tax amount is recognized in the corresponding item within equity as well.
Current taxes
The current tax liability is determined while using tax rates that have been enacted or substantively enacted by the reporting date, as well as any adjustments required with respect to tax liabilities from prior years.
F-86
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 2 - Principles of accounting policy (continued)
Deferred taxes
Deferred taxes are calculated on temporary differences between the amounts as presented in the financial statements and amounts adjusted for tax purposes. Deferred tax balances are calculated using the expected tax rates that would apply upon the realization of the asset or the removal of the liability, based on tax laws that have been enacted or substantively enacted by the reporting date.
On every reporting date, deferred tax assets are reviewed according to their expected usage. Losses carried forward and deductible temporary differences for which deferred tax assets have not been recognized are reviewed at each reporting date and an appropriate deferred tax asset is recognized for them if it is expected that they will be utilized.
In calculating deferred tax amounts the Company does not take into consideration any taxes that would apply in the event of the realization of investments in held entities, as long as the sale of the held entities is not expected in the foreseeable future.
| l. | Leases |
Initial implementation of IFRS 16 – Leases (hereunder: the “Standard”) – the Company elected to implement the provisions of the Standard using the modified retrospective manner (without restatement of comparative figures). The Company adopted the following accounting policy as of 1 January 2018 with respect to leases:
The Company treats the contract as a lease when, in accordance with the terms of the contract, the right to control an identified asset is transferred for a period of time in exchange for consideration.
| (1) | The Group as a lessee |
For transactions in which the Company serves as a lessee, it recognizes the leased property as a right of use asset as of the beginning of the lease term against a lease liability, excluding lease transactions with lease terms of less than 12 months and lease transactions where the underlying asset is of low value, in which case the Company recognizes lease related expenses in profit or loss using the straight line method over the lease term. As part of the measurement of the liability for a lease, the Company chose to apply the relief provided in the Standard and did not make a separation between lease components and non-lease components such as: management services, maintenance services and more that were included in the same transaction on the date the liability for the lease commenced. This includes all lease payments not yet paid, capitalized with the interest rate included in the lease when it can be easily determined, or with the Company’s additional interest rate. After this date, the Company measures the lease liability using the effective interest method. The right-of-use asset on the formation date is recognized at the amount of the lease liability plus lease payments paid on or before that date plus any transaction costs incurred. The right-of-use asset is measured by the cost model and depreciated over its useful life or over the lease term, whichever is shorter. Below are data regarding the number of years of depreciation of the relevant right-of-use assets according to groups of right-of-use assets:
| Number | ||||||
| years | Mainly | |||||
| Land and office buildings | 1-6 | 4 | ||||
| Vehicles | 5 | 5 |
When indicators of impairment exist, the Company reviews whether there is a need to recognize any right-of-use asset impairment subject to the provisions of IAS 36.
| (2) | CPI-linked lease payments |
At the time the lease is created, the Company uses the index rate existing at that time for the purpose of calculating future lease payments. For transactions in which the Company constitutes the lessee, any changes in future lease payments originating in index variations are capitalized (without amending the capitalization rate used for lease liability calculations) to the balance of the right-of-use asset and are credited as an adjustment to the balance of the lease obligation. Only when there is a change in the cash flows resulting from a change in the index (that is, at the time when the coordination of the lease payments takes effect).
| (3) | Options for extending and canceling a lease period |
The lease period that cannot be canceled includes both periods covered by an option to extend the lease when it is reasonably certain that the option to extend will be exercised, and periods covered by an option to cancel the lease when it is reasonably certain that the option to cancel will not be exercised. In the event that there is a change in the expectation for exercising an extension option or for not exercising a cancellation option, the Company recalculates the remaining liability for the lease in accordance with the updated lease period, according to the updated discount rate on the day of the change in expectation, with the total change credited to the balance of the right-of-use asset until it is reset, and beyond that to profit or loss.
F-87
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 2 - Principles of accounting policy (continued)
| (4) | Lease revisions |
When the Company amends the terms of a lease, and said amendment does not reduce the scope of the lease and is not handled as a separate lease transaction, the Company re-measures the balance of its lease liability in accordance with the new lease terms, using the discount rate applicable on the modification date, and credits the change in the liability balance for the lease to the balance of the right to use asset. When an amendment is made to the terms of the lease that results in a reduction in the scope of the lease, the Company recognizes the profit or loss resulting from the partial or full write-off of the balance of the right-of-use asset and the liability for the lease. Subsequently, the Company re-calculates the balance of the lease liability in accordance with the new lease terms, using the discount rate applicable on the modification date, and credits the change in the liability balance for the lease to the balance of the right to use asset.
| m. | Fixed Assets |
| (1) | Fixed asset items are measured at cost with deduction of accrued depreciation and accrued impairment losses |
The cost of fixed assets includes expenses directly attributable to the purchase of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, as well as any additional cost that can be directly attributed to bringing the asset to the location and condition necessary for it to be able to operate in the manner intended by the management, an estimate of the costs of dismantling and removing the items and restoring the site where the item is located, as well as credit costs that have been used. The cost of purchased software, which is an integral part of the operation of the related equipment, is recognized as part of the cost of this equipment.
The spare parts, auxiliary equipment and backup equipment are classified as fixed assets when they meet the definition of fixed assets according to IAS-16, and otherwise they are classified as inventory. A fixed asset item purchased in exchange for another non-monetary item as part of a commercial transaction is recognized at fair value.
When significant fixed asset parts have different life spans, they are treated as separate items (significant components) of the fixed asset.
Changes in the obligation to dismantle and remove items and restore the site where they are located, except for changes resulting from the passage of time, are added to or subtracted from the cost of the property in the period in which they occur. The amount deducted from the cost of the asset shall not exceed its book value. The balance, if any, is immediately recognized in profit and loss.
Profit or loss arising from deducting a fixed asset item is determined by comparing the net proceeds from deducting the asset to its book value, and recognized net in the other income or other expenses items, as the case may be, in the profit and loss statement.
| (2) | Depreciation |
Depreciation is a systematic allocation of the depreciable amount of an asset over its useful life. A depreciable amount is the cost of the asset, or another amount that replaces the cost deducted of its residual value.
An asset is depreciated when it is available for use, that is, when it has reached the location and condition necessary for it to be able to operate in the manner intended by management.
Depreciation is recognized in the profit and loss statement using the straight-line method over the estimated useful life of each component of the fixed asset items, since this method reflects the predicted consumption pattern of the future economic benefits inherent in the asset in the best way. Assets leased under financing leases are depreciated over the shorter of the lease term and the useful life of the assets, unless it is reasonably expected that the Group will receive ownership of the asset at the end of the lease term. Owned lands are not depreciated.
The estimated useful life for the current period and the comparison period is as follows:
| % | ||||
| Leasehold improvements | 8.5-10 | Throughout the leasing period including extension option | ||
| Computers | 15-33 | Mainly 33% | ||
| Office equipment | 6-33 | Mainly 25% | ||
| Vehicles | 15-20 | Mainly 15% |
F-88
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 2 - Principles of accounting policy (continued)
Leasehold improvements are depreciated using the straight-line method over the lease period (including the Group’s lease term extension option which it is planning to exercise) or over the useful life of the improvement, whichever is shorter. The Company reviews the useful life period, the depreciation method and the residual value of each asset at least annually. Any adjustments are implemented as a change in an accounting estimate, in a prospective manner. Depreciation of assets is terminated as soon as possible between the date on which the asset is classified as held for sale and the date on which the asset is written off.
The estimates regarding the depreciation method, the useful life and the residual value are re-examined at least at the end of each reporting year and adjusted when necessary.
| n. | Intangible assets |
Intangible assets that are acquired separately are measured upon initial recognition at cost plus direct acquisition costs. Intangible assets purchased as part of business combinations are included based on fair value on the date of acquisition. Costs related to internally developed intangible assets, excluding capitalized development costs, are recognized in the profit or loss as incurred.
The intangible assets of the Group have a defined useful life. The assets are amortized over their economic useful life, while the need for impairment is reviewed whenever impairment indicators exist. The amortization period and method are reviewed at least annually.
Goodwill
Goodwill arising from an acquisition of a business is measured by the excess of the acquisition cost, plus the fair value of the rights that do not confer control, including the net fair value of the identified assets, liabilities and contingent liabilities of the consolidated company recognized at the time of acquisition. The method of measuring goodwill, in accordance with the alternatives listed above, is determined individually in each business combination.
Goodwill is recognized for the first time as an asset at cost, and is measured in subsequent periods at cost deducted of accumulated impairment losses.
For the purpose of examining impairment, goodwill is allocated to each of the Group’s cash-generating units that are expected to benefit from the synergy of the business combination. Cash-generating units to which goodwill has been allocated are reviewed annually or more frequently insofar as indicators attesting to a possible decrease in value of said unit exist. When the recoverable amount of a cash-generating unit is less than the book value of that unit, the impairment loss is allocated first to reduce the book value of any goodwill attributed to the cash-generating unit. After that, the remaining impairment loss, if any, is allocated to other assets of the cash-generating unit, in proportion to their book value. An impairment loss of goodwill is not eliminated in subsequent periods.
Upon disposal of a consolidated company, the amount of the related goodwill is included in determining the profit or loss from the disposal.
Website
The Company operates an official website and official Facebook and Instagram pages, where it publishes product updates and promotions. In addition, the Company also operates a LinkedIn page.
F-89
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 2 - Principles of accounting policy (continued)
Licenses
The capitalized costs for the license are the costs of purchasing the license and costs that can be directly attributed and which are needed to obtain the license and include, among others, legal costs and consultants, travel costs abroad and salary costs that can be directly attributed to the license.
The capitalization of the costs for the license begins in the development phase and stops when the license is achieved, that is, when the property is in the necessary condition in order to be able to operate in the way management intended. Initial costs incurred during the research phase, meaning amounts used for obtaining knowledge and for searching for dealers and sub-agents, cannot be capitalized and shall therefore be recognized as incurred.
The useful life of a license shall not exceed the term of its contractual rights, yet the useful life might be shorter, according to the period the Company expects to use the license. In the event the contractual rights are provided for a renewable limited period, the useful life of the license shall include the renewal period only insofar as evidence exists supporting the Company’s intent of such renewal without incurring material costs. In the opinion of the Company, the requirements for including the renewal period as part of the useful life of the license have not been fulfilled.
Depreciation
Depreciation is a systematic allocation of the depreciable amount of an intangible asset over its useful life. A depreciable amount is the cost of the asset, deducted of its residual value.
The depreciation is recognized in profit and loss using the straight-line method, over the estimated useful life of the intangible assets as of the date when the assets are available for use, since these methods reflect the predicted consumption pattern of the future economic benefits inherent in each asset in the best way. Goodwill and intangible assets with an indefinite lifespan are not systematically depreciated, but are tested at least once a year for impairment.
F-90
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 2 - Principles of accounting policy (continued)
Intangible assets that are formed in the Group are not systematically depreciated as long as they are not available for use, that is, they are not in the location and condition required for them to be able to operate in the way management intended. Therefore, these intangible assets, such as development costs, are tested for impairment at least once a year, until the time they become available for use.
The estimated useful life for the current period and the comparative periods is as follows:
| % | |
| Website | 33 |
| Licenses | Throughout license validity period |
The estimates regarding the useful life and the residual value are re-examined at least at the end of each reporting year and adjusted when necessary.
The Group reviews the estimated useful life of an intangible asset that is not amortized at least annually in order to determine whether the events and circumstances continue to support the determination that the intangible asset has an indefinite life.
| o. | Impairment of non-financial assets |
The Company reviews the need for impairment of non-financial assets whenever indicators resulting from events or changes in circumstances show that the carrying amounts as stated in the financial reports may not be recoverable. In the event the carrying value of non-financial assets exceeds their recoverable amount, said value is reduced to the value of the recoverable amount. The recoverable amount of an asset is determined as the higher of fair value deducted by cost of disposal, and its value of use. In assessing the value of use, the expected cash flows are capitalized according to a pre-tax discount rate that reflects the specific risks for each asset. For assets which do not generate individual cash flows, the recoverable amount is determined for the cash-generating unit to which they can be attributed. Any impairment losses are recognized in profit and loss. An impairment loss of an asset, with the exception of goodwill, is canceled only when there have been changes in the estimates used to determine the asset’s recoverable amount from the date the impairment loss was last recognized. Such impairment reversal is limited to the lower of previously recognized impairment (deducted of depreciation or amortization) and the recoverable amount of the asset. As for assets measured at cost, said impairment reversal shall be recognized in profit or loss.
| p. | Financial instruments |
On 1 January 2018 the Company implemented the provisions of IFRS 9 – Financial Instruments (hereunder: the “Standard”) for the first time. The Company elected to implement the provisions of the Standard using the modified retrospective manner, without restatement of comparative figures.
The accounting policy implemented with respect to financial instruments as of 1 January 2018, is as follows:
| (1) | Financial assets |
Financial assets are initially measured at fair value, plus any transaction related costs directly attributable to the acquisition of the financial asset, excluding financial assets measured at fair value through profit or loss, for which transaction related costs are recognized in profit or loss.
The Company classifies and measures debt instruments in its financial statements based on the following criteria:
| ● | The Company’s business model for managing financial assets, and |
| ● | the contractual cash flow characteristics of the financial asset. |
F-91
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 2 - Principles of accounting policy (continued)
| a. | The Company measures debt instruments at amortized cost when: |
The Company’s business model is holding the financial assets in order to collect contractual cash flows, and the contractual terms of the financial assets provide entitlement at specified times to cash flows that are only principal and interest payments for the principal amount that has not yet been repaid. After initial recognition, debt instruments in this Group are measured according to their terms at amortized cost using the effective interest method and deducting an allowance for impairment.
At the time of first recognition, a company can designate, without the possibility of changing this designation, a debt instrument as measured at fair value through profit or loss, if this designation eliminates or significantly reduces inconsistencies in measurement or recognition, for example in the case where the related financial liability is also measured at fair value through profit or loss.
| b. | The Company measures debt instruments at fair value through other comprehensive income when: |
The Company’s business model is holding the financial assets in order to collect contractual cash flows, and the contractual terms of the financial assets provide entitlement at specified times to cash flows that are only principal and interest payments for the principal amount that has not yet been repaid. Following initial recognition, all instruments within this Group are measured at fair value. Any gains or losses arising from fair value adjustments, except interest and exchange rate differences, are recognized through other comprehensive income.
| c. | The Company measures debt instruments at fair value through profit or loss when: |
A financial asset that is a debt instrument does not meet the criteria for measuring it at amortized cost or at fair value through other comprehensive income. After initial recognition, the financial asset is measured at fair value and gains or losses as a result of fair value adjustments are credited to profit or loss.
| d. | Equity instruments and other financial assets held for trading |
Investments in capital instruments that do not meet the aforementioned criteria and are therefore measured at fair value through profit or loss. Other financial instruments held for trading, such as derivatives, including embedded derivatives separated from their host contracts, are measured at fair value through profit or loss, unless designated to serve as effective hedging instruments. With respect to certain equity instruments not held for trading, upon initial recognition the Company may irrevocably elect to present as part of other comprehensive income any subsequent fair value changes which otherwise would have been measured at fair value through profit or loss. These changes will not be attributed to profit or loss in the future, not even when the investment is withdrawn.
Dividend incomes deriving from investments in equity instruments are recognized on the effective date for dividend eligibility, in the statement of profit and loss.
| (2) | Impairment of financial assets |
The Group examines, on each reporting date, the provision for loss for financial debt instruments that are not measured at fair value through profit or loss.
| (3) | Financial liabilities |
Financial liabilities measured at amortized cost
Upon initial recognition, the Company measures financial liabilities at fair value, deducted of any transaction related costs directly attributable to issuance of the financial liabilities.
F-92
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 2 - Principles of accounting policy (continued)
Following the initial recognition, the Company measures all of its financial liabilities at amortized cost, while using the effective interest rate method, excluding:
Financial liabilities at fair value through profit or loss, such as derivatives;
| a. | Financial liabilities that arise when the transfer of a financial asset does not qualify for amortization or when the continuing involvement approach applies; |
| b. | Financial guarantee contracts; |
| c. | Obligations to provide a loan at an interest rate lower than the market interest rate; |
| d. | Contingent consideration recognized by a purchaser in a business combination to which International Financial Reporting Standard 3 applies. |
| (4) | Warrants for the purchase of shares of the Company and/or a consolidated company |
Receipts for the issuance of warrants to purchase the shares of the Company and/or a consolidated company, which give the holder the right to purchase a fixed number of ordinary shares in exchange for a fixed amount of cash, are presented within the capital in the section “Share-based payment”. In this context, for an exercise amount that changes according to the exercise date, the exercise price can be determined for any possible exercise date on the issuance date, and therefore it is considered a fixed amount.
F-93
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 2 - Principles of accounting policy (continued)
| (5) | Derivative financial instruments for hedging (protection) purposes |
At times, the Company enters into engagements involving derivative financial instruments, such as foreign currency forwards, in order to mitigate risks arising from foreign currency exchange rates’ fluctuation.
The Group does not implement accounting hedging. Profits or losses deriving from changes in fair value of derivatives that are not held for hedging purposes, are immediately recognized in profit or loss.
| (6) | Offsetting financial instruments |
Financial assets and financial liabilities are offset against each other. The net amount is presented as part of the statement of financial position, in the event the Company has a legally enforceable right to offset any amounts recognized, and insofar as the Company intends to clear the asset or the liability on a net basis, or realize the asset while clearing the liability, in parallel.
| q. | Fair value measurement |
Fair value is the price that would have been received for the sale of an asset or the price that would have been paid to transfer a liability in a normal transaction between market participants at the time of measurement. Fair value measurement is based on the assumption that the transaction is made in the active market of the asset or the liability, or in absence of active markets, the most advantageous market. The fair value of the asset or the liability is measured by using the following assumptions: that it would be used by market participants for quoting the price of the asset or liability, and that market participants act with the purpose of achieving their economic interests. Fair value measurement for a non-financial asset takes into account the ability of a market participant to generate economic benefits by using the asset in its best use or by selling it to another market participant who will use the asset in its best use. The Group uses valuation techniques that are appropriate to the circumstances and for which there is sufficient obtainable data to measure fair value, while maximizing the use of relevant data. All assets and liabilities measured or presented at fair value are categorized into different fair value levels based on the lowest data level that is significant for the fair value measurement as a whole:
Level 1: Quoted prices (not adjusted) in active markets for identical assets and liabilities.
Level 2: Data other than quoted prices included in level 1 which can be directly or indirectly observed. Level 3: Data not based on observable market data (valuation techniques without the use of observable market data).
| r. | Provisions |
A provision is recognized when the Group has a current legal or implied obligation, as a result of an event that occurred in the past, that can be reliably measured, and when it is expected that a negative flow of economic benefits will be required to settle the obligation. Provisions are determined by capitalizing future cash flows using the pre-tax interest rate which reflects current market assessments with respect to the time-value of the cash and the specific risks of the liability without taking the Company’s credit risk into consideration. The book value of the provision is adjusted in each period in order to reflect the passage of time. The amount of the adjustment is recognized as financing expenses. The Group recognizes indemnification assets if and only if it is virtually certain that the indemnification amount would be received insofar as the liability is settled. The recognized amount with respect to the indemnification shall not exceed the value of the provision.
Legal Claims
A provision for claims is recognized when the Group has a legal obligation at present or an implied obligation as a result of a past event, when it’s more likely than not that the Group will require its financial resources to settle the obligation and when it can be reliably estimated. When the effect of the time value is material, the provision is measured according to its present value.
F-94
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 2 - Principles of accounting policy (continued)
| s. | Share-based payments: |
Share-based payments to employees and others who provide similar services that are settled in the Company’s capital instruments are measured at their fair value at the time of granting. The Company measures at the time of granting the fair value of the capital instruments granted by using the Black-Scholes model. When the capital instruments granted do not mature until those employees complete a specified period of service during which the employees may also be required to meet certain performance conditions, the Company recognizes the share-based payment arrangements in the financial statements over the vesting period against capital growth, under the section “Capital fund for share-based payment”. At the end of each reporting period, the Company estimates the number of capital instruments expected to mature. A change in estimate compared to previous periods is recognized in profit or loss over the remainder of the vesting period.
| t. | Profit (loss) per share |
Profit per share is calculated by dividing net profit attributable to Company shareholders by the weighted number of actual ordinary shares that exist for the period.
Potential ordinary shares are included in the calculation of diluted profit per share in the event their effect dilutes the profit per share that arises from ongoing operations. Potential ordinary shares converted during the period shall be included as part of the diluted profit per share, only until the date they are converted. As of said date, potential ordinary shares shall be included in the basic profit per share. The Company’s share in profits of subsidiaries is calculated based on the Company’s portion in the profit-per-share of the subsidiaries, multiplied by the number of shares held by the Company.
| u. | Accounting aspects of Global AutoMax Ltd. merger transaction |
| (1) | As part of the transaction described in note 1 (b) above, the Company issued shares for the purpose of purchasing all of Global AutoMax’s shares. The Company constitutes the legal buyer of the transferred operation. However, since as of the date the transaction was finalized Global AutoMax’ shareholders became the Company’s controlling shareholders with the power to determine its financial and operational policies, the Company constitutes the accounting acquiree in the transaction. Therefore, the transaction is treated in the financial statements as a reverse purchase in which the net assets of the Company are considered as assets purchased by Global AutoMax (the accounting purchaser). In addition, since at the time of the transaction the Company was without any business activity, then it is not a “business” as defined by International Financial Reporting Standard IFRS 3 and therefore the transaction was treated as a share issue. The financial statements prepared after the completion of the transaction as stated above were described as a continuation of the financial statements of Global AutoMax and the comparative information presented in these reports will be for Global AutoMax only, excluding the activity previously reported as part of the Company’s financial statements. |
| (2) | Below are the principles that were applied in the context of the accounting treatment of the purchase of the Company by Global AutoMax, which was handled in the way of a “reverse purchase”. |
| ● | The assets and liabilities of the accounting purchaser and accounting acquiree were recognized in the consolidated financial statements according to their book value immediately before the transaction. |
| ● | Surpluses and the other capital items of the consolidated entity after the merger transaction are those of the accounting purchaser Global AutoMax, which is the legal subsidiary (shortly before the business combination). The structure of the legal capital, i.e. the type and number of remaining shares of the Company (the legal parent company). |
| ● | The accounting acquiree was a shelf corporation as of the date of the transaction. As a result of the transaction, no original differences or goodwill were created. The difference between the consideration for the value of the capital instruments of the Company (the accounting acquiree) on the day of completion of the transaction and the balance sheet value of the net assets of the accounting acquiree on the day of completion of the transaction is credited as one-time expenses for the registration for trading. |
| ● | Comparative information presented in the consolidated financial statements for the periods preceding the date of the transaction is that of the accounting purchaser. |
F-95
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 2 - Principles of accounting policy (continued)
| v. | Implementation of new financial reporting standards and amendments to existing accounting standards for the first time |
| 1. | Amendment to IAS 1, Disclosure of Accounting Policies |
In February 2021, the IASB published an amendment to International Accounting Standard 1:
Presentation of Financial Statements (hereunder: “the amendment”). In accordance with the amendment, companies will be required to provide disclosure of their material accounting policies instead of the current requirement to provide disclosure of their significant accounting policies. One of the main reasons for this amendment stems from the fact that the term “significant” does not have a definition in the IFRS while the term “material” has a definition in various standards and in particular in IAS 1.
The standard will be applied for annual periods beginning on 1 January 2023.
The above amendment had an impact on the Company’s accounting policy disclosures, but had no impact on the measurement, recognition or presentation of any items in the Company’s consolidated financial statements.
| 2. | Amendment to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors |
In February 2021, the IASB published an amendment to International Accounting Standard 8: Accounting Policies, Changes in Accounting Estimates and Errors (hereunder: “the amendment”). The purpose of the amendment is to introduce a new definition of the term “accounting estimates”.
Accounting estimates are defined as “financial amounts in the financial statements that are subject to measurement uncertainty.” The amendment clarifies what changes in accounting estimates are and how they differ from changes in accounting policy and error corrections.
The amendment was applied prospectively for annual periods beginning on 1 January 2023 and applies to changes in accounting policies and accounting estimates that occur at the beginning of that period or afterwards.
The above amendment did not have a material impact on the Company’s consolidated financial statements.
| 3. | Amendment to IAS 12 Taxes on Income |
In May 2021, the IASB published an amendment to International Accounting Standard 12, Taxes on Income (hereunder: “IAS 12” or “the standard”) which reduces the applicability of the ‘first recognition exception’ in deferred taxes stated in Articles 15 and 24 of IAS 12 (hereinafter: “the amendment”).
As part of the guidelines for the recognition of deferred tax assets and liabilities, IAS 12 excludes the recognition of deferred tax assets and liabilities for certain temporary differences arising from the initial recognition of assets and liabilities in certain transactions. This exception is called the ‘first recognition exception’. The amendment narrows the applicability of the ‘first recognition exception’ and clarifies that it does not apply to the recognition of deferred tax assets and liabilities arising from a transaction that is not a business combination and for which equal temporary differences arise in debit and credit even if they meet the other conditions of the exception.
The standard will be applied for annual periods beginning on 1 January 2023 or later. Early application is possible. Regarding lease transactions - the amendment will be applied starting from the beginning of the earliest reporting period shown in the financial statements in which the amendment was first applied, attributing the cumulative effect of the application for the first time to the opening balance of the surpluses (or another component of capital, as applicable) for that date.
The above amendment did not have a material impact on the Company’s consolidated financial statements.
F-96
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 3 - The main considerations, estimates and assumptions in preparing the financial statements
In preparing the financial statements in accordance with the IFRS, the Company’s management is required to use discretion in assessments, estimates and assumptions that affect the implementation of the accounting policy and the amounts of assets and liabilities, income and expenses. It is hereby clarified that the actual results may differ from said estimates.
During the formulation of accounting estimates used in the preparation of the Group’s financial statements, the Company’s management was required to make assumptions regarding circumstances and events involving significant uncertainty. In its discretion in formulating the estimates, the Company’s management bases the estimates on past experience, various facts, external factors and reasonable assumptions according to the circumstances appropriate to each estimate.
The estimates and assumptions based on which changes in recognized accounting estimates are regularly reviewed are recognized in the period in which the estimates were revised and in any affected future period.
Information regarding assumptions made by the Group regarding the future and other main factors of uncertainty in connection with estimates where there is a significant risk that their result will be a substantial adjustment to the book values of assets and liabilities during the next financial year is included in the following notes:
| a. | The considerations |
Discount rate of a liability for a lease
The Company cannot easily determine the interest rate inherent in leases, and therefore for the purpose of calculating the liabilities for a lease, it uses the additional interest rate of the Company. The additional interest rate determined by the Company constitutes the interest rate that the Company had to pay on a loan for a period similar to the lease period and with similar security, in order to obtain an asset of similar value to the right-of-use asset resulting from the lease, and all in a similar economic environment.
| b. | Estimates and assumptions |
In preparing the financial statements, management is required to use estimates, evaluations and assumptions that affect the implementation of the accounting policies and the amounts reported for assets, liabilities, income and expenses. Actual results may differ from management’s estimates. The changes in the accounting estimates are credited in the period in which the change in the estimate is made. Below are the main assumptions made in the financial statements in connection with the uncertainty for the reporting date and critical estimates calculated by the Group, where a material change in the estimates and assumptions may change the value of assets and liabilities in the financial statements in the following reporting periods:
| 1. | Determining the net disposal value of the new vehicle inventory |
The Company regularly examines the realizable value of its inventory, and in particular the inventory of new vehicles. As part of the considerations used to determine the realization value of the new vehicle inventory, the Company estimates the expected sales prices of the inventory and the total additional costs that it is expected to incur in order to complete the sale, including agent commission payments and costs for preparing the vehicle for sale.
| 2. | Legal Claims |
In assessing the chances of the results of the lawsuits filed against the Company and its held companies, the companies relied on the opinions of their legal advisors. These evaluations of the legal advisors are based on their best professional judgment, taking into account the stage of the proceedings as well as the legal experience gained in the various issues. Since the results of the legal claims will be determined by the courts, these results may differ from the estimates.
F-97
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands of NIS)
Note 3 - The main considerations, estimates and assumptions in preparing the financial statements (continued)
| 3. | Pension benefits and other benefits after employment is terminated |
The liability for post-employment benefit plans is determined using actuarial valuation techniques. Calculating the liability involves determining assumptions regarding discount rates, expected rates of return on assets, the wage increase rate and employee turnover rates, among other assumptions. The balance of the obligation may be significantly affected by changes in these estimates.
| 4. | Lease transactions that include extension and cancellation options |
For the purpose of assessing whether it is reasonably certain that the Company will exercise an option to extend a lease period or to cancel a lease period, the Company takes into account all the relevant facts and circumstances that create an economic incentive for the Company to exercise or not exercise the option, such as: significant amounts invested for improvements to the leased property, the importance of the underlying asset and the uniqueness inherent in it for the purpose of the Company’s activity, the Company’s past experience in similar lease transactions and more.
After the start date, the Company re-evaluates whether it is reasonably certain that it will or will not exercise an option when a significant event or a significant change in circumstances occurs that has the potential to influence the Company’s decisions regarding the exercise of the option, such as: significant improvements made to the leased property that were not foreseen at the start date, entering into a lease of a sub-asset of the base asset for a period that exceeds the end of the previously determined lease period and more.
Note 4 - New standards and interpretations that have not yet been adopted
| Standard/interpretation/ correction |
Financing expenses | Beginning and transition instructions |
Expected effects | |||
| Amendment to IAS 1, Presentation of Financial Statements: Classification of Current or Non- Current Liability | The amendment replaces certain classification requirements of liabilities as current or non- current. For example, according to the amendment, a liability will be classified as non-current when the entity has the right to postpone payment for a period of at least 12 months after the reporting period, when it has “substance” and when it exists at the end of the reporting period, and this replaces the requirement for a right that is “unconditional”. According to the amendment, a right exists as of the reporting date only if an entity meets the conditions for deferring payment as of this date. In addition, the amendment clarifies that the right to convert a liability will affect the classification of the instrument as a whole as current or non-current, unless the conversion component is equity. | The amendment will be implemented in reporting periods beginning on 1 January 2024, with the possibility of early implementation. The amendment will be applied retroactively, including the amendment of comparison numbers. | The implementation of the standard is not expected to have a material impact on the Company’s reports. | |||
| Amendment to IFRS16, Leases: Liability for Lease on Sale and Leaseback | The amendment clarifies the accounting treatment of variable payments for a seller-lessee in a sale and leaseback transaction. According to the amendment, a seller-lessee will include variable lease payment estimates when measuring the lease liability for the first time, and additionally after recognition for the first time the lessee-lessor applies the requirements to the subsequent measurement of the lease liability, so that no profit and loss is recognized relating to the right of use remaining in the hands of the seller-lessee. | The amendment will be implemented in reporting periods beginning on 1 January 2024, with the option of early implementation. The amendment will be applied retroactively, for sale and leaseback transactions that occurred after the adoption of IFRS 16, including the amendment of comparison numbers. | The Group is examining the consequences of the amendment on the financial statements without the intention of early implementation. |
F-98
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 5 - Cash and cash equivalents
| As for 31 December | ||||||||
| 2023 | 2022 | |||||||
| Cash | 6 | 9 | ||||||
| Cash in banking corporations in Israeli currency | 1,475 | 1,958 | ||||||
| Cash in banking corporations in foreign currency | 71 | 263 | ||||||
| Short-term deposits in foreign currency | - | 4 | ||||||
| Total cash and cash equivalents | 1,552 | 2,234 | ||||||
Note 6 – Customers
| As for 31 December | ||||||||
| 2023 | 2022 | |||||||
| A. The composition: | ||||||||
| Open debts | 17,709 | 9,649 | ||||||
| Checks for collection and credit cards | 8,965 | 8,292 | ||||||
| 26,674 | 17,941 | |||||||
| Less - provision for doubtful debts | (122 | ) | (122 | ) | ||||
| Total net customers | 26,552 | 17,819 | ||||||
Customer debts do not bear interest.
| b. | Below is the movement in the provision for doubtful debts: |
| Thousands of NIS | ||||
| Balance as for 1 January 2022 | (122 | ) | ||
| Provision during the year | - | |||
| Recognition of written off bad debts | - | |||
| Cancellation for secured debts that have been collected | - | |||
| Balance as for 31 December 2022 | (122 | ) | ||
| Provision during the year | - | |||
| Recognition of written off bad debts | - | |||
| Balance as for 31 December 2023 | (122 | ) | ||
F-99
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 6 - Customers (continued)
| c. | Information regarding the Company’s exposure to credit risk regarding customer balances: |
Customers whose due date has passed and the delay in their collection is | ||||||||||||||||||||
| Customers whose repayment date has not yet arrived (without arrears in collection) | Up to 60 days | 60-90 days | More than 90 days | Total | ||||||||||||||||
| As for 31 December 2023 | ||||||||||||||||||||
| Thousands of NIS | ||||||||||||||||||||
| Customer balance before provision | 4,143 | 3,123 | 5,704 | 4,739 | 17,709 | |||||||||||||||
| Doubtful debts | ||||||||||||||||||||
| Balance of provision for doubtful debts | - | - | - | (122 | ) | (122 | ) | |||||||||||||
| 4,143 | 3,123 | 5,704 | 4,617 | 17,587 | ||||||||||||||||
Customers whose due date has passed and the delay in their collection is | ||||||||||||||||||||
| Customers whose repayment date has not yet arrived (without arrears in collection) | Up to 60 days | 60-90 days | More than 90 days | Total | ||||||||||||||||
| As for 31 December 2022 | ||||||||||||||||||||
| Thousands of NIS | ||||||||||||||||||||
| Customer balance before provision | - | 8,366 | 268 | 1,015 | 9,649 | |||||||||||||||
| Doubtful debts | ||||||||||||||||||||
| Balance of provision for doubtful debts | - | - | - | (122 | ) | (122 | ) | |||||||||||||
| - | 8,366 | 268 | 893 | 9,527 | ||||||||||||||||
F-100
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 7 - Receivables and debit balances
| As for 31 December | ||||||||
| 2023 | 2022 | |||||||
| Advanced payments to suppliers | 17,287 | 39,494 | ||||||
| Related parties | 9,979 | - | ||||||
| Expenses in advance | 3,601 | 2,208 | ||||||
| Accounts receivable | 2,166 | - | ||||||
| Receivables and other debit balances | 1,386 | 942 | ||||||
| Value Added Tax | 369 | 1,556 | ||||||
| The assessing officer - a company | 14 | - | ||||||
| Asset for future transactions (forward) | - | 4,131 | ||||||
| 34,801 | 48,331 | |||||||
Note 8 - Vehicles inventory
| As for 31 December | ||||||||
| 2023 | 2022 | |||||||
| a. The composition: | ||||||||
| New cars | 170,009 | 157,957 | ||||||
| Used cars | 12,033 | 17,137 | ||||||
| Accessories | 1,605 | 1,769 | ||||||
| 183,647 | 176,863 | |||||||
| b. | As stated in Note 2 (i) above, the Group measures its inventory according to the lower of the cost base and the net realizable value. The Group regularly examines the realizable value of the inventory, taking into account a number of factors and characteristics, and in particular the age and condition of the inventory. Regarding the considerations taken into account regarding the examination of realizable value in respect of the new car inventory, see also Note 3b1. |
F-101
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 9 - Investments in companies treated according to the balance sheet value method
Further to what was covered in Notes 1 (c) and 2 (u) regarding the merger and reverse acquisition: as stated, Metomy is the legal purchaser of Global AutoMax and both own subsidiaries as follows:
| a. | Additional information regarding subsidiaries whose reports are consolidated in the Company’s reports: |
| Country of incorporation | The Company’s rights in capital and voting rights | Amounts advanced by the Company to the consolidated company | The scope of investment in the capital of the consolidated company | Total | |||||||||||||||
| % | Thousands of NIS | ||||||||||||||||||
| As for 31 December 2023 | |||||||||||||||||||
| Automax Hasharon(1) | Israel | 67 | 270 | 1,899 | 2,169 | ||||||||||||||
| Automax Trade In Ltd. (2) | Israel | 80 | 9,128 | - | 9,128 | ||||||||||||||
| Automax Leasing Ltd. (3) | Israel | 100 | 77 | - | 77 | ||||||||||||||
| Automax Netanya Ltd. (4) | Israel | 100 | 682 | - | 682 | ||||||||||||||
| 10,157 | 1,899 | 12,056 | |||||||||||||||||
| As for 31 December 2022 | |||||||||||||||||||
| Automax Hasharon (1) | Israel | 67 | 1,215 | 1,845 | 3,060 | ||||||||||||||
| Automax Trade In Ltd. (2) | Israel | 80 | 3,036 | - | 3,036 | ||||||||||||||
| Automax Leasing Ltd. (3) | Israel | 100 | 11 | - | 11 | ||||||||||||||
| Automax car fleets (5) | Israel | 100 | - | - | - | ||||||||||||||
| Metomy Germany GmbH (6) | Germany | 100 | - | - | - | ||||||||||||||
| 4,262 | 1,845 | 6,107 | |||||||||||||||||
F-102
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 9 - Investments in Companies handle according to the Balance Sheet Value method (continued)
| 1. | Automax Hasharon Ltd.: |
On April 25, 2021, Global AutoMax entered into a Founder’s Agreement with a third party that acts as an authorized distributor of vehicles imported by the Company, and operates the Company’s branch in Petah Tikva (hereunder: “the marketer” and “the Founders’ Agreement”, as applicable).
According to the Founder’s Agreement, the parties will work to establish a joint company (which was established under the name of Automax Hasharon), which will, among other things, operate marketing and sales centers for vehicles in the cities of Petah Tikva, Ra’anana, and other locations to be decided by the parties (below: “The joint company”). According to the Founder’s Agreement, the subsidiary company will own 1/3 of the joint company’s share capital, while the marketer will own the remaining 2/3. The parties undertook to provide the joint company with an initial amount as an owner’s loan for the purpose of financing its activities, divided between them according to the relative share of each party in the joint company’s share capital. Distribution of profits in the joint company will be made subject to any law, according to the relative share of each party in the joint company’s share capital. The joint company’s Board of Directors will appoint 3 members, where two will be appointed by the marketer and one by the subsidiary. The Founder’s Agreement also stipulates that certain decisions will require a 100% majority of the directors, including a change in the joint company’s incorporation documents, including a change in the rights attached to the joint company’s shares, providing loans and/or guarantees and/or other financing for the joint company’s activities that deviate from its normal course of business or Providing loans to stakeholders in the joint company, as well as approving transactions in which an office holder, director, shareholder and/or stakeholders in the company have a personal interest.
The Founders’ Agreement includes customary provisions that limit the possibility of share transferring in the joint company, including the right of first refusal (except in the circumstances stipulated in the Founders’ Agreement), the right to join the sale of shares (Tag Along) and forced sale (Bring Along). The joint company operates the company’s branches in Petah Tikva and Ra’anana.
On May 3, 2021, a vehicle marketing agreement was signed between the subsidiary and the joint company. The agreement is valid for a period of 5 years from the its signature date. In return for the marketing and distribution services, the marketer will receive a commission at certain determined rates from the price of each vehicle sold by the joint company (before VAT and minus license fees amount).
On June 23, 2022, an agreement was signed between Global AutoMax, and the marketer Automax Hasharon (joint company of the subsidiary and the marketer) entered into a Founders Agreement according to which Global AutoMax purchased from the third party shares held by it which constitute 1/3 of the issued share capital of Automax Hasharon, as well as granted Automax Hasharon with an owner’s loan in accordance with the agreement established between the parties. After granting the aforementioned owner’s loan, Automax Hasharon paid off the owner’s loan in the same amount granted by the third party. Simultaneously with the signing of the aforementioned agreement, an amendment to the Founder’s Agreement was signed according to which Global AutoMax will be entitled to appoint two directors to the Hasharon Automax board of directors, and the third party will be entitled to appoint one director. With the completion of the aforementioned agreement, Global AutoMax owns 2/3 of the issued share capital of Automax Hasharon, and the third party owns 1/3, and two directors on behalf of Global AutoMax, and one director on behalf of the third party, serve on the board of Automax Hasharon.
In October 2022, in accordance with the agreement between Global AutoMax and the Marketer, Global AutoMax commenced operating the Petah Tikva branch directly, while the joint company continues to operate the Ra’anana branch.
No consideration was transferred for the shares.
F-103
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 9 - Investments in Companies handle according to the Balance Sheet Value method (continued)
| b. | The attached cash flows that resulted to the group as a result of the purchase transaction: |
| Thousands of NIS | ||||
| Cash paid | - | |||
| With the deduction of cash and cash equivalents that were purchased | 465 | |||
| Total | 465 | |||
| c. | Attribution of excess cost: |
| Thousands of NIS | ||||
| Cash consideration | - | |||
| Balance of acquired assets and liabilities, net | (764 | ) | ||
| Excess cost for attribution | 764 | |||
| Attributed: | ||||
| Goodwill | 764 | |||
| 2. | See Note 21b(c) below. |
| 3. | The company was established on June 1, 2022 for the purpose of examining the possibility of engaging in leasing activities. |
| 4. | See Note 21b(g) below. |
| 5. |
Automax car fleets Established in February 2019. As of September 24, 2020 Automax Fleets was inactive. On July 30, 2023, an agreement was signed between Automax Fleets, Global AutoMax and I.V. Drive Ltd. (hereinafter: “I.V. Drive”), as part of which 50% of Automax Fleets’ share capital was transferred to I.V. Drive, and Automax fleets began the activity of brokering leasing transactions, as detailed in Note 21b (17) below. |
| 6. | Matomy Germany GmbH was dissolved during the last quarter of 2023. |
F-104
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 9 - Investments in Companies handle according to the Balance Sheet Value method (continued)
B. Details regarding affiliated companies held by the company:
| Company rights in capital and | As for December 31 | |||||||||||||||||||||
| Investment in affiliated | Number of | Nominated | voting rights | 2023 | 2022 | |||||||||||||||||
| companies | shares | Type | value | % | Thousands of NIS | |||||||||||||||||
| Dalhom Automax Ltd. (1) | 10 | Ordinary | 0.1 | 50 | % | 11,256 | 17,635 | |||||||||||||||
| 0.2 | Management | 0.1 | ||||||||||||||||||||
| Automax Shefela Ltd. (2) | 60 | Ordinary | 1 | 50 | % | 1,148 | 130 | |||||||||||||||
| Automax car fleets (3). | 171,451 | Ordinary | 0.1 | 50 | % | 85 | - | |||||||||||||||
| 8 | Management | 1 | ||||||||||||||||||||
| Automax Netanya Ltd. (4) | 60 | Ordinary | 1 | 50 | % | - | (133 | ) | ||||||||||||||
| Hiteczone Motors Ltd. (5) | 2,880 | Ordinary | 0.1 | 30 | % | - | 14 | |||||||||||||||
| 12,489 | 17,646 | |||||||||||||||||||||
F-105
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 9 - Investments in Companies handle according to the Balance Sheet Value method (continued)
| 1. | Dalhom Automax Ltd.: |
| As for December 31 | ||||||||
| 2023 | 2022 | |||||||
| Share capital | - | (*) | - | |||||
| Debits and Credits | 684 | 7,697 | ||||||
| Loan | 5,156 | 4,705 | ||||||
| Investment | 5,662 | 5,577 | ||||||
| Equity losses | (246 | ) | (344 | ) | ||||
| 11,256 | 17,635 | |||||||
| (*) | Amount lower than 1 thousand ILS. In addition, see Note 21b(e) below. |
| 2. | Automax Shefela Ltd.: |
| As for December 31 | ||||||||
| 2023 | 2022 | |||||||
| Share capital | - | (*) | - | |||||
| Debits and Credits | 1,249 | 244 | ||||||
| Equity losses | (548 | ) | (114 | ) | ||||
| Loan | 447 | - | ||||||
| 1,148 | 130 | |||||||
| (*) | Amount lower than 1 thousand ILS. In addition, see Note 21b(h) below. |
F-106
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 9 - Investments in Companies handle according to the Balance Sheet Value method (continued)
| 3. | Automax car fleets Ltd: |
| As for December 31 | ||||||||
| 2023 | 2022 | |||||||
| Share capital | 17 | - | ||||||
| Debits and Credits | 102 | - | ||||||
| Equity losses | (34 | ) | - | |||||
| 85 | - | |||||||
In addition, see Note 21b(p) below.
| 4. | Automax Netanya Ltd.: |
| As for December 31 | ||||||||
| 2023 | 2022 | |||||||
| Share capital | - | (*) | - | |||||
| Debits and Credits | - | (26 | ) | |||||
| Equity losses | - | (107 | ) | |||||
| - | (133 | ) | ||||||
| (*) | Amount lower than 1 thousand ILS. See Note 21b(g) below. |
| 5. | Hiteczone Motors Ltd.: |
| As for December 31 | ||||||||
| 2023 | 2022 | |||||||
| Share capital | - | (*) | - | |||||
| Debits and Credits | - | 39 | ||||||
| Equity losses | - | (25 | ) | |||||
| - | 14 | |||||||
| (*) | Amount lower than 1 thousand ILS. |
On May 27, 2021, Global AutoMax signed an agreement with Hi Biz Ltd., the operator of the Hiteczone consumer club, to establish a joint company to engage in automotive activity including marketing and sales of vehicles, and become, among other things a web based platform for Hiteczone consumer club and joint the national marketing and sales network of the new company (hereinafter: Hi Biz, the Agreement” and the “Joint Venture” as the case may be).
On July 18, 2023, Global AutoMax transferred all of its rights in the joint venture to High Biz. The transfer of the shares was done without any consideration.
F-107
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 10 - Assets and liabilities for Lease Agreements
As of January 1, 2018, the company applies standard IFRS 16 as detailed in Note 2 p. This note refers to leases where the Group is the lessee.
| a. | Assets composition due to Lease Agreements |
| As for December 31 | ||||||||
| 2023 | 2022 | |||||||
| Thousands of NIS | ||||||||
| Cost: | ||||||||
| Opening balance | 28,044 | 18,461 | ||||||
| Entry into consolidation | - | 5,202 | ||||||
| Additions during the year | 9,897 | 1,351 | ||||||
| Changes during the year | 1,532 | 3,030 | ||||||
| Closing Balance | 36,409 | 28,044 | ||||||
| Accrued depreciation and amortization: | ||||||||
| Opening balance | 11,247 | 6,309 | ||||||
| Changes during the year: | ||||||||
| Entry into consolidation | - | 766 | ||||||
| Depreciation | 5,750 | 4,516 | ||||||
| Changes during the year | (1,073 | ) | (344 | ) | ||||
| Closing Balance | 15,924 | 11,247 | ||||||
| Total | 20,485 | 16,797 | ||||||
| b. | Composition of liabilities for the Lease Agreements: |
| As for December 31 | ||||||||
| 2023 | 2022 | |||||||
| Thousands of NIS | ||||||||
| Opening balance | 18,032 | 12,508 | ||||||
| Changes during the year: | ||||||||
| Entry into consolidation | - | 4,701 | ||||||
| Additions | 9,807 | 1,351 | ||||||
| Changes during the year | (509 | ) | 3,002 | |||||
| Payments and changes due to leases | (5,226 | ) | (3,530 | ) | ||||
| Total | 22,104 | 18,032 | ||||||
| Current maturities of lease related liabilities | 5,775 | 4,177 | ||||||
| Long-term lease related liabilities | 16,329 | 13,855 | ||||||
| Total | 22,104 | 18,032 | ||||||
F-108
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 10 - Assets and liabilities for Lease Agreements (Continued)
| c. | Amounts recognized in profit and loss: |
| For the year ending on | ||||||||
| 2023 | 2022 | |||||||
| Thousands of NIS | ||||||||
| Depreciation expenses with respect to right-of-use assets | 5,750 | 4,887 | ||||||
| Financing expenses with respect to liabilities | 1,133 | 951 | ||||||
| d. | The Lease Agreements include ten properties according to the following breakdown: |
| 1. | Lease agreement for a land plot with a structure where Global AutoMax Jerusalem branch is built |
Global AutoMax has a Lease Agreement with a third party for the lease of an asset in Jerusalem. The Lease Agreement is valid until March 31, 2025, after exercising its extension option. Also, Global AutoMax is granted with additional options to extend it until March 31, 2027. Global AutoMax is entitled to notify the lessor every year at the appointed time of shortening and/or termination of the Lease Agreement with a written notice of 6 months in advance.
The current monthly lease fees amount to 110 thousands ILS, plus VAT and linkage differences. On April 1, 2020, and every two years thereafter, lease fees shall increase by 3%, in comparison to the monthly fees paid on the previous month.
In order to guarantee Global AutoMax undertakings subject to the Lease Agreement, the lessor was provided with various collaterals, as detailed: (a) personal guarantees by Daniel Levi, Yinon Amit, Emanuel Paz Puzailov and Eyal Baruch (hereunder: the “Guarantors”); (b) a promissory note by Global AutoMax at the amount of 500 thousands ILS, personally guaranteed by the Guarantors; and (c) a deposit of 1-month lease fees provided by Global AutoMax and held by the lessor as collateral for Global AutoMax undertakings.
In accordance with the approval of the General Assembly of the company’s shareholders, the subsidiary intends to replace the personal guarantees given by the guarantors as mentioned above, with other acceptable guarantees to be given by Global AutoMax in the amount of up to 5 months lease fees. As for the reporting date, said guarantees have not yet been replaced.
This property houses the subsidiary’s building in Jerusalem, which includes an exhibition center, a parking lot for vehicles imported by the subsidiary, the company’s management offices, as well as a facility and system for preparing vehicles for sale (PDI).
The inherent interest rate of this lease is estimated at 4.3%.
| 2. | Lease agreement for a land plot with a structure where Global AutoMax Rishon Lezion branch is built |
Global AutoMax has a Lease Agreement with a third party according to which it leases a 2,000 square meters plot of land on which a 566 square meters building is built in Rishon Lezion. The Lease Agreement is until May 2031. Global AutoMax may shorten the lease term by a written notice that would be provided to the lessor 6 months in advance. Also, the lessor may shorten the lease period with a written notice of five months in advance, if it wishes to build on the property, provided that it presents the subsidiary with a signed and valid building permit from the Rishon LeZion Planning and Construction Committee.
The monthly lease fees vary between 82 to 100 thousands ILS, plus VAT and linkage differences from May 2015 (predefined annual increases).
F-109
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 10 - Assets and liabilities for Lease Agreements (Continued)
In order to guarantee its undertakings subject to the Lease Agreement, the Company provided the lessor with various collaterals, including a bank guarantee on behalf of the Company, promissory notes by the Company, and Company guarantee.
Global AutoMax branch is located in this property including a presentation center comprised of a showroom for sale of vehicles imported by Global AutoMax.
The inherent interest rate of this lease is estimated at 3.7%.
| 3. | Lease agreement for a land plot with a storage lot of Global AutoMax in Jerusalem |
The subsidiary has a Lease Agreement with a third party according to which it leases a plot of land with an area of 1,776 square meters in Jerusalem. The Lease Agreement is until July 2024 (after the subsidiary exercised options granted to it to extend the lease period). The subsidiary may shorten the lease period provided that it notifies the lessor of this with a written notice 60 days in advance. The lessor has the right to cancel the agreement with a written notice of 6 months in advance, in cases of development and/or planning and/or sale of the leased property.
The current rent is ILS 42 thousand, plus VAT and linkage differences.
On March 24, 2024, the general meeting of the company’s shareholders approved the extension of the Lease Agreement for a period of up to 5 additional years, with monthly lease not exceeding NIS 44,100, plus VAT and linkage differences.
Approximately 47% of the leased property rights are held by an affiliated party of one of the Company’s Directors, who is also a controlling shareholder of the Company.
In order to guarantee its undertakings subject to the Lease Agreement, the Company provided the lessor with a sum for a total of 3-months lease fees (120 thousands ILS) plus VAT, as payment for the last three months of the lease term, and an additional CPI-linked promissory note by the subsidiary for the amount of 100 thousands ILS.
This property contains the logistic warehouse of the Company, where it stores its imported vehicles after they are released by the Customs Authorities and prior to their transportation to the Company’s PDI center.
The inherent interest rate of this lease is estimated at 3.7%.
F-110
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 10 - Assets and liabilities for Lease Agreements (Continued)
| 4. | Lease agreement for a land plot with a structure where Global AutoMax Haifa branch is built |
Global AutoMax has a Lease Agreement with a third party according to which it leases a plot of land with an area of 510 square meters on which a building with an area of approximatively 363 square meters is built in Haifa. The Lease Agreement is until May 2026, after it was extended for an additional period.
The monthly lease fees total 42.5 thousand ILS, plus VAT and linkage differences, lease fees for the additional period total 44 thousand ILS.
Against possession hand over, a deposit equal to three months’ rent plus VAT was paid to the lessor. Global AutoMax branch is located in this property including a presentation center comprised of a showroom for sale of vehicles imported by Global AutoMax.
The inherent interest rate of this lease is estimated at 2%.
| 5. | Lease agreement for a land plot with a structure where Global AutoMax Ra’anana branch is built |
Automax Hasharon has a Lease Agreement with a third party according to which it leases a 1,550 square meter lot on which a building of approximately 1,550 square meters is built in Ra’anana. The Lease Agreement is for the period from May 1, 2021 to April 30, 2026, when Automax Hasharon is granted options to extend it until April 30, 2031. Automax Hasharon is entitled to notify the lessor every year at the appointed time of the shortening and/or termination of the Lease Agreement with a written notice of 3 months in advance.
The monthly lease fees total 55,000 ILS, plus VAT and linkage differences.
Global AutoMax branch is located in this property including a presentation center comprised of a showroom for sale of vehicles imported by Global AutoMax.
The inherent interest rate of this lease is estimated at 9%.
| 6. | Lease agreement for a land plot with a structure where Global AutoMax Petach Tikva branch is built |
Automax Hasharon has a Lease Agreement with a third party according to which it leases a 4,095 square meter lot on which a building of approximately 4,095 square meters is built in Petach Tikva. The Lease Agreement is until December 2024, when she is granted options to extend it until December 2028.
The monthly lease fees total 27,500 ILS, plus VAT and linkage differences.
Global AutoMax branch is located in this property including a presentation center comprised of a showroom for sale of vehicles imported by Global AutoMax.
The inherent interest rate of this lease is estimated at 17%.
F-111
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 10 - Assets and liabilities for Lease Agreements (Continued)
| 7. | Lease agreement for a land plot with a structure where Global AutoMax Glilot branch is built |
Automax Trade in does not have a Lease Agreement with a third party according to which it leases a 1,100 square meter lot on which a building of approximately 1,100 square meters is built in Glilot. The Lease Agreement is for a period until August 2025 (after exercising an option for its extension). The monthly lease fees total 37,500 ILS, plus VAT and linkage differences.
Global AutoMax branch is located in this property including a presentation center for sale of new and used vehicles.
The inherent interest rate of this lease is estimated at 1.7% and during the option period at 7.2%.
| 8. | Lease agreement for a plot with a structure where Global AutoMax Afula branch is built |
Global AutoMax has a Lease Agreement with a third party according to which it rents a plot of land with an area of 545 square meters on which a building with an area of approximatively 545 square meters is built in Afula. The Lease Agreement is for the period from December 1, 2021 to December 1, 2024, when Global AutoMax is granted options to extend it until December 1, 2030. Global AutoMax is entitled to notify the lessor every year at the appointed time of shortening and/or termination of the Lease Agreement with a written notice of 3 months in advance.
The monthly lease fees were set at the amount of 27,250 ILS, plus VAT and linkage differences. Global AutoMax branch is located in this property including a presentation center comprised of a showroom for sale of vehicles imported by Global AutoMax.
The inherent interest rate of this lease is estimated at 2.9%.
| 9. | Lease Agreement in connection with the office in Ashdod |
The subsidiary had a Lease Agreement with a third party according to which it rents an 80 square meter office in Ashdod. The Lease Agreement was for the period from April 3, 2023 until it ended on April 2, 2023.
The monthly lease fees totaled 3,900 ILS, plus VAT and linkage differences.
This property houses the sales office for institutional customers and the subsidiary’s vehicle fleets, and once the lease period ended, its activity was transferred to other Company branches.
The inherent interest rate of this lease is estimated at 2%.
| 10. | Vehicles under operational lease |
During 2023, Global AutoMax signed operational Lease Agreements for 19 vehicles for a 3-year period. The aforementioned vehicles are presented on the basis of cost plus one-time setup costs transaction minus accrued depreciation. The vehicles are amortized based on individual calculations for each vehicle over the lease period.
The inherent interest rate of this lease is estimated between 4.53% and 6.9%.
F-112
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 11 - Fixed Assets, net
| As for December 31 | ||||||||||||||||||||||||
| 2023 | ||||||||||||||||||||||||
| Vehicles | Computers | Office equipment and furniture | Leasehold improvements | electronic equipment | Total | |||||||||||||||||||
| Cost | ||||||||||||||||||||||||
| Balance as for January 1, 2023 | 1,365 | 1,834 | 1,893 | 7,235 | 260 | 12,587 | ||||||||||||||||||
| Additions during the year | 2,144 | 341 | 196 | 924 | 313 | 3,951 | ||||||||||||||||||
| Subtractions during the year | (1,680 | ) | (16 | ) | (30 | ) | (220 | ) | (138 | ) | (2,084 | ) | ||||||||||||
| Balance as for December 31, 2023 | 1,829 | 2,159 | 2,059 | 7,939 | 435 | 14,454 | ||||||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||||||
| Balance as for January 1, 2023 | 208 | 1,269 | 817 | 2,838 | 25 | 5,157 | ||||||||||||||||||
| Additions during the year | 355 | 337 | 158 | 771 | 53 | 1,675 | ||||||||||||||||||
| Subtractions during the year | (229 | ) | (2 | ) | (1 | ) | (9 | ) | (8 | ) | (249 | ) | ||||||||||||
| Balance as for December 31, 2023 | (334 | ) | (1,604 | ) | (974 | ) | (3,600 | ) | (70 | ) | (6,583 | ) | ||||||||||||
| Fixed assets, net, as for December 31, 2023 | 1,495 | 555 | 1,085 | 4,339 | 365 | 7,871 | ||||||||||||||||||
F-113
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 11 - Fixed Assets, net (continued)
| As for December 31 | ||||||||||||||||||||||||
| 2022 | ||||||||||||||||||||||||
| Office | ||||||||||||||||||||||||
| equipment | ||||||||||||||||||||||||
| and | Leasehold | electronic | ||||||||||||||||||||||
| Vehicles | Computers | furniture | improvements | equipment | Total | |||||||||||||||||||
| Cost | ||||||||||||||||||||||||
| Balance as for January 1, 2022 | 351 | 1,414 | 1,484 | 4,904 | 61 | 8,214 | ||||||||||||||||||
| Entry into consolidation | 123 | 38 | 247 | 648 | - | 1,056 | ||||||||||||||||||
| Additions during the year | 1,319 | 392 | 173 | 1,728 | 199 | 3,811 | ||||||||||||||||||
| Subtractions during the year | (428 | ) | (10 | ) | (11 | ) | (45 | ) | - | (494 | ) | |||||||||||||
| Balance as for December 31, 2022 | 1,365 | 1,834 | 1,893 | 7,235 | 260 | 12,587 | ||||||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||||||
| Balance as for January 1, 2022 | 83 | 958 | 673 | 2,143 | - | 3,857 | ||||||||||||||||||
| Entry into consolidation | 20 | 12 | 24 | 62 | - | 118 | ||||||||||||||||||
| Additions during the year | 159 | 303 | 121 | 640 | 25 | 1,248 | ||||||||||||||||||
| Subtractions during the year | (54 | ) | (4 | ) | (1 | ) | (7 | ) | - | (66 | ) | |||||||||||||
| Balance as for December 31, 2022 | (208 | ) | (1,269 | ) | (817 | ) | (2,838 | ) | (25 | ) | (5,157 | ) | ||||||||||||
| Fixed assets, net, as for December 31, 2022 | 1,157 | 565 | 1,076 | 4,397 | 235 | 7,430 | ||||||||||||||||||
F-114
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 12 - Intangible assets, net
| As for December 31 2023 | ||||||||||||||||
| Import | ||||||||||||||||
| licenses | Goodwill | Website | Total | |||||||||||||
| Cost | ||||||||||||||||
| Balance as for January 1, 2023 | 17,020 | 764 | 1,045 | 18,829 | ||||||||||||
| Additions during the year | 2,644 | - | 772 | 3,415 | ||||||||||||
| Balance as for December 31, 2023 | 19,664 | 764 | 1,817 | 22,245 | ||||||||||||
| Cumulative reduction | ||||||||||||||||
| Balance as for January 1, 2023 | 7,114 | - | 1,045 | 8,159 | ||||||||||||
| Additions during the year | 2,765 | - | 202 | 2,967 | ||||||||||||
| Balance as for December 31, 2023 | 9,879 | - | 1,247 | (11,126 | ) | |||||||||||
| Reduced cost, net, as for December 31, 2023 | 9,785 | 764 | 570 | 11,119 | ||||||||||||
| As for December 31 2022 | ||||||||||||||||
| Import | ||||||||||||||||
| Licenses | Goodwill | Website | Total | |||||||||||||
| Cost | ||||||||||||||||
| Balance as for January 1, 2022 | 16,098 | - | 1,045 | 17,143 | ||||||||||||
| Additions during the year | 922 | 764 | - | 1,686 | ||||||||||||
| Balance as for December 31, 2022 | 17,020 | 764 | 1,045 | 18,829 | ||||||||||||
| Cumulative reduction | ||||||||||||||||
| Balance as for January 1, 2022 | 4,699 | - | 1,045 | 5,744 | ||||||||||||
| Additions during the year | 2,415 | - | - | 2,415 | ||||||||||||
| Balance as for December 31, 2022 | 7,114 | - | 1,045 | 8,159 | ||||||||||||
| Reduced cost, net, as for December 31, 2022 | 9,906 | 764 | - | 10,670 | ||||||||||||
Note 13 - Long-term deposits in banking corporations
Long-term deposits in banking corporations, as for December 31, 2023 total 409 thousands ILS. As for December 31, 2022, long-term deposits totaled 535 thousands ILS. The deposits constitute a part of the terms of state-guaranteed loans, as well as an additional deposit deposited by Automax Hasharon with respect to a guarantee provided in relation with the Lease Agreement of the R’aanana branch.
F-115
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 14 – Short-term credit from banking corporations and financing bodies
| Interest rate | As for December 31 | |||||||||
| % | 2023 | 2022 | ||||||||
| Bank - overdraft | 8 | - | ||||||||
| Current maturities of long-term loans (see Note 17) | 2,004 | 1,928 | ||||||||
| Short-term loans | 6.25-9 | 139,418 | 139,464 | |||||||
| 141,430 | 141,392 | |||||||||
The Group has unsecured credit lines, that totaled as for December 31, 2023 in approx. 148.1 million ILS as for December 31, 2022 approx. 148.1 million ILS. Out of these credit lines the Group utilized approx. 143 million ILS as for December 31, 2023 (approx. 145 million ILS as for December 31, 2022). The Group does not pay for its unutilized credit lines, which are, as stated, unsecured. For details regarding financial benchmarks, see Note 21 C below.
F-116
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 15 - Suppliers and services providers
| As for December 31 | ||||||||
| 2023 | 2022 | |||||||
| Open debts | 14,117 | 24,525 | ||||||
| Checks for cashing and credit | ||||||||
| cards | 2,052 | 3,450 | ||||||
| 16,169 | 27,975 | |||||||
Note 16 - Accounts payable and credit balances
| A. | The composition: |
| As for December 31 | ||||||||
| 2023 | 2022 | |||||||
| Advanced payments from Trade receivables | 22,407 | 6,190 | ||||||
| Contingent liability in respect of former shareholders of a subsidiary (b) | 10,777 | 10,456 | ||||||
| Value Added Tax | 5,898 | 101 | ||||||
| Expenses payable | 4,725 | 3,999 | ||||||
| Employees and related institutions | 819 | 1,824 | ||||||
| Obligation to Global AutoMax (c) previous shareholders | 495 | 495 | ||||||
| Obligation for future transactions (Forward) | 320 | - | ||||||
| Provision for sick leave and vacation | 262 | 575 | ||||||
| Obligation to the control holders of the Company | 117 | 117 | ||||||
| Obligation for bonds (d) | - | 388 | ||||||
| 45,820 | 24,145 | |||||||
| B. | Contingent liability in respect of the subsidiary’s former shareholders and an indemnifying asset for it - |
On November 13, 2015, Metomy USA (the company’s wholly-owned subsidiary, incorporated in accordance with the laws of Delaware, USA), acquired the entire holdings (100%) in Optimatic Media Inc. (“Optimatic”) by means of a reverse triangular merger (“The Transaction”). In accordance with the transaction documents, since Optimatic had a large number of shareholders, including inactive companies, and after the company took all reasonable measures to locate those shareholders, the company transferred the full transaction proceeds to a trustee, who was responsible for locating the shareholders and making the payment to the located shareholders. In accordance with the provisions of the Trust agreement signed with the Trustee, after one year from the date of completion of the transaction, the Trustee transferred to Matomy USA the balance of the proceeds of those shareholders who had not yet been located until that date, in the amount of 2,971 thousand US dollars (the “Obligation amount”). On October 29, 2019, Matomy USA was dissolved in accordance with Delaware law, when as part of the liquidation the company undertook to bear the claims filed against Matomi USA. To the best of the Company’s knowledge, according to the law applicable in Delaware, lawsuits can be filed against Matomi USA for a period of up to 3 years from the dissolution date as stated, and the Company’s obligation to bear claims filed against Matomi USA is valid for a period of up to 10 years from the date of dissolution. As part of the merger transaction between the Company and the shareholders of the former Global AutoMax Ltd. and as a condition precedent to its completion, an agreement was signed with M.R.M Merhavit Holdings and Management Ltd. (the initiator of the transaction) and L.I.A. Pure Capital Ltd. (hereafter collectively: “the Indemnifiers’), according to which in return for a payment of 1 million ILS, plus VAT, to be paid to the Indemnifiers by the company, the Indemnifiers will Indemnify the company for any amount paid to any of Optimatic’s undocumented shareholders as specified above, up to the obligation amount. This obligation was settled in an agreement signed on March 18, 2021 between the company and the Indemnifiers.
F-117
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 16 - Accounts payable and credit balances (continued)
It should be noted that the aforementioned summary was approved by the Company’s Board of Directors at meetings held prior to the approval of the merger transaction by the Company’s shareholders, and was brought to the Company’s shareholders for approval as part of the merger transaction, which was approved by them on February 28, 2021.
| C. | In an immediate report published by the company on March 24, 2021 in connection with the merger transaction completion, it was clarified that according to the merger agreement the cash amount in the company’s treasury should be approximately 22 million NIS. On the accounting deadline according to the aforementioned report, the cash amount in the company’s treasury amounted to of about 21.6 million NIS. In accordance with the aforementioned report, the indemnification provision set forth in item 1.1.10.5 of the meeting summons report dated February 22, 2021, whose agenda was the approval of the merger transaction (“the meeting summons report”) applies to the entire amount of the difference (about NIS 495 thousand) (“the difference amount”) “), according to which the amount difference will be paid by way of allocating the indemnification shares (as defined in the merger agreement) against the capital raising to be carried out by the company (and everything as specified in item 1.1.10.5 of the report convening the meeting), without the absorption of 150,000 NIS stipulated in item 1.1.10.2 of the report convening the meeting applying. It should be clarified that as of the date of publication of these reports, to the best of the company’s knowledge, the former shareholders of the subsidiary postponed the execution date of the aforementioned mechanism in accordance with the right granted to them to postpone it until after the date of the third milestone, but no later than 72 months from the date of completion of the transaction. It should be noted that if the company fails to raise capital, the obligation will be repaid in cash. As of December 31, 2023, the amount of the difference was recorded as capital fund in the Company’s books. |
| d. | As part of the issuance of the bonds (series B) as detailed in note 19 below, the Company undertook to grant the distributors 733.592 non -marketable warrants exercisable for up to 733.592 ordinary shares of the company with a par value of 0.05 ILS each (after capital consolidation at a rate of 1.5 as stipulated in Note 22 below) (hereinafter: the “Warrants”). The fair value (according to the B&S formula) of each warrant is ILS 0.1058 as of the day the bonds were issued (series B), and a total of about 388 thousand ILS. On July 26,2023 the company has allocated the warrants. |
F-118
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 17 – Long-term credit from banking corporations
| As for December 31 | ||||||||
| 2023 | 2022 | |||||||
| In ILS, non-linked (*) | 3,811 | 5,603 | ||||||
| With deduction of current maturities | (2,004 | ) | (1,928 | ) | ||||
| 1,807 | 3,675 | |||||||
| (*) | Loans are provided in ILS and bear a Prime+1.5% interest rate during 2023 and 2022. The loans are not CPI linked. |
For details regarding financial benchmarks, see Note 21 C below.
Note 18 - Non-granting control Loans from Right Holders
| As for December 31 | ||||||||
| 2023 | 2022 | |||||||
| A. O. A. Motors Ltd. - a shareholding company | 985 | 957 | ||||||
Note 19 - Liability for bonds
| A. | Composition as for December 31, 2023 |
| Balance | ||||||||||||||||||||
| with | ||||||||||||||||||||
| deduction | ||||||||||||||||||||
| Capital | Nominal | effective | of current | |||||||||||||||||
| amount | interest | interest | balance | maturities | ||||||||||||||||
| Unlinked bonds (series A) | 41,094 | 5.9 | % | 6.9 | % | 41,447 | 34,598 | |||||||||||||
| B. | Additional information regarding bond issuance (series B) |
On March 1, 2022, the company issued to the public a total of ILS 45,660 thousand nominal bonds (series B) of the company, worth 1 ILS each, in accordance with the shelf offer report published by the company on February 27, 2022, by virtue of the shelf prospectus of the company bearing the date November 30, 2021 (hereinafter: “The Shelf Offer Report”). The total gross consideration received by the Company for the bonds (series B) allocated according to the shelf offer report, totaled 45,660 thousand ILS. The Company bore the issuance costs totaled approx. 1,034 thousand ILS.
Terms of the bonds (series B)
The bonds (series B) bear a fixed, non-linked annual interest rate of 5.9%, which will be paid twice a year, on February 28 and August 31 of each of the years 2023 to 2025 (inclusive) and on February 28, 2026, all for a period of The interest that ended on the last day before the payment date (hereinafter: the “Interest period”). The interest rate to be paid for a certain interest period (except for the first interest period, as detailed below), will be calculated as the annual interest rate divided by two. The first interest payment date will be made on February 28, 2023 for the period that begins on the first trading day after the auction day according to the first shelf offer report, and ends on February 27, 2023 (hereinafter: “the first interest period”), and the last payment will be made on February 28, 2026, together with The final repayment of the bond fund and against handing over the bond certificates to the company.
F-119
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 19 - Liability for bonds (continued)
The bonds (series B) will be settled for repayment of principal in 4 unequal annual payments, to be paid on February 28 of each of the years 2023 to 2026 (inclusive), in such a way that the first payment (on February 28, 2023) will be 10% of the principal nominal value of The bonds, the second payment (on February 28, 2024) will be 15% of the total nominal value of the bonds, the third payment (on February 28, 2025) will be 30% of the total nominal value of the bonds, the fourth and final payment (on February 28, 2026) will constitute 45% of the total nominal value of the bonds.
Securing the bonds
In order to guarantee the complete fulfillment of all the Company’s obligations according to the terms of the bonds (series B) and to guarantee the full and accurate repayment of all the principal and interest payments the Company must pay to the bonds (series B) holders, the Company undertook to create and/or register the guarantees listed below for the trustee’s benefit:
| 1. | As a condition for providing owner loans to the controlled companies, the Company undertook to pledge, with a floating lien, the full rights of the Company by virtue of the owner loans provide from time to time to the controlled companies, and this is to ensure the full and exact fulfillment of all the Company’s obligations according to the bonds (series B) and the deed of trust. |
| 2. | The Company has committed that as long as the bonds (series B) have not been paid in full, in a final settlement, the company will not create general current liens on all of its assets and all of its rights, existing or future, for the benefit of any third party, to secure any debt or any obligation, unless: |
| (A) | Prior approval will be obtained from the bonds holders (series B), to create the lien in favor of a third party. |
F-120
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 19 - Liability for bonds (continued)
| (B) | The Company created for the benefit of the bonds (series B) holders to guarantee the unpaid balance of debt towards the holders, at the same time as the creation of the current lien in favor of the third party, a current lien of the same level PER PESO according to the ratio of the Company’s debts to the third party and to the holders of the bonds as it may change from For the time, this lien will be in effect as long as the bonds (series B) have not been paid in full or until the cancellation of the lien given in favor of the aforementioned third party, whichever comes first. |
In addition, the Company undertook as long as the bonds (series B) were not paid in full, it will not create and will not undertake to create, for the benefit of any person and/or entity, liens of any kind and type on the shares of Global AutoMax Ltd. it owns.
| 3. | The Company undertook that as long as the bonds (series B) were not paid in full, it would not make a distribution (as defined in the Companies Law, 5759-1999 (hereinafter: “The Companies Law”)), including that it would not declare, pay or distribute dividends (as defined in the Companies Law). Notwithstanding the above, subject to every law, the Company will be entitled to make a distribution by way of a dividend in kind of shares held by it in the affiliated companies and are listed for trading on the stock exchange, provided that the equity of the company, after making the distribution, will not be less than ILS 60 million. |
For details regarding financial benchmarks, see Note 21 C below.
Note 20 – Employee benefits
| A. | Post-employment benefits |
The Israeli Labor Law and Severance Pay Law require the Company to pay severance payments to its employees upon termination or retirement. Therefore, the Company handles the corresponding liability as a post-employment benefit. Calculation of the company’s liability for employee benefits is done in accordance with valid employment contracts and is based on employees’ salaries and employment period, entitling them to receive severance pay.
| B. | Defined deposit plans |
A portion of the Group’s severance payments to its employees in Israel is subject to the provisions of Paragraph 14 of the Severance Pay Law, 5723-1963. According to this paragraph, current contributions to pension funds and/or insurance policies with insurance companies exempt the Group from recognizing any further liabilities toward those employees for whom said amounts were deposited. Said contributions, as well as deposits in respect of remunerations, constitute defined deposit plans.
| C. | Defined benefit plans |
The portion of severance pay not covered by contributions to defined deposit plans, as detailed above, are handled by the Group as defined benefit plans, where the Group recognizes an employee’ benefits liability for which the Group is contributing amounts in corresponding insurance policies.
F-121
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 20 – Employee benefits (continued)
| D. | The composition of employee benefits liability presented in the financial status report: |
| As for December 31 | ||||||||
| 2023 | 2022 | |||||||
| Benefits after employment termination by departments: | ||||||||
| PDI department | 20 | 20 | ||||||
| Sales department | 108 | 154 | ||||||
| Management | 12 | 41 | ||||||
| 140 | 215 | |||||||
Note 21 - Contingent liabilities, engagements, encumbrances and guarantees
| A. | Claims and legal decisions in the field |
As part of its regular business activity, the Group may be exposed to legal proceedings and claims from time to time. Regardless of the outcome of said actions, legal proceedings might have negative impacts over the Company as a result of various costs arising from settlements and the need to receive legal defense and settlement, reassignment of management resources and other factors.
| ● | During 2015, an investigation was initiated against a subsidiary, Haim Levy Trade In Ltd. (hereunder: |
“Haim Levy Trade In”), one of the Company’s controlling shareholders, and against Company’ position holders – Daniel Levy, CEO; Yinon Amit, Chief Business Officer and Director; Haim Levy, Trade Manager and the son of Daniel Levy; and, Gal Levy, VP of Regulations and Branch network and the son of Daniel Levy, suspecting them of fraud, forgery and money laundering. In addition, said position holders (excluding Daniel and Gal Levy) were interrogated in relation with tax related offenses and regulatory breaches with respect to Company activities as a parallel importer of vehicles subject to the provisions of the Product and Services Supervision Order (Vehicle Import and Provision of Automotive Services), 5769-1978 (hereunder: the “Order”).
At the end of the investigation, Global AutoMax, Haim Levy Trade In and the aforementioned position holders (with the exception of Mr. Gal Levy) (hereinafter: “Position holders”) received hearing letters, according to which the attorney’s office is considering prosecuting them for committing the aforementioned offenses. On August 5, 2021, the parties involved received a notice from the Tel Aviv District Attorney’s Office (Taxation and Economy), according to which, after a hearing procedure that was held for Global AutoMax, the office holder (excluding Gal Levy) and Haim Levy Trade In, it was decided to reject their claims and file an indictment against them.
F-122
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, engagements, encumbrances and guarantees (continued)
On August 25, 2021, a notice of indictment was received against Global AutoMax, Haim Levy Trade In and position holders. The offenses attributed to the accused in the indictment:
| A. | Global AutoMax is accused of committing forgery offenses under the Penal Law, 5737-1977 (hereinafter: the “Penal Law”), fraud under the Penal Law, smuggling under the Customs Ordinance [new version] (hereinafter: the “Customs Ordinance”) and money laundering offenses, according to The Money Laundering Prohibition Law 5760-2000 (hereinafter: “Money Laundering Prohibition Law”) and the Penal Law; |
| B. | Haim Levy Trade In is accused of conducting forgery acts subject to the Penal Law, fraud subject to the Penal Law, contraband subject to the Customs Ordinance, tax and customs offenses (subject to the Customs Ordinance [New Version], the Value Added Tax Law, 5736-1975 and Acquisitions Tax Law (Goods and Services), 5712-1952) and money laundering offenses subject to the Anti-Money Laundering Law and the Penal Law; |
| C. | The position holders are accused of forgery according to the Penal Law, fraud according to the Penal Law, smuggling according to the Customs Ordinance and money laundering offenses according to the Law on the Prohibition of Money Laundering and the Penal Law. |
| D. | In regard to events related to Albar’s Group activity, Haim Levy Trade In is accused of conducting acts of forgery subject to the Penal Law, fraud subject to the Penal Law, contraband subject to the Customs Ordinance, tax and customs offenses (subject to the Customs Ordinance [New Version], the Value Added Tax Law, 5736-1975 and Acquisitions Tax Law (Goods and Services), 5712-1952) and money laundering subject to the Anti-Money Laundering Law and the Penal Law; In addition, Yinon Amit is accused in the aforementioned case with impeachment of the investigation, conspiracy to commit crime and misdemeanor, and obstruction of justice according to the Penal Code. |
As of the financial statements signing date, the preliminary hearings regarding the indictment were completed, and in March 2023, hearings on the substantial evidence began.
F-123
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, engagements, encumbrances and guarantees (continued)
Global AutoMax rejects the charges against the subject of the indictment, among other things in light of the fact that as of 2016 the Order was replaced by the Vehicle Services Licensing Law, which allows the importer to purchase vehicles from any source. Since then, and despite Global AutoMax being under investigation and later even being summoned to a hearing - which was well known to the Ministry of Transportation as the regulator entrusted with licensing and supervision of the field where Global AutoMax operates - the Ministry of Transportation renewed and extended Global AutoMax’s import licenses in accordance with the Vehicle Services Licensing Law, and even issued additional import licenses and permits to Global AutoMax. It should be emphasized that the vehicles subject to the indictment were not released from Customs at all, and no import documents, registrations or invoices were submitted to Customs. In addition, Global AutoMax did not continue to operate according to the import license, the subject of the indictment, which expired in 2015. In fact, this is a single incident, originating from the beginning of Global AutoMax’s activity; Global AutoMax has learned lessons regarding the manner of conduct and control with its suppliers, and it operates under internal procedures with regard to the company’s contracts with suppliers from which it purchases vehicles.
Global AutoMax believes, relying on the position of its legal advisors, that it holds good arguments to handle, the charges, the subject of the indictment.
According to legal advice received by Global AutoMax, in the event of a conviction, as part of a sentence, the punitive sanction as far as Global AutoMax is concerned may be a financial fine, while for the aforementioned party, in the case of a conviction for money laundering offenses, confiscation may be also possible as part of the sentence. In addition, besides the aforementioned, there is exposure to an administrative procedure by the Ministry of Transportation, as detailed below.
According to Section 8 of the Vehicle Services Licensing Law, an employee of the Ministry of Transportation serving as the Deputy Director General for Traffic (in this item “the Director”) has the authority to refuse granting or renewing a license “if the license applicant has been convicted of a criminal offense which, due to its nature, seriousness, or circumstances, he is not fit to engage in providing vehicle service or in a profession in the automotive industry for which he requested the license, or if an indictment was filed against him for a criminal offense as mentioned and a final judgment has not yet been given in his case.” Also, according to Section 10(a)(7) of the Vehicle Services Licensing Law, the Director may revoke a license, suspend it until ordered conditions are fulfilled, limit it or refuse to renew it, after giving the license holder an opportunity to assert his claims, if the license holder “has been convicted of a criminal or a disciplinary offense, which due to its nature, seriousness or circumstances, he is not fit to engage in providing car service or in a profession, or an indictment was filed against him for a criminal offense as mentioned and a final judgment was not yet given in his case.” In the opinion of the Company’s Management and Global AutoMax, based on its legal advisors’ opinions, the filing of an indictment against Global AutoMax, or the fact that it may be convicted in relation to the offences in the indictment, is insufficient to cause the of the director refusal to grant it import licenses, renew its indirect importer license, revoke, restrict, or refuse to renew any licenses granted to Global AutoMax, due to the following reasons, cumulatively, or to any of them:
| A. | The offenses, the subject of the indictment due to their nature, severity and circumstances, as described above, do not lead the Director to the conclusion that Global AutoMax is not appropriate to engage in the importation and sale of vehicles. |
| B. | The Ministry of Transportation is aware of the criminal investigation and the filing of the indictment against Global AutoMax, and this did not prevent it from granting the company an indirect importer’s license, extending it on an ongoing basis to additional vehicle products (when most indirect importer licenses for vehicle products were received or renewed after receiving the summons for the hearing) and granting the Company import permits for various types of vehicles since its operation began. The management of the company concludes from this that the Ministry of Transportation does not see the investigation opened and the indictment filed against Global AutoMax and their possible results, as possibly leading to the conclusion that Global AutoMax is not suitable to engage in the import of vehicles. |
F-124
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, engagements, encumbrances and guarantees (continued)
| C. | According to the ’s management, the policy of the Ministry of Transportation is to increase competition in the industry including the promotion of the company and its business. Thus, the goal of realizing the purpose of the Vehicle Services Licensing Law is to open up the vehicle import market in Israel to competition and to lower entry barriers for commercial imports in the vehicle industry. The Company is a leading party in competition in the industry and it has brought about a real revolution in it, therefore, per the understanding of the company’s management, a refusal to grant Global AutoMax licenses or renew its licenses is against the competition that the Ministry of Transportation aims to promote. |
| D. | To the best of Global AutoMax’s knowledge, since the enactment of the Vehicle Services Licensing Law, the Director has not exercised his authority not to grant or renew a license, and in the opinion of the company’s management, the use of such authority will be done sparingly and very carefully. |
Furthermore, Global AutoMax believes, relying on the position of its legal advisors, that if such administrative proceedings were taken against it, it would be possible to establish a substantial argument against it, including a delay in execution (and this is based, among other things, on similar administrative proceedings underway today, for example the proceedings of the Commissioner of the Capital market, Insurance and Savings vis-à-vis credit service providers).
It should also be noted that the company and Global AutoMax have a broad and solid managerial and professional framework, a good management system and excellent trade relations, which the company and Global AutoMax expect to be able to successfully deal with all the challenges that will arise, to the extent that they arise, following the filing of the indictment.
In light of the above, Global AutoMax assesses, relying on the position of its legal advisors, that the filing of the indictment does not cause cancellation or non -renewal or refusal to grant licenses to Global AutoMax by the Director, or to harm the functioning of the company and Global AutoMax.
| ● | On September 29, 2022, a lawsuit was filed with the District Court in Tel Aviv and an application for its approval as a class action against Global AutoMax Ltd. (hereinafter: Global AutoMax), Union Motors Ltd. (hereinafter: “Union”), Lex Motors Ltd. (hereinafter: “Lex”), Toyota Motor Corporation (hereinafter: “Toyota”), and Denso Corporation (hereinafter: “Denso”) (hereinafter: the “Request”). |
The subject of the application, is applicants claim that the defendants (Toyota as a manufacturer of vehicles; Danso as a manufacturer of allegedly defective fuel pumps which are installed in vehicles made by Toyota and Lexus and are the subject of the request; Union and Lex as direct importers of vehicles made by Toyota and Lexus to Israel; and Global AutoMax as an indirect importer of vehicles made by Toyota to Israel, as well as the company that imported the applicant’s vehicle to Israel) breached their obligations towards the members of the group by, inter alia, producing and/or importing and/or marketing and/or selling vehicles in which a defective fuel pump is installed, refrained from performing a service call for all vehicles in which defective pumps are installed, avoidance from bearing the costs caused by the damaged fuel pumps and the service call, and more.
F-125
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, engagements, encumbrances and guarantees (continued)
This, according to the applicants, in breach of the defendants’ obligations according to the Liability for Defective Products Law, 5740-1980, the Sales Law, 5728-1968, the Contracts Law (General Part), 5733-1973, the Licensing of Services and Professions in the Automotive Industry Law, 5776-2016 and other laws.
the group Which the applicants wish to represent as part of the class action (if approved) is all owners (at any time) or holders of vehicles made by Toyota or Lexus, where a fuel pump made by Denso was installed and of the type for which the service call was made.
The respondents estimate the total damage allegedly caused to all the members of the alleged group, in the amount of over 2.5 million NIS.
On November 14, 2023, Global AutoMax submitted a response to the approval application, in which it rejected all the claims raised in the approval application. In particular, Global AutoMax rejected the claims specifically directed at it, and this in view of its being an indirect importer, for which most of the alleged obligations on which the request for approval purports to be based - do not apply to it at all, and in view of the fact that with regard to the service calls, the object of the request for approval, it fully complied with all obligations (that are limited in any case) applies to it in this context. On February 25, 2024, the applicants submitted a response on their behalf, in response to the respondents’ answers to the approval request. In their response, the applicants repeated their main claims. Pre-trial hearing is set for September 25, 2024.
At this proceedings preliminary stage, the company’s legal advisors are unable to assess the chances of an approval request being accepted, But according to the information and data provided to them by Global AutoMax, the company’s legal advisors estimate that the exposure applicable to the company regarding this procedure is not material.
| B. | Engagements |
 | On January 6, 2022, the Company contracted with an attorney for the purpose of joint legal representation of Global AutoMax Ltd., and the position holders who are accused together in the indictment filed against them and others in August 2021, as detailed in Item 21A above. |
 | On December 29, 2021 and March 16, 2022, the Company’s Board of Directors approved the allocation of 9,284,280 non-marketable warrants exercisable for up to 9,284,280 ordinary company shares, by virtue of the option plan for office holders, employees, consultants and service providers of the company and controlled companies, to a company consultant where no employer-employee relationship exists. |
F-126
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, engagements, encumbrances and guarantees (continued)
 | On March 16, 2022, the company signed an agreement with third parties (hereinafter: the “partners”), under which the parties will work to establish and register a joint company, engaging in purchase and sale of used vehicles (trade-in) (hereinafter in this sub-item: “the Agreement” and the “Joint company”, as the case may be). |
The Company will grant the joint company exclusivity in the purchase of trade-in vehicles (to be purchased from the company’s customers), according to pricing to be determined at the company’s discretion, subject to meeting the goals set forth in the agreement.
According to an agreement, at the time of the joint company’s establishment, the Company will own 80% of its issued and paid-up capital, while the partners will jointly own the remaining 20%. The partners were given options (exercisable subject to meeting the joint company’s objectives as stipulated in the agreement (hereinafter: “the Option subject to meeting objectives”), as well as the Company meeting the milestones set forth in the merger agreement between the Company and the subsidiary), which, assuming their full exercise, may increase the partners holdings in the joint company up to 48% of its issued and repaid capital.
According to the option subjected to meeting the objectives, if in a certain period after the signing of the agreement the net profit of the joint company will be higher than a set threshold, and also the joint company will purchase a minimum amount of vehicles from the subsidiary as stipulated in the agreement, the partners will be entitled to purchase ordinary shares of the joint company at a rate of 20% from the issued and repaid capital, according to a company value of ILS 30 million pre-money.
Close to the establishment of the joint company, the Company will provide financing to the joint company, in the form of an owner’s loan in the amount of ILS 3 million, for its current activities (hereinafter: “the Owner’s loan”). The owner’s loan will bear interest according to Item 3(j) of the Income Tax Ordinance [new version] (hereinafter: “the Ordinance”), to be repaid in 30 equal monthly payments starting on January 1, 2025. Should the joint company require additional financing for the needs of its current activities in addition to the owner’s loan, the parties will provide the joint company with such financing, in the form of owner loans, according to each relative share in the Company’s issued share capital (hereinafter: “Additional owner loans”). The additional owner loans, if any issued, will bear interest according to item 3(j) of the ordinance.
Prior to the signing of the agreement, the Company entered into a sublease Agreement in connection with offices with an area of approximately 100 square meters as well as land with an area of approximately 1,000 square meters in the “Pi Gillot” complex, which will be assigned to the joint venture company from the date of its establishment and will be used for its activities (hereinafter: “Agreement Lease”). The lease period according to the Lease Agreement is from February 1, 2022 to August 6, 2023, and the company was given an option to extend for another identical period (subject to the extension of the lease period of the main tenant). The agreement can be terminated with a 6-months notice, upon request from the competent authorities.
F-127
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, engagements, encumbrances and guarantees (continued)
 | On March 16, 2022, a Lease Agreement addendum was signed for the property used as the Company’s logistics warehouse in Jerusalem, according to which the lease period was extended until July 20, 2023, with a Company option to extend said lease period by additional 12 months. The monthly lease fees total 42,000 ILS, plus VAT and linkage differences, and during the optional period, insofar exercised, totals 44,100 ILS, plus VAT and linkage differences. | |
| About 47% of the rights in the property are held by a party related to a Company’s Director, who is also one of a controlling owners of the Company. |
 | On April 27, 2022, following the company’s signing on April 27, 2022 of a non-binding memorandum of understanding with Dalhom Motors Ltd. (hereinafter: “Dalhom”), a franchise holder for importing Temsa brand buses (hereinafter: “the Franchise”), to establish a joint venture, on June 19, 2022, a detailed agreement was signed between the company, Dalhom and Dalhom Automax Ltd., a dedicated company established to operate the said joint venture (hereinafter: “the Agreement” and “the Joint company”, and the transaction subject to the agreement “the Transaction”), that will engage, among other things, with import to and marketing in Israel of Temsa brand buses. |
Below are the main points of the agreement:
| 1. | Each party’s holdings, appointment of directors, and management of the joint company: at the agreement completion, each party will hold 50% of the joint company’s ordinary shares, and the Company will be entitled to appoint more than half of the board of directors members. When the Company’s loans (as defined below) are repaid to the Company in full, the directors appointment rights of the Company and Dalhom in the joint company’s Board of Directors will become equal. The joint company’s Articles of association stipulates that decisions on certain matters in connection with the management of the joint company will require Dalhom’s approval. |
| 2. | Company loans: As of the completion date, the Company will provide the joint venture with owner loans in the total amount of 10 million NIS (above and below: “Company loans”) set at times to allow the joint venture to meet its obligations to Dalhom as detailed in Item 4 below. The Company’s loans will be offered at the same interest rate (back-to-back), as loans the company will raise the said amount from its financing sources, however, in any case loans will not exceed the rate stipulated in the agreement. The Company’s loans, plus interest, will be repaid to the Company or converted to the joint company’s serf capital, all in the manner and at the times stipulated in the agreement. |
F-128
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 – Contingent liabilities, engagements, liens and guarantees (continued)
| 3. | The initial repayment to the Company: The Company will be entitled to receive first from the joint company’s profits or from its other sources, a total equal to the actually advanced Company’s loans, plus interest accrued on the Company’s loans. |
| 4. | Payments to Dalhom: Subject to the completion of the agreement, the joint company will transfer to Dalhom an aggregate amount equal to the total of the Company’s loans, according to the details and under the following conditions and dates: |
| A. | The inventory: at the completion date, Dalhom will sell to the joint company, all of the Temsa spare parts inventory that it will have at that time, according to the amount of the cost of the inventory in Dalhom’s books (hereinafter: “ Inventory” and “Amount of Inventory Value”). |
| B. | Contingent advance: at the time of completion, the joint company will pay Dalhom an additional amount, as a conditional advance for the transfer of the franchise to the joint company (hereinafter: “the Conditional advance for the franchise”). The agreement sets a mechanism according to which the conditional advance in respect of the concession will gradually become a payment for the franchise to Dalhom, depending on the number of years the franchise will be in effect from the date of completion. |
| C. | Dalhom loan: As of the date of completion, the joint company will transfer to Dalhom an interest-bearing loan (hereinafter: “Dalhom loan”), as a loan at the expense of Dalhom’s share of future profits of the joint company which will be repaid in the manner and at the times stipulated in the agreement. |
| 5. | Collaterals: To guarantee repayment of the company’s loans, at the time of completion the joint company will pledge to the Company its rights towards Dalhom for the repayment of the Dalhom loan, and Dalhom will pledge to the company its shares in the joint company as a first-class lien. The liens will be removed upon full repayment of the Dalhom loan and the company’s loans in accordance with the provisions of the agreement. |
| 6. | Liability and maintenance: Dalhom will cease to be a party to bus maintenance agreements it entered into until the date of the agreement and will bear its obligations according to these, and the joint company and/or the Company will not have any liability or obligation in connection with these maintenance services. The parties reached agreements regarding the manner and conditions of supplying spare parts to Dalhom by the joint company, for the purpose of providing the said services. |
| 7. | Financing the joint company’s activity: In addition to the Company’s loans as mentioned above, after the agreement completion, the Company will provide the joint company with a credit line, or arrange a credit line to be provided by financing entities, to the extent stipulated in the agreement. |
| 8. | Preconditions: It was agreed between the parties that the completion of the agreement will be subject to the existence of a number of preconditions, including: (a) receiving Temsa’s consent to transfer the franchise to the joint company, and signing a franchise agreement between Temsa and the joint company, with substantially similar wording to the existing franchise agreement wording and to the satisfaction of the agreement parties, for a period of at least 3 years; and (b) receiving the approval of the Commissioner of Competition (received at the time of publication of the financial statements). |
On November 20, 2022, after all of the conditions for agreement completion had been met, the transaction will be completed.
F-129
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, engagements, encumbrances and guarantees (continued)
Prior to completing the Transaction, Dalhom Automax signed a franchise agreement with Temsa for a period of three years, under which the joint company would serve as a direct importer of buses manufactured by Temsa in Israel (hereinafter: “The Franchise Agreement”). The Franchise agreement includes the provisions accepted in agreements of this kind, including sales objectives agreed between the parties, failure to comply with which will give Temsa the right to cancel the franchise agreement, at the end of an agreed recovery period. Also, the joint company has committed that without Temsa’s prior written approval, it will not import and market in Israel during the period of the agreement products competing with those of Temsa.
The franchise agreement includes additional conditions as is customary in the industry.
In addition, the joint company signed a service and warranty agreement with Temsa for a period of three years, under which the joint company would provide maintenance and warranty services for buses manufactured by Temsa in Israel, according to commercial terms established between the parties (hereinafter: “The Service and Warranty Agreement”).
 | On July 24, 2022, the Company entered an agreement with a third party, under which it shall serve as an authorized distributor of the Company (hereunder: the “Distribution Agreement” and the “Distributor”, as applicable). |
Simultaneously with signing the Distribution Agreement, the distributor entered an agreement to rent a display center located in the city of Acre, where the distributor intends to operate a Company’s branch, in accordance with the provisions of the Distribution Agreement (hereunder: the “Lease Agreement”). The Company committed to the lessor in the Lease Agreement that insofar the distributor shall terminate the Lease Agreement (or fail to comply with the provisions of the Lease Agreement), then it will step in its place and sign a lease agreement with the lessor under identical terms. The Lease Agreement is for a period of 3 years starting August 1, 2022, and the Distributor is given an option to extend it for a period of additional 3 years. The Distribution Agreement is for a period of 5 years, and includes the occurrence of certain events, after which each party will be entitled to cancel the Distribution Agreement immediately. In addition, each party will be entitled to cancel the Distribution Agreement for any reason by giving 3 months’ written notice to the other party.
The Distribution Agreement stipulates that the Distributor will purchase demonstration vehicles from the Company for the purpose of demonstration drives, and that the Company will loan inventory of vehicles to the distributor for displaying them in the showroom, subject to the preparation of an insurance policy by the distributor and other established commercial matters.
According to the Distribution Agreement, the vehicles sold by the Distributor to end customers will be priced in accordance with the price list set forth by the Company, where each vehicle sale by the Distributor will earn the Distributor a commission at a certain rate determined in the Distribution Agreement.
 | On July 28, 2022, Global AutoMax entered an agreement with a third party, under which it shall serve as an authorized distributor of Global AutoMax in the city of Netanya (hereunder within this paragraph: the “Distribution Agreement” and the “Distributor”, as applicable). |
In addition, on August 7, 2022, the Company entered an agreement to lease a property in the city of Netanya with a total area of approx. 750 sq. m. (which was assigned to the joint company as detailed below), where the Distributor was supposed to operate a branch of the Company, in accordance with the provisions of the Distribution Agreement (hereunder within this subitem: “The Lease Agreement”) The Netanya branch includes offices, a display center and a yard.
F-130
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, engagements, encumbrances and guarantees (continued)
The Lease Agreement is for a period of 3 years starting September 1, 2022, and the Company is granted two options to extend it for additional 3 years periods each (and in total until August 30, 2031). To guarantee the Company’s obligations according to the Lease Agreement, among other things, a guarantee was given from the Company limited in to up to 5 months’ rent amount, plus VAT.
On November 8, 2022, a Founders’ Agreement was signed between the Company and the Distributor, in relation with founding a joint company, Automax Netanya Ltd., which will operate the branch in Netanya, and additional branches as may be decided between the parties (hereunder within this subitem: the “Founders’ Agreement” and “the Joint Company”, as applicable).
According to the Founders’ Agreement, the Company holds half of the joint company’s issued share capital, while the distributor holds the remaining half. The parties undertook providing the joint company with an initial amount as an owner’s loan for financing its activities, divided between them according to the relative share of each party in the joint company’s share capital (hereunder within this paragraph: “Owner’s Loan”). Distribution of profits in the joint company will be made subject to any law, according to the relative share of each party in the joint company’s share capital. The Company shall be entitled to appoint one director to the Board of Directors of the joint company, while the Distributor shall be entitled to appoint one director on his behalf to the Board of Directors after providing his share in the Owner’s Loan (through repayment of a loan provided to it by the Company as detailed below).
The Founder’s Agreement includes customary provisions limiting the possibility of transferring shares in the joint company, including the right of first refusal (except in the circumstances stipulated in the Founders’ Agreement), the right to join the sale of shares (Tag Along) and forced sale (Bring Along).
At the same time of signing of the Founders’ Agreement, a loan agreement was signed between the parties, according to which the Company shall finance the distributor’s share of the owner’s loan, and until the repayment of the such loan provided by the Company to the distributor as stated, the distributor’s holdings in the joint company will be mortgaged in favor of the Company.
In addition, at the same time of signing the Founders’ Agreement, the Distribution Agreement was terminated, and a similar Distribution Agreement has been signed between the Distributor, the joint company and Global AutoMax, and the Lease Agreement was assigned to the joint company.
During the second quarter of 2023, The retailer transferred his holdings in Automax Netanya (50%) to Global AutoMax Company Without consideration, in the manner that after such transfer Global AutoMax holds 100% b The share capital of Automax Netanya company And Automax Netanya activity was transferred to Global AutoMax. As of the date of the report Automax Netanya it is an empty company with no activity.
 | On August 5, 2022, Global AutoMax entered a Founders’ Agreement with a third party that acts as an authorized distributor of vehicles imported by the Company, and operates the Company’s branch in Ashkelon (hereunder: “the Distributor” and “the Founders’ Agreement”, as applicable). |
According to the Founder’s Agreement, the parties founded a joint company, Automax HaShfela Ltd., which, inter alia, operates vehicle’ distribution and sales centers in the cities of Ashdod, Ashkelon and other locations to be decided by the parties (hereunder: the “Joint Company”).
According to the Founder’s Agreement, Global AutoMax holds half of the joint company’s issued share capital, while the distributor holds the remaining half. The parties undertook to provide the joint company with an initial amount as an owner’s loan for the purpose of financing its activities, divided between them according to the relative share of each party in the joint company’s share capital. Distribution of profits in the joint company will be made subject to any law, according to the relative share of each party in the joint company’s share capital. The joint company’s Board of Directors will appoint four members, of whom two will be appointed by the distributor and two by the subsidiary company.
F-131
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, engagements, encumbrances and guarantees (continued)
The Founder’s Agreement includes customary provisions limiting the possibility of transferring shares in the joint company, including the right of first refusal (except in the circumstances stipulated in the Founders’ Agreement), the right to join the sale of shares (Tag Along) and forced sale (Bring Along).
Prior to the signing of the Founder’s Agreement, Global AutoMax entered an agreement for the lease of a showroom with an area of approx. 500 sq. m. in Ashdod which has been assigned to the joint company and is used as a branch of Global AutoMax in the city (hereunder: the “Lease Agreement”). The lease period is from September 15, 2022 and for three years thereafter, while the joint company is granted an option to extend the Lease Agreement for three additional periods of two years each and in total until September 19, 2031. The Lease Agreements in connection with the properties in Ashdod and Ashkelon were assigned to the joint company.
During the last quarter of 2022, the parties signed a vehicle Distribution Agreement between the joint company and Global AutoMax, according to which the joint company shall be the authorized distributor of the vehicles imported by the Company in the cities of Ashkelon and Ashdod, which shall replace the existing agreement between the Company and the Distributor.
 | On February 28, 2023, the company paid the first payment of principal and interest to the bonds (series B) holders in a total amount of approximately ILS 7.2 million. |
 | On March 13, 2023, Dalhom entered a conditional agreement for the distribution, sale, and marketing in Israel of private electric vehicles manufactured by Al Damani, a manufacturer from the United Arab Emirates (hereinafter: “the Distribution Agreement”, “the Vehicles” and “the Manufacturer”, respectively). |
In accordance with the Distribution Agreement, the vehicles will be sold to Dalhom according to the orders it will place from time to time, while the appointment of Dalhom as a distributor of the vehicles in Israel is subject to its meeting order goals within a certain period from the date of signing the Distribution Agreement. Prices and additional commercial terms to be agreed upon between the parties until the date when Dalhom’s obligations under the Distribution Agreement come into effect. The manufacturer will provide Dalhom with warranty services for the vehicles, for the period stipulated in the Distribution Agreement, and will also provide it with spare parts.
The Distribution Agreement is valid for several years, and subject to Dalhom meeting order goals, its validity will be automatically extended for several additional years.
The law applicable to the Distribution Agreement is the law of the Dubai International Financial Center (hereinafter: “DIFC”), and the place of jurisdiction in relation to any dispute between the parties regarding the Distribution Agreement will be in Dubai, in accordance with DIFC rules.
It should be emphasized that all Dalhom obligations according to the Distribution Agreement are conditional on receiving all the required regulatory approvals from the Ministry of Transportation for the import of vehicles to Israel, which have not yet been granted as of the date of the financial reports.
F-132
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, agreements, liens and guarantees (continued)
The information presented above in connection with the import and distribution of vehicles in Israel is considered forward-looking information as defined in the Securities Law, 5728-1968, which at this stage there is no certainty of its realization, inter alia, due to factors that are not under the control of the Company or are not under its full control. The realization of the aforementioned information depends, inter alia, on the certificates of the Ministry of Transportation and other institutions, which, as mentioned, have not yet been granted at this stage and there are no certainty that they shall be obtained in the future.
 | A lease agreement that is used as a service center for buses that are manufactured by Temsa In February 2023, Dalhom Automax signed a lease agreement with third parties (hereinafter: “the Lease Agreement” and the Lessors”, as applicable, according to which Dalhom Automax will rent from the Lessors an asset at Hod HaSharon that its area is approx. 4,000 square meters for the purpose of establishing and operating a vehicles’ repair shop, which will be used as a service center for buses that are manufactured by Temsa. |
The initial lease period according to the agreement is 5 years starting from March 15, 2023, and ending on March 14, 2028 (“the First Lease Period”). Dalhom Automax will have the option to extend the initial lease period for an additional period of 5 years, subject to its compliance with the provisions stipulated in the Lease Agreement (“the Additional Lease Period”).
During the first year of the lease period, Dalhom Automax will pay a monthly rental fee of 120 thousand ILS, plus VAT. Starting from the beginning of the second year of the First Leasing Period (i.e., starting from the 13th month of the rental period), Dalhom Automax will pay a monthly rental fee of 130 thousands ILS plus VAT. The rental fees during the Additional Leasing Period will increase by 5% compared to the last rent that was paid until the beginning of the Additional Lease Period. The rental fee shall be linked to the consumer price index.
In order to guarantee Dalhom Automax’s undertakings according to the Lease Agreement, the Lessors were provided with the following securities: (a) a Compay guarantee, jointly and severally with Dalhom Motors and for an unlimited amount, for all the undertakings of Dalhom Automax according to the Lease Agreement; (b) an autonomous bank guarantee in an amount that is equal to the rental fees for a 4-months period plus VAT, when the sum guarantee is linked to the consumer price index. Instead of providing a bank guarantee, Dalhom Automax may provide to the Lessors an amount of 561,600 ILS which shall be used as a deposit that will be held by the Lessors.
Dalhom Automax has undertaken to indemnify the Lessors and/or anyone on their behalf for any amount they will be required to pay in connection with a lawsuit of a certain third party, insofar it is filed, for the failure of Dalhom Automax and that said third party to jointly rent the asset. The service center was opened to customers during January 2024.
 | Given that the Company met milestones no. 2 and 3 that were set in the merger agreement between the Company, Global AutoMax and its shareholders at the time (the current shareholders in the Company), and between M.R.M Merchavit Holdings and Management Ltd. (the initiator of the transaction), on March 28th 2023 it allocated to the controlling shareholders in the Company an additional 168,105,258 ordinary shares of the Company, which constitute about 41% of the Company’s issued and paid-up share capital after the allocation. After this said allocation, the controlling shareholders of the Company held together about 70.9% of the issued and paid-up share capital of the Company, and as of the day the financial statements are signed they hold together about 55.65% of the Company’s issued and paid-up share capital. |
 | Following the approval of the general assembly of the Company’s shareholders, which took place on May 8th 2023, on May 21st 2023 the Company’s registered share capital and its issued and paid-up share capital were consolidated at a ratio of 1:5, in such a way that every five (5) ordinary shares in the Company’s registered share capital and in its issued and paid-up share capital, that the denominated value of each one of them is 0.01 ILS, were consolidated into one (1) share that its denominated value is 0.05 ILS and the articles of association were accordingly amended. |
F-133
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, agreements, liens and guarantees (continued)
 | Following the approval of the Company’s board of directors, on June 28, 2023 8,000,000 ordinary shares of the Company that the denominated value of each one is 0.05 ILS were allocated to 3 investors in exchange for a total investment of NIS 4,000,000 at a price of 50 Agorort per share by way of a private offer. |
 | On July 26, 2023, the Company allocated 733,592 (non-tradable) warrants, which can be exercised up to 733,592 ordinary shares of the Company, to Leumi Partners Ltd., as part of the consideration for the distribution services they provided to the Company in connection with the Company’s bond offering (series B). The warrants can be exercised in full on the date of their allocation and for a period of 48 months thereafter, at an exercise price of NIS 3 per share. |
 | On July 30, 2023, an agreement was signed between E.V Drive and Global AutoMax and Automax Vehicle Fleets (which until the signing of the aforementioned agreement was a non-active company, that was fully owned (100%) by Global AutoMax). According to this agreement, shares which represent 50% of the issued and paid-up capital of Automax Vehicle Fleets were transferred to E.V. Drive, without consideration, and it was decided that Automax Vehicle Fleets will engage in the field of leasing or in the brokerage of leasing transactions (hereinafter in this sub-article: “the Agreement”). The Agreement settles the management of Automax Vehicle Fleets and states, among other things, that Global AutoMax will provide to Automax Vehicle Fleets an initial amount as an owner’s loan for the purpose of financing its activities, which will be repaid from the profits of Automax Vehicle Fleets in 24 payments starting at the end of 36 months from the signing of the agreement. The distribution of profits in the joint company will be done subject to any law, according to the proportional share of each party in the joint company’s share capital. The board of directors of the joint company will appoint two members, when each party will appoint one director. The founders’ agreement also stipulates that certain decisions will require a majority of 100% of the directors, including a change in the joint company’s incorporation documents, and inter alia, a change in the rights that are attached to the joint company’s shares, the provision of loans and/or guarantees and/or other financing for the joint company’s activities that deviate from its regular course of business or the provision of loans to stakeholders in the joint company, as well as the approval of transactions in which an office holder, director, shareholder and/or stakeholders in the company have a personal interest. |
The Founders’ Agreement includes acceptable provisions that limit the possibility of transferring shares in the joint company, including the right of first refusal (except in the circumstances stipulated in the Founders’ Agreement), the right to join the sale of shares (Tag Along) and a forced sale (Bring Along).
 | Following the approval of the Company’s board of directors from August 15, 23 and 24, 2023, on September 18th 2023 new credit limits were provided to Dalhom Automax from two banking corporations (which also provided credit limits to Global AutoMax Ltd.) at a sum of NIS 7.5 million each (hereinafter: the “Credit Limits”). The credit, which was provided out of the Credit Limits carries an annual interest that ranges between prime + 1.5%-0.5%. The Company guarantees the undertakings of Dalhom Automax towards each of the banking corporations in connection with the Credit Limits. The Credit Limits include a commitment of Dalhom Automax to comply with financial standards, as detailed in note 21c below. |
 | On October 19, 2023, the Company entered into a market making agreement (the “Agreement”) with Israel Brokerage and Investments -IBI Ltd. (“the Market Maker”), according to which the Market Maker will act as a market maker in the Company’s ordinary shares (the “Securities”) which are traded on the Tel Aviv Stock Exchange Ltd. (“the Stock Exchange”) from October 22, 2023. Such market making will be done according to the rules set forth in Chapter IX of Part III of the Stock Exchange’s bylaws, and the instructions pursuant thereto, in exchange for an amount, which was set forth in the agreement, that is not significant for the Company. |
The agreement is for a period of one year starting from the day it came into effect, and it will be automatically extended, as long as it is not canceled in accordance with its instructions, for additional periods of 12 months each.
F-134
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, agreements, liens and guarantees (continued)
 | Following the Company’s announcement on November 9, 2023, regarding negotiations to sign a memorandum of understanding with a public company that is incorporated in Israel and its securities are traded on the NASDAQ Stock Exchange (the “Absorbing Company”), for a merger with the acquiring company (hereinafter: the “Memorandum of Understanding” and the Transaction “or the “Merger”, as the case may be), subject to the signing of a detailed agreement based on the principles that were set forth in the Memorandum of Understanding (hereinafter: the “Detailed Agreement”), the parties signed the Memorandum of Understanding on November 21st 2023, and on December 26, 2023, the Company notified that part of the commercial terms between the parties, shall be updated in the following manner. |
Here below are the main points of the Memorandum of Understanding, as they were updated:
| 1. | The Company will merge with the Absorbing Company through a reverse triangular merger - in such a way that the target company, which is a subsidiary that is fully owned by the Absorbing Company and was established for the purpose of the merger, will be merged with and into the Company and will be liquidated afterwards, so that the Company will become in exchange for an allocation of shares of the Absorbing Company to the Company’s shareholders, which will constitute 49.99% of the fully diluted issued and paid-up share capital of the Absorbing Company, a subsidiary of the Absorbing Company. |
| 2. | At the time the Transaction is completed, the Absorbing Company will invest in the Company as equity a total of sum of cash that will not be less than 4.250 million US dollars. |
| 3. | At the time the Transaction is completed, the Absorbing Company will have assets and activities, in addition to the Company’s field of activity. |
| 4. | According to legal advice the Company received, the shares of the Absorbing Company that will be allocated to the Company’s shareholders will not be blocked. |
| 5. | Completion of the Merger is subject to the fulfillment of contingent terms, which are acceptable in transactions of this type, including the completion of a due diligence by both parties up to their satisfaction, the receipt of all required approvals from third parties (including a ruling from the Israeli Tax Authority), compliance with the NASDAQ rules that guarantee that the shares of the Absorbing Company will continue to be registered for trade, the obtainment of approvals for the merger according to section 350 of the Companies Law, 5799-1999, as well as an exemption for Absorbing Company from publishing a prospectus in Israel. |
| 6. | The composition of the board of directors and the manner the Absorbing Company and the Company will be managed after the completion of the merger will be decided within the Detailed Agreement. |
| 7. | The Memorandum of Understanding is non-binding agreement, except for the provisions regarding confidentiality, No Shop, and the applicable law and place of jurisdiction, which bind the parties. |
F-135
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, agreements, liens and guarantees (continued)
It should be noted that if the Transaction is completed according to the above principles, then the Company’s shares are expected to be deleted from the trade in the Stock Exchange subject to the receipt of all the approvals that are required by law, while the bonds (series B) of the Company will continue to be traded in the Stock Exchange.
The Absorbing Company provided to the Company after the date of the report about the financial situation a bridging loan in the amount of 1.4 million dollars, as detailed in note 32(2) below.
It should be noted that there is no certainty that the Detailed Agreement will be signed or that it will be signed under the conditions, which are listed above, or that the conditions pending for the completion of the transaction will be met, therefore it is also not possible to estimate if and when the Transaction will be completed (if at all). The company will continue and report in every case that significant changes will apply and as required by law.
 | In accordance with the announcement of the Securities Authority on October 16, 2023, regarding an extension that is granted to the publication of the quarterly reports for the third quarter of 2023 due to the “Israel-Hamas” War, on November 28, 2023, the Company’s board of directors approved the postponement of the publication date of the quarterly report for the third quarter of 2023 to December 31, 2023. |
 | Following the approval of the Company’s board of directors, on December 31, 2023 14,285,714 ordinary shares of the Company that the denominated value of each one is 0.05 ILS were allocated by way of a private offer at a price of 70 Agorot per share in exchange for an offset of a current credit of suppliers in the sum of 10,000,000 NIS because of an inventory of about 90 vehicles that the Company purchased and they were given to it. |
| C. | Liens and financial standards |
Banking Corporations
| ● | Global AutoMax Ltd. |
The Company has On-Call credit limits from 4 banking corporations, which are unsecured and as of December 31st 2023 they amount to 150 million NIS.
On January 12, 2023, Global AutoMax’s credit limit from banking corporation B was increased from 30 million ILS to 40 million ILS.
The Company guarantees Global AutoMax’s undertakings towards the banking corporations in connection with the credit limits.
In order guarantee the full repayment of the amounts that will be provided to Global AutoMax according to the credit limits from the banking corporations, Global AutoMax mortgaged in favor of the banking corporations certain assets and rights that were agreed upon, including:
| 1. | A floating lien in the first degree on the entire plant, the equipment, the assets, the funds, the property and rights of Global AutoMax, including their fruits; |
| 2. | A permanent lien in the first degree and pledge on Global AutoMax’s unallocated share capital and its reputation; |
| 3. | A permanent lien and pledge on the bills of lading, certificates of ownership of goods, documentary letters of credit, or other documents that indicate an ownership of goods or chattel which will be delivered from time to time to the banking corporation; |
| 4. | A permanent lien and pledge on all the securities, documents, and bills of others that Automax has delivered or will deliver from time to time to the banking corporation. |
F-136
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, agreements, liens and guarantees (continued)
Also, as part of Global AutoMax’s undertakings to the banking corporations, it must meet financial standards. Here below is a specification of the maximum and cumulative financial standards that Global AutoMax undertook towards the banking corporations:
| ● | The tangible equity in the Company’s financial statements shall be no less than 35 million ILS. This standard will be examined according to Global AutoMax’s consolidated financial statements for June 30th and December 31st of every year. |
| ● | The tangible equity will constitute no less than 25% of Golbal Automax’s tangible balance sheet. This standard will be examined according to Global AutoMax’s consolidated financial statements for June 30th and December 31st of every year. |
| ● | The ratio between the inventory and net credit (LTC) will always be no less than 115%. This standard shall be examined once a month. |
The aforesaid financial standards will be examined in relation to the consolidated financial statements of Global AutoMax Ltd.
In the letters of commitments that Global AutoMax gave the banking corporations, it undertook, amongst other things, that:
| ● | No dividend will be distributed if the equity in the financial statements of Global AutoMax is less than 35 million ILS and its ratio in relation to the total balance sheet is less than 25%. |
| ● | Loans and promissory notes that were issued in favor of Global AutoMax’s shareholders will be inferior to the credit of Global AutoMax, which was received from the banks. |
Here below are the results of financial stipulations as of December 31, 2023:
| Bank A | Bank B | Bank C | Bank D | |||||||||||||
| Tangible equity | 62,062 | 64,080 | 64,080 | 64,080 | ||||||||||||
| Tangible Equity compared to the Balance Sheet | 25.63 | % | 26.24 | % | 26.24 | % | 26.24 | % | ||||||||
| LTC ratio to net credit | 131.77 | % | 131.77 | % | 131.77 | % | 131.77 | % | ||||||||
As was specified above, on December 31, 2023, Global AutoMax met all the financial stipulations, which are specified above
On December 31, 2022, Global AutoMax met all the financial stipulations, which are listed above, except for the stipulation of the ratio between the net financial debt and the EBITDA towards banking corporation A (as is specified here below, this stipulation was canceled) However, Global AutoMax received a disclaimer from the aforementioned banking corporation that it will not act with respect the failure to meet the aforesaid standard on December 31, 2022 according to the rights that were granted to it in the financing agreements.
On March 27, 2023, Global AutoMax signed an update to the letter of commitment with Banking Corporation A regarding the adjustment of the standards of Banking Corporation A to the other banking corporations (except with respect to the definition of the term tangible equity and tangible balance sheet). The financial stipulation of the ratio between the net financial debt and EBITDA has been canceled in this update.
F-137
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, agreements, liens and guarantees (continued)
| ● | Automax “Trade In” Ltd. |
On January 25, 2023, Automax Trade In Ltd. was given a credit limit of 15 million NIS from a banking corporation.
The Company guarantees Automax Trade In’s undertakings towards the banking corporation in connection with the credit limit.
The credit limit includes Automax Trade In’s undertakings to meet financial standards in accordance with a letter of commitment that was signed between Automax Trade In and the banking corporation, which specifies as follows:
| ● | The amount of Automax Trade In’s tangible equity shall be no less than 25% of Automax Trade In’s tangible balance sheet. |
An examination of compliance with this standard will be conducted on the basis of Automax Trade In’s semi-annual and annual reports.
As of December 31, 2023, the said ratio is 28.66%.
| ● | The ratio between (a) the value of Automax Trade-in’s vehicles, and (b) the net financial debt, will not be less than 130% (hereinafter: “the LTV Ratio”). The value of the vehicles according to Yad 2’s price list or according to another price list that will be approved by the banking corporation as was known at the time of the relevant calculation. |
An examination of compliance with this standard will be conducted on a monthly basis as well as according to the banking corporation’s demand. As of the date of the financial statements, the ratio of this standard was 140.90%.
In addition, the letter of commitment includes a provision of a cross-commitment regarding the credit that was provided by the banking corporation to Global AutoMax Ltd., and a subordination and lowering of the owner’s loans that were given to Automax Trade In.
As was specified above, on December 31, 2023, Global AutoMax met all the financial stipulations, which are specified above
| ● | Dalhom Automax Ltd. |
On September 28th 2023 new credit limits at a sum of 7.5 million NIS each were provided to Dalhom Automax by two banking corporations. The Company guarantees the undertakings of Dalhom Automax towards each of the banking corporations in connection with the credit limits.
The credit limit includes Dalhom Automax’s undertakings to meet a financial standard in accordance with the letters of commitment that were signed between Dalhom Automax and the banking corporations, which specifies as follows:
| ● | The ratio between (a) the value of the inventory of vehicles of Dalhom Automax together with the remainder of the advance payment to the supplier, and (b) the net financial debt, shall be no less than 1.2. |
An examination of compliance with this standard will be conducted on a monthly basis as well as according to the banking corporation’s demand.
As of the date of the financial statements, the ratio of this standard was 1.35.
F-138
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, agreements, liens and guarantees (continued)
In the letters of commitment that Dalhom Automax gave the banking corporations, it undertook, amongst other things, that its tangible equity will increase every year at a rate that will be no less than 50% of the annual net profit:
In addition, the letters of commitment include a cross default provision regarding the credit that is provided by the banking corporations to Global AutoMax, a prohibition on directly changing the control at Dalhom Automax and other acceptable instructions, including an inferiority and subordination of the owners’ loans that were given to Dalhom Automax, the provision of statements and reports to the banking corporations and etc.
In order to guarantee the full repayment of the amounts that will be provided to it according to the credit limits, Dalhom Automax mortgaged in favor of the banking corporations all its assets, including the rights and fruits that derive from the assets, in a floating lien (a general current lien)
It should be noted that at the Company’s request, part of the credit limits for Dalhom Automax were diverted from an existing credit limit of another company in the Group, so that after the credit limits were provided to Dalhom Automax, the total amount of credit for the Group (including Dalhom Automax) actually increased by 7.5 million NIS.
Bonds
On March 1, 2022, the Company issued bonds to the public (series B) (see Note 4 here below). The Company undertook within the issuance of these bonds to meet (until the date of the final and full repayment of the bonds (series B)) certain financial standards as detailed below:
| 1. | The ratio between the Company’s equity and its total balance sheet, according to the Company’s consolidated financial statements, will be no less than 11%. In order to calculate the ratio of the equity, the liabilities because of lease agreements and the current liabilities because of lease agreements will be neutralized from the total balance sheet. As of December 31, 2023, the ratio is 16.29%. |
“Equity” means the equity (including minority rights) that is presented in the Company’s consolidated financial statements, in accordance with the regulation and accounting standardization, which exist at the time of the issuance, and without taking into account regulatory changes. When calculating the equity, the Company’s undertaking to the former shareholders of Optimatic Media, Inc. will be taken into account as part of the equity.
Regulatory changes mean changes in the relevant legislation and/or accounting standardization, including changes in the direct or indirect tax regime, which applies to the fleet of vehicles of the Company and of its subsidiaries and/or to their activities.
| 2. | The Company’s equity shall be no less than 25 million NIS according to the Company’s consolidated financial statements (“a Minimal Equity”). As of December 31, 2023, the Equity as defined above was 46,191 thousand NIS. |
F-139
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, agreements, liens and guarantees (continued)
| 3. | The sum of the Company’s assets according to its consolidated financial statements, which are not encumbered with a specific lien, will not be less than the principal of the bonds that has not been repaid yet, together with the interest that has accrued thereon up to that date and has not yet been paid. As of December 31, 2023, the sum of the Company’s assets (which is calculated in the manner that is specified below) is 270,893 thousand ILS, and the sum of the principal of the bonds that has not yet been repaid together with the interest that accumulated until that date, is 41.700 thousand ILS. |
According to the deed of trust, the assets due to the lease agreements, intangible assets and deferred taxes will be neutralized for the purpose of calculating the total sum of the assets in the manner that is specified in the Company’s consolidated financial statements.
| 4. | The quotient that is obtained from dividing (a) the value of the vehicles that are owned by the Company by (b) the net credit, will be no less than 110% (“the Minimum Value of a Vehicle”). As of December 31, 2023, the ratio is 112%. |
The aforementioned standards are reviewed once a quarter, according to the Company’s consolidated financial statements.
If for two or more consecutive reporting periods, the equity ratio (as defined above) shall be lower than 11% and/or the Equity (as defined above) will fall below 20 million NIS, and/or the minimal sum of the assets shall be lower than the principal of bonds that has not yet been repaid plus the interest that it accrued up to that date and has not yet been paid and/or the Minimal Value of a Vehicle shall be less than 110%, this will be grounds for immediate repayment of the bonds (series B). What is said above will not apply if the Company will notify within the financial statements for the second consecutive reporting period, from which it derives that it has not met the undertakings regarding the Equity and/or the Minimum Equity and/or the Minimum Sum of Assets and/or of the Minimum Value of a Vehicle, which it will do until the date these financial statements are signed, that it has amended the violation after the date of the financial statements.
As was mentioned above, the Company met as of the date of the financial statements all the financial stipulations, which are listed above.
F-140
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 21 - Contingent liabilities, agreements, liens and guarantees (continued)
| d. | Guarantees |
The Company guarantees the undertakings of Global AutoMax, Automax Trade In and Dalhom Automax with respect to loans they received from banking corporations, including the state-guaranteed loans and Global AutoMax’s undertakings according to the rent agreements regarding the branch in Rishon Le-Zion and branch in Netanya.
The additional shareholder at Dalhom Automax undertook to indemnify the Company due to the guarantee the latter gave with respect to Dalhom Automax undertakings to banking corporations for the credit limits they submitted to it at a sum of half (50%) of the expenses the Company expended in connection with the exercise of any of the guarantees by any of the banking corporations, and it also undertook to pay to the Company every month a sum of 25,000 NIS plus VAT, as long as the shareholder is not a guarantor towards the banking corporations in accordance with their requirements.
In addition, some of the Company’s controlling shareholders guarantee, either directly or through companies controlled by them, the undertakings of the subsidiary according to the rent agreement regarding the Global AutoMax branch in Jerusalem. For additional details, see Note 10D1 here below.
A consolidated company provided to the customs authorities a bank guarantee at the amount of approx. 1,315 thousands ILS and a bank guarantee to a third party at the amount of approx. 50 thousands ILS.
Note 22 – Share capital and premium on the shares
א. Registered, issued and paid up share capital:
| Number of shares | ||||||||
| As of 31 December 2023 | ||||||||
| Registered | Issued and Paid up | |||||||
| Ordinary shares, 0.05 ILS par value each | 400,000,000 | 103,691,969 | ||||||
| Number of shares | ||||||||
| As of December 31, 2022 | ||||||||
| Issued and | ||||||||
| Registered | Paid up | |||||||
| Ordinary shares, 0.01 ILS par value each | 2,000,000,000 | 248,684,895 | ||||||
| (*) | including dormant shares that their dominated value is 1,951,775. |
| (*) | including dormant shares that their dominated value is 9,758,875. |
| (***) | A capital consolidation was carried out in a ratio of 1 to 5, see below section V. |
F-141
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 22 – Share capital and premium on the shares (continued)
Rights that are attached to shares:
The ordinary shares entitle their holders with the right to participate in the Company’s general assemblies and vote in them. All the ordinary shares entitle their holders with a right to receive dividends and distributions of the surpluses of the Company’s property in the event of a liquidation or to any other form of capital return, based on their par value.
Management shares give their owners all the rights that are granted to ordinary shares, and in addition they grant the right to appoint a director to the Company’s Board of Directors, as detailed in the Company’s articles of association.
Capital note conversion:
According to the provisions of the merger agreement, the capital note that has been issued to the former shareholders of the subsidiary, based on their proportional share in its equity, at a total amount of approx. 15.6 million ILS, has been converted into premium on the issued share capital.
Warrants and rights to shares:
On February 28, 2021, the merger agreement was approved by the general meeting of the Company’s shareholders.
On March 24, 2021, the merger transaction was completed, in which securities were allocated as follows (before the capital consolidation had been carried out at a ratio of 1:5): The developer received in exchange for the transaction 7,900,947 ordinary shares of the Company without any financial consideration on its part.
59,257,103 warrants of the Company were allocated to candidates for service as officers of the Company and 3,394,549 warrants of the Company were allocated to a candidate for service as an active chairman of the board of directors of the Company
168,105,258 rights to the Company’s shares were allocated to former shareholders of Global AutoMax and 6,738,368 warrants of the Company were allocated to the candidate for service as an active chairman of the board of directors of the Company, subject to the Company’s compliance with the milestones that were stipulated in the merger agreement. These rights were converted on March 29, 2023 into ordinary shares after the Company met the 2nd and 3rd milestones, which were set in the merger agreement.
F-142
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 22 – Share capital and premium on the shares (continued)
| ● | Here below is a specification of the allocations: |
| Name | Position | Rights to shares that were converted into ordinary shares | Warrants | Rights to shares (the indemnification) (1) | ||||||||||
| Haim Levy – Trade In Ltd. | 42,026,314 | 3,460,000 | ||||||||||||
| A. Yinon 2015 Ltd | 42,026,314 | 3,460,000 | ||||||||||||
| Pozilov Investments Ltd. | 42,026,315 | 3,460,000 | ||||||||||||
| Eliyahu Baruch Ltd. | 21,013,158 | 1,730,000 | ||||||||||||
| Belporto Investments Ltd. | 21,013,157 | 1,730,000 | ||||||||||||
| Daniel Levy | CEO | 8,888,565 | ||||||||||||
| Yinon Amit | Chief Business Officer | 8,888,565 | ||||||||||||
| Emanuel Paz Puzailov | Shareholder and Director | 8,888,565 | ||||||||||||
| Eyal Baruch | Shareholder and Director | 8,888,565 | ||||||||||||
| Haim Levy – Trade In Ltd. | Vice President of Trade and Procurement | 7,900,948 | ||||||||||||
| Gal Levy | Vice President of Standardization and Manager of Chain of Branches | 7,900,948 | ||||||||||||
| Tomer Levy | Vice President of Business Development and Headquarters and Director | 7,900,947 | ||||||||||||
| Doron Shorer | Former chairman of the board of directors (2) | 10,132,917 | ||||||||||||
| Total | 168,105,258 | 69,390,020 | 13,840,000 | |||||||||||
| (1) | This includes the indemnification shares because of undertaking to the controlling shareholders, see note 16c. |
| (2) | On December 29, 2021, Doron Shorer ceased to serve as chairman of the board and as a result 2,545,912 options from series B1, 2,799,014 options from series B2 and 3,939,354 options from series B3 expired. On March 16, 2022, the Company’s board of directors approved an allocation of 9,284,280 non-tradable warrants (series B) to Mr. Shorer, instead of the warrants that expired. |
The allocation of options and rights to shares is in accordance with the terms and in compliance with the milestones that are stipulated in the merger agreement. Also, it was agreed in the merger agreement on employment agreements for the designated officers, as was approved in the merger transaction.
F-143
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 22 – Share capital and premium on the shares (continued)
| ● | Here below is a table that includes the number of stock options and the changes that were made in the employee option plans: Following the capital consolidation that is detailed in note 22F here below, the amount of shares that will result from the exercise of the options will be one fifth of the amount of options that is shown here below: |
| For the year ended December 31 | ||||
| 2023 | ||||
| The number of warrants | ||||
| Warrants and rights to shares for the beginning of the year | 69,390,020 | |||
| Warrants to shares that were awarded during the year | - | |||
| Warrants that expired during the year | - | |||
| Warrants to shares for the end of the year | 69,390,020 | |||
| ● | Here below is data that was used while deciding the fair value of the option: |
| Series A | ||
| Stock price (in ILS) | 0.589 | |
| Exercise price | 1.6 | |
| Dividend rate | 0% | |
| Vesting term | 4 years | |
| Risk-free interest | 0.3% | |
| Standard deviation | 43% | |
| Series A | ||
| Stock price (in ILS) | 0.589 | |
| Exercise price | 2.91 | |
| Dividend rate | 0% | |
| Vesting term | 2.25-5 years | |
| Risk-free interest | 0.4%-0.13 % | |
| Series B for allocation that was given in March 2022 (*) | ||
| Stock price (in ILS) | 0.427 | |
| Exercise price | 2.7065 | |
| Dividend rate | 0% | |
| Vesting term | 2-4 years | |
| Risk-free interest | 1.4% |
| (*) | As stated above following the expiration of the options to Mr. Shorer and re-granting in March 2023. |
F-144
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 22 – Share capital and premium on the shares (continued)
Given that the Company met milestones no. 2 and 3 that were set in the merger agreement between the Company, Global AutoMax and its shareholders at the time (the current shareholders in the Company), and between M.R.M Merchavit Holdings and Management Ltd. (the initiator of the transaction), on March 28th 2023 it allocated to the controlling shareholders in the Company an additional 168,105,258 ordinary shares of the Company, which constituted 41% of the Company’s issued and paid-up share capital after the allocation. The controlling shareholders hold together as of the day the financial statements are signed about 55.65% of the Company’s issued and paid-up share capital.
Following the approval of the general assembly of the Company’s shareholders, which took place on May 8th 2023, on May 21st 2023 the Company’s registered share capital and its issued and paid-up share capital were consolidated at a ratio of 1:5, in such a way that every five (5) ordinary shares in the Company’s registered share capital and in its issued and paid-up share capital, that the denominated value of each one of them is 0.01 ILS, were consolidated into one (1) share that its denominated value is 0.05 ILS and the articles of association were accordingly amended.
Following the approval of the Company’s board of directors, on June 28, 2023 8,000,000 ordinary shares of the Company that the denominated value of each one is 0.05 ILS were allocated to 3 investors in exchange for a total investment of NIS 4,000,000 at a price of 50 Agorort per share by way of a private offer.
On July 26, 2023, the Company allocated 733,592 (non-tradable) warrants, which can be exercised up to 733,592 ordinary shares of the Company, to Leumi Partners Ltd., as part of the consideration for the distribution services they provided to the Company in connection with the Company’s bond offering (series B). The warrants can be exercised in full on the date of their allocation and for a period of 48 months thereafter, at an exercise price of NIS 3 per share.
Following the approval of the Company’s board of directors, on December 31, 2023 14,285,714 ordinary shares of the Company were allocated by way of a private offer at a price of 70 Agorot per share in exchange for an offset of a current credit of suppliers in the sum of 10,000,000 NIS because of an inventory of about 90 vehicles that the Company purchased and they were given to it.
During 2023 expenses with respect to the awarding of options in the amount of 2,549 thousand ILS were recorded in the income statement, and in 2022 expenses with respect to the awarding of options in the amount of 9,976 thousand ILS were recorded in the income statement.
Note 23 - Financial instruments
Financial risk factors
The Group’s activities expose it to various financial risks, such as a market risk (foreign exchange risk, consumer price index risk, interest rate risk), credit risk and liquidity risk. The Group uses derivative financial instruments in order to reduce certain exposures to risks.
| 1. | Foreign currency risk |
The Group imports vehicles from suppliers abroad, and is exposed to an exchange rate risk, which arises from exposure to various currencies, mainly the Euro and Polish zloty. An exchange rate risk arises from future commercial transactions, recognized assets and recognized liabilities that are in a currency, which isn’t the Group’s measurement currency, including transactions in foreign currency derivative instruments. The Group’s exposure to the foreign currency also derives from the fact that you cannot completely link the sales price of the vehicles to changes in the exchange rates of the foreign currency. In addition, a change in the prices of new vehicles, which are affected by changes in foreign currency exchange rates, may also affect the value of the Group’s vehicle inventory.
F-145
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 23 - Financial instruments (continued)
Here below is a segmentation of the balances that are shown in the financial statement:
| As of 31 December 2023 | ||||||||||||||||||||||||||||
| Non-linked NIS | Canadian dollar | US dollar | European Euro | Pound sterling | Polish zloty | Total | ||||||||||||||||||||||
| Thousands of NIS | ||||||||||||||||||||||||||||
| Total assets | ||||||||||||||||||||||||||||
| Cash and cash equivalents | 1,480 | 5 | 48 | 16 | 1 | 2 | 1,552 | |||||||||||||||||||||
| Trade receivables | 26,552 | - | - | - | - | - | 26,552 | |||||||||||||||||||||
| Other receivables | 14,296 | - | - | - | - | - | 14,296 | |||||||||||||||||||||
| Long-term deposits | 409 | - | - | - | - | - | 409 | |||||||||||||||||||||
| 42,737 | 5 | 48 | 16 | 1 | 2 | 42,809 | ||||||||||||||||||||||
| Total liabilities | ||||||||||||||||||||||||||||
| Overdraft | (8 | ) | - | - | - | - | - | (8 | ) | |||||||||||||||||||
| Credit from banking corporations and financing institutions | (143,229 | ) | - | - | - | - | - | (143,229 | ) | |||||||||||||||||||
| Suppliers and service providers | (3,205 | ) | (2,941 | ) | (6,215 | ) | (3,809 | ) | - | - | (16,169 | ) | ||||||||||||||||
| Other accounts payable | (12,698 | ) | - | (11,097 | ) | - | - | - | (23,795 | ) | ||||||||||||||||||
| Liabilities with respect to bonds | (41,447 | ) | - | - | - | - | - | (41,447 | ) | |||||||||||||||||||
| (200,587 | ) | (2,941 | ) | (17,312 | ) | (3,809 | ) | - | - | (224,648 | ) | |||||||||||||||||
| (157,850 | ) | (2,936 | ) | (17,264 | ) | (3,792 | ) | 1 | 2 | (181,839 | ) | |||||||||||||||||
F-146
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 23 - Financial instruments (continued)
| As of December 31, 2022 | ||||||||||||||||||||||||||||
| Non-linked NIS | Canadian dollar | US dollar | European Euro | Pound sterling | Polish zloty | Total | ||||||||||||||||||||||
| Thousands of NIS | ||||||||||||||||||||||||||||
| Total assets | ||||||||||||||||||||||||||||
| Cash and cash equivalents | 2,135 | 9 | 28 | 164 | 1 | - | 2,234 | |||||||||||||||||||||
| Trade receivables | 16,876 | - | - | 943 | - | - | 17,819 | |||||||||||||||||||||
| Other receivables | 2,498 | 527 | - | 2,806 | - | 798 | 6,629 | |||||||||||||||||||||
| Long-term deposits | 535 | - | - | - | - | - | 535 | |||||||||||||||||||||
| 21,941 | 536 | 28 | 3,913 | 1 | 798 | 27,217 | ||||||||||||||||||||||
| Total liabilities | ||||||||||||||||||||||||||||
| Credit from banking corporations and financing institutions | (145,067 | ) | - | - | - | - | - | (145,067 | ) | |||||||||||||||||||
| Suppliers and service providers | (6,079 | ) | (16,253 | ) | (526 | ) | (6,967 | ) | - | (293 | ) | (30,118 | ) | |||||||||||||||
| Other accounts payable | (8,457 | ) | - | (10,455 | ) | - | - | - | (18,912 | ) | ||||||||||||||||||
| Liabilities with respect to bonds | (47,109 | ) | - | - | - | - | - | (47,109 | ) | |||||||||||||||||||
| (206,712 | ) | (16,253 | ) | (10,981 | ) | (6,967 | ) | - | (293 | ) | (241,206 | ) | ||||||||||||||||
| (184,771 | ) | (15,717 | ) | (10,953 | ) | (3,054 | ) | 1 | 505 | (213,989 | ) | |||||||||||||||||
F-147
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 23 - Financial instruments (continued)
The table here below reasonably demonstrates the sensitivity test to a possible change to the various exchange rates when all other variables are unchanged. The impact on the Company’s pre-tax profit is due to the changes in the fair value of financial assets and liabilities, including foreign currency derivatives. The Company’s exposure to foreign currency risk, based on nominal values, is as follows: (in thousands of ILS)
| As of 31 December 2023 | ||||||||||||||||||
| Increase | Decrease | |||||||||||||||||
| Note | Profit (loss) | Capital | Profit (loss) | Capital | ||||||||||||||
| Change in the exchange rate of: | ||||||||||||||||||
| Canadian dollar by 5% | (1) | (147 | ) | (147 | ) | 147 | 147 | |||||||||||
| US Dollar by 5% | (2) | (554 | ) | (554 | ) | 554 | 554 | |||||||||||
| Euro by 5% | (3) | (52 | ) | (52 | ) | 52 | 52 | |||||||||||
| Polish zloty by 5% | (3) | 109 | 109 | (109 | ) | (109 | ) | |||||||||||
| Pound sterling by 5% | 86 | 86 | (86 | ) | (86 | ) | ||||||||||||
| As of December 31, 2022 | ||||||||||||||||||
| Increase | Decrease | |||||||||||||||||
| Note | Profit (loss) | Capital | Profit (loss) | Capital | ||||||||||||||
| Change in the exchange rate of: | ||||||||||||||||||
| Canadian dollar by 5% | (1) | (812 | ) | (812 | ) | 812 | 812 | |||||||||||
| US Dollar by 5% | (2) | (523 | ) | (523 | ) | 523 | 523 | |||||||||||
| Euro by 5% | (3) | 549 | 549 | (549 | ) | (549 | ) | |||||||||||
| Polish zloty by 5% | (3) | 515 | 515 | (515 | ) | (515 | ) | |||||||||||
| Pound sterling by 5% | 79 | 79 | (79 | ) | (79 | ) | ||||||||||||
| (1) | The sensitivity mainly stems from supplier balances that are denominated a foreign currency. |
| (2) | The sensitivity mainly stems from accounts payable balances that are denominated in a foreign currency. |
| (3) | The sensitivity mainly stems from receivable balances that are denominated in a foreign currency. |
Here below is data regarding the significant exchange rates:
| For the year that ended | on December 31st | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| % change | Spot rate at the time of the report | |||||||||||||||
| Canadian dollar exchange rate | 5.20 | 5.95 | 2.739 | 2.596 | ||||||||||||
| US dollar exchange rate | 2.98 | 11.62 | 3.627 | 3.519 | ||||||||||||
| Euro exchange rate | 6.45 | 6.24 | 4.012 | 3.753 | ||||||||||||
| Polish Zloty exchange rate | 12.39 | 4.32 | 0.913 | 0.799 | ||||||||||||
| Pound Sterling exchange rate | 8.29 | 0.81 | 4.620 | 4.237 | ||||||||||||
F-148
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 23 - Financial instruments (continued)
| 2. | Credit risk |
Credit risk is the risk that the counter party will not meet its obligations as a customer or its obligations that arise from a financial instrument, which will result in a loss for the Group. The Group’s incomes derive mainly from customers in Israel. In addition, the Group regularly monitors customer debts and the terms of the credit it grants, and the financial statements include allocations for doubtful debts that adequately reflect, in the opinion of the Company’s management, the inherent loss in debts that their collection is in doubt. The Group is exposed to credit risk because of its operational activity (mainly because of customer balances) and its financial activity, including loans that the Group has provided, transactions in a foreign currency and other financial instruments.
Here below is information regarding the maximum exposure to credit risks (book value):
| on December 31st | ||||||||
| 2023 | 2022 | |||||||
| Thousands of NIS | ||||||||
| Cash and cash equivalents | 1,552 | 2,234 | ||||||
| Trade receivables | 26,552 | 17,819 | ||||||
| Accounts receivable and debit balances | 14,296 | 6,629 | ||||||
| Deposits | 409 | 535 | ||||||
| Short-term credit | (141,430 | ) | (141,392 | ) | ||||
| Suppliers | (16,169 | ) | (30,118 | ) | ||||
| Accounts payable and credit balances | (23,795 | ) | (18,912 | ) | ||||
| Long-term loans and debts | (1,807 | ) | (3,675 | ) | ||||
| Liabilities with respect to bonds | (41,447 | ) | (47,109 | ) | ||||
| (181,839 | ) | (213,989 | ) | |||||
| 3. | Liquidity risk |
The Company’s goal regarding the liquidity risk is to maintain the extent of cash balances and other liquid assets in a way that will allow for the preservation of a level of liquidity, which is sufficient for meeting all of its financial obligations - both under regular conditions and in extreme scenarios, and without the occurrence of unwanted losses.
The table below shows the repayment dates of the Group’s financial liabilities according to the contractual terms in uncapitalized amounts (including interest payments):
| Book value | Projected cash flow | First year | Second year | Third to fifth year | ||||||||||||||||
| Thousands of NIS | ||||||||||||||||||||
| December 31, 2023 | ||||||||||||||||||||
| Suppliers and service providers | 16,169 | 16,169 | 16,169 | - | - | |||||||||||||||
| Accounts payable and credit balances | 23,795 | 23,795 | 23,795 | - | - | |||||||||||||||
| Credit and loans from banking and other corporations | 199,707 | 204,140 | 165,908 | 16,872 | 21,360 | |||||||||||||||
| 239,671 | 244,104 | 205,872 | 16,872 | 21,360 | ||||||||||||||||
F-149
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 23 - Financial instruments (continued)
| Book value | Projected cash flow | First year | Second year | Third to fifth year | ||||||||||||||||
| Thousands of NIS | ||||||||||||||||||||
| December 31, 2022 | ||||||||||||||||||||
| Suppliers and service providers | 30,118 | 30,118 | 27,975 | 2,143 | - | |||||||||||||||
| Accounts payable and credit balances | 14,646 | 14,646 | 14,646 | - | - | |||||||||||||||
| Credit and loans from banking and other corporations | 192,174 | 192,945 | 150,311 | 11,237 | 31,397 | |||||||||||||||
| 236,938 | 237,709 | 192,932 | 13,380 | 31,397 | ||||||||||||||||
| 4. | Interest rate risk |
The Group is exposed to a risk due to changes in the market interest rate that arises from loans, which carry a variable interest. Loans that carry fixed interest rates expose the Group to an interest rate risk because of a fair value. The Company only accepts credit limits and prime-linked loans.
Interest rate sensitivity analysis
The sensitivity analysis is determined based on the exposure to interest rates of derivative and non-derivative financial instruments during the period of the report. The sensitivity analysis regarding liabilities that carry a variable interest was prepared under the assumption that the sum of the liabilities at the end of the period of the report remained the same throughout the entire year of the report.
A 1% change in the interest rates at the end of the period of the report would increase (decrease) the capital and the profit and loss in the amounts shown below (after taxes). This analysis was done under the assumption that the other variables, and especially the foreign exchange rates, remained constant. The analysis regarding 2022 is done according to the same basis.
| Effect of a 1% change in the interest rate | ||||||||
| on December 31st | ||||||||
| 2023 | 2022 | |||||||
| Thousands of NIS | ||||||||
| 9,990 | 6,911 | |||||||
Note 24 - Income Tax
Tax rates applicable to the Group
The applicable corporate tax rate in Israel for 2022 – 2023 is 23%.
An assembly of people is liable for tax on real capital gain at the corporate tax rate, which is applicable in the year of sale.
F-150
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 24 - Income Tax (continued)
Income tax assessments
The companies within the Group have not yet been assessed by the Income Tax Authorities from the day they were incorporated.
Carried forward losses
The companies of the Group have business losses for tax purposes, which are carried forward to the following years, and as of December 31, 2023, these losses amount to approx. 7.3 million ILS, and as of December 31, 2022 they amounted to– approx. 6.3 million ILS. As a result of these losses, deferred taxes in the amounts of approx. 3 million ILS for 2023 and 3.3 million ILS for 2022 were acknowledged in the financial statements. The losses of the subsidiary that is tax liable in New York, USA, are acknowledged from the date it was decided during 2020 to dissolve that subsidiary as losses for tax purposes in Israel. Therefore, starting from the date of that aforesaid decision the Group acknowledged a tax asset with respect to these losses.
According to an agreed tax ruling from December 10, 2020, which was given with respect to the merger transaction (hereinafter: the “Ruling”), every kind of loss of the Company for tax purposes, including losses that would be decided as a result of any tax assessments prior to the finalization of the merger, and including any losses incurred by the Company during or as a result of the dissolution of subsidiaries, shall be deleted and would no longer be available in any way for a direct or indirect carrying forward and/or offset and/or deduction and/or capitalization. In addition, according to the Ruling, the Company and/or a party close to it (as this term is defined in section 88 of the Ordinance) will not be left in any way with a balance of advance payments on the expense of its excess expenses, which can be transferred and utilized in the following tax years, nor will the Company and/or the party close to it be left with any kind of credit balance due to foreign taxes and/or with any kind of tax balance, which was deducted and not yet used and is associated to it, and which can be transferred and credited and/or deducted in any way starting from the date of completion of the merger transaction.
F-151
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 24 - Income Tax (continued)
Deferred taxes
Deferred taxes – composition and movements:
| Employee | ||||||||||||||||||||
| Carried | and | |||||||||||||||||||
| Intangible | forward | others’ | Other | |||||||||||||||||
| assets | losses | benefits | differences | Total | ||||||||||||||||
| Thousands of NIS | ||||||||||||||||||||
| Balance as for January 1, 2022 | 109 | 1,494 | 169 | 1,890 | 3,662 | |||||||||||||||
| Changes that were imputed to the income statement | 156 | (1,171 | ) | 3 | 654 | (358 | ) | |||||||||||||
| Changes that were imputed to the comprehensive income statement | - | - | 29 | - | 29 | |||||||||||||||
| Balance as of December 31, 2022 | 265 | 323 | 201 | 2,544 | 3,333 | |||||||||||||||
| Changes that were imputed to the income statement | 89 | 1,375 | (123 | ) | (1,704 | ) | (363 | ) | ||||||||||||
| Changes that were imputed to the comprehensive income statement | - | - | 35 | - | 35 | |||||||||||||||
| Balance as for December 31, 2023 | 354 | 1,698 | 113 | 840 | 3,005 | |||||||||||||||
F-152
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 24 - Income Tax (continued)
Theoretical tax
| on December 31st | ||||||||
| 2023 | 2022 | |||||||
| Thousands of NIS | ||||||||
| Profit (loss) before taxes on income | (17,017 | ) | 671 | |||||
| The Company’s share in profits (losses) of companies that are handled according to the method of the balance sheet value | (577 | ) | 585 | |||||
| Profit (loss) when the Company’s share in the losses of companies that are handled according to the method of the balance sheet value is neutralized | (16,440 | ) | 1,256 | |||||
| Statutory tax rate | 23 | % | 23 | % | ||||
| Tax expenses (incomes) according to the statutory tax rate | (3,781 | ) | 289 | |||||
| Increase (decrease) of income tax amounts due to: | ||||||||
| Non-deductible expenses and exempted incomes | 154 | 213 | ||||||
| Temporary differences and losses for tax purposes in respect of which no deferred taxes were imputed | 1,027 | 1,136 | ||||||
| Carried forward losses that because of them deferred taxes were created for the first time | - | (81 | ) | |||||
| Differences in the basis of the measurement and other differences | 2,958 | 374 | ||||||
| Tax expenses (incomes) in the income statement | 358 | 1,931 | ||||||
Note 25 – Incomes
| For the year that ended December 31st |
||||||||
| 2023 | 2022 | |||||||
| Incomes from selling new vehicles | 346,922 | 434,786 | ||||||
| Incomes from selling used vehicles | 64,012 | 11,094 | ||||||
| Incomes from accessories | 4,971 | 6,052 | ||||||
| Other Incomes | 3,027 | 1,685 | ||||||
| 418,932 | 453,617 | |||||||
F-153
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 26 - Cost of sales
| For the year that ended December 31st |
||||||||||||
| 2023 | 2022 | |||||||||||
| Inventory at the beginning of the year | 176,864 | 79,168 | ||||||||||
| Cost of vehicles | 362,725 | 449,860 | ||||||||||
| Purchase commissions | 10,392 | 25,857 | ||||||||||
| Vehicle transportation | 5,593 | 6,757 | ||||||||||
| Depreciation and amortizations | 3,719 | 3,611 | ||||||||||
| Fuel, spare parts, repairs and vehicle fees | 3,084 | 2,345 | ||||||||||
| Salaries | 2,297 | 2,112 | ||||||||||
| Miscellaneous | 62 | 71 | ||||||||||
| Less the inventory at the end of the year | (183,647 | ) | (176,863 | ) | ||||||||
| 381,089 | 392,918 | |||||||||||
Note 27 - Sales and marketing expenses
| For the year that ended December 31st |
||||||||||||
| 2023 | 2022 | |||||||||||
| Salaries of sales agents | 12,090 | 10,483 | ||||||||||
| Advertisement and sale promotion | 10,147 | 13,184 | ||||||||||
| Depreciation and amortizations | 4,500 | 3,563 | ||||||||||
| Credit cards commissions | 420 | 305 | ||||||||||
| Miscellaneous | 37 | 77 | ||||||||||
| 27,194 | 27,612 | |||||||||||
Note 28 - General and administrative expenses
| For the year that ended December 31st |
||||||||||||
| 2023 | 2022 | |||||||||||
| Salaries and salary related payments | 3,979 | 4,483 | ||||||||||
| Professional Services | 2,795 | 3,518 | ||||||||||
| Office maintenance | 2,488 | 2,375 | ||||||||||
| Depreciation and amortizations | 2,167 | 1,009 | ||||||||||
| Miscellaneous | 1,935 | 1,387 | ||||||||||
| Taxes and fees | 1,394 | 1,267 | ||||||||||
| Consultation | 1,124 | 1,430 | ||||||||||
| Traveling abroad | 1,083 | 1,266 | ||||||||||
| Bad debts | - | 114 | ||||||||||
| 16,965 | 16,849 | |||||||||||
F-154
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 29 – Financing expenses, net
| For the year that ended December 31st |
||||||||||||
| 2023 | 2022 | |||||||||||
| Financing expenses | ||||||||||||
| Interest for banking corporations | 11,768 | 4,347 | ||||||||||
| Bond interest | 2,808 | 2,483 | ||||||||||
| Fees for banking corporations | 1,121 | 1,132 | ||||||||||
| Interest for commitment to lease agreements | 1,133 | 951 | ||||||||||
| Miscellaneous | - | 22 | ||||||||||
| Exchange rate differences | 1 | - | ||||||||||
| Miscellaneous | - | - | ||||||||||
| (16,831 | ) | (8,935 | ) | |||||||||
| Financing revenue | ||||||||||||
| Exchange rate differences | 6,971 | 3,511 | ||||||||||
| Incomes of Interest from related companies | 750 | 188 | ||||||||||
| Incomes of interest from related companies | (1 | ) | 3 | |||||||||
| Incomes from deposit interest | 2 | 1 | ||||||||||
| 7,722 | 3,703 | |||||||||||
| Net financing expenses | (9,109 | ) | (5,232 | ) | ||||||||
Note 30 - Loss per share:
| A. | Loss per share: |
The basic loss per share is calculated by dividing the loss that is attributed to the holders of the Company’s ordinary shares by the weighted average of the number of issued ordinary shares
| For the year that ended on December 31 |
||||||||||||
| 2023 | 2022 | |||||||||||
| Thousands of NIS | ||||||||||||
| Loss that is attributed to the Company’s shareholders | (16,384 | ) | (1,104 | ) | ||||||||
| The weighted average of the number of issued ordinary shares | 77,377,503 | 47,785,204 | ||||||||||
| Basic loss per share (ILS) | (0.21 | ) | (0.02 | ) | ||||||||
The number of shares that was used for calculating the loss per share in the periods that preceded the date of the reverse purchase, has been retroactively adjusted according to the exchange rate that was decided in the merger agreement.
| B. | Diluted loss per share |
The diluted loss per share is calculated by adjusting the weighted average of the number of ordinary shares by including all potential ordinary shares with dilutive impacts. The diluted loss per share as for the reported years is equal to the basic loss per share because the impact is anti-dilutive.
F-155
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 31 - Concentration of balances and transactions with related parties
| a. | The composition: |
| on December 31st | ||||||||
| 2023 | 2022 | |||||||
| Thousands of NIS | ||||||||
| Accounts receivable and debit balances | 433 | 161 | ||||||
| Options | 19,144 | 16,806 | ||||||
| Commitment to controlling shareholders (the previous shareholders of Global AutoMax) | 495 | 495 | ||||||
Transactions with related and interested parties – general
Some of the Company’s employees and its service providers are parties who are related to the Company. Some of them might be parties who are related to the Company’s shareholders, according to their identification on any date.
The Company’s key people as of December 31, 2023 are the Company’s CEO, Chief Business Officer, CFO, VP of Trade, Chief of Technology, the Company’s Manager of Regulation and Chain of Branches, and the Manager of HQ and Business Development. There had been no personnel changes amongst the Company’s managerial key people during the period of the report.
F-156
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 31 - Concentration of balances and transactions with related parties (continued)
Here below are the total expenses that were paid or received by the Company to/from related parties during the period of the report:
| The nature of the | For the year ended December 31 |
|||||||||
| expense | 2023 | 2022 | ||||||||
| Thousands of NIS | ||||||||||
| Company shareholders | Management fees | 1,200 | 1,200 | |||||||
| Granting options | 701 | 5,688 | ||||||||
| Interest on loans | - | - | ||||||||
| Key people in the Company who are related parties: | ||||||||||
| VP of Trade | Salary | 440 | 616 | |||||||
| Options | 312 | 1,264 | ||||||||
| Interest | (7 | ) | (6 | ) | ||||||
| Vice President of Technology, Standardization and the Manager of the Chain of Branches | Salary | 440 | 615 | |||||||
| Options | 312 | 1,264 | ||||||||
| VP of HQ and Business Development | Salary | 440 | 616 | |||||||
| Options | 312 | 1,264 | ||||||||
| Payments to suppliers who are related parties: | 782 | 872 | ||||||||
| Automax Hasharon (a consolidated company that was included last year) | Commissions | - | - | |||||||
| Interest | - | - | ||||||||
| Automax HaShefala (an included company) | Commissions | 1,390 | 41 | |||||||
| Interest | (35 | ) | (5 | ) | ||||||
| Automax Netanya (a consolidated company that was included last year) | Commissions | - | 47 | |||||||
| Interest | - | (3 | ) | |||||||
| Dalhom Automax (an included company) | Interest | (678 | ) | (192 | ) | |||||
F-157
Automax Motors Ltd.
Notes to the consolidated financial statements
(in thousands ILS)
Note 31 - Concentration of balances and transactions with related parties (continued)
Owner’s loans
Prior to the completion of the merger transaction, three stakeholders in the subsidiary provided in April 2019 loans to the Company in the total sum of 1.5 million ILS, which carried an interest rate of 6% per annum, and their repayment date was December 31, 2019. During 2020, an amendment to the agreement was signed with the above three stakeholders according to which the repayment dates of the loans were extended until December 31, 2020, and also that from January 1, 2020 the loans will carry an interest rate of 9.5% per annum. On December 24, 2020, another amendment to the agreement was signed according to which the repayment dates of the loans were extended until February 28, 2021. At the beginning of 2021, the aforementioned loans were repaid in full.
Note 32 - Significant events after the Period of the Reports
| 1. | On January 11, 2024, Global AutoMax received from a banking corporation a state-guaranteed loan in the sum of 16 million NIS. The loan carries an annual interest of prime + 1.5%, and it is not linked to any linkage base. The loan was granted for a period of 60 months, and it will be repaid in 57 equal monthly payments of principal and interest, while the first 3 months of the loan will constitute a grace period in which the principal and loan will not be repaid. As is customary in state-guaranteed loans, Global AutoMax deposited at the banking corporation an interest-accruing deposit against the loan that its sum is 5% of the principal of the loan, and this deposit will be encumbered with a permanent lien in the first degree in favor of the banking corporation. |
| 2. | Following what was said in note 21.S above, on January 17, 2024, the Company received a bridging loan in the amount of 1.4 million dollars as an advance payment in the expected investment within the merger transaction with the Absorbing Company. The loan will be repaid at the earliest date out of the following: |
| (a) | if the merger agreement is canceled (in case that is has been signed) in accordance with its terms - then within 3 months from the date of its cancellation; (b) on the date of completion of the merger agreement, by way of converting the loan and the interest that was accrued thereon into equity on the expense of the amount that the Absorbing Company will undertake to invest in the Company on the date the merger is completed (as of this date this sum is 4,250,000 US dollars); or (c) on July 15, 2024 (Hereinafter: “The Repayment Date”). |
The loan carries an annual interest of 7% (if the merger transaction will not be completed before the Repayment Date then 2% will be added to the annual interest), and it is not linked to any linkage base. On the Repayment Date the loan (principal and interest) will be repaid in one payment (or it converted into equity)
| 3.B. | On February 28, 2024, the Company paid the second payment of principal and interest for the bonds (series B) that its total sum was approximately 8 million NIS. After this payment, the Company repaid 25% of the principal of the bonds (series B). |
| 4. | Following the approval of the Company’s audit and balance committee and compensation committee and the Company’s board of directors, on March 24th 2024 the general assembly of the Company’s shareholders approved: (a) the extension of the service agreement between the Company and Haim Levy - Trade Inn Ltd., a company that is owned by Mr. Daniel Levy, regarding the provision of CEO services for an additional three-years; (b) the extension of the service agreement between the Company and A. Yinon (2015) Ltd., a company that is owned by Mr. Yinon Amit, regarding the provision of the services of a chief business manager for an additional three-years; (c) the extension of the indemnification and exemption letters to the officers and directors who are amongst the controlling shareholders, their relatives, or who are serving on behalf of the controlling shareholders, or which the controlling shareholders have a personal interest in their provision; (d) the Company’s updated compensation policy; and (e) the extension of a lease agreement with third parties regarding a lot that is used as a logistics warehouse in Jerusalem. |
F-158
ANNEX A
Execution Copy
AGREEMENT AND PLAN OF MERGER
among
SCISPARC
LTD.,
an Israeli limited company;
SCISPARC
MERGER SUB LTD.,
an Israeli limited company; and
AUTOMAX
MOTORS LTD.,
an Israeli limited company
Dated as of April 10, 2024
TABLE OF CONTENTS
| 1. | DESCRIPTION OF TRANSACTION | 2 | |
| 1.1 | The Merger | 2 | |
| 1.2 | Effects of the Merger | 2 | |
| 1.3 | Closing; Effective Time | 2 | |
| 1.4 | Articles of Association; Directors and Officers | 3 | |
| 1.5 | Conversion of Shares | 3 | |
| 1.6 | Calculation of Parent Net Cash | 5 | |
| 1.7 | Closing of the Company’s Transfer Books | 6 | |
| 1.8 | Payment of Aggregate Merger Consideration | 7 | |
| 1.9 | Further Action | 8 | |
| 1.10 | Withholding; Tax Rulings | 8 | |
| 2. | REPRESENTATIONS AND WARRANTIES OF THE COMPANY | 10 | |
| 2.1 | Due Organization; Subsidiaries | 11 | |
| 2.2 | Organizational Documents | 12 | |
| 2.3 | Authority; Binding Nature of Agreement | 12 | |
| 2.4 | Vote Required | 12 | |
| 2.5 | Non-Contravention; Consents | 12 | |
| 2.6 | Capitalization | 13 | |
| 2.7 | TASE Filings, Financial Statements | 15 | |
| 2.8 | Absence of Changes | 16 | |
| 2.9 | Absence of Undisclosed Liabilities | 17 | |
| 2.10 | Title to Assets | 17 | |
| 2.11 | Real Property; Leasehold | 17 | |
| 2.12 | Intellectual Property | 17 | |
| 2.13 | Agreements, Contracts and Commitments | 18 | |
| 2.14 | Compliance; Permits | 19 | |
| 2.15 | Legal Proceedings; Orders | 20 | |
| 2.16 | Tax Matters | 20 | |
| 2.17 | Employee and Labor Matters; Benefit Plan | 24 | |
| 2.18 | Environmental Matters | 27 | |
| 2.19 | Insurance | 28 | |
| 2.20 | No Financial Advisors | 28 | |
| 2.21 | Transactions with Affiliates | 28 | |
| 2.22 | Anti-Bribery | 29 | |
| 2.23 | Disclaimer of Other Representations or Warranties | 29 | |
| 3. | REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB | 29 | |
| 3.1 | Due Organization; Subsidiaries | 29 | |
| 3.2 | Organizational Documents | 30 | |
| 3.3 | Authority; Binding Nature of Agreement | 30 | |
| 3.4 | Vote Required | 31 | |
| 3.5 | Non-Contravention; Consents | 31 | |
| 3.6 | Capitalization | 32 | |
| 3.7 | SEC Filings; Financial Statements | 34 | |
| 3.8 | Absence of Changes | 36 | |
| 3.9 | Absence of Undisclosed Liabilities | 36 | |
Annex A-i
| 3.10 | Real Property; Leasehold | 36 | |
| 3.11 | Intellectual Property | 36 | |
| 3.12 | Agreements, Contracts and Commitments | 37 | |
| 3.13 | Compliance; Permits | 38 | |
| 3.14 | Legal Proceedings; Orders | 39 | |
| 3.15 | Tax Matters | 39 | |
| 3.16 | Transactions with Affiliates | 43 | |
| 3.17 | Insurance | 47 | |
| 3.18 | No Financial Advisors | 47 | |
| 3.19 | Anti-Bribery | 47 | |
| 3.20 | Valid Issuance | 47 | |
| 3.21 | Opinion of Financial Advisor | 47 | |
| 3.22 | Disclaimer of Other Representations or Warranties | 48 | |
| 4. | CERTAIN COVENANTS OF THE PARTIES | 48 | |
| 4.1 | Operation of Parent’s Business | 48 | |
| 4.2 | Operation of the Company’s Business | 50 | |
| 4.3 | Access and Investigation | 53 | |
| 4.4 | Parent Non-Solicitation | 53 | |
| 4.5 | Company Non-Solicitation | 54 | |
| 4.6 | Notification of Certain Matters | 55 | |
| 4.7 | Post-Closing Financing | 56 | |
| 5. | ADDITIONAL AGREEMENTS OF THE PARTIES | 56 | |
| 5.1 | Court Approval, Registration Statement and Transaction Report | 56 | |
| 5.2 | Company Meetings | 58 | |
| 5.3 | Parent Shareholders’ Meeting; Merger Sub Approval | 58 | |
| 5.4 | Regulatory Approvals | 60 | |
| 5.5 | Certificate of Merger | 60 | |
| 5.6 | Company Options | 60 | |
| 5.7 | Company Warrants | 60 | |
| 5.8 | TASE De-Listing of Company Ordinary Shares | 61 | |
| 5.9 | Additional Agreements | 61 | |
| 5.10 | Disclosure | 61 | |
| 5.11 | Listing | 62 | |
| 5.12 | Tax Matters | 62 | |
| 5.13 | Directors and Officers | 62 | |
| 5.14 | Termination of Certain Agreements and Rights | 62 | |
| 5.15 | Cooperation | 63 | |
| 5.16 | Allocation Certificates; Ownership Certificate | 63 | |
| 5.17 | Company Financial Statements | 63 | |
| 5.18 | Shareholder Litigation | 64 | |
| 5.19 | Certain Adjustments | 64 | |
| 6. | CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PARTY | 64 | |
| 6.1 | No Restraints | 64 | |
| 6.2 | Shareholder Approval | 64 | |
| 6.3 | Court Approval | 64 | |
| 6.4 | Tax Rulings | 65 | |
| 6.5 | Certificate of Merger | 65 | |
| 6.6 | No Legal Prohibition | 65 | |
| 6.7 | Bonds Trustee | 65 | |
Annex A-ii
| 7. | ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB | 66 | |
| 7.1 | Accuracy of Representations | 66 | |
| 7.2 | Performance of Covenants | 66 | |
| 7.3 | Documents | 66 | |
| 7.4 | No Company Material Adverse Effect | 67 | |
| 7.5 | Termination of Investor Agreements | 67 | |
| 8. | ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY | 67 | |
| 8.1 | Accuracy of Representations | 67 | |
| 8.2 | Performance of Covenants | 67 | |
| 8.3 | Documents | 68 | |
| 8.4 | No Parent Material Adverse Effect | 68 | |
| 8.5 | Parent Net Cash | 68 | |
| 8.6 | Listing | 68 | |
| 8.7 | Directors and Officers | 68 | |
| 9. | TERMINATION | 68 | |
| 9.1 | Termination | 68 | |
| 9.2 | Notice of Termination; Effect of Termination | 70 | |
| 9.3 | Expenses | 71 | |
| 10. | MISCELLANEOUS PROVISIONS | 71 | |
| 10.1 | Non-Survival of Representations and Warranties | 71 | |
| 10.2 | Amendment | 71 | |
| 10.3 | Waiver | 71 | |
| 10.4 | Entire Agreement; Counterparts; Exchanges by Electronic Transmission | 72 | |
| 10.5 | Applicable Law; Jurisdiction | 72 | |
| 10.6 | Attorneys’ Fee. | 72 | |
| 10.7 | Assignability | 72 | |
| 10.8 | Notices | 73 | |
| 10.9 | Cooperation | 74 | |
| 10.10 | Severability | 74 | |
| 10.11 | Other Remedies; Specific Performance | 74 | |
| 10.12 | No Third Party Beneficiaries | 75 | |
| 10.13 | Construction | 75 | |
Annex A-iii
Exhibits:
| Exhibit A | Definitions |
| Exhibit B | Company Shareholder Support Agreements |
| Exhibit C | Form of Restated Company Articles |
| Exhibit D | Form of Pre-Funded Warrant (to be agreed prior to the Closing) |
| Exhibit E | Company Allocation Schedule (to be agreed prior to the Closing) |
| Exhibit F | Form of Indemnification Agreement |
Annex A-iv
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (together with its exhibits and schedules, this “Agreement”) is made and entered into as of April 10, 2024, by and among SciSparc Ltd., an Israeli limited company (“Parent”), SciSparc Merger Sub Ltd., an Israeli limited company and wholly-owned subsidiary of Parent (“Merger Sub”), and AutoMax Motors Ltd., an Israeli limited company (the “Company”). Certain capitalized terms used in this Agreement are defined in Exhibit A.
RECITALS
A. Parent and the Company intend to effect a merger of Merger Sub with and into the Company (the “Merger”) in accordance with this Agreement and by way of a court approved arrangement between the Company and its shareholders and, if applicable, its Bondholders and creditors, in accordance with the provisions of Sections 350 and 351 of the Companies Law. Upon consummation of the Merger, Merger Sub will cease to exist, and the Company will become a wholly-owned subsidiary of Parent, on the terms and subject to the conditions set forth in this Agreement.
B. The Parent Board has: (i) determined that the Contemplated Transactions are fair to, advisable and in the best interests of Parent and its shareholders, (ii) approved and declared advisable this Agreement and the Contemplated Transactions, including the authorization and issuance of ordinary shares, with no par value, of Parent (“Parent Ordinary Shares”), listed and traded on Nasdaq, to the shareholders of the Company pursuant to the terms of this Agreement and (iii) determined to recommend, upon the terms and subject to the conditions set forth in this Agreement, that the shareholders of Parent vote to approve the Parent Shareholder Matters.
C. The Merger Sub Board has: (i) determined that the Contemplated Transactions are fair to, advisable and in the best interests of Merger Sub and its sole shareholder, (ii) approved and declared advisable this Agreement and the Contemplated Transactions and (iii) determined to recommend, upon the terms and subject to the conditions set forth in this Agreement, that the sole shareholder of Merger Sub votes to adopt this Agreement and thereby approve the Contemplated Transactions.
D. The Company Board has: (i) determined that the Contemplated Transactions are fair to, advisable and in the best interests of the Company and its shareholders, (ii) approved and declared advisable this Agreement and the Contemplated Transactions and (iii) determined to recommend, upon the terms and subject to the conditions set forth in this Agreement, that the shareholders and, if applicable, the creditors of the Company, vote to approve the Company Approval Matters and if required, pursuant to the Companies Law or the Applicable Court, that the Bondholders of the Company vote to approve the Company Approval Matters.
E. Concurrently with the execution and delivery of this Agreement and as a condition and inducement to Parent’s willingness to enter into this Agreement, (a) the shareholders of the Company listed in Section A-1 of the Company Disclosure Schedule (the “Company Signatories”) (solely in their capacity as shareholders of the Company) are executing support agreements in favor of Parent in substantially the form attached hereto as Exhibit B pursuant to which such Company Signatories are agreeing to take specified actions in furtherance of the Merger, including actions relating to the approval of the Merger and adoption of this Agreement by the Company’s shareholders (the “Company Shareholder Support Agreements”).
Annex A-1
AGREEMENT
The Parties, intending to be legally bound, agree as follows:
1. DESCRIPTION OF TRANSACTION
1.1 The Merger.
Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, Merger Sub shall be merged with and into the Company, and the separate existence of Merger Sub shall cease. The Company will continue as the surviving company in the Merger (the “Surviving Company”) and shall (a) become a private debenture company (Chevrat Igrot Hov) within the meaning of the Companies Law and a wholly-owned, direct subsidiary of Parent, (b) continue to be governed by the Laws of the State of Israel, (c) maintain a registered office in the State of Israel, and (d) succeed to and assume all of the rights, properties and obligation of Merger Sub in accordance with the Companies Law.
1.2 Effects of the Merger.
The Merger shall have the effects set forth in this Agreement. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time (as defined below), by virtue of, and simultaneously with, the Merger and without any further action on the part of Parent, Merger Sub, the Company or any Company Shareholder, (a) Merger Sub shall be merged with and into the Company, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the Surviving Company; (b) all the properties, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Company; (c) all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Company; and (d) all the rights, privileges, immunities, powers and franchises of the Company (as the Surviving Company) shall continue unaffected by the Merger.
1.3 Closing; Effective Time.
Unless this Agreement is earlier terminated pursuant to the provisions of Section 9.1, and subject to the satisfaction or, to the extent permitted by Law, waiver by such party entitled to waive such condition of the conditions set forth in Sections 6, 7 and 8, the consummation of the Merger (the “Closing”) shall take place remotely as promptly as practicable (but in no event later than the second Business Day following the satisfaction or waiver by such party entitled to waive such condition of the last to be satisfied or waived of the conditions set forth in in Sections 6,7 and 8, other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of each of such conditions), or at such other time, date and place as Parent and the Company may mutually agree in writing. The date on which the Closing actually takes place is referred to as the “Closing Date.” As soon as practicable after the determination of the Closing Date in accordance with this Section 1.3, each of the Company and Merger Sub shall (and Parent shall cause Merger Sub to), in coordination with each other, deliver to the Registrar of Companies of the State of Israel (the “Companies Registrar”), a notice of the proposed date of the Closing, in which notice the parties shall request that the Companies Registrar issue a certificate evidencing the Merger (the “Certificate of Merger”) on the date that the Parties shall provide further notice to the Companies Registrar that the Closing has occurred, and the Parties shall deliver such further notice to the Companies Registrar on the Closing Date. The Merger shall become effective upon the issuance by the Companies Registrar of the Certificate of Merger (the time at which the Merger becomes effective is referred to herein as the “Effective Time”). For the avoidance of doubt, and notwithstanding any provision of this Agreement to the contrary, it is the intention of the Parties that the Merger being declared effective and that the issuance by the Companies Registrar of the Certificate of Merger shall both occur on the Closing Date.
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1.4 Articles of Association; Directors and Officers.
At the Effective Time:
(a) the articles of association of the Surviving Company shall be amended and restated, as reflected in the form of amended and restated articles of association attached hereto as Exhibit C (the “Restated Company Articles”), until thereafter amended as provided by the Companies Law and such articles of association;
(b) unless otherwise agreed upon by the Parent and the Company, the articles of association of Parent shall be amended in order to change the name of Parent to such name as to be reasonably agreed upon by the Parties, and as may be approved by the Company and the Israeli Companies Registrar (the “Restated Parent Articles”);
(c) the directors and officers of Parent, each to hold office in accordance with the amended and restated articles of association of Parent, shall be as designated by the Parent and the Company prior to Closing after giving effect to the provisions of Section 5.13, or such other persons as shall be mutually agreed upon by Parent and the Company, until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be; and
(d) the directors and officers of the Surviving Company, each to hold office in accordance with the articles of association of the Surviving Company, shall be the directors and officers of the Company as in office immediately prior to the Effective Time, until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be.
1.5 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger and without any further action on the part of Parent, Merger Sub, the Company or any shareholder of the Company or shareholder of Parent, the following shall occur:
(i) any Company Ordinary Shares held in the treasury of the Company or held or owned by the Company or Merger Sub immediately prior to the Effective Time shall be canceled and retired without any conversion and shall cease to exist, and no consideration shall be delivered in exchange therefor; and
(ii) subject to Section 1.5(d) each Company Ordinary Share outstanding immediately prior to the Effective Time (excluding shares to be canceled pursuant to Section 1.5(a)(i) and excluding Company Ordinary Shares held by the Parent immediately prior to the Effective Time) shall be automatically converted solely into the right to receive a number of validly issued, fully paid and nonassessable Parent Ordinary Shares, equal to the Exchange Ratio, per each such Company Ordinary Share (the “Merger Consideration”) in accordance with Section 1.8(a).
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(b) Notwithstanding any other provision of this Agreement, under no circumstances shall the Parent issue Parent Ordinary Shares to any Company Shareholder pursuant to the terms of this Agreement, to the extent that after giving effect to such issuance, the Company Shareholder, together with any affiliate thereof, would beneficially own (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 9.99% of the number of Parent Ordinary Shares outstanding immediately after giving effect to such issuance (the “Ownership Limitation”). If the Parent cannot issue Parent Ordinary Shares due to be issued pursuant to this Agreement, the Parent shall (i) issue all such Parent Ordinary Shares that may be issued without causing a Company Shareholder to exceed the Ownership Limitation, and (ii) issue to the Company Shareholder, pre-funded warrants to purchase Parent Ordinary Shares, in substantially the form attached hereto as Exhibit D (the “Parent Pre-Funded Warrant”), in lieu of Parent Ordinary Shares not so provided to such holder. Each Parent Pre-Funded Warrant shall be exercised for $0.001 per each Parent Ordinary Share. The Pre-Funded Warrants will be registered in the Parent’s books and will not be listed for trading on any stock exchange or trading market.
(c) If any Company Ordinary Shares outstanding immediately prior to the Effective Time are unvested or are subject to a repurchase option or a risk of forfeiture under any applicable restricted share purchase agreement or other similar agreement with the Company, then the Parent Ordinary Shares issued in exchange for such Company Ordinary Shares will to the same extent be unvested and subject to the same repurchase option or risk of forfeiture, and the certificates representing such Parent Ordinary Shares shall accordingly be marked with appropriate legends. The Company shall take all actions that may be necessary to ensure that, from and after the Effective Time, Parent is entitled to exercise any such repurchase option or other right set forth in any such restricted share purchase agreement or other agreement in accordance with its terms.
(d) No fractional Parent Ordinary Shares shall be issued in connection with the Merger, and no certificates or scrip for any such fractional shares shall be issued. Any holder of Company Ordinary Shares who would otherwise be entitled to receive a fraction of a Parent Ordinary Share shall not receive such fraction, and shall instead receive such amount rounded to the nearest whole number of Parent Ordinary Shares.
(e) All Company Options outstanding immediately prior to the Effective Time under the Company Share Plans shall be treated in accordance with Section 5.6(a).
(f) All Company Warrants outstanding if any, immediately prior to the Effective Time shall be treated in accordance with Section 5.7(a).
(g) Each ordinary share, with no par value, of Merger Sub issued and outstanding immediately prior to the Effective Time shall automatically and without further action be converted into and exchanged for one validly issued, fully paid and nonassessable ordinary share, NIS 0.05 par value per share, of the Surviving Company. Each share certificate of Merger Sub evidencing ownership of any such shares shall, as of the Effective Time, evidence ownership of such ordinary shares of the Surviving Company.
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(h) If, between the time of calculating the Exchange Ratio and the Effective Time, the outstanding Company Ordinary Shares or Parent Ordinary Shares shall have been changed into, or exchanged for, a different number of shares or a different class, by reason of any share dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares or other like change, the Exchange Ratio shall be equitably adjusted to reflect such change to the extent necessary to provide the holders of Company Ordinary Shares, Parent Ordinary Shares, Company Options with the same economic effect as contemplated by this Agreement prior to such share dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares or other like change; provided, however, that nothing herein will be construed to permit the Company or Parent to take any action with respect to Company Ordinary Shares or Parent Ordinary Shares, respectively, that is prohibited or not expressly permitted by the terms of this Agreement.
1.6 Calculation of Parent Net Cash.
(a) For the purposes of this Agreement, the “Anticipated Closing Date” shall be the date, as agreed upon by Parent and the Company, to be the anticipated date for Closing. At least fifteen (15) calendar days prior to the Anticipated Closing Date, Parent shall deliver to the Company a schedule (the “Net Cash Schedule”) setting forth, in reasonable detail, Parent’s good faith, estimated calculation of the Parent Net Cash (the “Net Cash Calculation”) as of the Anticipated Closing Date, prepared and certified by Parent’s chief financial officer (or if there is no chief financial officer, the principal accounting officer). Section 1.6(a) of the Parent Disclosure Schedule is an illustrative Net Cash Schedule containing an illustrative Net Cash Calculation. Parent shall make available the work papers and back-up materials used or useful in preparing the Net Cash Schedule, as reasonably requested by the Company.
(b) Within five (5) calendar days after delivery of the Net Cash Schedule (the “Response Date”), the Company will have the right to dispute any part of the Net Cash Schedule by delivering a written notice to that effect to Parent (a “Dispute Notice”). Any Dispute Notice shall identify in reasonable detail any information available and known to the Company at such time related to the nature of any proposed revisions to the Net Cash Calculation.
(c) If on or prior to the Response Date, the Company: (i) notifies Parent in writing that it has no objections to the Net Cash Calculation or (ii) fails to deliver a Dispute Notice as provided in Section 1.6(b), then the Net Cash Calculation as set forth in the Net Cash Schedule shall be deemed to have been finally determined for purposes of this Agreement and to represent Parent Net Cash at the Anticipated Closing Date for purposes of this Agreement.
(d) If the Company delivers a Dispute Notice on or prior to the Response Date, then Representatives of both Parties shall promptly meet and attempt in good faith to resolve the disputed item(s) and negotiate an agreed-upon determination of Parent Net Cash, which agreed upon Parent Net Cash amount shall be deemed to have been finally determined for purposes of this Agreement and to represent the Parent Net Cash, at the Anticipated Closing Date for purposes of this Agreement.
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(e) (x) If Representatives of Parent and the Company are unable to negotiate an agreed-upon determination of Parent Net Cash at the Anticipated Closing Date pursuant to Section 1.6(d) within three (3) calendar days after delivery of the Dispute Notice (or such other period as Parent and the Company may mutually agree upon), then the Chief Executive Officer of Parent and the Chief Executive Officer of the Company shall promptly meet and agree on the amount of Parent Net Cash. (y) If the Chief Executive Officer of Parent and the Chief Executive Officer of the Company are unable to negotiate an agreed-upon determination of Parent Net Cash at the Anticipated Closing Date within three (3) calendar days after delivery of the Dispute Notice (or such other period as Parent and the Company may mutually agree upon), then Parent and the Company shall jointly approach (or either party may approach) one of the “big four” accounting firms (other than EY) (the “Accounting Firm”) to resolve any remaining disagreements as to the Net Cash Calculation within seven (7) calendar days; provided that the Accounting Firm shall be authorized and empowered by the parties solely as a neutral expert and not as an arbitrator to resolve accounting issues, and shall not be authorized to resolve any disputes related to the interpretation of this Agreement or any other legal disputes between the parties. Parent shall promptly deliver to the Accounting Firm the work papers and back-up materials used in preparing the Net Cash Schedule, and Parent and the Company shall use commercially reasonable efforts to cause the Accounting Firm to make its determination within seven (7) calendar days of approaching the Accounting Firm. The Company and Parent shall be afforded the opportunity to present to the Accounting Firm any material related to the unresolved disputes and to discuss the issues with the Accounting Firm; provided, however, that no such presentation or discussion shall occur without the presence of a Representative of each of the Company and Parent. The determination of the Accounting Firm shall be limited to the disagreements submitted to the Accounting Firm. The determination of the amount of Parent Net Cash made by the Accounting Firm shall be deemed to have been determined for purposes of this Agreement and to represent Parent Net Cash at the Anticipated Closing Date for purposes of this Agreement, and the Parties shall delay the Closing until the resolution of the matters described in this Section 1.6(e). The fees and expenses of the Accounting Firm shall be allocated between Parent and Company in the same proportion that the disputed amount of Parent Net Cash that was unsuccessfully disputed by such Party (as finally determined by the Accounting Firm) bears to the total disputed amount of Parent Net Cash (and, for the avoidance of doubt, the fees and expenses to be paid by Parent shall reduce Parent Net Cash). If this Section 1.6(e) applies as to the determination of Parent Net Cash, at the Anticipated Closing Date described in Section 1.6(a) upon resolution of the matter in accordance with this Section 1.6(e) (the “Resolution Number”), the Parties shall not be required to determine Parent Net Cash again, even though the Closing Date may occur later than the Anticipated Closing Date, except that either Party may request a re-determination of Parent Net Cash if the Closing Date occurs later than (10) ten Business Days after the Anticipated Closing Date.
1.7 Closing of the Company’s Transfer Books.
At the Effective Time: (a) all Company Ordinary Shares outstanding immediately prior to the Effective Time shall be treated in accordance with Section 1.5(a), and all holders of Company Ordinary Shares that were outstanding immediately prior to the Effective Time shall cease to have any rights as shareholders of the Company; and (b) the share transfer books of the Company shall be closed with respect to all Company Ordinary Shares outstanding immediately prior to the Effective Time. No further transfer of any such Company Ordinary Shares shall be made on such share transfer books after the Effective Time. If, after the Effective Time, a valid certificate previously representing any Company Ordinary Shares outstanding immediately prior to the Effective Time (a “Company Share Certificate”) is presented to the Parent, such Company Share Certificate shall be canceled and shall be exchanged as provided in Sections 1.5 and Section 1.8(b).
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1.8 Payment of Aggregate Merger Consideration.
(a) Payment Procedures with Respect to Company Ordinary Shares.
Prior to the Effective Time (but in no event later than five (5) Business Days prior to the anticipated Effective Time), the Parent shall select a bank or trust company in Israel that is a TASE member and reasonably acceptable to the Company, to act as the paying agent for the Merger (the “Paying Agent”) and, in connection therewith, shall enter into an agreement with the Paying Agent in form reasonably satisfactory to the Company and Parent (the “Paying Agent Agreement”). No later than the Effective Time, the Parent shall deliver to the Transfer Agent an irrevocable letter instructions, instructing the Transfer Agent to deposit, via The Depository Trust Company Deposit or Withdrawal at Custodian system (“DWAC”), with the account of the Paying Agent, in trust for the benefit of the Persons who were holders of Company Ordinary Shares (excluding Company Certified Shares), that were converted into the right to receive the Merger Consideration, such number of whole Parent Ordinary Shares and, if applicable, Parent Pre-Funded Warrants, representing the Merger Consideration to which the holders thereof are entitled to receive pursuant to Section 1.5(a). Immediately following the execution of this Agreement and prior to the Effective Time, the Parties will jointly discuss with the TASE all procedures relating to the transfer of the Company Ordinary Shares to the Parent as of the Effective Time and the delivery of the relevant portion of the Merger Consideration to the holders of Company Ordinary Shares, including the delivery of any information required by the Paying Agent.
(b) Payment Procedures with Respect to Company Certified Shares.
At the Effective Time, the Company will deliver to Parent a true, complete and accurate listing of all record holders of Company Certified Shares at the Effective Time, including the number and class of Company Certified Shares held by such record holder, and the number of Parent Ordinary Shares such holder is entitled to receive pursuant to Section 1.5, in the form attached hereto as Exhibit E (the “Company Allocation Schedule”). Promptly after Parent’s receipt of the Company Allocation Schedule (and in no event later than five (5) Business Days after the date of such receipt), the Parties shall cause to be mailed to the record holders of Company Certified Shares that were converted into the right to receive the Merger Consideration: (A) a letter of transmittal in such form as the Company and Parent may reasonably agree (a “Letter of Transmittal”), which shall specify that delivery shall be effected, and risk of loss and title to such Company Ordinary Shares shall pass, only upon delivery of the Company Share Certificates (or affidavits of loss in lieu thereof as provided below) to the Parent; and (B) instructions for use in effecting the surrender of the Company Share Certificates into the right to receive the Merger Consideration payable in respect thereof pursuant to the Company Allocation Schedule. Upon, surrender of Company Share Certificates (or affidavit of loss in lieu thereof as provided below) for cancellation to the Parent, the Parent shall deliver to the Transfer Agent an irrevocable letter instructions, instructing the Transfer Agent to deposit, via DWAC, with the account of the record holders of Company Certified Shares, that were converted into the right to receive the Merger Consideration, such number of whole Parent Ordinary Shares representing the Merger Consideration to which the holders thereof are entitled to receive pursuant to Section 1.5(a). Until surrendered as contemplated by this Section1.8(b), each Company Share Certificate shall be deemed, from and after the Effective Time, to represent only the right to receive book-entry Parent Ordinary Shares representing the Merger Consideration. If any Company Share Certificate shall have been lost, stolen or destroyed, Parent may, in its discretion and as a condition precedent to the delivery of any Parent Ordinary Shares, require the owner of such lost, stolen or destroyed Company Share Certificate to provide an applicable affidavit with respect to such Company Share Certificate and post a bond (in reasonable amount), as indemnity against any claim suffered by Parent with respect to such lost, stolen or destroyed Company Share Certificate as Parent may reasonably request. In the event of a transfer of ownership of a Company Share Certificate that is not registered in the transfer records of the Company, payment of the Merger Consideration may be made to a Person other than the Person in whose name such Company Share Certificate so surrendered is registered if such Company Share Certificate shall be properly endorsed or otherwise be in proper form for transfer and the Person requesting such payment shall pay any transfer or other Taxes required by reason of the transfer or establish to the reasonable satisfaction of Parent that such Taxes have been paid or are not applicable.
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(c) The Merger Consideration and any dividends or other distributions shall be deemed to have been in full satisfaction of all rights pertaining to Company Ordinary Shares. Notwithstanding the above, any Merger Consideration payable in respect of Company Ordinary Shares subject to the Withholding Tax Ruling or the 104H Ruling shall be transferred by the Paying Agent on the Closing Date to the Withholding Agent or the 104H Trustee, respectively, to the extent required by the Withholding Tax Ruling or the 104H Ruling for the benefit of the beneficial owners thereof, and shall be held and released (or otherwise treated) by said trustee to the beneficial holders of such Company Ordinary Shares in accordance with the requirements of the Withholding Tax Ruling, the 104H Ruling and the Ordinance.
(d) No party to this Agreement shall be liable to any holder of Company Ordinary Shares or to any other Person with respect to any Parent Ordinary Shares (or dividends or distributions with respect thereto) or for any cash amounts delivered to any public official pursuant to any applicable abandoned property Law, escheat Law or similar Law.
1.9 Further Action.
If, at any time after the Effective Time, any further action is determined by the Surviving Company to be necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Company with full right, title and possession of and to all rights and property of the Company, then the officers and directors of the Surviving Company shall be fully authorized, and shall use their and its commercially reasonable efforts (in the name of the Company, in the name of Merger Sub, in the name of the Surviving Company and otherwise) to take such action.
1.10 Withholding; Tax Rulings.
(a) Notwithstanding anything to the contrary hereunder, Parent, the Surviving Company, the 102 Trustee, the Transfer Agent, the Withholding Agent, the 104H Trustee, the Paying Agent, the Hevra Le’Rishumim, and the TASE members and any of their respective agents (each, a “Payor”) shall be entitled to deduct and withhold from any payment or consideration made pursuant to this Agreement (including the Merger Consideration) such amounts as may be required to be deducted and withheld with respect to the making of such payment under the Code, the Ordinance, or under any provision of applicable U.S. federal, state, local, Israeli, or other Tax Law, including the Withholding Tax Ruling and the 104H Ruling.
(b) The parties herby acknowledge that they and the Withholding Agent shall act in accordance with Income Tax Circular 19/2018 (Transaction for Sale of Rights in a Corporation that includes consideration that will be transferred to the Seller at Future Dates) (the “Circular”) and the Withholding Agent shall provide the Company, prior to the Closing Date, with an undertaking as required under Section 6.2.4.3(c) of the Circular.
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(c) Notwithstanding the provisions of Section1.10(a) above, with respect to withholding of Israeli Tax, subject to the provisions of the Withholding Tax Ruling or the 104H Ruling, as applicable, no tax shall be deducted or withheld from any payment pursuant to this Agreement, except as set forth in the Withholding Tax Ruling and the 104H Ruling, if obtained. The Merger Consideration payable or otherwise deliverable hereunder to any holder of Company Ordinary Shares (each, a “Payee”) shall (notwithstanding Section 1.10(a) above) be paid or delivered to, and retained by, the respective Payor for the benefit of such Payee until the earlier of: (x) (A) with respect to a Payee which holds 5% or more of the Company share capital on the date which is ten (10) days prior to the Closing Date, unless a different date for such calculations is specified by the ITA, in which case such date shall be as specified by the ITA (a “5% Payee”), and the 104H Ruling has been obtained, the date on which the 104H Ruling has been obtained or (B) if such Payee is a Less Than 5% Payee and the Withholding Tax Ruling has been obtained, the date on which the Withholding Tax Ruling has been obtained, or (C) with respect to a Payee that is not included in the application for the Withholding Tax Ruling nor the 104H ruling, the date on which such Payee delivers to the Withholding Agent a Valid Tax Certificate, and (y) the date that is 180 days following the Closing Date, as may be further extended (with respect to all or some of the Payees) by mutual agreement of the Company, Parent and the Withholding Agent (the “Withholding Drop Date”), during which time (unless a request is submitted by the Payee to Payor to release its portion of the consideration prior to the Withholding Drop Date) no Payor shall withhold any Israeli Tax from such Merger Consideration pursuant to this Agreement to such holder, except as provided below, and if during which time such recipient provides the Payor with a Valid Tax Certificate issued by the ITA regarding the withholding (or exemption from withholding) of Israeli Tax from the consideration payable in respect thereof in accordance with this Agreement, or other treatment with respect to Israeli Tax, at least three (3) Business Days prior to the Withholding Drop Date, then the deduction and withholding of any amounts under the Ordinance or any other provision of Israeli Law or requirement, if any, from the Merger Consideration payable to such holder of record of Company Ordinary Shares shall be made in accordance with the provisions of such Valid Tax Certificate, subject to any deduction and withholding as may be required to be deducted and withheld under any applicable Law. If any holder of record of Company Ordinary Shares (A) does not provide the Payor with a Valid Tax Certificate no later than three (3) Business Days prior to the Withholding Drop Date, or (B) submits a written request to the Payor to release his or her portion of the Merger Consideration prior to the Withholding Drop Date and fails to submit a Valid Tax Certificate at or before such time, then the amount to be withheld from the payment to such holder shall be calculated based on the applicable withholding rate on the actual payment date in accordance with applicable Law as determined by the Parent or its Israeli advisors at their reasonable discretion, and such amount will be calculated in NIS based on the USD-NIS exchange rate known on the date the payment is actually made to such Payee and shall be delivered to the ITA by the Payor, and the Payor shall deliver to such holder the balance of the portion of the Merger Consideration due to such holder that is not so withheld (if any).
(d) To the extent that amounts are so withheld pursuant to this Section 1.10, they shall be paid over to the appropriate Governmental Body prior to the last day on which such payment is required to be paid to such Governmental Body, and such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.
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(e) For the avoidance of doubt, to the extent that the Payor is obliged to withhold Israeli Taxes at the rate prescribed under the Ordinance and/or the Withholding Tax Ruling and/or 104H Ruling (the “Withheld Amounts”), each Person in respect of which such withholding is required to be made shall provide the Payor a cash payment equal to the Withheld Amounts within seven (7) Business Days from receipt of a request from the Payor to make such payment, and in any event prior to the release of the Merger Consideration deliverable to such Person. In the event that such Person fails to provide the Payor with the Withheld Amounts within such timeframe, the Payor will be authorized to sell on the open market, subject to any lock-up or transfer restrictions applicable at such time to the consideration or a portion thereof, any number of Parent Ordinary Shares required to cover any amount required to be deducted or withheld under this Section 1.10 and such amounts shall be treated for all purposes of this Agreement as having been delivered and paid to such Payee. Notwithstanding anything else to the contrary in this Agreement, and unless instructed otherwise by the ITA in writing, for Israeli withholding Tax purposes, the value of the consideration shall be determined based on the closing price of a Parent Ordinary Share on the Closing Date. Any currency conversion commissions will be borne by the applicable payment recipient and deducted from payments to be made to such payment recipient.
(f) Notwithstanding anything to the contrary herein, any payments made to holders of any Company Options, if any, will be subject to deduction or withholding of Israeli Tax under the Ordinance on the sixteenth (16th) day of the calendar month following the month during which the Closing Date occurs.
(g) Without derogating from the foregoing, as soon as reasonably practicable, but in no event more than five (5) Business Days after the date hereof, the Company, in full coordination with Parent and its Israeli counsel, will cause its Israeli counsel, advisors or accountants to prepare and file with the ITA an application for a Withholding Tax Ruling and 104H Ruling.
(h) Without limiting the generality of this Section 1.10, each of the Company and Parent shall cause their respective Israeli counsel, advisors and accountants to coordinate all material activities and to cooperate with each other with respect to the preparation and filing of such applications for rulings and in the preparation of any written or oral submissions that may be necessary, proper or advisable to obtain the Withholding Tax Ruling and 104H Ruling. In any event, the final text of the Withholding Tax Ruling and the 104H Ruling shall be subject to the prior written confirmation of Parent, which consent shall not be unreasonably withheld, conditioned or delayed. The Company shall keep Parent informed, on a prompt basis (and, in any event, within two Business Days) of its receipt of any notice or information in connection with any of the above rulings or approvals.
(i) Each party hereto is relying solely on the advice of its own Tax advisors with respect to the Tax consequences of the Merger.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
References in this Section 2 to the “Company” shall mean the Company and each of its Subsidiaries unless the nature of the context provides otherwise.
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Subject to Section 10.13(h), except: (i) as set forth in the disclosure schedule delivered by the Company to Parent (the “Company Disclosure Schedule”) or (ii) as disclosed in the Company TASE Documents filed with the ISA or the TASE prior to the date hereof and publicly available (but: (x) without giving effect to any amendment thereof filed with, or furnished to the ISA or the TASE on or after the date hereof and (y) excluding any disclosures contained under the heading “Risk Factors” and any disclosure of risks included in any “forward-looking statements” disclaimer or in any other section to the extent they are forward-looking statements or cautionary, predictive or forward-looking in nature), the Company represents and warrants to Parent and Merger Sub as follows:
2.1 Due Organization; Subsidiaries.
(a) The Company is a public company, listed and traded on TASE, duly organized and validly existing under the Laws of the State of Israel, is not a “breaching company” under the Companies Law, and has all necessary corporate power and authority: (i) to conduct its business in the manner in which its business is currently being conducted; (ii) to own or lease and use its property and assets in the manner in which its property and assets are currently owned or leased and used; and (iii) to perform its obligations under all Contracts by which it is bound, except where the failure to have such power or authority would not reasonably be expected to prevent or materially delay the ability of the Company to consummate the Contemplated Transactions.
(b) The Company is duly licensed and qualified to do business and is in good standing (to the extent applicable in such jurisdiction), under the Laws of all jurisdictions where the nature of its business requires such licensing or qualification other than in jurisdictions where the failure to be so qualified individually or in the aggregate would not be reasonably expected to have a Company Material Adverse Effect.
(c) The Company has no Subsidiaries except for the Entities identified in Section 2.1(c) of the Company Disclosure Schedule; and neither the Company nor any of the Entities identified in Section 2.1(c) of the Company Disclosure Schedule owns any share capital of, or any equity, ownership or profit sharing interest of any nature in, or controls directly or indirectly, any other Entity other than the Entities identified in Section 2.1(c) of the Company Disclosure Schedule. Each of the Company’s Subsidiaries is a corporation or other legal entity duly organized, validly existing and, if applicable, in good standing under the Laws of the jurisdiction of its organization and has all necessary corporate or other power and authority to conduct its business in the manner in which its business is currently being conducted and to own or lease and use its property and assets in the manner in which its property and assets are currently owned or leased and used, except where the failure to have such power or authority would not be reasonably expected to have a Company Material Adverse Effect.
(d) Except as set forth in Section 2.1(d) of the Company Disclosure Schedule, the Company is not and since March 24, 2021 has not been, directly or indirectly, a party to, member of or participant in any partnership, joint venture or similar business entity. The Company has not agreed or is obligated to make or is bound by any Contract under which it may become obligated to make, any future investment in or capital contribution to any other Entity. The Company is not and has never been a general partner of or has otherwise been liable for any of the debts or other obligations of, any general partnership, limited partnership or other Entity.
(e) The Company is not subject to any delisting proceedings by TASE, nor does the Company foresee any reason for delisting proceedings to commence following the Effective Date contemplated hereby, nor is the Company subject to any enforcement action by the ISA, or equivalent enforcement entities, nor does the Company foresee any reason for the commencement of enforcement actions against the Company, or its Affiliates, following the Effective Date.
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2.2 Organizational Documents.
The Company has made available to Parent accurate and complete copies of the Organizational Documents of the Company in effect as of the date of this Agreement. The Company is not in material breach or violation of its Organizational Documents.
2.3 Authority; Binding Nature of Agreement.
The Company has all necessary corporate power and authority to enter into and to perform its obligations under this Agreement and, subject to receipt of the Required Company Approval, and the filing and recordation of appropriate merger documents as required by the Companies Law, to consummate the Contemplated Transactions. The Company Board (at meetings duly called and held) has: (i) determined that the Contemplated Transactions are fair to, advisable and in the best interests of the Company and its shareholders; (ii) authorized, approved and declared advisable this Agreement and the Contemplated Transactions in accordance with the requirements of the Companies Law; and (iii) determined to recommend, upon the terms and subject to the conditions set forth in this Agreement, that the shareholders of the Company vote to approve this Agreement and the Contemplated Transactions. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to the Enforceability Exceptions.
2.4 Vote Required.
The Section 350 Vote (the “Required Company Approval”) is the only vote of the holders of any class or series of Company share capital, creditors or holders of any notes or bonds, necessary to adopt and approve this Agreement and to approve the Contemplated Transactions. Unless otherwise required by the Applicable Court and assuming the fulfilment of Section 6.7 below, no approval or vote of the Bondholders is necessary to adopt and approve this Agreement and to consummate the Contemplated Transactions.
2.5 Non-Contravention; Consents.
Subject to obtaining the Required Company Approval, the filings with the TASE, the ISA and the Companies Registrar of all notices or filings required under the Companies Law or the Israeli Securities Law, including with respect to the consummation of the Merger and the issuance of the Certificate of Merger by the Companies Registrar or any filings with the Applicable Court, neither: (i) the execution, delivery or performance of this Agreement by the Company, nor (ii) the consummation of the Contemplated Transactions, will directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of any of the provisions of the Company’s Organizational Documents;
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(b) contravene, conflict with or result in a violation of, or give any Governmental Body the right to challenge the Contemplated Transactions or to exercise any remedy or obtain any relief under, any Law or any order, writ, injunction, judgment or decree to which the Company, or any of the assets owned or used by the Company, is subject, except as would not reasonably be expected to be material to the Company or its business;
(c) contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by the Company, except as would not reasonably be expected to be material to the Company or its business;
(d) subject to obtaining the requisite approvals and consents in respect of the Contracts set forth in Section 2.5(d) of the Company Disclosure Schedule, contravene, conflict with or result in a violation or breach of, or result in a default under, any provision of any Company Material Contract, or give any Person the right to: (i) declare a default or exercise any remedy under any Company Material Contract; (ii) any material payment, rebate, chargeback, penalty or change in delivery schedule under any Company Material Contract; (iii) accelerate the maturity or performance of any Company Material Contract; or (iv) cancel, terminate or modify any term of any Company Material Contract, except in the case of any non-material breach, default, penalty or modification; or
(e) result in the imposition or creation of any Encumbrance upon or with respect to any asset owned or used by the Company (except for Permitted Encumbrances).
Except for: (i) the filings with the Companies Registrar and all such other notices or filings with respect to the consummation of the Merger and the issuance of the Certificate of Merger by the Companies Registrar, (ii) or any filings with the Applicable Court and (iii) such consents, waivers, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable securities Laws, the Company is not and will not be required to make any filing with or give any notice to, or to obtain any Consent from, any Governmental Body in connection with (x) the execution, delivery or performance of this Agreement, or (y) the consummation of the Contemplated Transactions, which if individually or in the aggregate were not given or obtained, would reasonably be expected to prevent or materially delay the ability of the Company to consummate the Contemplated Transactions.
2.6 Capitalization.
(a) The authorized share capital of the Company is 400,000,00 Company Ordinary Shares, of which 105,643,744 Company Ordinary Shares have been issued and are outstanding as of the close of business on the Business Day immediately preceding the date of this Agreement. Except as set forth in Section 2.6(a) of the Company Disclosure Schedule, the Company does not hold any of its share capital in its treasury.
(b) All of the outstanding Company Ordinary Shares have been duly authorized and validly issued, and are fully paid and nonassessable. None of the outstanding Company Ordinary Shares is entitled or subject to any preemptive right, right of participation, right of maintenance or any similar right and none of the outstanding Company Ordinary Shares is subject to any right of first refusal in favor of Company. Except as contemplated herein, there is no Company Contract relating to the voting or registration of, or restricting any Person from purchasing, selling, pledging or otherwise disposing of (or granting any option or similar right with respect to), any Company Ordinary Shares. Company is not under any obligation, nor is it bound by any Company Contract pursuant to which it may become obligated, to repurchase, redeem or otherwise acquire any outstanding Company Ordinary Shares or other securities.
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(c) Except for the Company Share Plans, the Company does not have any share option plan or any other plan, program, agreement or arrangement providing for any equity-based compensation for any Person. As of the date of this Agreement, Company has reserved 14,611,596 Company Ordinary Shares for issuance under the Company Share Plans, of which 70,123,612 options are issued and are currently outstanding, with a weighted average exercise price of NIS 1.77 (collectively, the “Company Options”), and 0 shares remain available for future issuance pursuant to the Company Share Plans. Section (c) of the Company Disclosure Schedule sets forth the following information with respect to each Company Option outstanding as of the date of this Agreement: (i) the name of the optionee; (ii) the number of Company Ordinary Shares subject to such Company Option at the time of grant; (iii) the number of Company Ordinary Shares subject to such Company Option as of the date of this Agreement; (iv) the exercise price of such Company Option; (v) the date on which such Company Option was granted; (vi) the applicable vesting schedule, including the number of vested and unvested shares as of the date of this Agreement and any acceleration provisions; (vii) the date on which such Company Option expires; and (viii) (A) the Tax route under which such Company Option was granted and is currently intended to qualify (pursuant to Section 102 or Section 3(i) of the Ordinance), and (B) for Company 102 Options, the date of the applicable corporate approval and the date of deposit of the respective award agreement with the 102 Trustee. The Company has made available to Parent an accurate and complete copy of the Company Share Plans and all share option agreements evidencing outstanding options granted thereunder. Except as set forth in Section 1.1(c) of the Company Disclosure Schedule, no vesting of Company Options will accelerate in connection with the closing of the Contemplated Transactions.
(d) All Company Options granted under Section 102 of the Ordinance were granted under an employee option plan deemed approved, or not rejected within 30 days from filing, by the ITA under the capital gains route of Section 102 of the Ordinance and comply in all respects with the requirements of Section 102 of the Ordinance and qualify for treatment under the capital gain route thereunder, and were duly and timely deposited in accordance with the provisions of Section 102 of the Ordinance with the 102 Trustee and no action has been threatened against the Company (nor is the Company aware of a reasonable basis for an action against the Company) with respect to the failure of the Company to comply with such requirements.
(e) No unexercised Company Options shall be outstanding immediately prior to the Effective Time.
(f) Section 1.1(f) of the Company Disclosure Schedule lists, as of the date of this Agreement: (i) each holder of issued and outstanding Company Warrants, (ii) the number and type of shares subject to each Company Warrant, (iii) the exercise price of each Company Warrant and (iv) the termination date of each Company Warrant.
(g) Except for the Company Warrants, the Company Share Plans, including the Company Options, and as otherwise set forth on Section 1.1(g) of the Company Disclosure Schedule, there is no: (i) outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire shares or other securities of Company or any of its Subsidiaries; (ii) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any shares or other securities of Company or any of its Subsidiaries; or (iii) condition or circumstance that is reasonably likely to give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any shares or other securities of Company or any of its Subsidiaries. There are no outstanding or authorized share appreciation, phantom shares, profit participation or other similar rights with respect to Company or any of its Subsidiaries.
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(h) All outstanding Company Ordinary Shares, Company Options, Company Warrants and other securities of Company have been issued and granted in material compliance with: (i) all applicable securities Laws and other applicable Law, and (ii) all requirements set forth in applicable Contracts.
(i) Except as set forth in Section 2.6(h) of the Company Disclosure Schedule, all of the issued and outstanding Company Ordinary Shares are registered and held through the Hevra Le’Rishumim.
2.7 TASE Filings, Financial Statements.
(a) The Company has delivered or made available to the Parent accurate and complete copies of all prospectuses, proxy statements and other statements, reports, schedules, forms and other documents filed by the Company with the ISA or the TASE since March 24, 2021 (the “Company TASE Documents”), other than such documents that can be obtained on the ISA’s or the TASE’s websites. All material statements, reports, schedules, forms and other documents required to have been filed by the Company or its officers with the ISA or the TASE have been filed on a timely basis. As of the time it was filed with the ISA or the TASE (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), each of the Company TASE Documents complied in all material respects with the applicable requirements of the Israeli Securities Law and, as of the time they were filed, none of the Company TASE Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company has made available to the Parent true and complete copies of all, but transmittal, correspondences, between the ISA and the Company and all material correspondences between the TASE and the Company, since March 24, 2021, including all ISA or TASE comment letters and responses to such comment letters by or on behalf of the Company other than such documents that can be obtained on the ISA’s or the TASE’s website. Except as set forth in Section 2.7(a) of the Company Disclosure Schedule, as of the date of this Agreement, there are no outstanding or unresolved comments in comment letters received from the ISA or the TASE with respect to the Company TASE Documents. To the Knowledge of the Company, none of the Company TASE Documents is the subject of ongoing ISA or TASE review and there are no inquiries or investigations by the ISA or TASE or internal investigations pending or threatened, including with regard to any accounting practices of the Company.
(b) The financial statements (including any related notes) contained or incorporated by reference in the Company TASE Documents: (i) complied as to form in all material respects with the published rules and regulations of the Israeli Securities Law; (ii) were prepared in accordance with IFRS (except as may be indicated in the notes to such financial statements, and except that the unaudited financial statements may not contain footnotes and are subject to normal and recurring year-end adjustments) applied on a consistent basis unless otherwise noted therein throughout the periods indicated; and (iii) fairly present, in all material respects, the financial position of the Company as of the respective dates thereof and the results of operations and cash flows of the Company for the periods covered thereby. Other than as expressly disclosed in the Company TASE Documents filed prior to the date hereof, there has been no material change in Company’s accounting methods or principles that would be required to be disclosed in Parent’s financial statements in accordance with IFRS.
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(c) The Company is in compliance in all material respects with the applicable current listing and governance rules and regulations of the TASE. Except as set forth in Section 2.7(c) of the Company Disclosure Schedule and the Company TASE Documents, from March 24, 2021 through the date hereof, Company has not received any correspondence from TASE or the staff thereof relating to the delisting or maintenance of listing of the Company Ordinary Shares on the TASE.
(d) The Company maintains disclosure controls and procedures. Such disclosure controls and procedures are designed to provide reasonable assurance that all material information concerning the Company (including its Subsidiaries) required to be disclosed by the Company in the Company TASE Documents is made known on a timely basis to the individuals responsible for the preparation of the Company TASE Documents.
(e) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; and (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with IFRS.
(f) During the twelve (12) month period prior to the date hereof, to the Company’s Knowledge, the Company’s principal executive officer and its principal financial officer have disclosed to the Company’s auditors and the audit committee of the Company Board (i) those significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information of the Company and its Subsidiaries on a consolidated basis that are known to them and (ii) any fraud known by such individuals, whether or not material, that involves management or other employees who have a significant role in the Company’s and in the Company Subsidiaries’ internal controls.
2.8 Absence of Changes.
Except as set forth on Section 2.8 of the Company Disclosure Schedule, between the date of the Company Balance Sheet, together with the statements of income, shareholders’ equity and cash flows of the Company for the period reflected in the Company Balance Sheet (collectively, the “Company Financials”) and the date of this Agreement, the Company has conducted its business only in the Ordinary Course of Business (except for the execution and performance of this Agreement and the discussions, negotiations and transactions related thereto) and there has not been any (a) Company Material Adverse Effect or (b) action, event or occurrence that would have required the consent of Parent pursuant to Section 4.2(b) had such action, event or occurrence taken place after the execution and delivery of this Agreement.
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2.9 Absence of Undisclosed Liabilities.
As of the date hereof, the Company has no liability, indebtedness, obligation or expense of any kind and is not subject to any claim, whether accrued, absolute, contingent, matured or unmatured (whether or not required to be reflected in the financial statements in accordance with IFRS) or any involvement in any special purpose vehicles (each a “Liability”), individually or in the aggregate, of a type required to be recorded or reflected on a balance sheet or disclosed in the footnotes thereto under IFRS except for: (a) Liabilities disclosed, reflected or reserved against in the Company Balance Sheet; (b) Liabilities that have been incurred by the Company since the date of the Company Balance Sheet in the Ordinary Course of Business; (c) Liabilities for performance of obligations of the Company under any Contract to which it is party; (d) Liabilities incurred in connection with the Contemplated Transactions; (e) Liabilities which would not, individually or in the aggregate, reasonably be expected to be material to the Company; and (f) Liabilities described in Section 2.9 of the Company Disclosure Schedule.
2.10 Title to Assets.
The Company owns, and has good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, all tangible properties or tangible assets and equipment used or held for use in its business or operations or purported to be owned by it, including: (a) all tangible assets reflected on the Company Balance Sheet and (b) all other tangible assets reflected in the books and records of the Company as being owned by the Company. All of such assets are owned or, in the case of leased assets, leased by the Company free and clear of any Encumbrances, other than Permitted Encumbrances.
2.11 Real Property; Leasehold.
Except as set forth in Section 2.11 of the Company Disclosure Schedule, the Company does not own and since March 24, 2021 has not owned any real property. The Company has made available to Parent: (i) an accurate and complete list of all real properties with respect to which the Company directly or indirectly holds a valid leasehold interest as well as any other real estate that is in the possession of or leased by the Company and (ii) copies of all leases under which any such real property is possessed (the “Company Real Estate Leases”), each of which is in full force and effect, with no existing material default thereunder. The Company’s use and operation of each such leased property conforms to all applicable Laws in all material respects, and the Company has exclusive possession of each such leased property and has not granted any occupancy rights to tenants or licensees with respect to such leased property. In addition, each such leased property is free and clear of all Encumbrances other than Permitted Encumbrances.
2.12 Intellectual Property.
(a) Except for the trademarks set forth on Section 2.12(a) of the Company Disclosure Schedule, the Company does not own, license or otherwise have any right, title or interest in any material Intellectual Property Rights.
(b) To the Knowledge of the Company the operation of the businesses of the Company as currently conducted does not infringe any valid and enforceable Registered IP or misappropriate or otherwise violate any Intellectual Property Right owned by any other Person. As of the date of this Agreement, no Legal Proceeding is pending (or, to the Knowledge of the Company, is threatened in writing) against the Company alleging that the operation of the businesses of the Company infringes or constitutes the misappropriation or other violation of any Intellectual Property Rights of another Person. Since March 24, 2021, the Company has not received any written notice or other written communication alleging that the operation of the business of the Company infringes or constitutes the misappropriation or other violation of any Intellectual Property Right of another Person.
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(c) To the Knowledge of the Company, the Company and the operation of the Company’s business are in substantial compliance with all Laws pertaining to data privacy and data security of any personally identifiable information and sensitive business information (collectively, “Sensitive Data”) except to the extent that such noncompliance has not and would not reasonably be expected to have a Company Material Adverse Effect. To the Knowledge of the Company, since March 24, 2021, there have been: (i) no material losses or thefts of data or security breaches relating to Sensitive Data used in the business of the Company, (ii) no violations of any security policy of the Company regarding any such Sensitive Data, (iii) no unauthorized access or unauthorized use of any Sensitive Data used in the business of the Company or (iv) no unintended or improper disclosure of any personally identifiable information in the possession, custody or control of the Company, or a contractor or agent acting on behalf of the Company, in each case of (i) through (iv), except as would not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect.
2.13 Agreements, Contracts and Commitments.
(a) Section 2.13(a) of the Company Disclosure Schedule lists the following Company Contracts in effect as of the date of this Agreement other than any Company Benefit Plans (each, a “Company Material Contract” and collectively, the “Company Material Contracts”):
(i) each Company Contract relating to any agreement of indemnification or guaranty not entered into in the Ordinary Course of Business;
(ii) each Company Contract containing: (A) any covenant limiting the freedom of the Company or the Surviving Company to engage in any line of business or compete with any Person, (B) any most-favored pricing arrangement, (C) any exclusivity provision, or (D) any non-solicitation provision;
(iii) each Company Contract relating to capital expenditures and requiring payments after the date of this Agreement in excess of $200,000 pursuant to its express terms and not cancelable without penalty;
(iv) each Company Contract relating to the disposition or acquisition of material assets or any ownership interest in any entity;
(v) each Company Contract relating to any mortgages, indentures, loans, notes or credit agreements, security agreements or other agreements or instruments relating to the borrowing of money or extension of credit or creating any material Encumbrances with respect to any assets of the Company or any loans or debt obligations with officers or directors of the Company;
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(vi) each Company Contract requiring payment by or to the Company after the date of this Agreement in excess of $200,000 pursuant to its express terms relating to: (A) any distribution agreement (identifying any that contain exclusivity provisions); (B) any dealer, distributor, joint marketing, alliance, joint venture, cooperation or other agreement currently in force under which the Company has continuing obligations to market any product, technology or service; or (C) any Contract to license any third party to manufacture or produce any product, service or technology of the Company or any Contract to sell, distribute or commercialize any products or service of the Company, in each case, except for Company Contracts entered into in the Ordinary Course of Business;
(vii) each Company Contract with any Person, including any financial advisor, broker, finder, investment banker or other Person, providing advisory services to the Company in connection with the Contemplated Transactions;
(viii) each Company Real Estate Lease;
(ix) each Company Contract with any Governmental Body;
(x) each Company Contract containing any royalty, dividend or similar arrangement based on the revenues or profits of the Company; or
(xi) any other Company Contract that is not terminable at will (with no penalty or payment) by the Company, and (A) which involves payment or receipt by the Company after the date of this Agreement under any such agreement, contract or commitment of more than $200,000 in the aggregate, or obligations after the date of this Agreement in excess of $200,000 in the aggregate, or (B) that is material to the business or operations of the Company.
(b) The Company has delivered or made available to Parent accurate and complete copies of all Company Material Contracts, including all amendments thereto. Except as set forth in Section 2.13(b) of the Company Disclosure Schedule, there are no Company Material Contracts that are not in written form. The Company has not, nor to the Company’s Knowledge, as of the date of this Agreement has any other party to a Company Material Contract, breached, violated or defaulted under, or received notice that it breached, violated or defaulted under, any of the terms or conditions of any Company Material Contract in such manner as would permit any other party to cancel or terminate any such Company Material Contract, or would permit any other party to seek damages which would reasonably be expected to be material to the Company or its business. As to the Company, as of the date of this Agreement, each Company Material Contract is valid, binding, enforceable and in full force and effect, subject to the Enforceability Exceptions. No Person is renegotiating, or has a right pursuant to the terms of any Company Material Contract to change, any material amount paid or payable to the Company under any Company Material Contract or any other material term or provision of any Company Material Contract.
2.14 Compliance; Permits.
(a) The Company is in compliance in all material respects with all applicable U.S., Israeli and other Laws, including the rules and regulations of the Israeli Ministry of Transport and Road Safety, except for any noncompliance, either individually or in the aggregate, which would not be material to the Company. No investigation, claim, suit, proceeding, audit or other action by any Governmental Body is pending or, to the Knowledge of the Company, threatened against the Company. There is no agreement, judgment, injunction, order or decree binding upon the Company which: (i) has or would reasonably be expected to have the effect of prohibiting or materially impairing any business practice of the Company, any acquisition of material property by the Company or the conduct of business by the Company as currently conducted, (ii) is reasonably likely to have an adverse effect on the Company’s ability to comply with or perform any covenant or obligation under this Agreement, or (iii) is reasonably likely to have the effect of preventing, delaying, making illegal or otherwise interfering with the Contemplated Transactions.
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(b) The Company holds all required Governmental Authorizations necessary for the operation of the business of the Company as currently conducted (the “Company Permits”). Section 2.14(b) of the Company Disclosure Schedule identifies each Company Permit. The Company is in material compliance with the terms of the Company Permits. No Legal Proceeding is pending or, to the Knowledge of the Company, threatened, which seeks to revoke, limit, suspend, or materially modify any Company Permit. All of the Governmental Authorizations are valid and in full force and effect, except where the invalidity of such Governmental Authorizations or the failure of such Governmental Authorizations to be in full force and effect would not have a Company Material Adverse Effect; and the Company has not received any notice of proceedings relating to the revocation or modification of any such Governmental Authorizations which, singly or in the aggregate, would reasonably be expected to result in a Company Material Adverse Effect.
2.15 Legal Proceedings; Orders.
(a) As of the date of this Agreement, there is no pending Legal Proceeding and, to the Knowledge of the Company, no Person has threatened in writing to commence any Legal Proceeding: (i) that involves (A) the Company, (B) any Company Associate (in his or her capacity as such) or (C) any of the material assets owned or used by the Company; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, the Contemplated Transactions.
(b) Except as set forth in Section 2.15(b) of the Company Disclosure Schedule, since March 24, 2021, no Legal Proceeding has been pending against the Company that had or would reasonably be expected to have resulted in material liability to the Company.
(c) There is no order, writ, injunction, judgment or decree to which the Company, or any of the material assets owned or used by the Company, is subject. To the Knowledge of the Company, no officer of the Company is subject to any order, writ, injunction, judgment or decree that prohibits such officer or employee from engaging in or continuing any conduct, activity or practice relating to the business of the Company or to any material assets owned or used by the Company.
2.16 Tax Matters.
(a)
(i) Each Tax Return required to be filed with any Governmental Body by the Company has been filed when due (taking into account extensions in the ordinary course of business) in accordance with applicable Law, each of which is true, accurate and complete;
(ii) the Company has timely paid, collected or withheld, to the appropriate Governmental Body all Taxes due and payable;
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(iii) the Company has complied with all applicable Law relating to the payment and withholding of any Tax and has, within the time and in the manner prescribed by Law, withheld and paid over to the proper Governmental Body all amounts required to be so withheld and paid over;
(iv) the Company has established adequate accruals or reserves, in accordance with IFRS, for all Taxes for taxable periods beginning on or after the date of the most recent Company Financials;
(v) Except as set forth in Section 2.16(a)(v) of the Company Disclosure Schedule, there is no Legal Proceeding against or with respect to the Company in respect of any Tax or any Tax Return and there is no investigation against or with respect to the Company, pending or threatened or otherwise in respect of any Tax or any Tax Return. All deficiencies asserted or assessments made against the Company as a result of any examinations by any Governmental Body have been fully paid;
(vi) the Company has not consented or requested to extend the time, or is the recipient of any extension of time, in which any Tax may be assessed or collected by any Governmental Authority and the Company has not waived any statute of limitations;
(vii) no Governmental Authority in a jurisdiction where no Tax Return has been filed or no Tax has been paid has made or threatened to make a claim for the payment of any Tax or the filing of any Tax Return;
(viii) the Company is a Tax resident only in its jurisdiction of formation;
(ix) Except as otherwise provided in Section 2.16(a)(ix) of the Company Disclosure Schedule, no power of attorney granted by or with respect to the Company for Taxes is currently in force, no ruling with respect to Taxes has been requested by or on behalf of the Company; and no closing agreement pursuant to Section 7121 of the Code (or any predecessor provision) or any similar provision of any state, local or non-U.S. Law has been entered into or requested by or with respect to the Company;
(x) the Company has provided or made available to Parent prior to the date hereof true, correct and complete copies of all material Tax Returns, examination reports, and statements of deficiencies filed, assessed against, or agreed to by the Company with respect to Taxes and all material written correspondence with any Governmental Authority regarding Taxes;
(xi) Except as otherwise provided in Section 2.16(a)(xi) of the Company Disclosure Schedule, the Company is neither a controlled foreign corporation (as defined in Section 957 of the Code or any similar provision of any state, local or non-U.S. Law) nor a passive foreign investment company (as defined in Section 1297 of the Code). The Company does not own any interest in any controlled foreign corporation (as defined in Section 957 of the Code or any similar provision of any state, local or non-U.S. Law), or passive foreign investment company (as defined in Section 1297 of the Code) or other entity the income of which is or could be required to be included in the income of the Company;
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(xii) the Company is not and has never been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code;
(xiii) the Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for (A) any Tax period (or portion thereof), as a result of any deferred foreign income within the meaning of Section 965 of the Code, including, but not limited to, as the result of an election under Section 965(h) of the Code, or (B) any Tax period (or portion thereof) ending after the Closing Date, as a result of any (1) deferred intercompany gain or any excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding provision of state, local or non-U.S. Tax Law); (2) installment sale or other open transaction disposition made on or prior to the Closing Date; (3) prepaid amount, refund or credit received on or prior to the Closing Date; (4) change in accounting method for a taxable period ending on or prior to the Closing Date; (5) use of an improper method of accounting for a taxable period ending on or prior to the Closing Date; or (6) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or non-U.S. Tax Law) executed on or prior to the Closing Date;
(xiv) all material records which the Company is required to keep for Tax purposes or which would be needed to substantiate any claim made or position taken in relation to Taxes by the Company have been duly kept and are available for inspection at the premises of the Company;
(xv) the Company is in compliance in all respects with all terms and conditions of any Tax exemption, Tax holiday or other Tax reduction agreement or order of a Governmental Body;
(xvi) all of the Company’s property that is subject to property Tax has been properly listed and described on the property Tax rolls of the appropriate Tax jurisdiction and no portion of any the Company’s property constitutes omitted property for property Tax purposes;
(xvii) there are no Liens for Taxes on any of the assets of the Company other than for any Taxes not yet due and payable;
(xviii) Except as otherwise provided in Section 2.16(a)(xviii) of the Company Disclosure Schedule, the Company does not and has never participated or engaged in any transaction listed in Section 131(g) of the Ordinance and the Israeli Income Tax Regulations (Reportable Tax Planning), 5767-2006, promulgated thereunder; the Company does not and has never taken a tax position that is subject to reporting under Section 131E of the Ordinance; the Company has never obtained a legal or tax opinion that is subject to reporting under Section 131D of the Ordinance; and the Company does not and has never performed and was not part of any action or transaction that is classified as a “reportable opinion” under Section 67C of the Israeli VAT Law or a “reportable position” under Section 67D of the Israeli VAT Law;
(xix) the Company is duly registered for the purposes of Israeli value added tax and has complied in all respects with all requirements concerning VAT. The Company (i) has not made any exempt transactions (as defined in the Israeli Value Added Tax Law, 5736-1975) and there are no circumstances by reason of which there might not be an entitlement to full credit of all VAT chargeable or paid on inputs, supplies, and other transactions and imports made by it, (ii) has collected and remitted in a timely manner to the ITA all output VAT which it is required to collect and remit under any applicable Law and (iii) has not received a refund for input VAT for which it is not entitled under any applicable Law;
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(xx) each of the Company Share Plans that is intended to qualify as a capital gains route plan under Section 102 of the Ordinance has received a favorable determination or approval letter from, or is otherwise approved by or deemed approved by passage of time without objection by, the ITA. All Company 102 Options have been granted and issued, as applicable, in compliance with the applicable requirements of Section 102 and the written requirements and guidance of the ITA, including the filing of the necessary documents with the ITA, the appointment of an authorized trustee, the grant of Company 102 Options only following the lapse of the required 30 day period from the filing of each of the Company Share Plans that is intended to qualify as a capital gains route plan under Section 102 of the Ordinance with the ITA, the receipt of the required written consents from the option holders and the due deposit of such securities with the 102 Trustee pursuant to the terms of Section 102 of the Ordinance and the guidance published by the ITA on July 24, 2012, and clarification dated November 6, 2012;
(xxi) the Company is not and has never been a real property corporation (Igud Mekarke’in) within the meaning of this term under Section 1 of the Israeli Land Taxation Law (Appreciation and Acquisition), 5723-1963;
(xxii) Except as otherwise provided in Section 2.16(a)(xxii) of the Company Disclosure Schedule, neither the Company nor any holder of Company securities is subject to any restrictions or limitations pursuant to Part E2 of the Ordinance or pursuant to any Tax ruling made with reference to the provisions of Part E2;
(xxiii) no independent contractor was, or to the Knowledge of the Company will be, entitled to be considered to be an employee of the Company by any applicable Tax authority; and
(xxiv) the Company did not apply for any tax benefits under the Law for the Encouragement of Capital Investments, 5719-1959.
(b) Except as provided in Section 2.16(b), the Company is in compliance in all respects with all applicable transfer pricing laws and regulations, and the prices for any property or services provided by or to it are arm’s length prices for purposes of the applicable laws, including Section 85A to the Ordinance and the Income Tax Regulations (Determination of Market Terms) 2006 and including to the extent required, the execution and maintenance of contemporaneous documentation substantiating the transfer pricing practices and methodology of the Company.
(c) The Company does not have any (A) place of management, (B) branch, (C) office (or any other place of business), (D) operations or employees, (E) agent with binding authority, or (F) other activities, in each case that gives rise to a permanent establishment or taxable presence which has subjected it to any Tax obligation or to a requirement to file any Tax return in any country other than the country where the Company was organized.
(d) Except as otherwise provided in Section 2.16(d) of the Company Disclosure Schedule, the Company is not, nor at any time has it been, engaged in the conduct of a trade or business within the United States within the meaning of Section 864(b) or Section 882(a) of the Code, or considered to be so engaged under Section 882(d) or Section 897 of the Code or, if applicable, considered to have a U.S. permanent establishment as defined under any applicable or relevant bilateral income tax treaty or otherwise.
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(e) (i) The Company is not nor has it ever been, a party to any Tax Sharing Agreement pursuant to which it will have any obligation to make any payments for Taxes after the Closing Date, (ii) the Company is not and has never been a member of a group filing a consolidated, combined or unitary Tax Return, and (iii) the Company has no liability for the payment of any Tax imposed on any Person (other than the Company) as a transferee or successor.
(f) The Company has never taken a position that could give rise to substantial understatement of income tax within the meaning of Section 6662 of the Code (or any corresponding provision of state, local or non-U.S. Tax Law) or has ever been a beneficiary or otherwise participated in any “reportable transaction” as defined in Code Section 6707A(c)(1)) and Treasury Regulation Section 1.6011-4(b)(1).
(g) With the exception of Israeli VAT, the Company is not, nor is it required to be, registered as a taxable person for purpose of value added Taxes or any similar indirect Tax.
For purposes of this Section 2.16, each reference to the Company shall be deemed to include any Person that was liquidated into, merged with, or is otherwise a predecessor to, the Company.
2.17 Employee and Labor Matters; Benefit Plans.
(a) Section 2.17(a) of the Company Disclosure Schedule is a list of all material Company Benefit Plans, including, without limitation, each Company Benefit Plan that provides for change in control, stay or retention, deferred compensation, incentive compensation, pension and severance benefits. “Company Benefit Plan” means each pension, profit sharing, bonus, incentive, equity or equity-based, phantom equity, employment (other than at-will employment offer letters or employment agreement on the Company’s standard form as may be amended from time to time and other than individual Company Options or other compensatory equity award agreements made pursuant to the Company’s standard forms, in which case only representative standard forms of such agreements shall be scheduled) and fringe benefit plan, program, agreement (including collective bargaining agreement and extension order), policy or arrangement (whether written or unwritten, but excluding statutory benefits or benefits mentioned in the Company’s standard form of employment agreement) for the benefit of any current or former employee, director, officer or independent contractor of the Company or any of its Subsidiaries or under which the Company or any of its Subsidiaries has any actual or contingent liability.
(b) As applicable with respect to each material Company Benefit Plan, the Company has made available to Parent true and complete copies of each material Company Benefit Plan, including all amendments thereto, and in the case of an unwritten material Company Benefit Plan, a written description thereof, and all material correspondence to or from any Governmental Body with respect to each Company Benefit Plan.
(c) Each Company Benefit Plan has been established, maintained, operated and administered in compliance in all material respects with its terms and all applicable Laws. Each Company Benefit Plan required to be funded is fully funded, and with respect to Company Share Plans that are not required by applicable Law to be so fully funded, adequate reserves therefor have been established on the Company Financials (except for severance pay that is fully funded, and full Section 14 Arrangements apply to all of the Company’s employees). No material liability or obligation of the Company or any of its Affiliates exists with respect to any Company Benefit Plan that has not been disclosed in Section 2.17(c) of the Company Disclosure Schedule. The Company does not have, and except as set forth in Section 2.17(c) of the Company Disclosure Schedule has never had, any employees in the United States.
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(d) To the Knowledge of the Company, there are no pending audits or investigations by any Governmental Body involving any Company Benefit Plan, and no pending or, to the Knowledge of the Company, threatened claims (except for individual claims for benefits payable in the normal operation of the Company Benefit Plans), suits or proceedings involving any Company Benefit Plan in any case except as would not be reasonably expected to result in material liability to the Company. The Company does not have any Company Benefit Plan that is maintained in the United States.
(e) Neither the execution of, nor the performance of the Contemplated Transactions will either alone or in connection with any other event(s): (i) result in any material payment becoming due to any current or former employee, director, officer, or independent contractor of the Company, (ii) increase any material amount of compensation or benefits otherwise payable under any Company Benefit Plan, (iii) result in the acceleration of the time of payment, funding or vesting of any benefits under any Company Benefit Plan, (iv) require any material contribution or payment to fund any obligation under any Company Benefit Plan or (v) limit the right to merge, amend or terminate any Company Benefit Plan.
(f) Section 2.17(f) of the Company Disclosure Schedule sets forth the policy of the Company with respect to accrued vacation, accrued sick time and earned time off and the amount of such liabilities, including regarding bonuses to employees and independent contractors for the last two years, as of the date of this Agreement (in the case of accrued vacation, per employee for those who have more than 44 accrued days). The Company does not have and has not had a policy regarding the payment of bonuses.
(g) The Company is not a party to, is not bound by, and does not have a duty to bargain under, any collective bargaining agreement or other Contract with a labor union, labor organization, or similar Person representing any of its employees, and to the Knowledge of the Company, there is no labor union, labor organization, or similar Person representing or purporting to represent or seeking to represent any employees of the Company. There is not and has not been in the past three years, nor is there or has there been in the past three years any threat of, any strike, slowdown, work stoppage, lockout, union election petition, demand for recognition, or any similar activity or dispute, or, to the Knowledge of the Company, any union organizing activity, against the Company. No event has occurred, and no condition or circumstance exists, that might directly or indirectly be likely to give rise to or provide a basis for the commencement of any such strike, slowdown, work stoppage, lockout, union election petition, demand for recognition, any similar activity or dispute, or, to the Knowledge of the Company, any union organizing activity. The Company has paid all required payments, if any, that the Company has been requested to pay to any employers’ association or organization.
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(h) Section 2.17(h) of the Company Disclosure Schedule contains a list of all employees of the Company and its Subsidiaries along with the position, the monthly rate of salary of each such employee, whether such employee is full time or part time, is exempt or non-exempt from the Hours of Work and Rest Law, is on leave and if so, the type of leave and expected date of return, visa status (as applicable), date of hire, any incentive payment paid or payable in calendar year 2023 (and whether such incentive is cash or, if not, what other property is due), short-term or temporary basis, vacation entitlement and accrued vacation or paid time-off balance, car entitlement, sick leave entitlement and accrual (if any), and recuperation pay entitlement and accrual, pension entitlements and provident funds (including manager’s insurance, pension fund, education fund and health fund), their respective contribution rates for each component (e.g., severance component, pension savings and disability insurance) and the salary basis for such contributions, severance entitlements (including whether such employee, to the extent employed in the State of Israel, is subject to a Section 14 arrangement under the Severance Pay Law, 5723-1963 (the “Israeli Severance Pay Law” and “Section 14 Arrangement”), and, to the extent such employee is subject to such a Section 14 Arrangement, an indication of whether such arrangement (or other applicable pension arrangement) has been applied to such person from the commencement date of their employment and on the basis of their entire salary including other compensation (e.g., commission), main work location, notice period entitlement, and any other material compensation payable to such employee. Neither the Company nor its Subsidiaries is delinquent in payments to any employees for wages, salaries, commissions or bonuses for services performed as of the date hereof or amounts required by applicable Law to be reimbursed to such employees. The consummation of the Contemplated Transactions will not give rise to any liability of the Company or any of its Subsidiaries for payments related to severance, termination, bonus, accrued vacation or personal time, accrued days of sick pay or any similar payment. No current employee of the Company or any of its Affiliates is or was, during the period of such employment or other service, based in or resident of the United States.
(i) Section 2.17(i) of the Company Disclosure Schedule contains a list of each individual who currently renders services to Company as an independent contractor or consultant (collectively, the “Company Contractors”) and the Company has made available to Parent true and complete copies of each Company Contractors agreement and the last 3 months invoices. The Company has accurately classified each such Company Contractor or former Company Contractor as an independent contractor under all applicable Laws (including for purposes of Taxes and Tax reporting and under the Company Benefit Plans). Except as set forth in Section 2.17(i) of the Company Disclosure Schedule, each Company Contractor can be terminated on notice of thirty days or less to the Company Contractor. According to the Company Contractors’ agreements with the Company, no Company Contractor is entitled to any rights under the applicable labor laws. All current and former Company Contractors have received all their rights to which they are and were entitled according to any applicable Law or Contract with the Company.
(j) The Company is not delinquent in payments to any employees for wages, salaries, commissions or bonuses for services performed as of the date hereof or amounts required by applicable Law to be reimbursed to such employees. The employment seniority for each employee for any employment purposes began as of the date of hire and prior to such date no employment relations existed between any employee and the Company for any matter or purpose. The Company has withheld, paid and reported all amounts required by the Ordinance, the National Insurance Law [Consolidated Version], 5755-1995, and the National Health Insurance Law, 5754-1994 regarding its current and former employees and Company Contractors.
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(k) The Company is, and since March 24, 2021 has been, in material compliance with all applicable Laws and agreements (including collective bargaining agreements and extension orders) respecting labor (including consultants), employment, employment practices, and terms and conditions of employment, including proper classification of independent contractors as not being employees. There are no actions, suits, claims, charges, lawsuits, investigations, audits or administrative matters pending or, to the Knowledge of the Company, threatened or reasonably anticipated against the Company relating to any employee, applicant for employment, consultant, employment agreement or Company Benefit Plan (other than routine claims for benefits).
(l) There is not and has not been in the past three years, nor is there or has there been in the past three years any threat of, any material claim, charge, grievance or Legal Proceeding against the Company brought by or on behalf of any current or former applicant, employee, independent contractor, subcontractor, leased employee, volunteer, or temporary employee of the Company, alleging violation of any applicable employment Law, agreement or any other claim arising out of such Person’s employment, application for employment or termination of employment, consulting or other relationship with the Company.
(m) At all times since March 24, 2021, the Company has not engaged any employees whose employment would require special licenses or permits by the Company.
(n) The Company’s obligations to provide statutory severance pay to its Israeli employees pursuant to the Israeli Severance Pay Law are fully funded in accordance with Section 14 Arrangements and it is and was implemented properly, from the commencement date of each employee’s employment and on the basis of 8.33% of the employee’s entire salary.
(o) The Company has not been and is not subject to, and none of its employees or consultants benefits from, any collective agreement, extension order (tzavei harchave) or any general contract or arrangement with respect to employment or termination of employment, except those extension orders that apply to all Israeli companies generally.
(p) Each officer of the Company is a party to a confidentiality agreement with the Company; copies of such agreements have previously been delivered, or made available, to Parent.
(q) No group of employees has notified the Company of its intent, or, to the Knowledge of the Company, has any plans, to terminate employment with the Company.
(r) The Company does not have unsatisfied obligations of any nature to any of its former employees or consultants.
2.18 Environmental Matters.
The Company is, and since March 24, 2021 has been, in compliance with all applicable Environmental Laws, which compliance includes the possession by the Company of all permits and other Governmental Authorizations required under applicable Environmental Laws and compliance with the terms and conditions thereof, except for any failure to be in such compliance that, either individually or in the aggregate, would not reasonably be expected to be material to the Company or its business. The Company has not received since March 24, 2021 (or prior to that time, which to the Knowledge of the Company is pending and unresolved), any written notice or other communication (in writing or otherwise), whether from a Governmental Body or other Person, that alleges that the Company is not in compliance with or has liability pursuant to any Environmental Law and, to the Knowledge of the Company, there are no circumstances that would reasonably be expected to prevent or interfere with the Company’s compliance in any material respects with any Environmental Law, except where such failure to comply would not reasonably be expected to be material to the Company or its business. No current or (during the time a prior property was leased or controlled by the Company) prior property leased or controlled by the Company has had a release of or exposure to Hazardous Materials in material violation of or as would reasonably be expected to result in any material liability of the Company pursuant to Environmental Law. No consent, approval or Governmental Authorization of or registration or filing with any Governmental Body is required by Environmental Laws in connection with the execution and delivery of this Agreement or the consummation of the Contemplated Transactions. Prior to the date hereof, the Company has provided or otherwise made available to Parent true and correct copies of all material environmental reports, assessments, studies and audits in the possession or control of the Company with respect to any property leased or controlled by the Company or any business operated by it.
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2.19 Insurance.
The Company has delivered or made available to Parent accurate and complete copies of all material insurance policies and all material self-insurance programs and arrangements relating to the business, assets, liabilities and operations of the Company. Each such insurance policy is in full force and effect and the Company is in compliance in all material respects with the terms thereof. Other than customary end of policy notifications from insurance carriers, since March 24, 2021, the Company has not received any notice or other communication regarding any actual or possible: (i) cancellation or invalidation of any insurance policy; or (ii) refusal or denial of any coverage, reservation of rights or rejection of any material claim under any insurance policy. The Company has provided timely written notice to the appropriate insurance carrier(s) of each Legal Proceeding that is currently pending against the Company for which the Company has insurance coverage, and no such carrier has issued a denial of coverage or a reservation of rights with respect to any such Legal Proceeding or informed the Company of its intent to do so.
2.20 No Financial Advisors.
Except as set forth on Section 2.20 of the Company Disclosure Schedule, no broker, finder or investment banker is entitled to any brokerage fee, finder’s fee, opinion fee, success fee, transaction fee or other fee or commission in connection with the Contemplated Transactions based upon arrangements made by or on behalf of the Company.
2.21 Transactions with Affiliates.
(a) Section 2.21(a) of the Company Disclosure Schedule describes any material transactions or relationships, since March 24, 2021, between, on one hand, the Company and, on the other hand, any: (i) executive officer or director of the Company or, to the Knowledge of the Company, any of such executive officer’s or director’s immediate family members, (ii) owner of more than 5% of the voting power of the outstanding Company Ordinary Shares or (iii) to the Knowledge of the Company, any “related person” (within the meaning of Item 404 of Regulation S-K under the Securities Act) of any such officer, director or owner (other than the Company) in the case of each of sub-limb (i), (ii) or (iii) that is of the type that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act.
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(b) Section 2.21(b) of the Company Disclosure Schedule lists each shareholders’ agreement, voting agreement, co-sale agreement or other similar Contract between the Company and any holders of Company Ordinary Shares, including any such Contract granting any Person investor rights, rights of first refusal, rights of first offer, director designation rights or similar rights (collectively, the “Investor Agreements”).
2.22 Anti-Bribery.
Neither of the Company nor any of its directors, officers, employees or, to the Company’s Knowledge, agents or any other Person acting on their behalf has directly or indirectly made any bribes, rebates, payoffs, influence payments, kickbacks, illegal payments, illegal political contributions, or other payments, in the form of cash, gifts, or otherwise, or taken any other action, in violation of the Foreign Corrupt Practices Act of 1977, the UK Bribery Act of 2010, Sections 291 and 291A of the Israeli Penal Law, 5737-1977 or any other anti-bribery or anti-corruption Law (collectively, the “Anti-Bribery Laws”). The Company is not and since March 24, 2021 has not been the subject of any investigation or inquiry by any Governmental Body with respect to potential violations of Anti-Bribery Laws.
2.23 Disclaimer of Other Representations or Warranties.
Except as set forth in this Section 2 or in any certificate delivered by the Company to Parent and/or Merger Sub pursuant to this Agreement, the Company makes no representation or warranty, express or implied, at law or in equity, with respect to it or any of its assets, liabilities or operations, and any such other representations or warranties are hereby expressly disclaimed.
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Subject to Section 10.13(h), except: (i) as set forth in the disclosure schedule delivered by Parent to the Company (the “Parent Disclosure Schedule”) or (ii) as disclosed in the Parent SEC Documents filed with the SEC prior to the date hereof and publicly available on the SEC’s Electronic Data Gathering Analysis and Retrieval system (but: (x) without giving effect to any amendment thereof filed with, or furnished to the SEC on or after the date hereof and (y) excluding any disclosures contained under the heading “Risk Factors” and any disclosure of risks included in any “forward-looking statements” disclaimer or in any other section to the extent they are forward-looking statements or cautionary, predictive or forward-looking in nature), Parent and Merger Sub represent and warrant to the Company as follows:
3.1 Due Organization; Subsidiaries.
(a) Parent is a public company duly organized and validly existing under the Laws of the State of Israel and Merger Sub is a company duly organized and validly existing under the laws of the State of Israel, and neither Parent nor Merger Sub is a “breaching company” under the Companies Law, and has all necessary corporate power and authority: (i) to conduct its business in the manner in which its business is currently being conducted; (ii) to own or lease and use its property and assets in the manner in which its property and assets are currently owned or leased and used; and (iii) to perform its obligations under all Contracts by which it is bound, except where the failure to have such power or authority would not reasonably be expected to prevent or materially delay the ability of Parent and Merger Sub to consummate the Contemplated Transactions to which it is a party. Since the date of its incorporation, Merger Sub has not engaged in any activities other than activities incident to its formation or in connection with or as contemplated by this Agreement.
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(b) Parent is duly licensed and qualified to do business and is in good standing (to the extent applicable in such jurisdiction), under the Laws of all jurisdictions where the nature of its business requires such licensing or qualification other than in jurisdictions where the failure to be so qualified individually or in the aggregate would not be reasonably expected to have a Parent Material Adverse Effect.
(c) The Parent has no Subsidiaries, except for the Entities identified in Section 3.1(c) of the Parent Disclosure Schedule; and neither the Parent nor any of the Entities identified in Section 3.1(c) of the Company Disclosure Schedule owns any share capital of, or any equity, ownership or profit sharing interest of any nature in, or controls directly or indirectly, any other Entity other than the Entities identified in Section 3.1(c) of the Parent Disclosure Schedule. Each of the Parent’s Subsidiaries is a corporation or other legal entity duly organized, validly existing and, if applicable, in good standing under the Laws of the jurisdiction of its organization and has all necessary corporate or other power and authority to conduct its business in the manner in which its business is currently being conducted and to own or lease and use its property and assets in the manner in which its property and assets are currently owned or leased and used, except where the failure to have such power or authority would not be reasonably expected to have a Parent Material Adverse Effect.
(d) The Parent is not and has never otherwise been, directly or indirectly, a party to, member of or participant in any partnership, joint venture or similar business entity. The Parent has not agreed and is not obligated to make, or is bound by any Contract under which it may become obligated to make, any future investment in or capital contribution to any other Entity. The Parent has not any time, been a general partner of, or has otherwise been liable for any of the debts or other obligations of, any general partnership, limited partnership or other Entity.
3.2 Organizational Documents.
Parent has made available to the Company accurate and complete copies of Parent’s and Merger Sub’s Organizational Documents in effect as of the date of this Agreement. Neither Parent nor Merger Sub is in material breach or violation of its respective Organizational Documents.
3.3 Authority; Binding Nature of Agreement.
Each of Parent and Merger Sub has all necessary corporate power and authority to enter into and to perform its obligations under this Agreement and, subject, with respect to Parent, to receipt of the Required Parent Shareholder Vote and, with respect to Merger Sub, the adoption of this Agreement by Parent in its capacity as sole shareholder of Merger Sub, to perform its obligations hereunder and to consummate the Contemplated Transactions to which it is a party. The Parent Board (at meetings duly called and held) has: (i) determined that the Contemplated Transactions to which it is a party are fair to, advisable and in the best interests of Parent and its shareholders; (ii) authorized, approved and declared advisable this Agreement and the Contemplated Transactions to which it is a party, including the issuance of Parent Ordinary Shares to the shareholders of the Company pursuant to the terms of this Agreement and the treatment of the Company Options and Company Warrants pursuant to this Agreement; and (iii) determined to recommend, upon the terms and subject to the conditions set forth in this Agreement, that the shareholders of Parent vote to approve this Agreement and the Contemplated Transactions, including the issuance of Parent Ordinary Shares to the shareholders of the Company pursuant to the terms of this Agreement. The Merger Sub Board (by unanimous written consent) has: (x) determined that the Contemplated Transactions to which it is a party are fair to, advisable and in the best interests of Merger Sub and its sole shareholder; (y) deemed advisable and approved this Agreement and the Contemplated Transactions to which it is a party; and (z) determined to recommend, upon the terms and subject to the conditions set forth in this Agreement, that the sole shareholder of Merger Sub vote to adopt this Agreement and thereby approve the Contemplated Transactions to which it is a party. This Agreement has been duly executed and delivered by Parent and Merger Sub and, assuming the due authorization, execution and delivery by the Company, constitutes the legal, valid and binding obligation of Parent and Merger Sub, enforceable against each of Parent and Merger Sub in accordance with its terms, subject to the Enforceability Exceptions.
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3.4 Vote Required.
The affirmative vote of a majority of the votes cast by the holders of the outstanding Parent Ordinary Shares is the only vote of the holders of any class or series of Parent’s outstanding share capital necessary to approve the proposals in Section 5.3(a) (the “Required Parent Shareholder Vote”).
3.5 Non-Contravention; Consents.
Subject to obtaining the Required Parent Shareholder Vote and the filings with the Companies Registrar or all other notices or filings required under the Companies Law with respect to the consummation of the Merger and the issuance of the Certificate of Merger by the Companies Registrar or any filings with the Applicable Court, neither: (i) the execution, delivery or performance of this Agreement by Parent or Merger Sub, nor (ii) the consummation of the Contemplated Transactions to which it is a party, will directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of any of the provisions of the Organizational Documents of Parent or Merger Sub;
(b) contravene, conflict with or result in a violation of, or give any Governmental Body the right to challenge the Contemplated Transactions to which it is a party or to exercise any remedy or obtain any relief under, any Law or any order, writ, injunction, judgment or decree to which Parent or Merger Sub, or any of the assets owned or used by Parent or Merger Sub, is subject, except as would not reasonably be expected to be material to Parent or its business;
(c) contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by Parent, except as would not reasonably be expected to be material to Parent or its business;
(d) subject to obtaining the requisite approvals and consents in respect of the Contracts set forth in Section 3.5(d) of the Parent Disclosure Schedule, contravene, conflict with or result in a violation or breach of, or result in a default under, any provision of any Parent Material Contract, or give any Person the right to: (i) declare a default or exercise any remedy under any Parent Material Contract; (ii) any material payment, rebate, chargeback, penalty or change in delivery schedule under any Parent Material Contract; (iii) accelerate the maturity or performance of any Parent Material Contract; or (iv) cancel, terminate or modify any term of any Parent Material Contract, except in the case of any non-material breach, default, penalty or modification; or
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(e) result in the imposition or creation of any Encumbrance upon or with respect to any asset owned or used by Parent or Merger Sub (except for Permitted Encumbrances).
Except for: (i) the filing with the Companies Registrar and all such other notices or filings with respect to the consummation of the Merger and the issuance of the Certificate of Merger by the Companies Registrar, (ii) the filing of the Nasdaq Notification and receiving the requisite approval from Nasdaq, (iii) or any filings with the Applicable Court and (iv) such consents, waivers, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal and state securities Laws, neither the Parent nor Merger Sub is or will be required to make any filing with or give any notice to, or to obtain any Consent from, any Governmental Body in connection with (y) the execution, delivery or performance of this Agreement, or (z) the consummation of the Contemplated Transactions to which it is a party, which if individually or in the aggregate were not given or obtained, would reasonably be expected to prevent or materially delay the ability of Parent and Merger Sub to consummate the Contemplated Transactions. No takeover statute or regulation is applicable to this Agreement, the Merger or any of the other Contemplated Transactions to which it is a party.
3.6 Capitalization.
(a) The authorized Parent Share Capital is 75,000,000 Parent Ordinary Shares, of which 2,703,674 Parent Ordinary Shares have been issued and are outstanding as of the close of business on the Business Day immediately preceding the date of this Agreement. Parent does not hold any of its share capital in its treasury.
(b) All of the outstanding Parent Ordinary Shares have been duly authorized and validly issued and are fully paid and nonassessable. None of the outstanding Parent Ordinary Shares is entitled or subject to any preemptive right, right of participation, right of maintenance or any similar right and none of the outstanding Parent Ordinary Shares is subject to any right of first refusal in favor of Parent. Except as contemplated herein, there is no Parent Contract relating to the voting or registration of, or restricting any Person from purchasing, selling, pledging or otherwise disposing of (or granting any option or similar right with respect to), any Parent Ordinary Shares. Parent is not under any obligation, nor is it bound by any Contract pursuant to which it may become obligated, to repurchase, redeem or otherwise acquire any outstanding Parent Ordinary Shares or other securities.
(c) Except for the Parent Share Plans, Parent does not have any share option plan or any other plan, program, agreement or arrangement providing for any equity-based compensation for any Person. As of the date of this Agreement, Parent has reserved 1,020,800 Parent Ordinary Shares for issuance under the Parent Share Plans, of which 7,013 Parent Options are issued and are currently outstanding, with a weighted average exercise price of $166.28, no Parent Ordinary Shares are issuable upon the vesting or settlement of outstanding Parent RSUs, and 1,013,787 Parent Ordinary Shares remain available for future issuance pursuant to the Parent Share Plans. Section 3.6(c) of the Parent Disclosure Schedule sets forth the following information with respect to each Parent Equity Award outstanding as of the date of this Agreement: (i) the name of the grantee; (ii) the number of Parent Ordinary Shares subject to such Parent Equity Award at the time of grant; (iii) the number of Parent Ordinary Shares subject to such Parent Equity Award as of the date of this Agreement; (iv) the exercise price (if applicable) of such Parent Equity Award; (v) the date on which such Parent Equity Award was granted; (vi) the applicable vesting schedule, including the number of vested and unvested shares as of the date of this Agreement and any acceleration provisions; (vii) the date on which such Parent Equity Award expires; and (viii) (A) the Tax route under which such Parent Equity Award was granted and is currently intended to qualify (pursuant to Section 102 or Section 3(i) of the Ordinance), and (B) for Parent 102 Equity Awards, the date of the applicable corporate approval and the date of deposit of the respective award agreement with the 102 Trustee. The Parent has made available to the Company an accurate and complete copy of the Parent Plans and all share award agreements evidencing outstanding awards granted thereunder. Except as set forth in Section 3.6(c) of the Parent Disclosure Schedule, no vesting of Parent Equity Awards will accelerate in connection with the closing of the Contemplated Transactions.
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(d) All Parent Equity Awards granted under Section 102 of the Ordinance were granted under an employee option plan deemed approved, or not rejected within 30 days from filing, by the ITA under the capital gains route of Section 102 of the Ordinance and comply in all respects with the requirements of Section 102 of the Ordinance and qualify for treatment under the capital gain route thereunder, and were duly and timely deposited in accordance with the provisions of Section 102 of the Ordinance with the 102 Trustee and no action has been threatened against Parent (nor is Parent aware of a reasonable basis for an action against Parent) with respect to the failure of Parent to comply with such requirements.
(e) Section 3.6(e) of the Parent Disclosure Schedule lists, as of the date of this Agreement: (i) each holder of issued and outstanding Parent Warrants, (ii) the number and type of shares subject to each Parent Warrant, (iii) the exercise price of each Parent Warrant and (iv) the termination date of each Parent Warrant.
(f) Except for the Parent Warrants, the Parent Share Plans, including the Parent Equity Awards, and as otherwise set forth on Section 3.6(f) of the Parent Disclosure Schedule, there is no: (i) outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire shares or other securities of Parent; (ii) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any shares or other securities of Parent; or (iii) condition or circumstance that is reasonably likely to give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any shares or other securities of Parent. There are no outstanding or authorized share appreciation, phantom shares, profit participation or other similar rights with respect to Parent.
(g) All outstanding Parent Ordinary Shares, Parent Equity Awards, Parent Warrants and other securities of Parent have been issued and granted in material compliance with: (i) all applicable securities Laws and other applicable Law, and (ii) all requirements set forth in applicable Contracts.
(h) The Parent Pre-Funded Warrants legally bind the Parent and are enforceable against the Parent in accordance with their terms. The Parent Pre-Funded Warrants and the transactions contemplated thereby were duly approved by all required corporate approvals of the Parent.
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3.7 SEC Filings; Financial Statements.
(a) Parent has delivered or made available to the Company accurate and complete copies of all registration statements, proxy statements, Certifications (as defined below) and other statements, reports, schedules, forms and other documents filed by Parent with the SEC since January 1, 2021 (the “Parent SEC Documents”), other than such documents that can be obtained on the SEC’s website at www.sec.gov. All material statements, reports, schedules, forms and other documents required to have been filed by Parent or its officers with the SEC have been filed on a timely basis. As of the time it was filed with the SEC (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), each of the Parent SEC Documents complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act (as the case may be) and, as of the time they were filed, none of the Parent SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The certifications and statements required by: (i) Rule 13a-14 under the Exchange Act and (ii) 18 U.S.C. §1350 (Section 906 of the Sarbanes-Oxley Act) relating to the Parent SEC Documents (collectively, the “Certifications”) are accurate and complete and comply as to form and content with all applicable Laws. As used in this Section 3.7, the term “file” and variations thereof shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC. Parent has made available to the Company true and complete copies of all correspondences, other than transmittal correspondences, between the SEC, on the one hand, and Parent, on the other, since January 1, 2021, including all SEC comment letters and responses to such comment letters by or on behalf of Parent other than such documents that can be obtained on the SEC’s website at www.sec.gov. As of the date of this Agreement, there are no outstanding or unresolved comments in comment letters received from the SEC or Nasdaq with respect to the Parent SEC Documents. To the Knowledge of Parent, none of the Parent SEC Documents is the subject of ongoing SEC review and there are no inquiries or investigations by the SEC or internal investigations pending or threatened, including with regard to any accounting practices of Parent.
(b) The financial statements (including any related notes) contained or incorporated by reference in the Parent SEC Documents: (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with IFRS(except as may be indicated in the notes to such financial statements or, in the case of unaudited financial statements, except as permitted by Form 6-K of the SEC, and except that the unaudited financial statements may not contain footnotes and are subject to normal and recurring year-end adjustments) applied on a consistent basis unless otherwise noted therein throughout the periods indicated; and (iii) fairly present, in all material respects, the financial position of Parent as of the respective dates thereof and the results of operations and cash flows of Parent for the periods covered thereby. Other than as expressly disclosed in the Parent SEC Documents filed prior to the date hereof, there has been no material change in Parent’s accounting methods or principles that would be required to be disclosed in Parent’s financial statements in accordance with IFRS.
(c) Parent’s auditor has at all times since its retention by Parent been: (i) to the Knowledge of Parent, a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act); (ii) to the Knowledge of Parent, “independent” with respect to Parent within the meaning of Regulation S-X under the Exchange Act; and (iii) to the Knowledge of Parent, in compliance with subsections (g) through (l) of Section 10A of the Exchange Act and the rules and regulations promulgated by the SEC and the Public Company Accounting Oversight Board thereunder with respect to services provided to Parent.
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(d) Parent is in compliance in all material respects with the applicable current listing and governance rules and regulations of Nasdaq. Except as set forth in Section 3.7(d) of the Parent Disclosure Schedule and the Parent SEC Documents, from January 1, 2021 through the date hereof, Parent has not received any correspondence from Nasdaq or the staff thereof relating to the delisting or maintenance of listing of the Parent Ordinary Shares on the Nasdaq Capital Market.
(e) Since January 1, 2021, there have been no formal internal investigations regarding financial reporting or accounting policies and practices discussed with, reviewed by or initiated at the direction of the chief executive officer or chief financial officer of Parent, the Parent Board or any committee thereof, other than ordinary course audits or reviews of accounting policies and practices or internal controls required by the Sarbanes-Oxley Act.
(f) Parent maintains a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS and to provide reasonable assurance: (i) that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, (ii) that receipts and expenditures are made only in accordance with authorizations of management and the Parent Board and (iii) regarding prevention or timely detection of the unauthorized acquisition, use or disposition of Parent’s assets that could have a material effect on Parent’s financial statements. Parent has evaluated the effectiveness of Parent’s internal control over financial reporting as of September 30, 2023, and, to the extent required by applicable Law, presented in any applicable Parent SEC Document that is a report on Form 20-F or Form 6-K (or any amendment thereto) its conclusions about the effectiveness of the internal control over financial reporting as of the end of the period covered by such report or amendment based on such evaluation. Parent has disclosed, based on its most recent evaluation of internal control over financial reporting, to Parent’s auditors and audit committee (and made available to the Company a summary of the significant aspects of such disclosure): (A) all significant deficiencies, if any, in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect Parent’s ability to record, process, summarize and report financial information and (B) any known fraud that involves management or other employees who have a significant role in Parent’s internal control over financial reporting. Parent has not identified, based on its most recent evaluation of internal control over financial reporting, any material weaknesses in the design or operation of Parent’s internal control over financial reporting.
(g) Parent maintains “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) that are reasonably designed to ensure that information required to be disclosed by Parent in the periodic reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the required time periods, and that all such information is accumulated and communicated to Parent’s management as appropriate to allow timely decisions regarding required disclosure and to make the Certifications.
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3.8 Absence of Changes.
Except as set forth on Section 3.8 of the Parent Disclosure Schedule, between the date of the Parent Balance Sheet and the date of this Agreement, Parent has conducted its business only in the Ordinary Course of Business (except for the execution and performance of this Agreement and the discussions, negotiations and transactions related thereto) and there has not been any (a) Parent Material Adverse Effect or (b) action, event or occurrence that would have required the consent of the Company pursuant to Section 4.1(b) had such action, event or occurrence taken place after the execution and delivery of this Agreement.
3.9 Absence of Undisclosed Liabilities.
As of the date hereof, neither the Parent nor Merger Sub has any Liability, individually or in the aggregate, whether or not of a type required to be recorded or reflected on a balance sheet or disclosed in the footnotes thereto under IFRS except for: (a) Liabilities disclosed, reflected or reserved against in the Parent Balance Sheet; (b) Liabilities that have been incurred by Parent since the date of the Parent Balance Sheet in the Ordinary Course of Business; (c) Liabilities for performance of obligations of Parent under Parent Contracts; (d) Liabilities incurred in connection with the Contemplated Transactions; (e) Liabilities which would not, individually or in the aggregate, reasonably be expected to be material to Parent; and (f) Liabilities described in Section 3.9 of the Parent Disclosure Schedule.
3.10 Real Property; Leasehold.
Except as set forth in Section 3.10 of the Parent Disclosure Schedule, the Parent does not own and since January 1, 2021 has not owned any real property. The Parent has made available to Company: (i) an accurate and complete list of all real properties with respect to which the Parent directly or indirectly holds a valid leasehold interest as well as any other real estate that is in the possession of or leased by the Parent and (ii) copies of all leases under which any such real property is possessed (the ” Parent Real Estate Leases”), each of which is in full force and effect, with no existing material default thereunder. The Parent’s use and operation of each such leased property conforms to all applicable Laws in all material respects, and the Parent has exclusive possession of each such leased property and has not granted any occupancy rights to tenants or licensees with respect to such leased property. In addition, each such leased property is free and clear of all Encumbrances other than Permitted Encumbrances.
3.11 Intellectual Property.
(a) Except as set forth on Section 2.12(a) of the Parent Disclosure Schedule, the Parent does not own, license or otherwise have any right, title or interest in any material Intellectual Property Rights.
(b) To the Knowledge of the Parent the operation of the businesses of the Company as currently conducted does not infringe any valid and enforceable Registered IP or misappropriate or otherwise violate any Intellectual Property Right owned by any other Person. As of the date of this Agreement, no Legal Proceeding is pending (or, to the Knowledge of the Parent, is threatened in writing) against the Parent alleging that the operation of the businesses of the Parent infringes or constitutes the misappropriation or other violation of any Intellectual Property Rights of another Person. The Parent has not received any written notice or other written communication alleging that the operation of the business of the Parent infringes or constitutes the misappropriation or other violation of any Intellectual Property Right of another Person.
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(c) To the Knowledge of the Parent, the Parent and the operation of the Parent’s business are in substantial compliance with all Laws pertaining to data privacy and data security of any personally identifiable information and sensitive business information (collectively, “Sensitive Data”) except to the extent that such noncompliance has not and would not reasonably be expected to have a Company Material Adverse Effect. To the Knowledge of the Parent, since January 1, 2021, there have been: (i) no material losses or thefts of data or security breaches relating to Sensitive Data used in the business of the Parent, (ii) no violations of any security policy of the Parent regarding any such Sensitive Data, (iii) no unauthorized access or unauthorized use of any Sensitive Data used in the business of the Parent or (iv) no unintended or improper disclosure of any personally identifiable information in the possession, custody or control of the Parent, or a contractor or agent acting on behalf of the Parent, in each case of (i) through (iv), except as would not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect.
3.12 Agreements, Contracts and Commitments.
(a) Section 3.12 of the Parent Disclosure Schedule lists the following Parent Contracts in effect as of the date of this Agreement (each, a “Parent Material Contract” and collectively, the “Parent Material Contracts”):
(i) each Parent Contract relating to any agreement of indemnification or guaranty not entered into in the Ordinary Course of Business;
(ii) each Parent Contract containing: (A) any covenant limiting the freedom of the Parent to engage in any line of business or compete with any Person, (B) any most-favored pricing arrangement, (C) any exclusivity provision, or (D) any non-solicitation provision;
(iii) each Parent Contract relating to capital expenditures and requiring payments after the date of this Agreement in excess of $200,000 pursuant to its express terms and not cancelable without penalty;
(iv) each Parent Contract relating to the disposition or acquisition of material assets or any ownership interest in any entity;
(v) each Parent Contract relating to any mortgages, indentures, loans, notes or credit agreements, security agreements or other agreements or instruments relating to the borrowing of money or extension of credit or creating any material Encumbrances with respect to any assets of the Parent or any loans or debt obligations with officers or directors of the Parent;
(vi) each Parent Contract requiring payment by or to the Parent after the date of this Agreement in excess of $200,000 pursuant to its express terms relating to: (A) any distribution agreement (identifying any that contain exclusivity provisions); (B) any dealer, distributor, joint marketing, alliance, joint venture, cooperation or other agreement currently in force under which the Parent has continuing obligations to market any product, technology or service; or (C) any Contract to license any third party to manufacture or produce any product, service or technology of the Parent or any Contract to sell, distribute or commercialize any products or service of the Parent, in each case, except for Parent Contracts entered into in the Ordinary Course of Business;
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(vii) each Parent Contract with any Person, including any financial advisor, broker, finder, investment banker or other Person, providing advisory services to the Parent in connection with the Contemplated Transactions;
(viii) each Parent Real Estate Lease;
(ix) each Parent Contract with any Governmental Body;
(x) each Parent Contract containing any royalty, dividend or similar arrangement based on the revenues or profits of the Parent; or
(xi) any other Parent Contract that is not terminable at will (with no penalty or payment) by the Parent, and (A) which involves payment or receipt by the Parent after the date of this Agreement under any such agreement, contract or commitment of more than $200,000 in the aggregate, or obligations after the date of this Agreement in excess of $200,000 in the aggregate, or (B) that is material to the business or operations of the Parent.
(b) The Parent has delivered or made available to Company accurate and complete copies of all Parent Material Contracts, including all amendments thereto. There are no Parent Material Contracts that are not in written form. The Parent has not, nor to the Parent’s Knowledge, as of the date of this Agreement has any other party to a Parent Material Contract, breached, violated or defaulted under, or received notice that it breached, violated or defaulted under, any of the terms or conditions of any Parent Material Contract in such manner as would permit any other party to cancel or terminate any such Parent Material Contract, or would permit any other party to seek damages which would reasonably be expected to be material to the Parent or its business. As to the Parent, as of the date of this Agreement, each Parent Material Contract is valid, binding, enforceable and in full force and effect, subject to the Enforceability Exceptions. No Person is renegotiating, or has a right pursuant to the terms of any Parent Material Contract to change, any material amount paid or payable to the Parent under any Parent Material Contract or any other material term or provision of any Parent Material Contract.
3.13 Compliance; Permits.
(a) Parent is in compliance in all material respects with all U.S., Israeli and other applicable Laws, including the FDA regulations adopted thereunder, and any other similar Law administered or promulgated by the FDA or other Drug Regulatory Agency, except for any noncompliance, either individually or in the aggregate, which would not be material to Parent. No investigation, claim, suit, proceeding, audit or other action by any Governmental Body is pending or, to the Knowledge of Parent, threatened against Parent. There is no agreement, judgment, injunction, order or decree binding upon Parent which: (i) has or would reasonably be expected to have the effect of prohibiting or materially impairing any business practice of Parent, any acquisition of material property by Parent or the conduct of business by Parent as currently conducted, (ii) is reasonably likely to have an adverse effect on Parent’s ability to comply with or perform any covenant or obligation under this Agreement, or (iii) is reasonably likely to have the effect of preventing, delaying, making illegal or otherwise interfering with the Contemplated Transactions.
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(b) Parent holds all required Governmental Authorizations which are material to the operation of the business of Parent as currently conducted (the “Parent Permits”). Section 3.13(b) of the Parent Disclosure Schedule identifies each Parent Permit. Parent is in material compliance with the terms of the Parent Permits. No Legal Proceeding is pending or, to the Knowledge of Parent, threatened, which seeks to revoke, limit, suspend, or materially modify any Parent Permit. All of the Governmental Authorizations are valid and in full force and effect, except where the invalidity of such Governmental Authorizations or the failure of such Governmental Authorizations to be in full force and effect would not have a Parent Material Adverse Effect; and Parent has not received any notice of proceedings relating to the revocation or modification of any such Governmental Authorizations which, singly or in the aggregate, would reasonably be expected to result in a Parent Material Adverse Effect.
3.14 Legal Proceedings; Orders.
(a) As of the date of this Agreement, there is no material pending Legal Proceeding and, to the Knowledge of Parent, no Person has threatened in writing to commence any Legal Proceeding: (i) that involves (A) Parent, (B) any Parent Associate (in his or her capacity as such) or (C) any of the material assets owned or used by Parent; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, the Contemplated Transactions.
(b) Except as set forth in Section 3.14(b) of the Parent Disclosure Schedule, since January 1, 2021, no Legal Proceeding has been pending against Parent that resulted in material liability to Parent.
(c) There is no order, writ, injunction, judgment or decree to which Parent, or any of the material assets owned or used by Parent is subject. To the Knowledge of Parent, no officer of Parent is subject to any order, writ, injunction, judgment or decree that prohibits such officer or employee from engaging in or continuing any conduct, activity or practice relating to the business of Parent or to any material assets owned or used by Parent.
3.15 Tax Matters.
(a)
(i) Each Tax Return required to be filed with any Governmental Body by Parent has been filed when due (taking into account extensions in the ordinary course of business) in accordance with applicable Law, each of which is true, accurate and complete;
(ii) Parent has timely paid to the appropriate Governmental Body all Taxes due and payable;
(iii) Parent has complied with all applicable Law relating to the payment and withholding of any Tax and has, within the time and in the manner prescribed by Law, withheld and paid over to the proper Governmental Body all amounts required to be so withheld and paid over;
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(iv) Parent has established adequate accruals or reserves, in accordance with IFRS, for all Taxes for taxable periods beginning on or after the date of the most recent Parent financial statements;
(v) there is no Legal Proceeding against or with respect to Parent in respect of any Tax or any Tax Return and there is no investigation against or with respect to Parent, pending or threatened or otherwise in respect of any Tax or any Tax Return. All deficiencies asserted or assessments made against Parent as a result of any examinations by any Governmental Body have been fully paid;
(vi) Parent has not consented or requested to extend the time, or is the recipient of any extension of time, in which any Tax may be assessed or collected by any Governmental Authority and Parent has not waived any statute of limitations;
(vii) no Governmental Authority in a jurisdiction where no Tax Return has been filed or no Tax has been paid has made or threatened to make a claim for the payment of any Tax or the filing of any Tax Return;
(viii) Except as otherwise provided in Section 3.15(a)(viii) of the Parent Disclosure Schedule, no power of attorney granted by or with respect to Parent for Taxes is currently in force, no ruling with respect to Taxes has been requested by or on behalf of Parent; and no closing agreement pursuant to Section 7121 of the Code (or any predecessor provision) or any similar provision of any state, local or non-U.S. Law has been entered into or requested by or with respect to Parent;
(ix) Parent has provided or made available to the Company prior to the date hereof true, correct and complete copies of all material Tax Returns, examination reports, and statements of deficiencies filed, assessed against, or agreed to by Parent with respect to Taxes and all material written correspondence with any Governmental Authority regarding Taxes;
(x) [Reserved]
(xi) Parent is not and has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code;
(xii) Parent will not be required to include any item of income in, or exclude any item of deduction from, taxable income for (A) any Tax period (or portion thereof), as a result of any deferred foreign income within the meaning of Section 965 of the Code, including, but not limited to, as the result of an election under Section 965(h) of the Code, or (B) any Tax period (or portion thereof) ending after the Closing Date, as a result of any (1) deferred intercompany gain or any excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding provision of state, local or non-U.S. Tax Law); (2) installment sale or other open transaction disposition made on or prior to the Closing Date; (3) prepaid amount, refund or credit received on or prior to the Closing Date; (4) change in accounting method for a taxable period ending on or prior to the Closing Date; (5) use of an improper method of accounting for a taxable period ending on or prior to the Closing Date; or (6) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or non-U.S. Tax Law) executed on or prior to the Closing Date;
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(xiii) all material records which Parent is required to keep for Tax purposes or which would be needed to substantiate any claim made or position taken in relation to Taxes by Parent, have been duly kept and are available for inspection at the premises of Parent;
(xiv) Parent is in compliance in all material respects with all terms and conditions of any Tax exemption, Tax holiday or other Tax reduction agreement or order of a Governmental Body;
(xv) all of Parent’s property that is subject to property Tax has been properly listed and described on the property Tax rolls of the appropriate Tax jurisdiction and no portion of any Parent’s property constitutes omitted property for property Tax purposes;
(xvi) there are no Liens for Taxes on any of the assets of Parent other than for any Taxes not yet due and payable;
(xvii) Parent has not ever (A) participated or engaged in any transaction listed in Section 131(g) of the Ordinance and the Israeli Income Tax Regulations (Reportable Tax Planning), 5767-2006, promulgated thereunder; (B) taken a tax position that is subject to reporting under Section 131E of the Ordinance; (C) obtained a legal or tax opinion that is subject to reporting under Section 131D of the Ordinance; or (D) performed or been part of any action or transaction that is classified as a “reportable opinion” under Section 67C of the Israeli VAT Law or a “reportable position” under Section 67D of the Israeli VAT Law;
(xviii) Parent is duly registered for the purposes of Israeli value added tax and has complied in all respects with all requirements concerning VAT. Parent (i) has not made any exempt transactions (as defined in the Israeli Value Added Tax Law, 5736-1975) and there are no circumstances by reason of which there might not be an entitlement to full credit of all VAT chargeable or paid on inputs, supplies, and other transactions and imports made by it, (ii) has collected and remitted in a timely manner to the ITA all output VAT which it is required to collect and remit under any applicable Law and (iii) has not received a refund for input VAT for which it is not entitled under any applicable Law;
(xix) each of the Parent Share Plans that is intended to qualify as a capital gains route plan under Section 102 of the Ordinance has received a favorable determination or approval letter from or is otherwise approved by or deemed approved by passage of time without objection by, the ITA. All Parent 102 Equity Awards and Parent 102 Shares have been granted and issued, as applicable, in compliance with the applicable requirements of Section 102 of the Ordinance and the written requirements and guidance of the ITA, including the filing of the necessary documents with the ITA, the appointment of an authorized trustee, and the due deposit of such securities with the 102 Trustee pursuant to the terms of Section 102 of the Ordinance and the guidance published by the ITA on July 24, 2012, and clarification dated November 6, 2012;
(xx) 409A. The Parent believes in good faith that any “nonqualified deferred compensation plan” (as such term is defined under Section 409A(d)(1) of the Code and the guidance thereunder) under which the Parent makes, is obligated to make or promises to make, payments (each, a “409A Plan”) complies in all material respects, in both form and operation, with the requirements of Section 409A of the Code and the guidance thereunder. To the knowledge of the Company, no payment to be made under any 409A Plan is, or will be, subject to the penalties of Section 409A(a)(1) of the Code.
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(xxi) Parent is not and has never been a real property corporation (Igud Mekarke’in) within the meaning of this term under Section 1 of the Israeli Land Taxation Law (Appreciation and Acquisition), 5723-1963;
(xxii) neither Parent nor any holder of Parent securities is subject to any restrictions or limitations pursuant to Part E2 of the Ordinance or pursuant to any Tax ruling made with reference to the provisions of Part E2;
(xxiii) no independent contractor was, or to the Knowledge of Parent will be, entitled to be considered to be an employee of Parent by any applicable Tax authority; and
(b) Parent has not (nor has it ever had) any (A) place of management, (B) branch, (C) office (or any other place of business), (D) operations or employees, (E) agent with binding authority, or (F) other activities, in each case that gives rise to a permanent establishment or taxable presence which has subjected it to any Tax obligation or to a requirement to file any Tax return in any country other than the country where Parent was organized.
(c) Parent is not, nor at any time has been, engaged in the conduct of a trade or business within the United States within the meaning of Section 864(b) or Section 882(a) of the Code, or considered to be so engaged under Section 882(d) or Section 897 of the Code or, if applicable, considered to have a U.S. permanent establishment as defined under any applicable or relevant bilateral income tax treaty or otherwise.
(d) (i) Parent is not, nor has been, a party to any Tax Sharing Agreement (other than an agreement exclusively between or among Parent and its Subsidiaries) pursuant to which it will have any obligation to make any payments for Taxes after the Closing Date, (ii) Parent has never been a member of a group filing a consolidated, combined or unitary Tax Return (other than a group the common parent of which is or was Parent or any of its Subsidiaries), and (iii) Parent has no liability for the payment of any Tax imposed on any Person (other than Parent) as a transferee or successor.
(e) Parent has never taken a position that could give rise to substantial understatement of income tax within the meaning of Section 6662 of the Code (or any corresponding provision of state, local or non-U.S. Tax Law) or has ever been a beneficiary or otherwise participated in any “reportable transaction” as defined in Code Section 6707A(c)(1)) and Treasury Regulation Section 1.6011-4(b)(1).
(f) With the exception of Israeli VAT, Parent is not, nor is required to be, registered as a taxable person for purpose of value added Taxes or any similar indirect Tax.
For purposes of this Section 3.15, each reference to Parent shall be deemed to include any Person that was liquidated into, merged with, or is otherwise a predecessor to, Parent.
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3.16 Transactions with Affiliates.
(a) Except as set forth in the Parent SEC Documents filed prior to the date of this Agreement, since the date of Parent’s last proxy statement filed in 2023 with the SEC, no event has occurred that would be required to be reported by Parent pursuant to Item 404 of Regulation S-K.
(b) Section 3.16(b) of the Parent Disclosure Schedule describes any material transactions or relationships, since January 1, 2021, between, on one hand, the Parent on the other hand, any: (i) executive officer or director of the Parent or, to the Knowledge of the Parent or any of such executive officer’s or director’s immediate family members, (ii) owner of more than 5% of the voting power of the outstanding Parent Share Capital or (iii) to the Knowledge of the Parent, any “related person” (within the meaning of Item 404 of Regulation S-K under the Securities Act) of any such officer, director or owner (other than the Parent) in the case of each of sub-limb (i), (ii) or (iii) that is of the type that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act.
(c) There is no Investor Agreement between the Parent and any holders of Parent Ordinary Shares.
3.17 Employee and Labor Matters; Benefit Plans.
(a) Section 3.17(a) of the Parent Disclosure Schedule is a list of all material Parent Benefit Plans, including, without limitation, each Parent Benefit Plan that provides for change in control, stay or retention, deferred compensation, incentive compensation, pension and severance benefits. “Parent Benefit Plan” means each pension, profit sharing, bonus, incentive, equity or equity-based, phantom equity, employment (other than at-will employment offer letters or employment agreement on the Parent’s standard form as may be amended from time to time and other than individual Parent Options or other compensatory equity award agreements made pursuant to the Parent’s standard forms, in which case only representative standard forms of such agreements shall be scheduled) and fringe benefit plan, program, agreement (including collective bargaining agreement and extension order), policy or arrangement (whether written or unwritten, but excluding statutory benefits or benefits mentioned in the Parent’s standard form of employment agreement) for the benefit of any current or former employee, director, officer or independent contractor of the Parent or any of its Subsidiaries or under which the Parent or any of its Subsidiaries has any actual or contingent liability.
(b) As applicable with respect to each material Parent Benefit Plan, the Parent has made available to Company true and complete copies of each material Parent Benefit Plan, including all amendments thereto, and in the case of an unwritten material Parent Benefit Plan, a written description thereof, and all material correspondence to or from any Governmental Body with respect to each Parent Benefit Plan.
(c) Each Parent Benefit Plan has been established, maintained, operated and administered in compliance in all material respects with its terms and all applicable Laws. Each Parent Benefit Plan required to be funded is fully funded, and with respect to Parent Share Plans that are not required by applicable Law to be so fully funded, adequate reserves therefor have been established on the Parent Financials (except for severance pay that is fully funded, and full Section 14 Arrangements apply to all of the Parent’s employees). No material liability or obligation of the Company or any of its Affiliates exists with respect to any Parent Benefit Plan that has not been disclosed in Section 3.17(c) of the Parent Disclosure Schedule. The Parent does not have, and has never had, any employees in the United States.
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(d) To the Knowledge of the Parent, there are no pending audits or investigations by any Governmental Body involving any Parent Benefit Plan, and no pending or, to the Knowledge of the Parent, threatened claims (except for individual claims for benefits payable in the normal operation of the Parent Benefit Plans), suits or proceedings involving any Parent Benefit Plan in any case except as would not be reasonably expected to result in material liability to the Parent. The Parent does not have any Company Benefit Plan that is maintained in the United States.
(e) Neither the execution of, nor the performance of the Contemplated Transactions will either alone or in connection with any other event(s): (i) result in any material payment becoming due to any current or former employee, director, officer, or independent contractor of the Parent, (ii) increase any material amount of compensation or benefits otherwise payable under any Parent Benefit Plan, (iii) result in the acceleration of the time of payment, funding or vesting of any benefits under any Parent Benefit Plan, (iv) require any material contribution or payment to fund any obligation under any Parent Benefit Plan or (v) limit the right to merge, amend or terminate any Parent Benefit Plan.
(f) Section 3.17(f) of the Parent Disclosure Schedule sets forth the policy of the Parent with respect to accrued vacation, accrued sick time and earned time off and the amount of such liabilities, including regarding bonuses to employees and independent contractors for the last two years, as of the date of this Agreement (in the case of accrued vacation, per employee for those who have more than 44 accrued days). The Parent does not have and has not had a policy regarding the payment of bonuses.
(g) The Parent is not a party to, is not bound by, and does not have a duty to bargain under, any collective bargaining agreement or other Contract with a labor union, labor organization, or similar Person representing any of its employees, and to the Knowledge of the Parent, there is no labor union, labor organization, or similar Person representing or purporting to represent or seeking to represent any employees of the Parent. There is not and has not been in the past three years, nor is there or has there been in the past three years any threat of, any strike, slowdown, work stoppage, lockout, union election petition, demand for recognition, or any similar activity or dispute, or, to the Knowledge of the Parent, any union organizing activity, against the Parent. No event has occurred, and no condition or circumstance exists, that might directly or indirectly be likely to give rise to or provide a basis for the commencement of any such strike, slowdown, work stoppage, lockout, union election petition, demand for recognition, any similar activity or dispute, or, to the Knowledge of the Parent, any union organizing activity. The Parent has paid all required payments, if any, that the Parent has been requested to pay to any employers’ association or organization.
(h) Section 3.17(h) of the Parent Disclosure Schedule contains a list of all employees of the Parent and its Subsidiaries along with the position, the monthly rate of salary of each such employee, whether such employee is full time or part time, is exempt or non-exempt from the Hours of Work and Rest Law, is on leave and if so, the type of leave and expected date of return, visa status (as applicable), date of hire, any incentive payment paid or payable in calendar year 2023 (and whether such incentive is cash or, if not, what other property is due), short-term or temporary basis, vacation entitlement and accrued vacation or paid time-off balance, car entitlement, sick leave entitlement and accrual (if any), and recuperation pay entitlement and accrual, pension entitlements and provident funds (including manager’s insurance, pension fund, education fund and health fund), their respective contribution rates for each component (e.g., severance component, pension savings and disability insurance) and the salary basis for such contributions, severance entitlements (including whether such employee, to the extent employed in the State of Israel, is subject to a Section 14 arrangement under the Severance Pay Law, 5723-1963 (the “Israeli Severance Pay Law” and “Section 14 Arrangement”), and, to the extent such employee is subject to such a Section 14 Arrangement, an indication of whether such arrangement (or other applicable pension arrangement) has been applied to such person from the commencement date of their employment and on the basis of their entire salary including other compensation (e.g., commission), main work location, notice period entitlement, and any other material compensation payable to such employee. Neither the Parent nor its Subsidiaries is delinquent in payments to any employees for wages, salaries, commissions or bonuses for services performed as of the date hereof or amounts required by applicable Law to be reimbursed to such employees. The consummation of the Contemplated Transactions will not give rise to any liability of the Parent or any of its Subsidiaries for payments related to severance, termination, bonus, accrued vacation or personal time, accrued days of sick pay or any similar payment. No current employee of the Parent or any of its Affiliates is or was, during the period of such employment or other service, based in or resident of the United States.
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(i) Section 3.17(i) of the Parent Disclosure Schedule contains a list of each individual who currently renders services to Parent as an independent contractor or consultant (collectively, the “Parent Contractors”) and the Parent has made available to Company true and complete copies of each Parent Contractors agreement and the last 3 months invoices. The Parent has accurately classified each such Parent Contractor or former Parent Contractor as an independent contractor under all applicable Laws (including for purposes of Taxes and Tax reporting and under the Company Benefit Plans). Except as set forth in Section 3.17(i) of the Parent Disclosure Schedule, each Parent Contractor can be terminated on notice of thirty days or less to the Parent Contractor. According to the Parent Contractors’ agreements with the Parent, no Parent Contractor is entitled to any rights under the applicable labor laws. All current and former Parent Contractors have received all their rights to which they are and were entitled according to any applicable Law or Contract with the Parent.
(j) The Parent is not delinquent in payments to any employees for wages, salaries, commissions or bonuses for services performed as of the date hereof or amounts required by applicable Law to be reimbursed to such employees. The employment seniority for each employee for any employment purposes began as of the date of hire and prior to such date no employment relations existed between any employee and the Parent for any matter or purpose. The Parent has withheld, paid and reported all amounts required by the Ordinance, the National Insurance Law [Consolidated Version], 5755-1995, and the National Health Insurance Law, 5754-1994 regarding its current and former employees and Parent Contractors.
(k) The Parent is, and since January 1, 2021 has been, in material compliance with all applicable Laws and agreements (including collective bargaining agreements and extension orders) respecting labor (including consultants), employment, employment practices, and terms and conditions of employment, including proper classification of independent contractors as not being employees. There are no actions, suits, claims, charges, lawsuits, investigations, audits or administrative matters pending or, to the Knowledge of the Parent, threatened or reasonably anticipated against the Parent relating to any employee, applicant for employment, consultant, employment agreement or Parent Benefit Plan (other than routine claims for benefits).
(l) There is not and has not been in the past three years, nor is there or has there been in the past three years any threat of, any material claim, charge, grievance or Legal Proceeding against the Parent brought by or on behalf of any current or former applicant, employee, independent contractor, subcontractor, leased employee, volunteer, or temporary employee of the Parent, alleging violation of any applicable employment Law, agreement or any other claim arising out of such Person’s employment, application for employment or termination of employment, consulting or other relationship with the Parent.
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(m) At all times, the Parent has not engaged any employees whose employment would require special licenses or permits by the Parent.
(n) The Parent’s obligations to provide statutory severance pay to its Israeli employees pursuant to the Israeli Severance Pay Law are fully funded in accordance with Section 14 Arrangements and it is and was implemented properly, from the commencement date of each employee’s employment and on the basis of 8.33% of the employee’s entire salary.
(o) The Parent has not been and is not subject to, and none of its employees or consultants benefits from, any collective agreement, extension order (tzavei harchave) or any general contract or arrangement with respect to employment or termination of employment, except those extension orders that apply to all Israeli companies generally.
(p) Each employee of the Parent is a party to a confidentiality, non-competition and protection of intellectual property agreement with the Parent; copies of such agreements have previously been delivered, or made available, to Parent.
(q) No group of employees has notified the Parent of its intent, or, to the Knowledge of the Parent, has any plans, to terminate employment with the Parent.
(r) The Parent does not have unsatisfied obligations of any nature to any of its former employees or consultants.
3.18 Environmental Matters.
The Company is, and since January 1, 2021 has been, in compliance with all applicable Environmental Laws, which compliance includes the possession by the Parent of all permits and other Governmental Authorizations required under applicable Environmental Laws and compliance with the terms and conditions thereof, except for any failure to be in such compliance that, either individually or in the aggregate, would not reasonably be expected to be material to the Parent or its business. The Parent has not received since January 1, 2021 (or prior to that time, which to the Knowledge of the Parent is pending and unresolved), any written notice or other communication (in writing or otherwise), whether from a Governmental Body or other Person, that alleges that the Parent is not in compliance with or has liability pursuant to any Environmental Law and, to the Knowledge of the Parent, there are no circumstances that would reasonably be expected to prevent or interfere with the Parent’s compliance in any material respects with any Environmental Law, except where such failure to comply would not reasonably be expected to be material to the Parent or its business. No current or (during the time a prior property was leased or controlled by the Parent) prior property leased or controlled by the Parent has had a release of or exposure to Hazardous Materials in material violation of or as would reasonably be expected to result in any material liability of the Parent pursuant to Environmental Law. No consent, approval or Governmental Authorization of or registration or filing with any Governmental Body is required by Environmental Laws in connection with the execution and delivery of this Agreement or the consummation of the Contemplated Transactions. Prior to the date hereof, the Parent has provided or otherwise made available to Company true and correct copies of all material environmental reports, assessments, studies and audits in the possession or control of the Parent with respect to any property leased or controlled by the Parent or any business operated by it.
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3.19 Insurance.
Parent has delivered or made available to the Company accurate and complete copies of all material insurance policies and all material self-insurance programs and arrangements relating to the business, assets, liabilities and operations of Parent. Each of such insurance policy is in full force and effect and Parent is in compliance in all material respects with the terms thereof. Other than customary end of policy notifications from insurance carriers, since January 1, 2021, Parent has not received any notice or other communication regarding any actual or possible: (i) cancellation or invalidation of any insurance policy; or (ii) refusal or denial of any coverage, reservation of rights or rejection of any material claim under any insurance policy. Parent has provided timely written notice to the appropriate insurance carrier(s) of each Legal Proceeding that is currently pending against Parent for which Parent has insurance coverage, and no such carrier has issued a denial of coverage or a reservation of rights with respect to any such Legal Proceeding, or informed Parent of its intent to do so.
3.20 No Financial Advisors.
Except as set forth on Section 3.20 of the Parent Disclosure Schedule, no broker, finder or investment banker is entitled to any brokerage fee, finder’s fee, opinion fee, success fee, transaction fee or other fee or commission in connection with the Contemplated Transactions to which it is a party based upon arrangements made by or on behalf of Parent or Merger Sub.
3.21 Anti-Bribery.
Neither Parent nor any of its directors, officers, employees or, to Parent’s Knowledge, agents or any other Person acting on their behalf has directly or indirectly made any bribes, rebates, payoffs, influence payments, kickbacks, illegal payments, illegal political contributions, or other payments, in the form of cash, gifts, or otherwise, or taken any other action, in violation of Anti-Bribery Laws. Parent is not nor has ever been the subject of any investigation or inquiry by any Governmental Body with respect to potential violations of Anti-Bribery Laws.
3.22 Valid Issuance.
The Parent Ordinary Shares to be issued in the Merger (including the Parent Ordinary Shares issuable upon exercise of the Parent Pre-Funded Warrants) will, when issued in accordance with the provisions of this Agreement, be validly issued, fully paid and nonassessable.
3.23 Valuation Report of Financial Advisor.
The Parent Board has received the valuation report prepared by E.D.B Consulting and Investments Ltd., and has determined based on the value of the Company estimated therein, that, as of the date of this Agreement and subject to the assumptions, qualifications, limitations and other matters set forth therein, the Exchange Ratio is fair, from a financial point of view to the holders of Parent Ordinary Shares. It is agreed and understood that such valuation report is for the benefit of the Parent Board and may not be relied upon by the Company.
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3.24 Disclaimer of Other Representations or Warranties.
Except as set forth in this Section 3 or in any certificate delivered by Parent or Merger Sub to the Company pursuant to this Agreement, neither Parent nor Merger Sub makes any representation or warranty, express or implied, at law or in equity, with respect to it or any of its assets, liabilities or operations, and any such other representations or warranties are hereby expressly disclaimed.
4. CERTAIN COVENANTS OF THE PARTIES
4.1 Operation of Parent’s Business.
(a) Except as set forth in Section 4.1(a) of the Parent Disclosure Schedule, as expressly permitted by this Agreement (including the consummation of a Closing Financing), as required by applicable Law or unless the Company shall otherwise consent in writing (which consent shall not be unreasonably withheld, delayed or conditioned), during the period commencing on the date of this Agreement and continuing until the earlier to occur of the termination of this Agreement pursuant to Section 9 and the Effective Time (the “Pre-Closing Period”): (i) Parent shall conduct its business and operations in the Ordinary Course of Business subject to and without derogating from any of the Parent’s covenants set forth in Section 4.1(b); (ii) Parent shall conduct its business and operations in compliance in all material respects with all applicable Laws.
(b) Except: (i) as expressly permitted by this Agreement, (ii) as set forth in Section 4.1(b) of the Parent Disclosure Schedule, (iii) for entering into and consummating the Closing Financing, (iv) as required by applicable Law, or (v) with the prior written consent of the Company (which consent shall not be unreasonably withheld, delayed or conditioned), at all times during the Pre-Closing Period, Parent shall not do any of the following:
(i) declare, accrue, set aside or pay any dividend or make any other distribution in respect of any of its shares or make any other actual, constructive or deemed distribution in respect of the Parent Share Capital, or directly or indirectly acquire, repurchase, redeem or otherwise reacquire any of its shares or other securities (except in connection with the payment of the exercise price and/or withholding Taxes incurred upon the exercise, settlement or vesting of any award granted under the Parent Share Plans and in accordance with their current terms);
(ii) sell, issue, grant, pledge or otherwise dispose of or encumber or authorize any of the foregoing with respect to: (A) any shares or other security of Parent (except for Parent Ordinary Shares issued upon the valid exercise of outstanding Parent Equity Awards or Parent Warrants); (B) any option, warrant or right to acquire any shares or any other security; or (C) any instrument convertible into or exchangeable for any shares or other security of Parent;
(iii) except as required to give effect to anything in contemplation of the Closing, amend any of its Organizational Documents, or effect or be a party to any merger, consolidation, share exchange, business combination, recapitalization, reclassification of shares, share split, reverse share split, or similar transaction except, for the avoidance of doubt, the Contemplated Transactions and as permitted by this Agreement;
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(iv) propose to adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Parent, or elect or appoint any new directors or executive officers of the Parent, except for the transactions contemplated by this Agreement and actions and resolutions adopted in the course of its implementation;
(v) form any Subsidiary or acquire any equity interest or other interest in any other Entity or enter into a joint venture, strategic alliance or partnership with any other Entity;
(vi) acquire or agree to acquire (by merger, consolidation or acquisition of s or assets or by any other manner) (1) any business or other Person, or (2) any assets that are material, individually or in the aggregate, to the Parent, or (3) sell, lease (as lessor), license or otherwise dispose of or subject to any Lien any properties or assets of the Parent, which are material to the Parent;
(vii) (A) lend money to any Person, (B) incur or guarantee any indebtedness for borrowed money, (C) guarantee any debt securities of others, or (D) make any capital expenditure in excess of the budgeted capital expenditure amounts set forth in Parent operating budget set forth in Section 4.1(b)(vii)of the Parent Disclosure Schedule (the “Parent Budget”); other than as required by applicable Law or the terms of any Parent Benefit Plan as in effect on the date of this Agreement: (i) adopt, terminate, establish or enter into any Parent Benefit Plan; (ii) cause or permit any Parent Benefit Plan to be amended in any material respect; (iii) pay any bonus or make any profit-sharing or similar payment to, or increase the amount of the wages, salary, commissions, benefits or other compensation or remuneration payable to any of its directors, officers or employees except for the payment of annual bonuses according to the targets predetermined for the year end 2023 (including any discretionary component); (iv) increase the severance or change of control benefits offered to any current or new employees, directors or consultants or (v) hire, terminate or give notice of termination to any (x) officer or (y) employee whose annual base salary is or is expected to be more than $25,000 per year;
(viii) recognize any labor union, labor organization, or similar Person;
(ix) enter into any material transaction;
(x) acquire any material asset or sell, lease or otherwise irrevocably dispose of any of its assets or properties, or grant any Encumbrance with respect to such assets or properties;
(xi) sell, assign, transfer, license, sublicense or otherwise dispose of any material Parent IP;
(xii) make, change or revoke any material Tax election, fail to pay any income or other material Tax as such Tax becomes due and payable (subject to good faith disputes with respect to such Taxes), file any amendment making any material change to any Tax Return, settle or compromise any income or other material Tax liability, enter into any Tax allocation, sharing, indemnification or other similar agreement or arrangement, request or consent to any extension or waiver of any limitation period with respect to any claim or assessment for any income or other material Taxes (other than pursuant to an extension of time to file any Tax Return granted in the Ordinary Course of Business of not more than six months), or adopt or change any material accounting method in respect of Taxes;
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(xiii) (A) except as otherwise set forth in the Parent Budget, make any expenditures, incur any Liabilities, settle, discharge or satisfy any claims, litigation or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) or Liabilities, in each case, in amounts that exceed the aggregate amount of the Parent Budget by $200,000, except for any amounts related to claims, litigations, obligations, or Liabilities that are outstanding as of the date of this Agreement, or (B) cancel any material indebtedness for borrowed money (individually or in the aggregate) or waive any claims or rights with a value in excess of $200,000, or (C) give any material discount, accommodation or other concession (other than in the ordinary course of business consistent with past practice) in order to accelerate or induce the collection of any receivable;
(xiv) enter into, engage in or amend any transaction or Contract with any interested parties (Ba’alay Inyan);
(xv) other than as required by Law or IFRS, take any action to change accounting policies or procedures;
(xvi) cancel or fail to in good faith seek to renew any material insurance policies;
(xvii) apply for or accept (x) any Government Grant from the IIA or any other Israeli Governmental Authority, or (y) any material Government Grants from any other Governmental Authority; or
(xviii) agree, resolve or commit to do any of the foregoing.
Nothing contained in this Agreement shall give the Company, directly or indirectly, the right to control or direct the operations of Parent prior to the Effective Time. Prior to the Effective Time, Parent shall exercise, consistent with the terms and conditions of this Agreement, complete unilateral control and supervision over its business operations.
4.2 Operation of the Company’s Business.
(a) Except as set forth in Section 4.2(a) of the Company Disclosure Schedule, as expressly permitted by this Agreement (including a Closing Financing), as required by applicable Law or unless Parent shall otherwise consent in writing (which consent shall not be unreasonably withheld, delayed or conditioned), during the Pre-Closing Period, the Company shall conduct its business and operations: (i) in the Ordinary Course of Business subject to and without derogating from any of the Company’s covenants set forth in Section 4.2(b) ; and (ii) in compliance in all material respects with all applicable Laws and the requirements of all Contracts that constitute Company Material Contracts.
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(b) Except: (i) as expressly permitted by this Agreement, (ii) as set forth in Section 4.2(b) of the Company Disclosure Schedule, (iii) as required by applicable Law or (iv) with the prior written consent of Parent (which consent shall not be unreasonably withheld, delayed or conditioned), at all times during the Pre-Closing Period, the Company shall not do any of the following:
(i) declare, accrue, set aside or pay any dividend or make any other distribution in respect of any shares of its share capital or make any other actual, constructive or deemed distribution in respect of Company Ordinary Shares, or directly or indirectly acquire, or repurchase, redeem or otherwise reacquire any shares of its share capital or other securities (except in connection with the payment of the exercise price and/or withholding Taxes incurred upon the exercise, settlement or vesting of any award granted under the Company Share Plans in accordance with their current terms);
(ii) sell, issue, grant, pledge or otherwise dispose of or encumber or authorize any of the foregoing with respect to: (A) any share capital or other security of the Company (except for outstanding Company Ordinary Shares issued upon the valid exercise of Company Options); (B) any option, warrant or right to acquire any share capital or any other security, other than award grants to employees and service providers; or (C) any instrument convertible into or exchangeable for any share capital or other security of the Company;
(iii) except as required to give effect to anything in contemplation of the Closing, amend any of its Organizational Documents, or effect or be a party to any merger, consolidation, share exchange, business combination, recapitalization, reclassification of shares, share split, reverse share split or similar transaction except, for the avoidance of doubt, the Contemplated Transactions;
(iv) propose to adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company, or elect or appoint any new directors or executive officers of the Company, except for the transactions contemplated by this Agreement and actions and resolutions adopted in the course of its implementation;
(v) form any Subsidiary or acquire any equity interest or other interest in any other Entity or enter into a joint venture, strategic alliance or partnership with any other Entity;
(vi) acquire or agree to acquire (by merger, consolidation or acquisition of shares or assets or by any other manner) (1) any business or other Person or (2) any assets that are material, individually or in the aggregate, to the Company; or (3) other than in the Ordinary Course of Business, sell, lease (as lessor), license or otherwise dispose of or subject to any Lien any properties or assets of the Company, which are material to the Company, except for purchases of inventory, services or supplies in the Ordinary Course of Business;
(vii) (A) lend money to any Person (except for the advance of expenses to employees, directors and consultants in the Ordinary Course of Business), (B) incur or guarantee any indebtedness for borrowed money, or (C) guarantee any debt securities of others;
(viii) recognize any labor union, labor organization, or similar Person;
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(ix) enter into any material transaction other than in the Ordinary Course of Business;
(x) acquire any material asset or sell, lease or otherwise irrevocably dispose of any of its assets or properties, or grant any Encumbrance with respect to such assets or properties, except in the Ordinary Course of Business;
(xi) make, change or revoke any material Tax election, fail to pay any income or other material Tax as such Tax becomes due and payable (subject to good faith disputes with respect to such Taxes), file any amendment making any material change to any Tax Return, settle or compromise any income or other material Tax liability, enter into any Tax allocation, sharing, indemnification or other similar agreement or arrangement (other than customary commercial contracts entered into in the Ordinary Course of Business the principal subject matter of which is not Taxes), request or consent to any extension or waiver of any limitation period with respect to any claim or assessment for any income or other material Taxes (other than pursuant to an extension of time to file any Tax Return granted in the Ordinary Course of Business of not more than six months), or adopt or change any material accounting method in respect of Taxes;
(xii) enter into, materially amend or terminate any Company Material Contract, except if such execution, amendment or termination is in the Ordinary Course of Business;
(xiii) (A) except in the Ordinary Course of Business, make any expenditures, incur any Liabilities, settle or discharge or satisfy any claims, litigation, obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) or Liabilities, or (B) cancel any material indebtedness for borrowed money (individually or in the aggregate) or waive any claims or rights with a value in excess of $200,000, or (C) give any material discount, accommodation or other concession (other than in the Ordinary Course of Business consistent with past practice) in order to accelerate or induce the collection of any receivable;
(xiv) enter into, engage in or amend any transaction or Contract with any interested parties (Ba’alay Inyan), except as required for the consummation of the Closing ;
(xv) other than as required by Law or IFRS, take any action to change accounting policies or procedures;
(xvi) cancel or fail to in good faith seek to renew any material insurance policies;
(xvii) apply for or accept (x) any Government Grant from the IIA or any other Israeli Governmental Authority, or (y) any material Government Grants from any other Governmental Authority;
(xviii) initiate or settle, compromise, or agree to settle any Legal Proceeding; or
(xix) agree, resolve or commit to do any of the foregoing.
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Nothing contained in this Agreement shall give Parent, directly or indirectly, the right to control or direct the operations of the Company prior to the Effective Time. Prior to the Effective Time, the Company shall exercise, consistent with the terms and conditions of this Agreement, complete unilateral control and supervision over its business operations.
4.3 Access and Investigation.
Subject to the terms of the Confidentiality Agreement, which the Parties agree will continue in full force following the date of this Agreement, during the Pre-Closing Period, upon not less than three (3) Business Days’ notice, Parent, on the one hand, and the Company, on the other hand, shall and shall use commercially reasonable efforts to cause such Party’s Representatives to: (a) provide the other Party and such other Party’s Representatives with reasonable access during normal business hours to such Party’s Representatives, personnel, property and assets and to all existing books, records, Tax Returns, work papers and other documents and information relating to such Party and its Subsidiaries; (b) provide the other Party and such other Party’s Representatives with such copies of the existing books, records, Tax Returns, work papers, product data, and other documents and information relating to such Party and its Subsidiaries, and with such additional financial, operating and other data and information regarding such Party and its Subsidiaries as the other Party may reasonably request; (c) permit the other Party’s officers and other employees to hold discussions, upon reasonable notice and during normal business hours, with the chief financial officer and other officers and managers of such Party responsible for such Party’s financial statements and the internal controls of such Party to discuss such matters as the other Party may deem necessary or appropriate and; (d) make available to the other Party copies of unaudited financial statements, material operating and financial reports prepared for senior management or the board of directors of such Party, and any material notice, report or other document filed with or sent to or received from any Governmental Body in connection with the Contemplated Transactions. Any investigation conducted by either Parent or the Company pursuant to this Section 4.3 shall be conducted in such manner as not to interfere unreasonably with the conduct of the business of the other Party. Each Party shall provide the other Party with unaudited cash balances promptly after such cash balances are available to such Party, and with a statement of accounts payable of such Party as of the end of each calendar month, promptly after such Party prepares such a statement, all to the extent prepared by and available to such Party.
Notwithstanding the foregoing, any Party may restrict the foregoing access to the extent that any Law applicable to such Party requires such Party to restrict or prohibit access to any such properties or information or as may be necessary to preserve the attorney-client privilege under any circumstances in which such privilege may be jeopardized by such disclosure or access.
4.4 Parent Non-Solicitation.
(a) Parent agrees that during the Pre-Closing Period it shall not, nor shall it authorize any of its Representatives to, directly or indirectly: (i) solicit, initiate or knowingly encourage, induce or facilitate the communication, making, submission or announcement of any Acquisition Proposal or Acquisition Inquiry or take any action that could reasonably be expected to lead to an Acquisition Proposal or Acquisition Inquiry; (ii) furnish any non-public information regarding Parent to any Person in connection with or in response to an Acquisition Proposal or Acquisition Inquiry; (iii) engage in discussions (other than to inform any Person of the existence of the provisions in this Section 4.4) or negotiations with any Person with respect to any Acquisition Proposal or Acquisition Inquiry; (iv) approve, endorse or recommend any Acquisition Proposal (subject to Section 5.3); (v) execute or enter into any letter of intent or any Contract contemplating or otherwise relating to any Acquisition Transaction; or (vi) publicly propose to do any of the foregoing. Without limiting the generality of the foregoing, Parent acknowledges and agrees that, in the event any Representative of Parent (whether or not such Representative is purporting to act on behalf of Parent) takes any action that, if taken by Parent, would constitute a breach of this Section 4.4, the taking of such action by such Representative shall be deemed to constitute a breach of this Section 4.4 by Parent for purposes of this Agreement.
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(b) If Parent or any Representative of Parent receives an Acquisition Proposal or Acquisition Inquiry at any time during the Pre-Closing Period, then Parent shall promptly (and in no event later than one Business Day after Parent becomes aware of such Acquisition Proposal or Acquisition Inquiry) advise the Company orally and in writing of such Acquisition Proposal or Acquisition Inquiry (including the identity of the Person making or submitting such Acquisition Proposal or Acquisition Inquiry, and the material terms thereof). Parent shall keep the Company reasonably informed with respect to the status and material terms of any such Acquisition Proposal or Acquisition Inquiry and any material modification or proposed material modification thereto.
(c) Parent shall immediately cease and cause to be terminated any existing discussions, negotiations and communications with any Person that relate to any Acquisition Proposal or Acquisition Inquiry that has not already been terminated as of the date of this Agreement and request the destruction or return of any nonpublic information of Parent provided to such Person.
Nothing in this Section 4.4 shall be deemed to restrict Parent and its Representatives from communications, negotiations and entering into agreements to the extent reasonably necessary for purposes of pursuing and completing for transactions that are specifically authorized by this Agreement, including transactions related to the Closing Financing.
4.5 Company Non-Solicitation.
(a) The Company agrees that, during the Pre-Closing Period, the Company shall not, nor shall it authorize any of its Representatives to, directly or indirectly: (i) solicit, initiate or knowingly encourage, induce or facilitate the communication, making, submission or announcement of any Acquisition Proposal or Acquisition Inquiry or take any action that could reasonably be expected to lead to an Acquisition Proposal or Acquisition Inquiry; (ii) furnish any non-public information regarding the Company to any Person in connection with or in response to an Acquisition Proposal or Acquisition Inquiry; (iii) engage in discussions (other than to inform any Person of the existence of the provisions in this Section 4.5) or negotiations with any Person with respect to any Acquisition Proposal or Acquisition Inquiry; (iv) approve, endorse or recommend any Acquisition Proposal; (v) execute or enter into any letter of intent or any Contract contemplating or otherwise relating to any Acquisition Transaction; or (vi) publicly propose to do any of the foregoing. Without limiting the generality of the foregoing, the Company acknowledges and agrees that, in the event any Representative of the Company (whether or not such Representative is purporting to act on behalf of the Company) takes any action that, if taken by the Company, would constitute a breach of this Section 4.5, the taking of such action by such Representative shall be deemed to constitute a breach of this Section 4.5 by the Company for purposes of this Agreement.
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(b) If the Company or any Representative of the Company receives an Acquisition Proposal or Acquisition Inquiry at any time during the Pre-Closing Period, then the Company shall promptly (and in no event later than one Business Day after the Company becomes aware of such Acquisition Proposal or Acquisition Inquiry) advise Parent orally and in writing of such Acquisition Proposal or Acquisition Inquiry (including the identity of the Person making or submitting such Acquisition Proposal or Acquisition Inquiry, and the material terms thereof). The Company shall keep Parent reasonably informed with respect to the status and material terms of any such Acquisition Proposal or Acquisition Inquiry and any material modification or proposed material modification thereto.
(c) The Company shall immediately cease and cause to be terminated any existing discussions, negotiations and communications with any Person that relate to any Acquisition Proposal or Acquisition Inquiry that has not already been terminated as of the date of this Agreement and request the destruction or return of any nonpublic information of the Company provided to such Person.
Nothing in this Section 4.5 shall be deemed to restrict Company and its Representatives from communications, negotiations and entering into agreements to the extent reasonably necessary for purposes of pursuing and completing for transactions that are specifically authorized by this Agreement.
4.6 Notification of Certain Matters.
(a) During the Pre-Closing Period, the Company shall promptly notify Parent (and, if in writing, furnish copies of) if any of the following occurs: (i) any notice or other communication is received from any Person alleging that the Consent of such Person is or may be required in connection with any of the Contemplated Transactions; (ii) any Legal Proceeding against or involving or otherwise affecting the Company is commenced, or, to the Knowledge of the Company, threatened against the Company or, to the Knowledge of the Company, any director or officer of the Company; (iii) the Company becomes aware of any inaccuracy in any representation or warranty made by it in this Agreement; or (iv) the failure of the Company to comply with any covenant or obligation of the Company; in the case of sub-limbs (iii) and (iv) that could reasonably be expected to make the timely satisfaction of any of the conditions set forth in Sections 6 or 7 , as applicable, impossible or materially less likely. No notification given to Parent pursuant to this Section 4.6(a) shall change, limit or otherwise affect any of the representations, warranties, covenants or obligations of the Company contained in this Agreement or the Company Disclosure Schedule for purposes of Sections 6 or 7, as applicable.
(b) During the Pre-Closing Period, Parent shall promptly notify the Company (and, if in writing, furnish copies of) if any of the following occurs: (i) any notice or other communication is received from any Person alleging that the Consent of such Person is or may be required in connection with any of the Contemplated Transactions; (ii) any Legal Proceeding against or involving or otherwise affecting Parent is commenced, or, to the Knowledge of Parent, threatened against Parent or, to the Knowledge of Parent, any director or officer of Parent; (iii) Parent becomes aware of any inaccuracy in any representation or warranty made by it in this Agreement; or (iv) the failure of Parent to comply with any covenant or obligation of Parent or Merger Sub; in the case of sub-limbs (iii) and (iv) that could reasonably be expected to make the timely satisfaction of any of the conditions set forth in Sections 6 or 8, as applicable, impossible or materially less likely. No notification given to the Company pursuant to this Section 4.6(b) shall change, limit or otherwise affect any of the representations, warranties, covenants or obligations of Parent contained in this Agreement or the Parent Disclosure Schedule for purposes of Sections 6 and 8, as applicable.
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4.7 Post-Closing Financing
At the Closing, the Parent shall deliver to the Company an amount of $4,250,000 (less any amount due by the Company to the Parent under any loan agreement between the parties), by wire transfer of immediately available funds to an account, the details of which shall be provided by the Company, for the Company’s ongoing capital requirements and operational expenses.
5. ADDITIONAL AGREEMENTS OF THE PARTIES
5.1 Court Approval, Registration Statement and Transaction Report.
(a) As promptly as practicable after the execution and delivery of this Agreement and in accordance with Sections 350 and 351 of the Companies Law, the Company shall submit to the district court of Tel Aviv-Jaffa (the “Applicable Court”) a first motion to convene, in the manner set forth in the Companies Law and the regulations promulgated pursuant to Sections 350 and 351 of the Companies Law and as shall otherwise be ordered by the Applicable Court (the “First Motion Approval”), a shareholders meeting (the “Company Shareholders’ Meeting”) and, if required by the Applicable Court, a Bondholder or creditors meeting (collectively, the “Company Meetings”) for the approval of the terms and conditions of an arrangement between the Company and its shareholders, Bondholders and/or creditors, including the Merger, by a majority representing at least 75% of the votes cast at the Company Meetings (the “Section 350 Vote”), together with a request to exempt from the need to publish a prospectus by reason of Section 15A(a)(3) of the Israeli Securities Law.
(b) As promptly as practicable after the execution of this Agreement, the Parties shall prepare and the Parent shall cause to be filed with the SEC, the Registration Statement. Parent hereby covenants and agrees that the Registration Statement, including any pro forma financial statements included therein (and the letter to shareholders, notice of meeting and form of proxy included therewith), will not, at the time that the Registration Statement or any amendments or supplements thereto is filed with the SEC or declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein not misleading. The Company hereby covenants and agrees that the information provided by the Company to Parent for inclusion in the Registration Statement (including the Company Financials) will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make such information not misleading. Notwithstanding the foregoing, Parent makes no covenant, representation or warranty with respect to statements made in the Registration Statement, if any, based on information provided by the Company or any of their Representatives specifically for inclusion therein. The Company and its legal counsel shall be given reasonable opportunity to review and comment on the Registration Statement, including all amendments and supplements thereto, prior to the filing thereof with the SEC, and on the response to any comments of the SEC on the Registration Statement, prior to the filing thereof with the SEC. Parent shall use commercially reasonable efforts to cause the Registration Statement to comply with the applicable rules and regulations promulgated by the SEC and to respond promptly to any comments of the SEC or its staff. Parent shall use commercially reasonable efforts to cause the Proxy Statement to be mailed to Parent’s shareholders in accordance with the applicable rules and regulations promulgated by the SEC. Each Party shall promptly furnish to the other Party all information concerning such Party and such Party’s Affiliates and such Party’s shareholders that may be required or reasonably requested in connection with any action contemplated by this Section 5.1. If Parent, Merger Sub or the Company become aware of any event or information that, pursuant to the Exchange Act, should be disclosed in an amendment or supplement to the Registration Statement, then such Party shall promptly inform the other Parties thereof and shall cooperate with such other Parties in filing such amendment or supplement with the SEC and, if appropriate, in mailing such amendment or supplement to Parent’s shareholders.
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(c) As promptly as practicable after the execution of this Agreement, the Parties shall prepare, and as soon as practicable after the First Motion Approval, the Company shall cause to be filed with the ISA such notice of the Company Meetings to call, give notice of and hold the Company Meetings, which shall include a transaction report as well as a proxy card (Ktav Hatzbaa) (such notice, transaction report and proxy card, collectively, shall be referred to herein as the “Transaction Report”), in order to obtain the Required Company Approval, in each case for purposes of adopting and approving this Agreement and the Contemplated Transactions, including the Section 350 Vote and the approval of the Restated Company Articles, (collectively, the “Company Approval Matters”). The Company covenants and agrees that the Transaction Report, including any pro forma financial statements included therein (and the letter to shareholders, notice of meeting and form of proxy included therewith), will not, at the time that the Transaction Report or any amendments or supplements thereto is filed with the ISA contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Parent covenants and agrees that the information provided by the Parent to the Company for inclusion in the Transaction Report will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make such information not misleading. Notwithstanding the foregoing, Company makes no covenant, representation or warranty with respect to statements made in the Proxy Transaction Report (and the letter to shareholders, notice of meeting and form of proxy included therewith), if any, based on information provided by the Parent or any of their Representatives specifically for inclusion therein. The Parent and its legal counsel shall be given reasonable opportunity to review and comment on the Transaction Report, including all amendments and supplements thereto, prior to the filing thereof with the ISA, and on the response to any comments of the ISA or the TASE on the Transaction Report, prior to the filing thereof with the ISA. Company shall use commercially reasonable efforts to cause the Transaction Report to comply with the applicable rules and regulations promulgated by the ISA and the TASE and to respond promptly to any comments of the ISA, the TASE or its staff. Company covenants and agrees that the Transaction Report will comply in all respects with the requirements of Israeli law. Each Party shall promptly furnish to the other Party all information concerning such Party and such Party’s Affiliates and such Party’s shareholders that may be required or reasonably requested in connection with any action contemplated by this Section 5.1. If Parent, Merger Sub or the Company become aware of any event or information that, should be disclosed in an amendment or supplement to the Transaction Report, then such Party shall promptly inform the other Parties thereof and shall cooperate with such other Parties in filing such amendment or supplement with the ISA and, if appropriate, in mailing such amendment or supplement to the Company’s shareholders.
(d) The Parties shall reasonably cooperate with each other and provide, and require their respective Representatives to provide, the other Party and its Representatives, with all true, correct and complete information regarding such Party or its Subsidiaries that is required by Law to be included in the Registration Statement and/or the Transaction Report or reasonably requested by the other Party to be included in the Registration Statement and or/the Transaction Report.
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5.2 Company Meetings.
(a) The Company agrees that:(i) the Company Board shall recommend that the Company’s shareholders and if applicable, the Company’s Bondholders and/or creditors vote to approve the Company Approval Matters and shall use reasonable best efforts to solicit such approval (the recommendation of the Company Board that the Company’s shareholders, creditors or Bondholders (as applicable) vote to adopt and approve this Agreement being referred to as the “Company Board Recommendation”); and (ii) the Company Board Recommendation shall not be withdrawn or modified (and the Company Board shall not publicly propose to withdraw or modify the Company Board Recommendation) in a manner adverse to Parent, and no resolution by the Company Board or any committee thereof to withdraw or modify the Company Board Recommendation in a manner adverse to Parent or to adopt, approve or recommend (or publicly propose to adopt, approve or recommend) any Acquisition Proposal shall be adopted or proposed (the actions set forth in the foregoing clause (ii), collectively, a “Company Board Adverse Recommendation Change”).
(b) As part of the notice of the Company Meetings, the Company will deliver to each of its shareholders, and if applicable, creditors and Bondholders, a notice of the meetings, the order of the court to convene the meetings, the application for the approval of the proposed Merger submitted to the court and a proxy card for the vote (the “Proxy Materials”). The Proxy Materials will include a description of the rights of a shareholder to object to the Merger, information on the hearing scheduled before the Applicable Court and the Company Board Recommendation. Following the approval of the Merger by the shareholders and if applicable, creditors and Bondholders, as set forth above, the Company will submit to the Applicable Court a second motion for the approval of the arrangement and the Merger and the order of all actions to be taken in accordance with the Merger, including the exemption from the need to publish a prospectus by reason of Section 15A(a)(3) of the Israeli Securities Law (these approvals when obtained shall be collectively referred to as the “Court Approval”).
(c) The Company’s obligation to solicit the Required Company Approval in accordance with Section 5.2(a) and Section 5.2(b) shall not be limited or otherwise affected by the commencement, disclosure, announcement or submission of any other Acquisition Proposal.
5.3 Parent Shareholders’ Meeting; Merger Sub Approval.
(a) Promptly as practicable following the date the Registration Statement is declared effective by the SEC under the Securities Act, or later, in case the Parent Board determines, after consultation with its outside counsel that it is likely that there are required changes/amendments to the Registration Statement, Parent shall take all action necessary under applicable Law to call, give notice of and hold the Parent Shareholders’ Meeting for the purpose of seeking approval of (i) this Agreement and the Contemplated Transactions; (ii) to the extent applicable, the adoption of the Restated Parent Articles (which shall include the change of the Parent’s company name); (iii) adoption of the form of Indemnification Agreement, (iv) if not so appointed by the Parent Board, election to the post-Closing Parent Board of the candidates designated by the Company to serve thereon in accordance with Section 5.13 below (provided that (i) if, in accordance with Section 5.13 below, the Company designates two candidates to the post-Closing Parent Board, than one of them shall be appointed or elected for three year term and another for two year term, and (ii) if, in accordance with Section 5.13 below, the Company designates three candidates to the post-Closing Parent Board, than each to be classified to a different class of the Parent Board) and (v) compensation to the directors and officers of the Parent (as of the Pre-Closing Period), all effective upon the Merger (the matters contemplated by this Section 5.3(a) are referred to as the “Parent Shareholder Matters” and such meeting, the “Parent Shareholders’ Meeting).
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(b) Parent shall take reasonable measures to ensure that all proxies solicited in connection with the Parent Shareholders’ Meeting are solicited in compliance with all applicable Law. Notwithstanding anything to the contrary contained herein, if on the date of the Parent Shareholders’ Meeting, or a date preceding the date on which the Parent Shareholders’ Meeting is scheduled, Parent reasonably believes that: (i) it will not receive proxies sufficient to obtain the Required Parent Shareholder Vote, whether or not a quorum would be present, or (ii) it will not have sufficient Parent Ordinary Shares to constitute a quorum necessary to conduct the business of the Parent Shareholders’ Meeting, Parent may postpone or adjourn, or make one or more successive postponements or adjournments of, the Parent Shareholders’ Meeting as long as the date of the Parent Shareholders’ Meeting is not postponed or adjourned more than an aggregate of 90 calendar days in connection with any postponements or adjournments.
(c) Parent agrees that: (i) the Parent Board shall recommend that Parent’s shareholders vote to approve the Parent Shareholder Matters, (ii) the Registration Statement shall include a statement to the effect that the Parent Board recommends that Parent’s shareholders vote to approve the Parent Shareholder Matters (the recommendation of the Parent Board with respect to the Parent Shareholder Matters being referred to as the “Parent Board Recommendation”); and (iii) the Parent Board Recommendation shall not be withheld, amended, withdrawn or modified (and the Parent Board shall not publicly propose to withhold, amend, withdraw or modify the Parent Board Recommendation) without the Company’s prior written consent (the actions set forth in the foregoing clause (iii), collectively, a “Parent Board Adverse Recommendation Change”).
(d) Nothing contained in this Agreement shall prohibit Parent or Parent Board from making any disclosure to the Parent shareholders if the Parent Board determines in good faith, after consultation with its outside legal counsel, that such disclosure is required for the Parent Board to comply with its fiduciary duties to the Parent shareholders under applicable Law.
(e) Without derogating from the above, nothing contained in this Agreement shall prohibit Parent or the Parent Board from: (i) complying with Rule 14d-9 promulgated under the Exchange Act, or (ii) issuing a “stop, look and listen” communication or similar communication of the type contemplated by Section 14d-9(f) under the Exchange Act.
(f) Promptly after the execution of this Agreement, and in any event within 2 Business Days, Parent, as the sole shareholder of Merger Sub, shall deliver to the Company a unanimous written consent in lieu of a meeting that adopted and approved this Agreement and the Contemplated Transactions.
(g) Parent as the sole shareholder of Merger Sub shall not take any action to rescind the unanimous written consent in lieu of a meeting that adopted and approved this Agreement and the Contemplated Transactions.
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5.4 Regulatory Approvals.
(a) Each Party shall use reasonable best efforts to file or otherwise submit, as soon as practicable after the execution of this Agreement, all applications, notices, reports, filings and other documents reasonably required to be filed by such Party with or otherwise submitted by such Party to any Governmental Body with respect to the Contemplated Transactions, and to submit promptly any additional information requested by any such Governmental Body.
(b) No Party hereto shall take any action that could reasonably be expected to adversely affect or materially delay the approval of any Governmental Body, or the expiration or termination of any waiting period under any antitrust, competition or trade regulation Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening competition through merger or acquisition, including by agreeing to merge with or acquire any other person or acquire a substantial portion of the assets of or equity in any other person. The parties hereto further covenant and agree, with respect to a threatened or pending preliminary or permanent injunction or other order, decree or ruling or statute, rule, regulation or executive order that would adversely affect the ability of the parties to consummate the Contemplated Transactions, to use reasonable best efforts to prevent or lift the entry, enactment or promulgation thereof, as the case may be.
5.5 Certificate of Merger.
As required under the Companies Law, the Company and Merger Sub shall (and the Parent shall cause Merger Sub to) file any required filings with the Companies Registrar. On the Closing Date and subject to the terms and conditions hereof, the Parties shall cause the Merger to be consummated by obtaining a certificate of merger (the “Merger Certificate”) issued by the Companies Registrar. The Merger shall become effective at such time as the Merger Certificate is issued and delivered by the Companies Registrar.
5.6 Company Options.
(a) Each Company Option that is outstanding and unexercised immediately prior to the Effective Time under the Company Share Plans, whether or not vested (taking into account any acceleration of vesting as a result of the consummation of the Merger), shall be cancelled immediately prior to the Effective Time for no consideration.
(b) Prior to the Effective Time, the Company shall take all actions that may be necessary (under the Company Share Plans and otherwise) to effectuate the provisions of this Section 5.6 and to ensure that, from and after the Effective Time, holders of Company Options have no rights with respect thereto other than those specifically provided in this Section 5.6.
5.7 Company Warrants.
(a) Each Company Warrant that is outstanding and unexercised immediately prior to the Effective Time, shall be cancelled immediately prior to the Effective Time for no consideration.
(b) Prior to the Effective Time, the Company shall take all actions that may be necessary to effectuate the provisions of this Section 5.7 and to ensure that, from and after the Effective Time, holders of Company Warrants have no rights with respect thereto other than those specifically provided in this Section 5.7.
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(c) The Company shall use its reasonable best efforts to maintain the effectiveness of the Registration Statement under the Securities Act, including if necessary the filing with and seeking effectiveness from the SEC of a replacement registration statement on an appropriate form, as long as the Pre-Funded Warrants are outstanding following the Closing, for the purpose of registering the issuance of Parent Ordinary Shares upon the exercise of any Parent Pre-Funded Warrants issued, pursuant to the terms of this Agreement.
5.8 TASE De-Listing of Company Ordinary Shares.
Prior to the Effective Time, the Company shall cooperate with Parent and use commercially reasonable best efforts to take, or cause to be taken, all actions, and do or cause to be done all things, reasonably necessary, proper or advisable on its part under applicable Law and rules and policies of the TASE to enable the de-listing of the Company Ordinary Shares from the TASE under the Israeli Securities Law effective as of the Effective Time.
5.9 Additional Agreements.
The Parties shall (a) use commercially reasonable efforts to cause to be taken all actions necessary to consummate the Contemplated Transactions and (b) reasonably cooperate with the other Parties and provide the other Parties with such assistance as may be reasonably requested for the purpose of facilitating the performance by each Party of its respective obligations under this Agreement and to enable the Surviving Company to continue to meet its obligations under this Agreement following the Closing. Without limiting the generality of the foregoing, each Party to this Agreement: (i) shall make all filings and other submissions (if any) and give all notices (if any) required to be made and given by such Party in connection with the Contemplated Transactions; (ii) shall use reasonable best efforts to obtain each Consent (if any) reasonably required to be obtained (pursuant to any applicable Law or Contract, or otherwise) by such Party in connection with the Contemplated Transactions or for such Contract (with respect to Contracts set forth in Section 2.5(d) of the Company Disclosure Schedule) to remain in full force and effect; (iii) shall use commercially reasonable efforts to lift any injunction prohibiting, or any other legal bar to, the Contemplated Transactions; and (iv) shall use commercially reasonable efforts to satisfy the conditions precedent to the consummation of this Agreement.
5.10 Disclosure.
The initial press release relating to this Agreement shall be a joint press release issued by the Company and Parent and thereafter Parent and the Company shall consult with each other before issuing any further press release(s) or otherwise making any public statement or making any announcement to Parent Associates or Company Associates (to the extent not previously issued or made in accordance with this Agreement) with respect to the Contemplated Transactions and shall not issue any such press release, public statement or announcement to Parent Associates or Company Associates without the other Party’s written consent (which shall not be unreasonably withheld, conditioned or delayed). Notwithstanding the foregoing: (a) each Party may, without such consultation or consent, make any public statement in response to questions from the press, analysts, investors or those attending industry conferences, make internal announcements to employees and make disclosures in Parent SEC Documents and/or Company TASE Documents, so long as such statements are consistent with previous press releases, public disclosures or public statements made jointly by the parties (or individually, if approved by the other Party); (b) a Party may, without the prior consent of the other Party hereto but subject to giving advance notice to the other Party, issue any such press release or make any such public announcement or statement as may be required by any Law; and (c) a Party need not consult with the other Party in connection with such portion of any press release, public statement or filing to be issued or made pursuant to Section 5.3(e) or with respect to any Acquisition Proposal or Board Adverse Recommendation Change, as applicable.
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5.11 Listing.
Parent shall use its commercially reasonable efforts, to the extent required by the rules and regulations of Nasdaq (including pursuant to any applicable discretion afforded to Nasdaq under such rules and regulations), to prepare and submit to Nasdaq a notification form for the listing of the Parent Ordinary Shares to be issued in connection with the Contemplated Transactions (including the Parent Ordinary Shares issuable upon the exercise of the Parent Pre-Funded Warrants) (the “Nasdaq Notification”). The Parties will use commercially reasonable efforts to coordinate with respect to compliance with Nasdaq rules and regulations. The Company will cooperate with Parent as reasonably requested by Parent with respect to the Nasdaq Notification, and promptly furnish to Parent all information concerning the Company and its shareholders that may be required or reasonably requested in connection with any action contemplated by this Section 5.11.
5.12 Tax Matters.
The Parties will cooperate in preparing and filing all Tax Returns of the Company that are required to be filed for any taxable periods ending on or before the Closing Date. All such Tax Returns will be prepared by treating items on such Tax Returns in a manner consistent with the past practices of the Company with respect to such items, except as required by applicable Law.
5.13 Directors and Officers.
The Parties shall take all necessary action so that immediately after the Effective Time, (a) the post-Closing Parent Board shall be comprised of at least five and not more than seven directors; whereby (b) the Company shall have the right to designate two members to the post-Closing Parent Board, if the post-Closing Parent Board is comprised of five or six directors, or three members, if the post-Closing Parent Board is comprised of seven directors; provided that at least one shall be an independent director (as defined under the Nasdaq listing rules) and if so required (based on the advice of counsel) in order to meet such condition, such director shall be acceptable by the Company but appointed by the Parent Board; (c) one designated member shall be mutually agreed between the Company and the Parent (initially being Mr. Amitai Weiss); (d) the Parent shall designate the remaining directors (the “Company Designees and the “Parent Designees”, respectively) and (e) the Persons designed by the Parent Board shall be appointed to the positions of officers of Parent, as set forth therein, to serve in such positions effective as of the Effective Time until successors are duly appointed and qualified in accordance with applicable Law.
5.14 Termination of Certain Agreements and Rights.
The Company shall cause any Investor Agreements (excluding the Company Shareholder Support Agreements) to be terminated immediately prior to the Effective Time, without any liability being imposed on the part of Company, Parent or the Surviving Company, as the case may be.
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5.15 Cooperation.
Each Party shall cooperate reasonably with the other Party and shall provide the other Party with such assistance as may be reasonably requested for the purpose of facilitating the performance by each Party of its respective obligations under this Agreement and to enable the combined entity to continue to meet its obligations following the Effective Time.
5.16 Allocation Certificates; Ownership Certificate.
(a) The Company will prepare and deliver to Parent at least ten Business Days prior to the Closing Date a certificate signed by the chief financial officer of the Company in a form reasonably acceptable to Parent setting forth (as of immediately prior to the Effective Time): (i) each record holder of Company Ordinary Shares, Company Options or Company Warrants, (ii) such record holder’s name and address, (iii) the number of Company Ordinary Shares held and/or underlying the Company Options or Company Warrants as of the Effective Time for such holder (the “Company Outstanding Shares Certificate”).
(b) Parent will prepare and deliver to the Company at least ten Business Days prior to the Closing Date a certificate signed by the chief financial officer of Parent in a form reasonably acceptable to the Company, setting forth, as of immediately prior to the Effective Time: (i) each record holder of Parent Ordinary Shares, Parent Equity Awards or Parent Warrants, (ii) such record holder’s name and address, (iii) the number of Parent Ordinary Shares held and/or underlying the Parent Equity Awards or Parent Warrants as of the Effective Time for such holder (the “Parent Outstanding Shares Certificate”).
(c) Parent will deliver to the Company at least ten Business Days prior to the Closing Date either (i) an ownership certificate, issued by a TASE member, confirming Parent’s ownership of the Company Ordinary Shares on the date of issuance thereof, together with a confirmation of the chief financial officer of Parent that no changes in Parent’s ownership of the Company Ordinary Shares were made since such ownership certificate was issued, or (ii) a certificate signed by the chief financial officer of Parent confirming that on the date of issuance thereof Parent does not own any Company Ordinary Shares, all in a form reasonably acceptable to the Company (a certificate provided under this Section 5.16(c) – the “Parent Ownership Certificate”). Following the issuance of the Parent Ownership Certificate and up to the Closing Date, the Parent shall not dispose of or acquire Company Ordinary Shares.
5.17 Company Financial Statements.
(a) As promptly as reasonably practicable following the date of this Agreement: (i) the Company will furnish to Parent audited financial statements for the fiscal years ended 2022 and 2021, and to the extent necessary to be included in the Registration Statement, for the fiscal year ended 2023, translated into English for inclusion in the Registration Statement (the “Company Audited Financial Statements”); (ii) the Company will furnish to Parent unaudited interim financial statements, translated into English for each interim period completed prior to Closing that would be required to be included in the Registration Statement or any periodic report due prior to the Closing if the Company were subject to the periodic reporting requirements under the Securities Act or the Exchange Act (the “Company Interim Financial Statements”); and (iii) the Company will furnish to Parent any such additional information or documents reasonably required by Parent, after consulting with its independent auditors, for compliance with Regulation S-X. The Company hereby covenants that each of the Company Audited Financial Statements and the Company Interim Financial Statements will be suitable for inclusion in the Registration Statement and prepared as applied on a consistent basis during the periods involved (except in each case as described in the notes thereto) and on that basis will present fairly, in all material respects, the financial position and the results of operations, changes in shareholders’ equity, and cash flows of the Company as of the dates of and for the periods referred to in the Company Audited Financial Statements or the Company Interim Financial Statements, as the case may be.
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(b) Following the Closing, the financial statements shall be audited in accordance with the auditing standards of the U.S. Public Company Accounting Oversight Board (“PCAOB”) by a PCAOB qualified auditor.
5.18 Shareholder Litigation.
Prior to the Closing, Parent shall conduct and control the settlement and defense of any shareholder litigation against Parent or any of its directors relating to this Agreement or the Contemplated Transactions; provided that (i) Parent shall keep the Company reasonably apprised of any material developments in connection with any such shareholder litigation, (ii) Parent shall consult with the Company in connection with the defense and settlement of any such shareholder litigation and (iii) any settlement or other resolution of any such shareholder litigation shall be subject to the approval of the Company, which approval shall not be unreasonably withheld, delayed or conditioned.
5.19 Certain Adjustments.
Parent and the Company shall discuss and agree the terms of any reverse split of the Parent Ordinary Shares.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PARTY
The obligations of each Party to effect the Merger and otherwise consummate the Contemplated Transactions to be consummated at the Closing are subject to the satisfaction or, to the extent permitted by applicable Law, the written waiver by each of the Parties, at or prior to the Closing, of each of the following conditions:
6.1 No Restraints.
No temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the Contemplated Transactions shall have been issued by any court of competent jurisdiction or other Governmental Body of competent jurisdiction and remain in effect and there shall not be any Law which has the effect of making the consummation of the Contemplated Transactions illegal.
6.2 Shareholder Approval.
(a) Parent shall have obtained the Required Parent Shareholder Vote and (b) the Company shall have obtained the Required Company Approval.
6.3 Court Approval.
The Court Approval shall have been obtained in accordance with the Companies Law, including after obtaining the Required Company Approval, in accordance with Sections 350 and 351 of the Companies Law and exempting among others, the Parent from the requirement to publish a prospectus in Israel.
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6.4 Tax Rulings.
The Company shall have received the Withholding Tax Ruling and the 104H Ruling, in the forms reasonably acceptable on the Parties.
6.5 Certificate of Merger.
The Company and Merger Sub shall have received the Merger Certificate from the Companies Registrar.
6.6 No Legal Prohibition.
No Governmental Authority of competent jurisdiction shall have (i) enacted, issued or promulgated any Law that is in effect and has the effect of making the Merger illegal or which has the effect of prohibiting or otherwise preventing the consummation of the Merger, or (ii) issued or granted any order that has the effect of making the Merger illegal or which has the effect of prohibiting or otherwise preventing the consummation of the Merger.
6.7 Bonds’ Trustee.
Not less than seven (7) Business Days prior to the Closing, the Company and the Parent shall provide the Bonds’ Trustee, to the extent not reported by the Company on an immediate report filed with the TASE, with (a) a written confirmation that no reasonable concern exists that due to the Merger the Company and the Parent as the absorbing company, will be unable to perform all and any obligations to the Bond holders under the terms of the Series B Bonds and the Bonds Trust Deed, and (b) a written confirmation that as a result of the Merger, no pledges that are inconsistent with the Company’s obligations under the Bonds Trust Deed regarding the creation of certain pledges, will be assigned to the Company.
6.8 Registration Statement.
The Registration Statement will have been declared effective and continue to be effective under the Securities Act. No stop order suspending the effectiveness of the Registration Statement will be in effect, and no proceedings for purposes of suspending the effectiveness of the Registration Statement will have been initiated or be threatened by the SEC.
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7. ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and otherwise consummate the transactions to be consummated at the Closing are subject to the satisfaction or the written waiver by Parent, at or prior to the Closing, of each of the following conditions:
7.1 Accuracy of Representations.
The Company Fundamental Representations shall have been true and correct as of the date of this Agreement and shall be true and correct on and as of the Closing Date with the same force and effect as if made on and as of such date (except to the extent such representations and warranties are specifically made as of a particular date, in which case such representations and warranties shall be true and correct as of such date) other than, with respect to the representations and warranties set forth in Section 2.6, for inaccuracies that are de minimis in nature and amount as of such date. The representations and warranties of the Company contained in this Agreement (other than the Company Fundamental Representations) shall have been true and correct as of the date of this Agreement and shall be true and correct on and as of the Closing Date with the same force and effect as if made on the Closing Date except: (i) in each case, or in the aggregate, where the failure to be true and correct would not reasonably be expected to have a Company Material Adverse Effect (without giving effect to any references therein to any Company Material Adverse Effect or other materiality qualifications), and (ii) for those representations and warranties which address matters only as of a particular date (which representations shall have been true and correct, subject to the qualifications as set forth in the preceding clause (i), as of such particular date) (it being understood that, for purposes of determining the accuracy of such representations and warranties, any update of or modification to the Company Disclosure Schedule made or purported to have been made after the date of this Agreement shall be disregarded).
7.2 Performance of Covenants.
The Company shall have performed or complied in all material respects with all agreements and covenants required to be performed or complied with by it under this Agreement at or prior to the Effective Time.
7.3 Documents.
Parent shall have received the following documents, each of which shall be in full force and effect:
(a) a certificate executed by the chief executive officer or chief financial officer of the Company certifying: (i) that the conditions set forth in Sections 7.1, 7.2, 7.4 and 7.5 have been duly satisfied and (ii) that the information set forth in the Company Allocation Schedule and the Company Outstanding Shares Certificate delivered by the Company in accordance with Section 1.8(b) and Section 5.16(a) is true and accurate in all respects as of the Closing Date; and
(b) the Company Allocation Schedule and the Company Outstanding Shares Certificate.
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7.4 No Company Material Adverse Effect.
Since the date of this Agreement, there shall not have occurred any Company Material Adverse Effect.
7.5 Termination of Investor Agreements.
The Investor Agreements shall have been terminated.
8. ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY
The obligations of the Company to effect the Merger and otherwise consummate the transactions to be consummated at the Closing are subject to the satisfaction or the written waiver by the Company, at or prior to the Closing, of each of the following conditions:
8.1 Accuracy of Representations.
The Parent Fundamental Representations shall have been true and correct as of the date of this Agreement and shall be true and correct on and as of the Closing Date with the same force and effect as if made on and as of such date (except to the extent such representations and warranties are specifically made as of a particular date, in which case such representations and warranties shall be true and correct as of such date) other than, with respect to the representations and warranties set forth in Section 3.6, which shall be true and correct as of the Closing Date except for inaccuracies that are de minimis in nature and amount as of such date. The representations and warranties of Parent and Merger Sub contained in this Agreement (other than the Parent Fundamental Representations) shall have been true and correct as of the date of this Agreement and shall be true and correct on and as of the Closing Date with the same force and effect as if made on the Closing Date except (a) in each case, or in the aggregate, where the failure to be true and correct would not reasonably be expected to have a Parent Material Adverse Effect (without giving effect to any references therein to any Parent Material Adverse Effect or other materiality qualifications), and (b) for those representations and warranties which address matters only as of a particular date (which representations shall have been true and correct, subject to the qualifications as set forth in the preceding clause (a), as of such particular date) (it being understood that, for purposes of determining the accuracy of such representations and warranties, any update of or modification to the Parent Disclosure Schedule made or purported to have been made after the date of this Agreement shall be disregarded).
8.2 Performance of Covenants.
Parent and Merger Sub shall have performed or complied with in all material respects all of their agreements and covenants required to be performed or complied with by each of them under this Agreement at or prior to the Effective Time.
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8.3 Documents.
The Company shall have received the following documents, each of which shall be in full force and effect:
(a) a certificate executed by the chief financial officer of Parent certifying that the conditions set forth in Sections 8.1, 8.2 and 8.4 have been duly satisfied; and
(b) the Parent Outstanding Shares Certificate; and
(c) the Parent Ownership Certificate.
8.4 No Parent Material Adverse Effect.
Since the date of this Agreement, there shall not have occurred any Parent Material Adverse Effect.
8.5 Parent Net Cash.
Parent and the Company have agreed in writing upon the calculation of the Parent Net Cash, or the Accounting Firm has delivered its determination with respect to the calculation of the Parent Net Cash, in each case pursuant to Section 1.6, and the Parent Net Cash shall be no less than $4,250,000 (less any amount owned by the Company to the Parent under any loan agreement between the parties) and the sum of $4,250,000 (less any amount owned by the Company to the Parent under any loan agreement between the parties), in accordance with Section 4.7 shall have been transferred and cleared to the Company’s designated bank account.
8.6 Listing.
The Parent Ordinary Shares shall remain listed on Nasdaq and shall not be subject to a delisting notice from Nasdaq that will not be cured by the Contemplated Transactions. The Nasdaq Notification shall have been accepted and approved (subject to official notice of issuance).
8.7 Directors and Officers.
(i) The Parent shall have appointed, effective as of the Effective Time in accordance with Section 5.13, to the Parent Board all Persons designated by the Company to the Parent Board and all such Persons shall receive an executed Indemnification Agreement with Parent in the form of Exhibit F, and (ii) Parent shall have appointed the Persons designated by the Company to the positions of officers of Parent, as set forth therein, to serve in such positions effective as of the Effective Time in accordance with Section 5.13; all until successors are duly appointed and qualified in accordance with applicable Law and Restated Parent Articles.
9. TERMINATION
9.1 Termination.
This Agreement may be terminated prior to the Effective Time (whether before or after approval of the Company Approval Matters and whether before or after approval of the Parent Shareholder Matters by Parent’s shareholders, unless otherwise specified below):
(a) at any time prior to the Effective Time, by mutual written consent of Parent and the Company;
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(b) by either Parent or the Company if the Contemplated Transactions shall not have been consummated by August 30, 2024, which can be extended by mutual consent of the Parent and the Company by additional periods (subject in either case to possible extension by agreement between the Parties, the “End Date”);
(c) by either Parent or the Company if a court of competent jurisdiction or other Governmental Body shall have issued a final and non-appealable order, decree or ruling, or shall have taken any other action, having the effect of permanently restraining, enjoining or otherwise prohibiting the Contemplated Transactions;
(d) by either Parent or the Company if: (i) the Parent Shareholders’ Meeting (including any adjournments and postponements thereof) and/or the Company Meetings shall have been held and completed and the Parent’s and/or the Company’s shareholders and/or the Company’s Bondholders or creditors (if applicable), shall have taken a final vote on the Parent Shareholder Matters or the Company Approval Matters, as applicable and (ii) the Parent Shareholder Matters or the Company Approval Matters, as applicable, shall not have been approved at the Parent Shareholders’ Meeting or the Company Meetings, as applicable (or at any adjournment or postponement thereof), by the Required Parent Shareholder Vote or the Required Company Approval, as applicable; provided, that Parent or the Company may not terminate this Agreement pursuant to this Section 9.1(d) if its breach of its obligations under this Agreement was the principal factor contributing to the failure to have obtained the approval of the Parent Shareholder Matters at the Parent Shareholders’ Meeting or of the Company Approval Matters at the Company Meetings, as applicable (including any adjournments and postponements thereof), provided, however, that Parent shall not be deemed in breach of its obligations under this Agreement in the event that a request for additional information has been made by any Governmental Body, or in the event that the SEC has not declared effective under the Securities Act the Registration Statement or otherwise delayed such declaration and as a result Parent did not have sufficient time to solicit votes;
(e) by the Company (at any time prior to the approval of the Parent Shareholder Matters by the Required Parent Shareholder Vote) if a Parent Triggering Event shall have occurred;
(f) by Parent (at any time prior to the Required Company Approval being obtained) if a Company Triggering Event shall have occurred;
(g) by the Company, upon a breach of any representation, warranty, covenant or agreement set forth in this Agreement by Parent or Merger Sub or if any representation or warranty of Parent or Merger Sub shall have become inaccurate, in either case, such that the conditions set forth in Section 8.1or Section 8.2 would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become inaccurate; provided that the Company is not then in material breach of any representation, warranty, covenant or agreement under this Agreement; provided, further, that if such inaccuracy in Parent’s or Merger Sub’s representations and warranties or breach by Parent or Merger Sub is curable by the End Date by Parent or Merger Sub, then this Agreement shall not terminate pursuant to this Section 9.1(g) as a result of such particular breach or inaccuracy until the expiration of a 30 calendar day period commencing upon delivery of written notice from the Company to Parent or Merger Sub of such breach or inaccuracy and its intention to terminate pursuant to this Section 9.1(g) (it being understood that this Agreement shall not terminate pursuant to this Section 9.1(g) as a result of such particular breach or inaccuracy if such breach by Parent or Merger Sub is cured prior to such termination becoming effective);
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(h) by Parent, upon a breach of any representation, warranty, covenant or agreement set forth in this Agreement by the Company or if any representation or warranty of the Company shall have become inaccurate, in either case, such that the conditions set forth in Section 7.1 or Section 7.2 would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become inaccurate; provided that Parent is not then in material breach of any representation, warranty, covenant or agreement under this Agreement; provided, further, that if such inaccuracy in the Company’s representations and warranties or breach by the Company is curable by the End Date by the Company then this Agreement shall not terminate pursuant to this Section 9.1(h) as a result of such particular breach or inaccuracy until the expiration of a 30 calendar day period commencing upon delivery of written notice from Parent to the Company of such breach or inaccuracy and its intention to terminate pursuant to this Section 9.1(h) (it being understood that this Agreement shall not terminate pursuant to this Section 9.1(h) as a result of such particular breach or inaccuracy if such breach by the Company is cured prior to such termination becoming effective); or
(i) by Company, if the Parent Net Cash is less than $4,250,000 (less any amount owned by the Company to the Parent under any loan agreement between the parties), by the End Date.
(j) by Parent, if the Company Audited Financial Statements have not been provided by the Company to Parent within 45 calendar days immediately following the date hereof.
9.2 Notice of Termination; Effect of Termination.
Any proper and valid termination of this Agreement pursuant to Section 9.1 shall be effective immediately upon the delivery of written notice of the terminating party to the other party or parties hereto, as applicable. In the event of the termination of this Agreement as provided in Section 9.1, this Agreement shall be of no further force or effect; provided, however, that (a) this Section 9.1, Section 5.10, Section 9.3, Section 10 and the definitions of the defined terms in such Sections shall survive the termination of this Agreement and shall remain in full force and effect, and (b) the termination of this Agreement and the provisions of Section 9.3 shall not relieve any Party of any liability for fraud or for any willful and material breach of any representation, warranty, covenant, obligation or other provision contained in this Agreement. For purposes of this Agreement, “willful breach” shall mean any act or failure to act by any person with the actual knowledge that the taking of such act or the failure to take such act would cause a breach of this Agreement. In addition to the foregoing, no termination of this Agreement shall affect the obligations of the Parties set forth in the Confidentiality Agreement, all of which obligations shall survive termination of this Agreement in accordance with their terms.
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9.3 Expenses.
(a) Except as set forth in this Section 9.3(a), all fees and expenses incurred in connection with this Agreement and the Contemplated Transactions shall be paid by the Party incurring such expenses, whether or not the Merger is consummated (including any attorney’s, accountant’s, financial advisor’s or finder’s fees); provided that (i) Parent shall pay all fees and expenses incurred in relation to the drafting, printing and filing with the SEC of the Registration Statement and any amendments and supplements thereto and paid to a financial printer or the SEC, and (ii) drafting, printing and filing with the ISA of the Transaction Report and any amendments and supplements thereto. It is understood and agreed that all fees and expenses incurred or to be incurred by the Company in connection with the Contemplated Transactions and preparing, negotiating and entering into this Agreement and the performance of its obligations under this Agreement shall be paid by the Company and that it is understood and agreed that all fees and expenses incurred or to be incurred by Parent in connection with the Contemplated Transactions and preparing, negotiating and entering into this Agreement and the performance of its obligations under this Agreement shall be paid by Parent.
(b) Each of the Parties acknowledges that: (i) the agreements contained in this Section 9.3 are an integral part of the Contemplated Transactions, (ii) without these agreements, the Parties would not enter into this Agreement and (iii) any amount payable pursuant to this Section 9.3 is not a penalty, but rather is liquidated damages in a reasonable amount that will compensate the Company in the circumstances in which such amount is payable.
10. MISCELLANEOUS PROVISIONS
10.1 Non-Survival of Representations and Warranties.
The representations and warranties of the Company, Parent and Merger Sub contained in this Agreement or any certificate or instrument delivered pursuant to this Agreement shall terminate at the Effective Time, and only the covenants that by their terms survive the Effective Time and this Section 10 shall survive the Effective Time.
10.2 Amendment.
This Agreement may be amended with the approval of the respective boards of directors of the Company, Merger Sub and Parent at any time (whether before or after obtaining the Required Company Approval or before or after obtaining the Required Parent Shareholder Vote); provided, however, that after any such approval of this Agreement by a Party’s shareholders, no amendment shall be made which by Law requires further approval of such shareholders without the further approval of such shareholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the Company, Merger Sub and Parent.
10.3 Waiver.
(a) No failure on the part of any Party to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any Party in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy.
(b) No Party shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such Party and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.
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10.4 Entire Agreement; Counterparts; Exchanges by Electronic Transmission.
This Agreement, the Company Disclosure Schedule, the Parent Disclosure Schedule and the other agreements referred to in this Agreement constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among or between any of the Parties with respect to the subject matter hereof and thereof; provided, however, that the Confidentiality Agreement shall not be superseded and shall remain in full force and effect in accordance with its terms. This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. The exchange of a fully executed Agreement (in counterparts or otherwise) by all Parties by electronic transmission in PDF format shall be sufficient to bind the Parties to the terms and conditions of this Agreement.
10.5 Applicable Law; Jurisdiction.
(a) This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Israel, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws. In any action or proceeding between any of the Parties arising out of or relating to this Agreement or any of the Contemplated Transactions, each of the Parties irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the courts located in Tel Aviv, Israel; and (b) agrees that all claims in respect of such action or proceeding shall be heard and determined exclusively in accordance with clause (a) of this Section 10.5.
10.6 Attorneys’ Fees.
In any action at law or suit in equity to enforce this Agreement or the rights of any of the Parties, the prevailing Party in such action or suit (as determined by a court of competent jurisdiction) shall be entitled to recover its reasonable out-of-pocket attorneys’ fees and all other reasonable costs and expenses incurred in such action or suit.
10.7 Assignability.
This Agreement shall be binding upon, and shall be enforceable by and inure solely to the benefit of, the Parties and their respective successors and permitted assigns; provided, however, that neither this Agreement nor any of a Party’s rights or obligations hereunder may be assigned or delegated by such Party without the prior written consent of the other Party, and any attempted assignment or delegation of this Agreement or any of such rights or obligations by such Party without the other Party’s prior written consent shall be void and of no effect.
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10.8 Notices.
All notices and other communications hereunder shall be in writing and shall be deemed to have been duly delivered and received hereunder (a) one Business Day after being sent for next Business Day delivery, fees prepaid, via a reputable overnight courier service, (b) upon delivery in the case of delivery by hand, or (c) on the date delivered in the place of delivery if sent by email (with a written or electronic confirmation of delivery) prior to 5:00 p.m. Israel time, otherwise on the next succeeding Business Day, in each case to the intended recipient as set forth below:
if to Parent or Merger Sub:
SciSparc Ltd.
20 Raul Wallenberg Street, Tower A
Tel Aviv, Israel, 6971916
Attention: Oz Adler
Email: oz@scisparc.com
with a copy to (which shall not constitute notice):
Meitar | Law Offices
16 Abba Hillel Rd.
Ramat Gan 5250608, Israel
Tel: (+972) (3) 610-3100
Attention: Dr. Shachar Hadar
Email: shacharh@meitar.com
And
Sullivan & Worcester LLP
1633 Broadway
New York, NY 10019
Tel: (212) 660-3000
Attention: Oded Har-Even, Esq., Howard E. Berkenblit, Esq
Email: ohareven@sullivanlaw.com, hberkenblit@sullivanlaw.com
if to the Company:
AutoMax Motors Ltd.
15 HaRechavim St., Jerusalem
Attention: Tomer Levy
Email: tomer@automax.co.il
with a copy to (which shall not constitute notice):
Lipa Meir & Co. Law Office
2 Weizmann ST.
Tel -Aviv 6423902, Israel
Tel: +973 (3) 6070600
Attention: Gregory Irgo, Adv.
Email: gregory@lipameir.co.il
And
Greenberg Traurig, P.A.
One Azrieli Center
Round Tower, 30th floor
132 Menachem Begin Rd, Tel Aviv 6701101, Israel
Attention: David A. Huberman
Email: David.Huberman@gtlaw.com
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10.9 Cooperation.
Each Party agrees to cooperate fully with the other Parties and to execute and deliver such further documents, certificates, agreements and instruments and to take such other actions as may be reasonably requested by the other Parties to evidence or reflect the Contemplated Transactions and to carry out the intent and purposes of this Agreement.
10.10 Severability.
Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions of this Agreement or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If a final judgment of a court of competent jurisdiction declares that any term or provision of this Agreement is invalid or unenforceable, the Parties agree that the court making such determination shall have the power to limit such term or provision, to delete specific words or phrases or to replace such term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be valid and enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the Parties agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term or provision.
10.11 Other Remedies; Specific Performance.
Except as otherwise provided herein, any and all remedies herein expressly conferred upon a Party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such Party, and the exercise by a Party of any one remedy will not preclude the exercise of any other remedy. The Parties agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that any Party does not perform the provisions of this Agreement (including failing to take such actions as are required of it hereunder to consummate this Agreement) in accordance with its specified terms or otherwise breaches such provisions. Accordingly, the Parties acknowledge and agree that the Parties shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity. Each of the Parties agrees that it will not oppose the granting of an injunction, specific performance or other equitable relief on the basis that any other Party has an adequate remedy at law or that any award of specific performance is not an appropriate remedy for any reason at law or in equity. Any Party seeking an injunction or injunctions to prevent breaches of this Agreement shall not be required to provide any bond or other security in connection with any such order or injunction.
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10.12 No Third Party Beneficiaries.
Nothing in this Agreement, express or implied, is intended to or shall confer upon any Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
10.13 Construction.
(a) References to “cash,” “dollars” or “$” are to U.S. dollars.
(b) For purposes of this Agreement, whenever the context requires: the singular number shall include the plural, and vice versa; the masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender shall include masculine and feminine genders.
(c) The Parties have participated jointly in the negotiating and drafting of this Agreement and agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting Party shall not be applied in the construction or interpretation of this Agreement, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.
(d) As used in this Agreement, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.” The word “or” shall not be exclusive.
(e) Except as otherwise indicated, all references in this Agreement to “Sections,” “Exhibits” and “Schedules” are intended to refer to Sections of this Agreement and Exhibits and Schedules to this Agreement, respectively.
(f) Any reference to legislation or to any provision of any legislation shall include any modification, amendment, re-enactment thereof, any legislative provision substituted therefor and all rules, regulations, and statutory instruments issued or related to such legislations.
(g) The bold-faced headings and table of contents contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.
(h) The Parties agree that each of the Company Disclosure Schedule and the Parent Disclosure Schedule shall be arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in this Agreement. The disclosures in any section or subsection of the Company Disclosure Schedule or the Parent Disclosure Schedule shall qualify other sections and subsections in this Agreement.
(i) Each of “delivered” or “made available” means, with respect to any documentation, that prior to 11:59 p.m. (Israel time) on the date that is two calendar days prior to the date of this Agreement: (i) a copy of such material has been posted to and made available by a Party to the other Party and its Representatives in the electronic data room maintained by such disclosing Party or (ii) such material is disclosed in the Parent SEC Documents filed with the SEC prior to the date hereof and publicly made available on the SEC’s Electronic Data Gathering Analysis and Retrieval system and/or disclosed in the Company TASE Documents filed with the ISA prior to the date hereof and publicly made available.
(j) Whenever the last day for the exercise of any privilege or the discharge of any duty hereunder shall fall upon a Friday, Saturday, or any date on which banks in Tel Aviv, Israel are authorized or obligated by Law to be closed, the Party having such privilege or duty may exercise such privilege or discharge such duty on the next succeeding day which is a regular Business Day.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first above written.
| SCISPARC LTD. | ||
| By: | /s/ Oz Adler | |
| Name: | Oz Adler | |
| Title: | Chief Executive Officer | |
| SCISPARC MERGER SUB LTD. | ||
| By: | /s/ Oz Adler | |
| Name: | Oz Adler | |
| Title: | Director | |
| AUTOMAX MOTORS LTD. | ||
| By: | /s/ Tomer Levy | |
| Name: | Tomer Levy | |
| Title: | Director | |
| By: | /s/ Yaarah Alfi | |
| Name: | Yaarah Alfi | |
| Title: | Chief Financial Officer | |
[SIGNATURE PAGE TO MERGER AGREEMENT]
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addendum no. 1
to
AGREEMENT AND PLAN OF MERGER
This addendum, dated August 14, 2024 (the “Effective Date”) constitutes addendum no. 1 (the “Addendum”) to that certain Agreement and Plan Of Merger dated April 10, 2024 (hereinafter together, the “Agreement”), by and between, SciSparc Ltd., an Israeli limited company (the “Parent”), SciSparc Merger Sub Ltd., an Israeli limited company and wholly-owned subsidiary of Parent (“Merger Sub”), and AutoMax Motors Ltd., an Israeli limited company (the “Company”).
| WHEREAS | the Parties wish to modify and amend certain provisions set forth in the Agreement, all as further stipulated herein. |
NOW THEREFORE, the parties hereto agree to amend the Agreement as follows:
| 1. | Amendment of End Date: |
Notwithstanding Section 9.1(b) of the Agreement, the End Date shall be extended from August 30, 2024, to November 30, 2024.
| 2. | General |
| 2.1. | Any and all provisions, terms and/or conditions contained in the Agreement shall continue in full force and effect, unless and to the extent otherwise expressly provided herein which provisions will supersede any such provisions of the Agreement. In the event of a conflict or inconsistency between the terms of the Agreement, previous addendums/amendments (if any), and the terms of this Addendum, the terms of the latter shall govern and prevail. |
| 2.2. | This Addendum shall be deemed for all intents and purposes an integral part of the Agreement. |
| 2.3. | Terms used but not defined herein shall have the meanings assigned to such terms in the Agreement. |
[Signature page to follow]
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IN WITNESS WHEREOF, the undersigned have caused this Addendum to be executed as of the Effective Date.
| SCISPARC LTD. | ||
| By: | /s/ Oz Adler | |
| Name: | Oz Adler | |
| Title: | Chief Executive Officer | |
| SCISPARC MERGER SUB LTD. | ||
| By: | /s/ Oz Adler | |
| Name: | Oz Adler | |
| Title: | Director | |
| AUTOMAX MOTORS LTD. | ||
| By: | /s/ Tomer Levy | |
| Name: | Tomer Levy | |
| Title: | Director | |
| By: | /s/ Yaarah Alfi | |
| Name: | Yaarah Alfi | |
| Title: | Chief Financial Officer | |
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ANNEX B
Execution Copy
SHAREHOLDER SUPPORT AGREEMENT
This Shareholder Support Agreement, dated as of April 10, 2024 (this “Agreement”), is entered into by and among SciSparc Ltd., an Israeli limited company (the “Parent”) and each of the shareholders of AutoMax Motors Ltd. (the “Company”) listed on Schedule I hereto (the “Shareholders”).
W I T N E S S E T H:
WHEREAS, Parent, SciSparc Merger Sub Ltd., a company organized under the laws of the State of Israel and a wholly-owned subsidiary of Parent (“Merger Sub”), and the Company are concurrently with this Agreement entering into that certain Agreement and Plan of Merger a copy of which was provided to the Shareholders (the “Merger Agreement”), pursuant to which, among other things, at the Effective Time, Merger Sub will merge with and into the Company, with the Company continuing as the Surviving Company and a wholly owned subsidiary of Parent on the terms and conditions set forth in the Merger Agreement (the “Merger”) on the terms and subject to the conditions set forth in the Merger Agreement and by way of a court approved arrangement between the Company and its shareholders and, if applicable, its creditors and bondholders, in accordance with the provisions of Sections 350 and 351 of the Companies Law 5759-1999 of the State of Israel (together with the rules and regulations promulgated thereunder, the “Companies Law”);
WHEREAS, each Shareholder, as of the date hereof, holds or Beneficially Owns its Existing Shares; and
WHEREAS, as a condition and material inducement to the Parent’s willingness to enter into the Merger Agreement and to consummate the transactions contemplated thereby, including the Merger, the Shareholders have agreed to enter into this Agreement, pursuant to which the Shareholders are agreeing, among other things, to vote all of their Covered Shares in accordance with the terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
GENERAL
Section 1.1 Defined Terms. Each of the following capitalized terms, as used in this Agreement, shall have the meaning set forth below next to such term. Each capitalized term used but not otherwise defined in this Agreement shall have the meaning ascribed thereto in the Merger Agreement.
(a) “Beneficial Ownership” the ownership of Company Shares, including Company Shares of which a Shareholder directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares the power to vote or direct the voting of, or the power to dispose or to direct the disposition of, such Company Shares.
(b) “Company Shares” means ordinary shares, par value NIS 0.05 per share, of the Company.
(c) “Covered Shares” means each Shareholder’s Existing Shares, together with any Company Shares or other voting share capital of Company issuable upon the conversion, exercise or exchange of securities that are, as of the relevant date, convertible into or exercisable or exchangeable for Company Shares or other voting share capital of Company, and any other Company Shares or other voting share capital of Company, in each case that such Shareholder has or acquires Beneficial Ownership of on or after the date hereof and prior to the termination of this Agreement (including by means of purchase, dividend or distribution, or upon the exercise of any stock options, warrants or other rights).
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(d) “Existing Shares” means the Company Shares Beneficially Owned by such Shareholder as of the date hereof. Each Shareholder represents and warrants that all of the Existing Shares owned by such Shareholder are as set forth in Exhibit B hereto.
(e) “Expiration Date” means any date upon which the Merger Agreement is validly terminated (for any reason) in accordance with its terms.
(f) “Permitted Transfer” means a Transfer of Covered Shares by any Shareholder to a Permitted Transferee, provided that (i) the transferee remains a Permitted Transferee of such Shareholder at all times following such Transfer until the termination of this Agreement in accordance with Section 5.1 hereof; provided further, that prior to the effectiveness of such Transfer (A) written notice of such Transfer is delivered to Parent in accordance with Section 5.4, and (B) such transferee executes and delivers to the Parent a joinder to this Agreement in the form attached hereto as Exhibit A, pursuant to which such transferee agrees to assume all of such Shareholder’s obligations hereunder in respect of the securities subject to such Transfer and to be bound by the terms of this Agreement, with respect to the securities subject to such Transfer, to the same extent as such Shareholder is bound hereunder and to make each of the representations and warranties in respect of the securities Transferred as such Shareholder shall have made hereunder (the “Joinder Agreement”).
(g) “Permitted Transferee” means transfers of a Shareholder’s Covered Shares as bona fide charitable contributions, gifts or donations, (ii) transfers or dispositions of a Shareholder’s Covered Shares to an immediate family member of such Shareholder or to any trust for the direct or indirect benefit of the Shareholder or the immediate family of such Shareholder, (iii) transfers or dispositions of a Shareholder’s Covered Shares by will, other testamentary document or intestate succession to the legal representative, heir, beneficiary or a member of the immediate family of such Shareholder, (iv) if a Shareholder is a partnership, limited liability company, corporation or other entity, transfers of such Shareholder’s Covered Shares to the shareholders, partners (general or limited), members, managers, other equity holders or affiliates of such Shareholder, as applicable, or to the estates of any such shareholders, partners, members, managers, other equity holders or affiliates, or to another corporation, partnership, limited liability company or other entity that controls, is controlled by or is under common control with such Shareholder or with any of such Shareholder’s partners, members, managers or other equity holders or affiliates (v) transfers that occur by operation of law pursuant to a qualified domestic relations order or in connection with a divorce settlement, (vi) transfers or dispositions not involving a change in beneficial ownership, and (vii) if a Shareholder is a trust, transfers or dispositions to any beneficiary of such Shareholder or the estate of any such beneficiary.
(h) “Transfer” means, directly or indirectly, to sell, transfer, assign, pledge, encumber, hypothecate, convey any legal or beneficial interest in, or otherwise dispose of (by merger (including by conversion into securities or other consideration), by tendering into any tender or exchange offer, by testamentary disposition, by operation of Law or otherwise), either voluntarily or involuntarily, or to enter into any Contract or other arrangement or understanding with respect to the voting of or sale, transfer, assignment, pledge, encumbrance, hypothecation, conveyance of any direct or indirect legal or beneficial interest in, or other disposition of (by merger, by tendering into any tender or exchange offer, by testamentary disposition, by operation of Law or otherwise) the Covered Shares.
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ARTICLE II
VOTING
Section 2.1 Agreement to Vote.
(a) Each Shareholder hereby irrevocably and unconditionally agrees that during the period beginning on the date hereof and ending upon the termination of this Agreement in accordance with its terms, at any meeting of the Company’s Shareholders, however called, including any adjournment or postponement thereof, such Shareholder shall, in each case, to the fullest extent that such matters are submitted for the vote of the Company Shareholders and that the Covered Shares are entitled to vote thereon or consent thereto:
(i) appear at each such meeting or otherwise cause all of its Covered Shares to be counted as present for purposes of calculating a quorum; and
(ii) vote (or cause to be voted), in person or by a proxy covering all of its Covered Shares (A) in favor of (1) the approval of the Merger and the other transactions contemplated by the Merger Agreement; (2) any action in connection with the Merger and the Contemplated Transactions; or (3) any proposal to adjourn or postpone to a later date any meeting of the Company’s Shareholders at which any of the foregoing matters of this Section 2.1(a)(ii) are submitted for consideration and vote of the Company Shareholders if there are not sufficient votes for approval of any such matters on the date on which the meeting is held, and (B) against (1) any Acquisition Proposal or Acquisition Inquiry; (2) any other action, proposal, transaction or agreement involving Company that is intended or would reasonably be expected to have the effect of frustrating the purposes of the Merger or preventing, impeding, interfering with, delaying, postponing or impairing the ability of the Company, Parent or Merger Sub to consummate the Merger or any other transaction contemplated by the Merger Agreement; or (3) any action or Contract that would be expected to result in any condition to the consummation of the Merger set forth in Sections 6, 7 or 8 of the Merger Agreement not being fulfilled on or prior to the End Date. No Shareholder shall enter into any Contract with any Person prior to the termination of this Agreement to vote in any manner inconsistent herewith.
(b) Any vote required to be cast or consent required to be executed pursuant to this Section 2.1 shall be cast (or consent shall be given if legally valid) by such Shareholder in accordance with such procedures relating thereto so as to ensure that it is duly counted, including for purposes of determining whether a quorum is present.
(c) Except as explicitly set forth in this Section 2.1, nothing in this Agreement shall limit the right of each Shareholder to vote in favor of, against or abstain with respect to any other matters presented to the Company Shareholders.
(d) The obligations of each Shareholder specified in this Section 2.1 shall not be affected by the commencement, public proposal, public disclosure or communication to Company of any Acquisition Proposal, Acquisition Inquiry or by any Company Board Adverse Recommendation Change.
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Section 2.2 Grant of Irrevocable Proxy; Appointment of Proxy.
(a) From and after the date hereof until the Expiration Date, each Shareholder hereby irrevocably and unconditionally grants to, and appoints, the Parent as such Shareholder’s proxy and attorney-in-fact (with full power of substitution) in accordance with the Companies Law, for and in the name, place and stead of such Shareholder, to attend any and all meetings of the Company’s Shareholders and to vote or cause to be voted (including by proxy) the Covered Shares in accordance with this Agreement; provided that each Shareholder’s grant of the proxy contemplated by this Section 2.2 shall be effective if, and only if, such Shareholder has failed to act in accordance with such Shareholder’s obligations as to voting pursuant to Section 2.1 of this Agreement by delivering to Company at least 5 business days prior to the meeting at which any of the matters described in Section 2.1 are to be considered, a duly executed irrevocable proxy card directing that the Covered Shares of such Shareholder be voted in accordance with this Agreement.
(i) Each Shareholder hereby represents that any proxies heretofore given in respect of the Covered Shares, if any, are revocable, and hereby revokes all such proxies.
(ii) Each Shareholder hereby affirms that the irrevocable proxy set forth in Section 2.2, if it becomes effective, is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Shareholder under this Agreement. The parties hereby further affirm that the irrevocable proxy, if it becomes effective, is coupled with an interest and is intended to be irrevocable until the Expiration Date, at which time it will terminate automatically, at which time any underlying appointment shall automatically be revoked and rescinded and of no force and effect, in each case without further action by any party. The proxy granted by the Shareholders herein shall survive the dissolution, bankruptcy, death or incapacity of any Shareholder. If for any reason any proxy granted herein is not irrevocable after it becomes effective, then the Shareholder granting such proxy agrees, until the Expiration Date, to vote, or to cause the holder of record on any applicable record date to vote, the Covered Shares in accordance with this Agreement. The parties agree that the foregoing is a voting agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of Each Shareholder. Each Shareholder hereby represents and warrants to Parent and the Company, as of the date hereof, and at all times during the term of this Agreement, as follows:
(a) Authorization. Such Shareholder has the power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by such Shareholder of this Agreement, the performance by it of its obligations hereunder and the consummation by it of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of such Shareholder and no other actions or proceedings on the part of such Shareholder are necessary to authorize the execution and delivery by it of this Agreement, the performance by it of its obligations hereunder or the consummation by it of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by such Shareholder and, assuming this Agreement constitutes a valid and binding obligation of Parent, constitutes a legal, valid and binding obligation of such Shareholder, enforceable against it in accordance with its terms (except to the extent that enforceability may be limited by the Enforceability Exceptions).
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(b) Ownership. Such Shareholder’s Existing Shares are, and all Covered Shares of such Shareholder from the date hereof through and on the Closing Date will be, Beneficially Owned and owned of record by such Shareholder or by a Permitted Transferee. Except as set forth in Schedule 3.1(b), such Shareholder has good and valid title to such Shareholder’s Existing Shares, free and clear of any Encumbrances (except for transfer restrictions arising under securities Laws). Except as set forth in Schedule 3.1(b1), other than the Existing Shares, as of the date hereof such Shareholder does not Beneficially Own or own of record: (i) any securities of Company convertible into or exchangeable or exercisable for shares of the share capital or other voting securities or equity interests of Company; (ii) any warrants, calls, options or other rights to acquire from Company any share capital, voting securities, equity interests or securities convertible into or exchangeable or exercisable for share capital or voting securities of Company, or any stock appreciation rights; (iii) “phantom” stock rights, performance units or other rights to receive Company Shares (or cash or other economic benefit in respect thereof) on a deferred basis; or (iv) other rights that are linked to the value of Company Shares. As of the date hereof, such Shareholder’s Existing Shares constitute all of the Company Shares that are Beneficially Owned or owned of record by such Shareholder. Such Shareholder has and will have at all times through the Effective Time sole voting power (including the right to control such vote as contemplated herein), sole power of disposition, sole power to issue instructions with respect to the matters set forth in ARTICLE II and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of such Shareholder’s Existing Shares and with respect to all of the Covered Shares owned by such Shareholder at all times through the Effective Time. Each Shareholder hereby represents that all proxies, powers of attorney, instructions or other requests given by such Shareholder prior to the execution of this Agreement in respect of the voting of such Shareholder’s Covered Shares, if any, are revocable by such Shareholder at any time.
(c) No Violation. The execution, delivery and performance of this Agreement by such Shareholder does not and will not, and the consummation of the transactions contemplated hereby and the compliance with the provisions hereof do not and will not (in each case, whether with or without notice or lapse of time, or both):
(i) violate, conflict with or result in the breach of any provision of the Organizational Documents of such Shareholder (to the extent such Shareholder is not a natural Person);
(ii) violate, conflict with or result in the breach of any of the terms or conditions of, result in any (or the right to make any) modification of or the cancellation or loss of a benefit under, require any notice, consent or action under, or otherwise give any Person the right to terminate, accelerate obligations under or receive payment or additional rights under, or constitute a default under, any Contract to which such Shareholder is a party or by which it is bound;
(iii) require any consent of, approval, authorization or permit of, filing with or license from or registration, declaration or notification to any Governmental Body (except for filings, if any, under the Israeli Securities Law, 5728-1968 or the Companies Law); or
(iv) violate or conflict with any Law applicable to such Shareholder or by which any of such Shareholder’s assets or properties is bound.
Except under the Organizational Documents of Company and as set forth by such Shareholder’s name in Exhibit B, such Shareholder’s Existing Shares are not, with respect to the voting or Transfer thereof, subject to any other Contract (other than a Contract for Transfer of Existing Shares to a Permitted Transferee), including any voting agreement, shareholders agreement, irrevocable proxy or voting trust.
(d) Absence of Litigation. There is no Legal Proceeding pending or, to the knowledge of such Shareholder, threatened by, against, involving or affecting such Shareholder or the Covered Shares, that would reasonably be expected to impair the ability of such Shareholder to perform its obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.
(e) Reliance by the Parent. Such Shareholder understands and acknowledges that the Parent is entering into the Merger Agreement in reliance upon the execution and delivery of this Agreement by such Shareholder and the representations, warranties, covenants and agreements of such Shareholder contained herein and that the same are a material inducement thereto. Such Shareholder understands and acknowledges that the Merger Agreement governs the terms of the Merger and the other transactions contemplated by the Merger Agreement.
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(f) Independent Advice. Such Shareholder has carefully reviewed the Merger Agreement, the other documentation relating to the Merger and other transactions contemplated in the Merger Agreement referred to therein and this Agreement and has had an opportunity to discuss the Merger Agreement, such other documentation and this Agreement with an attorney of his, her or its own choosing.
Section 3.2 Representations and Warranties of the Parent. The Parent hereby represents and warrants to the Shareholders, as of the date hereof, and at all times during the term of this Agreement, as follows:
(a) Authorization. The Parent has the power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by the Parent of this Agreement, the performance by the Parent of its obligations hereunder and the consummation by the Parent of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of the Parent and no other actions or proceedings on the part of the Parent are necessary to authorize the execution and delivery by the Parent of this Agreement, the performance by the Parent of its obligations hereunder or the consummation by the Parent of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Parent and, assuming this Agreement constitutes a valid and binding obligation of the other parties hereto, constitutes a legal, valid and binding obligation of the Parent, enforceable against the Parent in accordance with its terms (except to the extent that enforceability may be limited by the Enforceability Exceptions).
(b) No Violation. The execution, delivery and performance of this Agreement by the Parent does not and will not, and the consummation of the transactions contemplated hereby and the compliance with the provisions hereof do not and will not (in each case, whether with or without notice or lapse of time, or both):
(i) violate, conflict with or result in the breach of any provision of the Organizational Documents of the Parent;
(ii) violate, conflict with or result in the breach of any of the terms or conditions of, result in any (or the right to make any) modification of or the cancellation or loss of a benefit under, require any notice, consent or action under, or otherwise give any Person the right to terminate, accelerate obligations under or receive payment or additional rights under, or constitute a default under, any Contract to which the Parent is a party or by which the Parent is bound;
(iii) require any consent of, approval, authorization or permit of, filing with or license from or registration, declaration or notification to any Governmental Entity (except for filings, if any, under the Exchange Act, the Israeli Securities Law, 5728-1968 or the Companies Law); or
(iv) violate or conflict with any Law applicable to the Parent or by which any of the Parent’s assets or properties is bound.
(c) Absence of Litigation. There is no Legal Proceeding pending or, to the knowledge of the Parent, threatened by, against, involving or affecting the Parent that would reasonably be expected to impair the ability of the Parent to perform its obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.
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ARTICLE IV
OTHER COVENANTS
Section 4.1 No Solicitation. Each Shareholder shall not (a) engage or participate in, or knowingly facilitate, any discussions or negotiations regarding any Acquisition Proposal of the Company, (b) furnish to any Person other than the Company or Parent any non-public information that could reasonably be expected to be used for the purposes of formulating any Acquisition Proposal of the Company, or (c) enter into any letter of intent, agreement in principle or other similar type of agreement relating to any Acquisition Proposal of Company. If prior to the Expiration Date, any Shareholder receives an Acquisition Proposal, then such Shareholder will promptly notify the Company.
Section 4.2 Prohibition on Transfers; Other Actions. During the term of this Agreement, each Shareholder hereby agrees not to (a) Transfer any of the Covered Shares, Beneficial Ownership thereof or any other interest therein (including by tendering into a tender or exchange offer), unless such Transfer is a Permitted Transfer; (b) grant any proxy, consent or power of attorney with respect to any of the Covered Shares or deposit any of the Covered Shares into a voting trust or enter into a voting agreement, voting trust or arrangement with respect to any such Covered Shares; (c) take any other action that would or would reasonably be expected to make any representation or warranty contained in this Agreement untrue or incorrect or that would or would reasonably be expected to restrict or otherwise adversely affect the performance of or have the effect of preventing or disabling such Shareholder from performing any of its obligations under this Agreement; or (d) commit or agree (whether or not in writing) to take any of the actions prohibited by the foregoing clause (a), (b) or (c). Any Transfer or other action in violation of this provision shall be void ab initio. It is hereby clarified that if any involuntary Transfer of any of the Covered Shares shall occur (such as in the case of appointment of a receiver to Shareholder’s assets as part of bankruptcy proceedings), the transferee (which term, as used herein, shall include the initial transferee and any and all subsequent transferees of the initial transferee) shall take and hold such Covered Shares subject to all of the restrictions, liabilities and rights under this Agreement, which shall continue in full force and effect until the valid termination of this Agreement. During the term of the Agreement, Company shall not recognize and shall issue stop-transfer instructions to its transfer agent (if relevant) with respect to any sale, pledge, or transfer, except upon the conditions specified in this Agreement. A transferring Shareholder will cause any proposed transferee of the Covered Shares pursuant to a Permitted Transfer to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.
Section 4.3 Share Dividends, etc. In the event of a share split, share dividend or distribution (including any dividend or distribution of securities convertible into Company Shares), or any change in the Company Shares by reason of any split-up, reverse share split, recapitalization, reorganization, combination, reclassification, reincorporation, exchange of shares or the like, the terms “Existing Shares” and “Covered Shares” shall be deemed to refer to and include such shares as well as all such share dividends and distributions and any securities into which or for which any or all of such shares may be changed or exchanged or which are received in such transaction.
Section 4.4 Public Announcements. Except as required by applicable Law (in which case the Shareholders shall use reasonable best efforts to allow the Parent reasonable time to comment on such announcement and shall consider in good faith any comments provided by the Parent), no public announcements by the Shareholders regarding this Agreement, the transactions contemplated hereby, the Merger Agreement or the transactions contemplated thereby are permitted. Each Shareholder (a) to the extent such consent or authorization of such Shareholder is required, consents to and authorizes the publication and disclosure by Parent, the Company and their respective affiliates of such Shareholder’s identity and holding of the Covered Shares and the nature of its commitments and obligations under this Agreement in any announcement or disclosure required (in the opinion of the Parent’s counsel) by the SEC, the Israel Securities Authority or any other Governmental Body or the rules or regulations of any applicable securities exchange (including Nasdaq and TASE); (b) agrees as promptly as practicable to give to Parent and the Company any information that it may reasonably require for the preparation of any such announcement or disclosure documents; and (c) agrees to promptly notify Parent and the Company of any required corrections with respect to any written information supplied by it specifically for use in any such disclosure document, if any, to the extent that any shall be or have become false or misleading, in any material respect.
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Section 4.5 Further Assurances. Each Shareholder agrees, from time to time, at the request of the Parent and without further consideration, to execute and deliver such additional documents and take all such further action as may be reasonably required to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement.
Section 4.6 Acquisition of Covered Shares. Each Shareholder agrees that any additional Covered Shares acquired by such Shareholder after the date of this Agreement and prior to the Expiration Date (including through the exercise of any Company options or otherwise) shall automatically be subject to the terms of this Agreement as though owned by such Shareholder on the date hereof. Each Shareholder hereby agrees to notify the Company in writing as promptly as practicable (and in any event within one Business Day of receipt following such acquisition by such Shareholder) of the number of any additional Covered Shares or other securities of Company of which the Shareholder acquires Beneficial Ownership on or after the date hereof.
ARTICLE V
MISCELLANEOUS
Section 5.1 Termination. This Agreement shall remain in effect until the earliest to occur of (a) the Expiration Date and (b) the Effective Time; provided, however, that the provisions of this ARTICLE V shall survive any termination of this Agreement. Neither the provisions of this Section 5.1 nor the termination of this Agreement shall relieve any party hereto from any liability of such party to any other party arising out of or in connection with a breach of this Agreement incurred prior to such termination or expiration. For the avoidance of doubt, in the event this Agreement is terminated prior to the Effective Time, any consent or other document executed pursuant hereto shall be deemed null and void and shall have no further effect.
Section 5.2 No Ownership Interest. Nothing contained in this Agreement shall be deemed to vest in the Parent or any other Person any direct or indirect ownership or incidence of ownership of or with respect to any Covered Shares. All rights, ownership and economic benefits of and relating to the Covered Shares shall remain vested in and belong to each respective Shareholder, and neither the Parent nor any other Person shall have any authority to direct such Shareholder in the voting or disposition of any of the Covered Shares, except as otherwise expressly provided herein.
Section 5.3 Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such costs and expenses, whether or not the Merger is consummated.
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Section 5.4 Notices. All notices, consents and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by hand delivery, by prepaid overnight courier (providing written proof of delivery) or by confirmed electronic mail, addressed as follows:
if to the Parent, to:
SciSparc Ltd.
20 Raul Wallenberg Street, Tower A
Tel Aviv, Israel, 6971916
Attention: Oz Adler
Email: oz@scisparc.com
with a copy to (which shall not constitute notice):
Meitar | Law Offices
16 Abba Hillel Rd.
Ramat Gan 5250608, Israel
Tel: (+972) (3) 610-3100
Attention: Dr. Shachar Hadar
Email: shacharh@meitar.com
And
Sullivan & Worcester LLP
1633 Broadway
New York, NY 10019
Tel: (212) 660-3000
Attention: Oded Har-Even, Esq., Howard E. Berkenblit, Esq
Email: ohareven@sullivanlaw.com, hberkenblit@sullivanlaw.com
if to the Shareholders, to the address set forth in the signature page hereto.
Any notice received at the addressee’s location on any Business Day after 5:00 p.m., addressee’s local time, or on any day that is not a Business Day will be deemed to have been received at 9:00 a.m., addressee’s local time, on the next Business Day. From time to time, any party hereto may provide notice to the other parties of a change in its address through a notice given in accordance with this Section 5.4, except that notice of any change to the address or any of the other details specified in or pursuant to this Section 5.4 will not be deemed to have been received until, and will be deemed to have been received upon, the later of the date that is (a) specified in such notice; or (b) five Business Days after such notice would otherwise be deemed to have been received pursuant to this Section 5.4. The inability to deliver because of changed address of which no notice is given will be deemed to be receipt of the notice as of the date of such inability to deliver.
Section 5.5 Interpretation. The words “hereof,” “herein,” “hereby,” “hereunder” and “herewith” and words of similar import shall refer to this Agreement as a whole and not to any particular provision of this Agreement. References to articles, sections, paragraphs, exhibits, annexes and schedules are to the articles, sections and paragraphs of, and exhibits, annexes and schedules to, this Agreement, unless otherwise specified, and the headings in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the phrase “without limitation.” Words describing the singular number shall be deemed to include the plural and vice versa, words denoting any gender shall be deemed to include all genders, words denoting natural persons shall be deemed to include business entities and vice versa and references to a Person are also to its permitted successors and assigns. The term “or” is not exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if.” Any Law or agreement defined or referred to herein or in any agreement or instrument that is referred to herein shall mean such Law or agreement as from time to time amended, modified or supplemented, including (in the case of statutes) by succession of comparable successor Laws (provided that for purposes of any representations and warranties contained in this Agreement that are made as of a specific date or dates, references to any statute or agreement shall be deemed to refer to such statute or agreement, as amended, and to any rules or regulations promulgated thereunder, in each case, as of such date).
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Section 5.6 Counterparts. This Agreement and any amendments hereto may be executed in one or more identical counterparts, all of which will be considered one and the same agreement and will become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Any such counterpart, to the extent delivered electronically will be treated in all manners and respects as an original executed counterpart and will be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. No party hereto may raise the use of electronic delivery to deliver a signature, or the fact that any signature or agreement or instrument was transmitted or communicated through the use of electronic delivery, as a defense to the formation of a contract, and each party forever waives any such defense, except to the extent such defense relates to lack of authenticity.
Section 5.7 Entire Agreement. This Agreement and the documents and instruments and other agreements among the parties as contemplated by or referred to herein or therein constitute the entire agreement among the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and thereof.
Section 5.8 Governing Law; Consent to Jurisdiction
(a) This Agreement and any dispute, controversy or claim arising out of, relating to or in connection with this Agreement, the negotiation, execution, existence, validity, enforceability or performance of this Agreement, or for the breach or alleged breach hereof (whether in contract, in tort or otherwise) shall be governed by and construed and enforced solely in accordance with the Laws of the State of Israel, without giving effect to any choice of Law or conflict of Law provision or rule (whether of the State of Israel or otherwise) that would cause the application of the Laws of any jurisdiction other than the State of Israel.
(b) Each of the parties (i) irrevocably consents to the service of statement of claim and any other process in any action or proceeding relating to the transactions contemplated by this Agreement, for and on behalf of itself or any of its properties or assets, in accordance with Section 5.4 or in such other manner as may be permitted by Applicable Law, and nothing in this Section 5.8 shall affect the right of any party to serve legal process in any other manner permitted by Applicable Law, (ii) irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any court located in Tel Aviv-Jaffa, Israel, in any action or proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and (iii) irrevocably and unconditionally (A) agrees not to commence any such action or proceeding except in any competent court located in Tel Aviv-Jaffa, Israel, (B) agrees that any claim in respect of any such action or proceeding may be heard and determined in any competent court located in Tel Aviv-Jaffa, Israel, (C) waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any such action or proceeding in such courts, and (D) waives, to the fullest extent permitted by Law, and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. Each of the parties agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
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(c) Each party hereto irrevocably consents to the service of process in any Legal Proceeding with respect to this Agreement and the transactions contemplated by this Agreement or for recognition and enforcement of any judgment in respect hereof brought by any other party hereto made by mailing copies thereof by registered mail, postage prepaid, return receipt requested, to its address as specified in or pursuant to Section 5.4 and such service of process shall be sufficient to confer personal jurisdiction over such party in such Legal Proceeding and shall otherwise constitute effective and binding service in every respect.
Section 5.9 Specific Performance. The Shareholders hereby acknowledge and agree that the Parent will suffer irreparable damage in the event that any of the obligations of the Shareholders in this Agreement are not performed in accordance with its specific terms or if the Agreement is otherwise breached by the Shareholders and that money damages, even if available, would not be an adequate remedy therefor. Accordingly, each Shareholder agrees that the Parent shall be entitled to specific performance, an injunction, restraining order and/or such other equitable relief, in addition to any other rights and remedies existing in its favor at law or in equity, as a court of competent jurisdiction may deem necessary or appropriate to enforce its rights and such Shareholder’s obligations hereunder (without posting of bond or other security). The Shareholders agree not to raise any objection or legal or equitable defense to the availability of any equitable remedy that the Parent may have in respect of this Agreement. These injunctive remedies are cumulative and in addition to any other rights and remedies the Parent may have at law or in equity. In the event the Parent seeks an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, the Parent shall not be required to provide any bond or other security in connection with any such order or injunction.
Section 5.10 Amendment; Waiver. This Agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing signed by each of the parties. Any party hereto may, to the extent permitted by Law, waive compliance with any of the agreements or conditions for the benefit of such party contained herein if such waiver is set forth in an instrument in writing signed on behalf of such party. Any delay in exercising any right under this Agreement shall not constitute a waiver of such right.
Section 5.11 Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other Persons or circumstances will be interpreted so as reasonably to effect the intent of the parties. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.
Section 5.12 Assignment; Successors; No Third Party Beneficiaries. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of Law or otherwise) without the prior written consent of the other parties hereto. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by and against the parties and their respective permitted successors and assigns. Any attempted assignment in violation of this Section 5.12 shall be null and void ab initio. Nothing in this Agreement, express or implied, is intended to or shall confer upon any Person other than the parties and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature under or by reason of this Agreement.
Section 5.13 Shareholder Capacity. The parties acknowledge that this Agreement is entered into by each Shareholder solely in his or its capacity as the record or Beneficial Owner of such Shareholder’s Company Shares and nothing in this Agreement restricts or limits any action taken by such Shareholder in his capacity as a director or officer of Company. The taking of any action (or failure to act) by any Shareholder in his capacity as an officer or director of Company will not be deemed to constitute a breach of this Agreement.
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Annex B-11
IN WITNESS WHEREOF, the parties have caused to be executed and delivered or executed and delivered this Shareholder Support Agreement as of the date first written above.
| THE PARENT: | |||
| SCISPARC LTD. | |||
| By: | /s/ Oz Adler | ||
| Name: | Oz Adler | ||
| Title: | CFO | ||
[Signature Page to Shareholder Support Agreement]
Annex B-12
IN WITNESS WHEREOF, the parties have caused to be executed and delivered or executed and delivered this Shareholder Support Agreement as of the date first written above.
| SHAREHOLDERS: | |||
| Haim Levy Trade-In Ltd. | |||
| By: | /S/ Daniel Levy | ||
| Name: | Daniel Levy | ||
| Title: | Director | ||
Address for notices:
[SHAREHOLDERS]
[ ]
[ ]
Attention: [ ]
Email: [ ]
with copies (which shall not constitute notice) to:
[ ]
[ ]
Attention: [ ]
Email: [ ]
[Signature Page to Shareholder Support Agreement]
Annex B-13
IN WITNESS WHEREOF, the parties have caused to be executed and delivered or executed and delivered this Shareholder Support Agreement as of the date first written above.
| SHAREHOLDERS: | |||
| A. Yinon (2015) Ltd. | |||
| By: | /S/ Yinon Amit | ||
| Name: | Yinon Amit | ||
| Title: | Director | ||
Address for notices:
[SHAREHOLDERS]
[ ]
[ ]
Attention: [ ]
Email: [ ]
with copies (which shall not constitute notice) to:
[ ]
[ ]
Attention: [ ]
Email: [ ]
[Signature Page to Shareholder Support Agreement]
Annex B-14
IN WITNESS WHEREOF, the parties have caused to be executed and delivered or executed and delivered this Shareholder Support Agreement as of the date first written above.
| SHAREHOLDERS: | |||
| Puzailov Investments Ltd. | |||
| By: | /S/ Emanuel Paz Puzailov | ||
| Name: | Emanuel Paz Puzailov | ||
| Title: | Director | ||
| Emanuel Paz Puzailov | |
| /S/ Emanuel Paz Puzailov |
Address for notices:
[SHAREHOLDERS]
[ ]
[ ]
Attention: [ ]
Email: [ ]
with copies (which shall not constitute notice) to:
[ ]
[ ]
Attention: [ ]
Email: [ ]
[Signature Page to Shareholder Support Agreement]
Annex B-15
IN WITNESS WHEREOF, the parties have caused to be executed and delivered or executed and delivered this Shareholder Support Agreement as of the date first written above.
| SHAREHOLDERS: | |||
| Eliyahu Baruch Ltd. | |||
| By: | /S/ Eyal Baruch | ||
| Name: | Eyal Baruch | ||
| Title: | Director | ||
| Belporto Investments Ltd. | |||
| By: | /S/ Eyal Baruch | ||
| Name: | Eyal Baruch | ||
| Title: | Director | ||
Address for notices:
| [SHAREHOLDERS] | |
| [ ] | |
| [ ] | |
| Attention: [ ] | |
Email: [ ] | |
| with copies (which shall not constitute notice) to: |
| [ ] | |
| [ ] | |
| Attention: [ ] | |
| Email: [ ] |
[Signature Page to Shareholder Support Agreement]
Annex B-16
SCHEDULE I
Haim Levy Trade-In Ltd.,
A. Yinon (2015) Ltd.
Eliyahu Baruch Ltd.
Belporto Investments Ltd.
Puzailov Investments Ltd.
Emanuel Paz Puzailov
Annex B-17
EXHIBIT A
FORM OF JOINDER AGREEMENT
The undersigned is executing and delivering this Joinder Agreement pursuant to that certain Shareholder Support Agreement, dated as of April 10, 2024 (as amended, restated, supplemented or otherwise modified in accordance with the terms thereof, the “Shareholder Support Agreement”) by and between SciSparc Ltd., an Israeli limited company, and each of the shareholders of AutoMax Motors Ltd., an Israeli limited company (the “Company”), listed on Schedule I thereto (the “Shareholders”). Each capitalized term used but not defined in this Joinder Agreement shall have the respective meaning ascribed to such term in the Shareholder Support Agreement.
By executing and delivering this Joinder Agreement to the Shareholder Support Agreement, the undersigned hereby (i) adopts and approves the Shareholder Support Agreement, (ii) assumes and agrees to comply with all of the Shareholder’s obligations under the Shareholder Support Agreement in respect of the securities subject to the applicable Transfer and (iii) agrees, effective commencing on the date hereof and as a condition to the Transfer, to become a party to, and to be bound by and comply with the provisions of, the Shareholder Support Agreement applicable to the Shareholders, in the same manner as if the undersigned were an original signatory to the Shareholder Support Agreement.
The undersigned hereby (i) represents and warrants that, pursuant to this Joinder Agreement and the Shareholder Support Agreement, it is a Permitted Transferee under the Shareholder Support Agreement and (ii) makes all of the representations and warranties set forth in Article 3 of the Shareholder Support Agreement, mutatis mutandis.
The undersigned acknowledges and agrees that the provisions of ARTICLE V of the Shareholder Support Agreement are incorporated herein by reference, mutatis mutandis.
[Remainder of page intentionally left blank]
Annex B-18
Accordingly, the undersigned have executed and delivered this Joinder Agreement as of the _____ day of _______, _______.
| PERMITTED TRANSFEREE | |
| Name: | |
| Notice Information | |
| Address: | |
| Phone: | |
Annex B-19
ANNEX C
FORM OF indemnification agreement
THIS INDEMNIFICATION AGREEMENT (the “Agreement”), dated as of __________, 2024, is entered into by and between SciSparc Ltd., an Israeli company whose address is 20 Raul Wallenberg St., Tower A, 2nd Floor, Tel Aviv 6971916, Israel (the “Company”), and the undersigned Director or Officer of the Company whose name appears on the signature page hereto officer (the “Indemnitee”).
| WHEREAS, | Indemnitee is an Office Holder (“Nosse Misra”), as such term is defined in the Companies Law, 5759–1999, as amended (the “Office Holder” and the “Companies Law”, respectively), of the Company; |
| WHEREAS, | both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against Office Holders of companies and that highly competent persons have become more reluctant to serve corporations as directors and officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to, and activities on behalf of, companies; |
| WHEREAS, | the Articles of Association of the Company authorize the Company to indemnify and advance expenses to its Office Holders and provide for insurance and exculpation to its Office Holders, in each case, to the fullest extent permitted by applicable law; |
| WHEREAS, | the Company has determined that (i) the increased difficulty in attracting and retaining competent persons is detrimental to the best interests of the Company’s shareholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future, and (ii) it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law, so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified; and |
| WHEREAS, | in recognition of Indemnitee’s need for substantial protection against personal liability in order to assure Indemnitee’s continued service to the Company in an effective manner and, in part, in order to provide Indemnitee with specific contractual assurance that the indemnification, insurance and exculpation afforded by the Articles of Association will be available to Indemnitee, the Company wishes to undertake in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the fullest extent permitted by applicable law and as set forth in this Agreement and provide for insurance and exculpation of Indemnitee as set forth in this Agreement. |
NOW, THEREFORE, the parties hereto agree as follows:
| 1. | INDEMNIFICATION AND INSURANCE. |
| 1.1. | The Company hereby undertakes to indemnify Indemnitee to the fullest extent permitted by applicable law for any liability and expense specified in Sections 1.1.1 through 1.1.4 below, imposed on Indemnitee due to or in connection with an act performed by such Indemnitee, either prior to or after the date hereof, in Indemnitee’s capacity as an Office Holder, including, without limitation, as a director, officer, employee, agent or fiduciary of the Company, any subsidiary thereof or any other corporation, collaboration, partnership, joint venture, trust or other enterprise, in which Indemnitee serves at any time at the request of the Company (the “Corporate Capacity”). The term “act performed in Indemnitee’s capacity as an Office Holder” shall include, without limitation, any act, omission or failure to act and any other circumstances relating to or arising from Indemnitee’s service in a Corporate Capacity. Notwithstanding the foregoing, in the event that the Office Holder is the beneficiary of an indemnification undertaking provided by a subsidiary of the Company or any other entity, with respect to his or her Corporate Capacity with such subsidiary or entity, then the indemnification obligations of the Company hereunder with respect to such Corporate Capacity shall only apply to the extent that the indemnification by such subsidiary or other entity does not actually fully cover the indemnifiable liabilities and expenses relating thereto. The following shall be hereinafter referred to as “Indemnifiable Events” |
Annex C-1
| 1.1.1. | Financial liability imposed on Indemnitee in favor of any person pursuant to a judgment, including a judgment rendered in the context of a settlement or an arbitrator’s award approved by a court. For purposes of Section 1 of this Agreement, the term “person” shall include, without limitation, a natural person, firm, partnership, joint venture, trust, company, corporation, limited liability entity, unincorporated organization, estate, government, municipality, or any political, governmental, regulatory or similar agency or body; |
| 1.1.2. | Reasonable Expenses (as defined below) expended by Indemnitee as a result of an investigation or any proceeding instituted against the Indemnitee by an authority that is authorized to conduct such investigation or proceeding, and that was concluded without filing an indictment against the Indemnitee and without imposing on the Indemnitee a financial liability in lieu of a criminal proceeding, or that was concluded without filing an indictment against the Indemnitee but imposing a financial liability in lieu of a criminal proceeding in an offence that does not require proof of mens rea, or in connection with a financial sanction. In this section “conclusion of a proceeding without filing an indictment in a matter in which a criminal investigation has been instigated” and “financial liability in lieu of a criminal proceeding” shall have the meaning assigned to such terms under the Companies Law, and the term “financial sanction” shall mean such term as referred to in Section 260(a)(1a) of the Companies Law; |
| 1.1.3. | Reasonable Expenses expended by or imposed on Indemnitee by a court, in a proceeding instituted against Indemnitee by the Company or on its behalf or by another person, or in a criminal charge from which Indemnitee was acquitted or in which Indemnitee convicted of an offence that does not require proof of mens rea; and |
| 1.1.4. | Any other event, occurrence, matter or circumstances under any law with respect to which the Company may, or will be able to, indemnify an Office Holder (including, without limitation, in accordance with Section 56h(b)(1) of the Israeli Securities Law 5728-1968 (the “Israeli Securities Law”), if applicable, and Section 50P(b)(2) of the Israeli Economic Competition Law, 5758-1988 (the “Economic Competition Law”)). |
For the purpose of this Agreement, “Expenses” shall include, without limitation, legal fees and all other costs, expenses and obligations paid or incurred by Indemnitee in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any claim, action, suit, proceeding, alternative dispute resolution mechanism, hearing, inquiry or investigation relating to any matter for which indemnification hereunder may be provided. Expenses shall be considered paid or incurred by Indemnitee at such time as Indemnitee is required to pay or incur such cost or expenses, including upon receipt of an invoice or payment demand. The Company shall pay the Expenses in accordance with the provisions of Section1.3.
Annex C-2
| 1.2. | Notwithstanding anything herein to the contrary, the Company’s undertaking to indemnify the Indemnitee under Section 1.1.1 shall only be with respect to events described in Exhibit A hereto. The Board of Directors of the Company (the “Board”) has determined that the categories of events listed in Exhibit A are foreseeable in light of the operations of the Company. The maximum amount of indemnification payable by the Company to the Indemnitee under Section 1.1.1 and other indemnitees under similar indemnification agreements with the Company (the “Indemnifiable Persons”) shall be as set forth in Exhibit A hereto (the “Limit Amount”) for each five year period commencing as of [DATE OF APPROVAL], and for every subsequent five year period thereafter, and shall apply to all Indemnifiable Persons, in the aggregate. If the Limit Amount is insufficient to cover all the indemnity amounts payable with respect to all Indemnifiable Persons during the relevant five year period, then such amount shall be allocated to such Indemnifiable Persons pro rata according to the percentage of their culpability, as finally determined by a court in the relevant claim, or, absent such determination or in the event such persons are parties to different claims, based on an equal pro rata allocation among such Indemnifiable Persons. The Limit Amount payable by the Company as described in Exhibit A is deemed by the Company to be reasonable in light of the circumstances. The indemnification provided under Section 1.1.1 herein shall not be subject to the limitations imposed by this Section 1.2 and Exhibit A if and to the extent such limits do not or are no longer required by the Companies Law. |
| 1.3. | If so requested by Indemnitee in writing, and subject to the Company’s repayment and reimbursements rights set forth in Sections 3 and 5 below, the Company shall pay amounts to cover Indemnitee’s Expenses with respect to which Indemnitee is entitled to be indemnified under Section 1.1 above, as and when incurred. The payments of such amounts shall be made by the Company directly to the Indemnitee’s legal and other advisors, as soon as practicable, but in any event no later than fifteen (15) days after written demand by such Indemnitee therefor to the Company, and any such payment shall be deemed to constitute indemnification hereunder. As part of the aforementioned undertaking, the Company will make available to Indemnitee any security or guarantee that Indemnitee may be required to post in accordance with an interim decision given by a court, governmental or administrative body, or an arbitrator, including for the purpose of substituting liens imposed on Indemnitee’s assets. |
| 1.4. | The Company’s obligation to indemnify Indemnitee and advance Expenses in accordance with this Agreement shall be for such period (the “Indemnification Period”) as Indemnitee shall be subject to any actual, possible or threatened claim, action, suit, demand or proceeding or any inquiry or investigation, whether civil, criminal or investigative, arising out of the Indemnitee’s service in the Corporate Capacity as described in Section 1.1 above, whether or not Indemnitee is still serving in such position. |
| 1.5. | The Company undertakes that, subject to the mandatory limitations under applicable law, as long as it may be obligated to provide indemnification and advance Expenses under this Agreement, the Company will purchase and maintain in effect directors and officers liability insurance, which will include coverage for the benefit of the Indemnitee, providing coverage in amounts as reasonably determined by the Board; provided that, the Company shall have no obligation to obtain or maintain directors and officers insurance policy if the Company determines in good faith that such insurance is not reasonably available, the premium costs for such insurance are disproportionate to the amount of coverage provided, or the coverage provided by such insurance is so limited by exclusions that it provides an insufficient benefit. The Company hereby undertakes to notify the Indemnitee 30 days prior to the expiration or termination of the directors and officers liability insurance. |
| 1.6. | The Company undertakes to give prompt written notice of the commencement of any claim hereunder to the insurers in accordance with the procedures set forth in each of the policies. The Company shall thereafter diligently take all actions reasonably necessary under the circumstances to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such action, suit, proceeding, inquiry or investigation in accordance with the terms of such policies. The above shall not derogate from Company’s authority to freely negotiate or reach any compromise with the insurer which is reasonable at the Company’s sole discretion provided that the Company shall act in good faith and in a diligent manner. |
Annex C-3
| 2. | SPECIFIC LIMITATIONS ON INDEMNIFICATION. |
Notwithstanding anything to the contrary in this Agreement, the Company shall not indemnify or advance Expenses to Indemnitee with respect to (i) any act, event or circumstance with respect to which it is prohibited to do so under applicable law, or (ii) a counter claim made by the Company or in its name in connection with a claim against the Company filed by the Indemnitee.
| 3. | REPAYMENT OF EXPENSES. |
| 3.1. | In the event that the Company provides or is required to provide indemnification with respect to Expenses hereunder and at any time thereafter the Company determines, based on advice from its legal counsel, that the Indemnitee was not entitled to such payments, the amounts so indemnified by the Company will be promptly repaid by Indemnitee, unless the Indemnitee disputes the Company’s determination, in which case the Indemnitee’s obligation to repay to the Company shall be postponed until such dispute is resolved. |
| 3.2. | Indemnitee’s obligation to repay to the Company for any Expenses or other sums paid hereunder shall be deemed as a loan given to Indemnitee by the Company subject to the minimum interest rate prescribed by Section 3(9) of the Income Tax Ordinance [New Version], 1961, or any other legislation replacing it, which is not considered a taxable benefit. |
| 4. | SUBROGATION. |
| 4.1. | In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. |
| 5. | REIMBURSEMENT. |
The Company shall not be liable under this Agreement to make any payment in connection with any Indemnifiable Event to the extent Indemnitee has otherwise actually received payment under any insurance policy or otherwise (without any obligation of Indemnitee to repay any such amount) of the amounts otherwise indemnifiable hereunder. Any amounts paid to Indemnitee under such insurance policy or otherwise after the Company has indemnified Indemnitee for such liability or Expense shall be repaid to the Company promptly upon receipt by Indemnitee, in accordance with the terms set forth in Section 3.2.
| 6. | EFFECTIVENESS. |
This Agreement shall be valid, binding and enforceable in accordance with its terms and shall be in full force and effect immediately upon its approval by the Company’s general meeting of shareholders.
| 7. | NOTIFICATION AND DEFENSE OF CLAIM. |
Indemnitee shall notify the Company of the commencement of any action, suit or proceeding, and of the receipt of any notice or threat that any such legal proceeding has been or shall or may be initiated against Indemnitee (including any proceedings by or against the Company and any subsidiary thereof), promptly upon Indemnitee first becoming so aware; but the omission so to notify the Company will not relieve the Company from any liability which it may have to Indemnitee under this Agreement unless and to the extent that such failure to provide notice prejudices the Company’s ability to defend such action. Notice to the Company shall be directed to the Chief Executive Officer or Chief Financial Officer of the Company at the address shown in the preamble to this Agreement (or such other address as the Company shall designate in writing to Indemnitee). With respect to any such action, suit or proceeding as to which Indemnitee notifies the Company of the commencement thereof and without derogating from Sections 1.1 and 2:
| 7.1. | The Company will be entitled to participate therein at its own expense. |
Annex C-4
| 7.2. | Except as otherwise provided below, the Company, alone or jointly with any other indemnifying party similarly notified, will be entitled to assume the defense thereof, with counsel selected by the Company. Indemnitee shall have the right to employ his or her own counsel in such action, suit or proceeding, but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of Indemnitee, unless: (i) the employment of counsel by Indemnitee has been authorized in writing by the Company; (ii) the Company, in good faith, reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of the defense of such action; or (iii) the Company has not in fact employed counsel to assume the defense of such action within reasonable time, in which cases the reasonable fees and expenses of Indemnitee’s counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any action, suit or proceeding brought by or on behalf of the Company or as to which Indemnitee and the Company shall have reached the conclusion specified in (ii) above. |
| 7.3. | The Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts or expenses paid in connection with a settlement of any action, claim or otherwise, effected without the Company’s prior written consent. |
| 7.4. | The Company shall have the right to conduct the defense as it sees fit in its sole discretion (provided that the Company shall conduct the defense in good faith and in a diligent manner), including the right to settle or compromise any claim or to consent to the entry of any judgment against Indemnitee without the consent of the Indemnitee, provided that, the amount of such settlement, compromise or judgment does not exceed the Limit Amount (if applicable) and is fully indemnifiable pursuant to this Agreement (subject to Section 1.2 of this Agreement) and/or applicable law, and any such settlement, compromise or judgment does not impose any penalty or limitation on Indemnitee without the Indemnitee’s prior written consent. The Indemnitee’s consent shall not be required if the settlement includes a complete release of Indemnitee, does not contain any admission of wrong-doing by Indemnitee, and includes monetary sanctions only as provided above. In the case of criminal proceedings, the Company and/or its legal counsel will not have the right to plead guilty or agree to a plea-bargain in the Indemnitee’s name without the Indemnitee’s prior written consent. Neither the Company nor Indemnitee will unreasonably withhold or delay their consent to any proposed settlement. |
| 7.5. | Indemnitee shall fully cooperate with the Company and shall give the Company all information and access to documents, files and to his or her advisors and representatives as shall be within Indemnitee’s power, in every reasonable way as may be required by the Company with respect to any claim which is the subject matter of this Agreement and in the defense of other claims asserted against the Company (other than claims asserted by Indemnitee), provided that the Company shall cover all expenses, costs and fees incidental thereto such that the Indemnitee will not be required to pay or bear such expenses, costs and fees. |
Annex C-5
| 8. | EXCULPATION. |
Subject to the provisions of the Companies Law, the Company hereby releases, in advance, the Office Holder from liability to the Company for any damage that arises from the breach of the Office Holder’s duty of care to the Company (within the meaning of such terms under Sections 252 and 253 of the Companies Law), other than breach of the duty of care towards the Company in a distribution (as such term is defined in the Companies Law).
| 9. | NON-EXCLUSIVITY. |
The rights of the Indemnitee hereunder shall not be deemed exclusive of any other rights Indemnitee may have under the Articles of Association, applicable law or otherwise, and to the extent that during the Indemnification Period the indemnification rights of the then serving directors and officers are more favorable to such directors or officers than the indemnification rights provided under this Agreement to Indemnitee, Indemnitee shall be entitled to the full benefits of such more favorable indemnification rights to the extent permitted by law.
| 10. | PARTIAL INDEMNIFICATION. |
If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the expenses, judgments, fines or penalties actually or reasonably incurred by Indemnitee in connection with any proceedings, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such expenses, judgments, fines or penalties to which Indemnitee is entitled under any provision of this Agreement. Subject to the provisions of Section 5 above, any amount received by Indemnitee (under any insurance policy or otherwise) shall not reduce the Limit Amount hereunder and shall not derogate from the Company’s obligation to indemnify the Indemnitee in accordance with the provisions of this Agreement up to the Limit Amount, as set forth in Section 1.2.
| 11. | BINDING EFFECT. |
This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns. In the event of a merger or consolidation of the Company or a transfer or disposition of all or substantially all of the business or assets of the Company, the Indemnitee shall be entitled to the same indemnification and insurance provisions as the most favorable indemnification and insurance provisions afforded to the then-serving Office Holders of the Company. In the event that in connection with such transaction the Company purchases a directors and officers’ “tail” or “run-off” policy for the benefit of its then serving Office Holders, then such policy shall cover Indemnitee and such coverage shall be deemed to be in satisfaction of the insurance requirements under this Agreement. This Agreement shall continue in effect during the Indemnification Period regardless of whether Indemnitee continues to serve in a Corporate Capacity.
Any amendment to the Companies Law, the Israeli Securities Law, the Economic Competition Law or other applicable law adversely affecting the right of the Indemnitee to be indemnified, insured or released pursuant hereto shall be prospective in effect, and shall not affect the Company’s obligation or ability to indemnify or insure the Indemnitee for any act or omission occurring prior to such amendment, unless otherwise provided by applicable law.
| 12. | SEVERABILITY. |
The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.
Annex C-6
| 13. | NOTICE. |
All notices and other communications pursuant to this Agreement shall be in writing and shall be deemed provided if delivered personally, telecopied, sent by electronic facsimile, email, reputable overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the addresses shown in the preamble to this Agreement, or to such other address as the party to whom notice is to be given may have furnished to the other party hereto in writing in accordance herewith. Any such notice or communication shall be deemed to have been delivered and received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of telecopier or an electronic facsimile or email, one business day after the date of transmission if confirmation of receipt is received, (iii) in the case of a reputable overnight courier, three business days after deposit with such reputable overnight courier service, and (iv) in the case of mailing, on the seventh business day following that on which the mail containing such communication is posted.
| 14. | GOVERNING LAW; JURISDICTION. |
This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Israel, without giving effect to the conflicts of law provisions of those laws. The Company and Indemnitee each hereby irrevocably consent to the exclusive jurisdiction and venue of the courts of Tel Aviv, Israel for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement.
| 15. | ENTIRE AGREEMENT. |
This Agreement represents the entire agreement between the parties and supersedes any other agreements, contracts or understandings between the parties, whether written or oral, with respect to the subject matter of this Agreement.
| 16. | NO MODIFICATION AND NO WAIVER. |
No supplement, modification or amendment, termination or cancellation of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. Any waiver shall be in writing. The Company hereby undertakes not to amend its Articles of Association in a manner which will adversely affect the provisions of this Agreement.
| 17. | ASSIGNMENTS; NO THIRD PARTY RIGHTS |
Neither party hereto may assign any of its rights or obligations hereunder except with the express prior written consent of the other party. Nothing herein shall be deemed to create or imply an obligation for the benefit of a third party. Without limitation of the foregoing, nothing herein shall be deemed to create any right of any insurer that provides directors and officers’ liability insurance, to claim, on behalf of Indemnitee, any rights hereunder.
| 18. | INTERPRETATION; DEFINITIONS. |
Unless the context shall otherwise require: words in the singular shall also include the plural, and vice versa; any pronoun shall include the corresponding masculine, feminine and neuter forms; the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; the words “herein”, “hereof” and “hereunder” and words of similar import refer to this Agreement in its entirety and not to any part hereof; all references herein to Sections or clauses shall be deemed references to Sections or clauses of this Agreement; any references to any agreement or other instrument or law, statute or regulation are to it as amended, supplemented or restated, from time to time (and, in the case of any law, to any successor provisions or re-enactment or modification thereof being in force at the time); any reference to “law” shall include any supranational, national, federal, state, local, or foreign statute or law and all rules and regulations promulgated thereunder; any reference to a “day” or a number of “days” (without any explicit reference otherwise, such as to business days) shall be interpreted as a reference to a calendar day or number of calendar days; reference to month or year means according to the Gregorian calendar; reference to a “company”, “corporate body” or “entity” shall include a, partnership, firm, company, corporation, limited liability company, association, joint venture, trust, unincorporated organization, estate, or a government municipality or any political, governmental, regulatory or similar agency or body, and reference to a “person” shall mean any of the foregoing or a natural person.
| 19. | COUNTERPARTS |
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and enforceable against the parties actually executing such counterpart, and all of which together shall constitute one and the same instrument; it being understood that parties need not sign the same counterpart. The exchange of an executed Agreement (in counterparts or otherwise) by facsimile or by electronic delivery in pdf format shall be sufficient to bind the parties to the terms and conditions of this Agreement, as an original.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties, each acting under due and proper authority, have executed this Indemnification Agreement as of the date first mentioned above, in one or more counterparts.
| SciSparc Ltd. | ||
| By: | ||
| Name and title: | ||
| Indemnitee: | ||
| Name: | ||
| Signature: | ||
| Address: | ||
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EXHIBIT A*
| CATEGORY OF INDEMNIFIABLE EVENT | |
| 1. | Matters, events, occurrences or circumstances in connection or associated with employment relationships with employees or consultants or any employee union or similar or comparable organization. |
| 2. | Matters, events, occurrences or circumstances in connection or associated with business relations of any kind between the Company and its employees, independent contractors, customers, suppliers, partners, distributors, agents, resellers, representatives, licensors, licensees, service providers and other business associates. |
| 3. | Negotiations, execution, delivery and performance of agreements of any kind or nature and any decisions or deliberations relating to actions or omissions relating to the foregoing; any acts, omissions or circumstances that do or may constitute or are alleged to constitute anti-competitive acts, acts of commercial wrongdoing, or failure to meet any standard of conduct which is or may be applicable to such acts, omissions or circumstances. |
| 4. | Approval of and recommendation or information provided to shareholders with respect to any and all corporate actions, including the approval of the acts of the Company’s management, their guidance and their supervision, matters relating to the approval of transactions with Office Holders (including, without limitation, all compensation related matters) or shareholders, including controlling persons and claims and allegations of failure to exercise business judgment, reasonable level of proficiency, expertise, care or any other applicable standard, with respect to the foregoing or otherwise with respect to the Company’s business, strategy, operations and prospective outlook, and any discussions, deliberations, reviews or other preparatory or preliminary phases relating to any of the foregoing. |
| 5. | Violation, infringement, misappropriation, dilution and other misuse of copyrights, patents, designs, trade secrets, confidential information, proprietary information and any intellectual property rights, acts in connection with the registration, assertion or protection of rights to intellectual property and the defense of claims related to intellectual property, breach of confidentiality obligations, acts in regard of invasion of privacy or any violation of privacy or privacy related right or regulation, including with respect to databases or handling, collection or use of private information, acts in connection with slander and defamation, and claims in connection with publishing or providing any information, including any filings with any governmental authorities, whether or not required under any applicable laws. |
| 6. | Violations of or failure to comply with securities laws, and any regulations or other rules promulgated thereunder, of any jurisdiction, including without limitation, claims under the U.S. Securities Act of 1933 or the U.S. Exchange Act of 1934 or under the Israeli Securities Law, fraudulent disclosure claims, failure to comply with any securities authority or any stock exchange disclosure or other rules and any other claims relating to relationships with investors, debt holders, shareholders, optionholders, holders of any other equity or debt instrument of the Company, and otherwise with the investment community (including without limitation any such claims relating to a merger, acquisition, change in control transaction, issuance of securities, restructuring, spin out, spin off, divestiture, recapitalization or any other transaction relating to the corporate structure or organization of the Company); claims relating to or arising out of financing arrangements, any breach of financial covenants or other obligations towards investors, lenders or debt holders, class actions, violations of laws requiring the Company to obtain regulatory and governmental licenses, permits and authorizations in any jurisdiction, including in connection with disclosure, offering or other transaction related documents; actions taken in connection with the issuance, purchase, holding or disposition of any type of securities of Company, including, without limitation, the grant of options, warrants or other rights to purchase any of the same or any offering of the Company’s securities (whether on behalf of the Company or on behalf of any holders of securities of the Company) to private investors, underwriters, resellers or to the public, and listing of such securities, or the offer by the Company to purchase securities from the public or from private investors or other holders, and any undertakings, representations, warranties and other obligations related to any of the foregoing or to the Company’s status as a public company or as an issuer of securities. |
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| 7. | Liabilities arising in connection with any products or services developed, distributed, rendered, sold, provided, licensed or marketed by the Company or any Affiliate thereof, and any actions or omissions in connection with the distribution, provision, sale, marketing, license or use of such products or services, including without limitation in connection with professional liability and product liability claims or regulatory or reputational matters. |
| 8. | The offering of securities by the Company (whether on behalf of itself or on behalf of any holder of securities and any other person) to the public and/or to offerees or the offer by the Company to purchase securities from the public and/or from private investors or other holders pursuant to a prospectus, offering documents, agreements, notices, reports, tenders and/or other processes. |
| 9. | Events, facts or circumstances in connection with change in ownership or in the structure of the Company, its reorganization, dissolution, winding up, any other arrangements concerning creditors rights, merger, change in control, issuances of securities, restructuring, spin out, spin off, divestiture, recapitalization or any other transaction relating to the corporate structure or organization of the Company, and the approval of failure to approve of any corporate actions and any matters relating to corporate governance, capital structure, articles of association or other charter or governance documents, appointment or dismissal of office holders or compensation thereof and appointment or dismissal of auditors, internal auditor or any other person performing any services for the Company. |
| 10. | Any claim or demand made in connection with any transaction not in the ordinary course of business of the Company, as well as the sale, lease, purchase or acquisition of, or the receipt or grant of any rights with respect to, any assets or business. |
| 11. | Any claim or demand made by any third party suffering any personal injury and/or bodily injury or damage to business or personal property or any other type of damage through any act or omission attributed to the Company, or its employees, agents or other persons acting or allegedly acting on its behalf, including, without limitation, failure to make proper safety arrangements for the Company or its employees and liabilities arising from any accidental or continuous damage or harm to the Company’s employees, its contractors, its guests and visitors as a result of an accidental or continuous event, or employment conditions, permanent or temporary, in the Company’s offices. |
| 12. | Any claim or demand made directly or indirectly in connection with complete or partial failure, by the Company or its directors, officers and employees, to pay, report, keep applicable records or otherwise, of any local or foreign federal, state, county, municipal or city taxes or other taxes or compulsory payments of any nature whatsoever, including, without limitation, income, sales, use, transfer, excise, value added, registration, severance, stamp, occupation, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll or employee withholding or other withholding, including any interest, penalty or addition thereto, whether disputed or not. |
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| 13. | Any administrative, regulatory, judicial or civil actions orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any governmental entity or other person alleging potential responsibility or liability (including potential responsibility or liability for costs of enforcement investigation, cleanup, governmental response, removal or remediation, for natural resources damages, property damage, personal injuries or penalties or for contribution, indemnification, cost recovery, compensation or injunctive relief) arising out of, based on or related to (a) the presence of, release, spill, emission, leaning, dumping, pouring, deposit, disposal, discharge, leaching or migration into the environment (each a “Release”) or threatened Release of, or exposure to, any hazardous, toxic, explosive or radioactive substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing material, polychlorinated biphenyls (“PCBs”) or PCB-containing materials or equipment, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any environmental law, at any location, whether or not owned, operated, leased or managed by the Company or any of its subsidiaries, or (b) circumstances forming the basis of any violation of any environmental law or environmental permit, license, registration or other authorization required under applicable environmental law. |
| 14. | Any administrative, regulatory or judicial actions, orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any governmental or regulatory entity or authority or any other person alleging the failure to comply with any statute, law, ordinance, rule, regulation, order or decree of any governmental entity applicable to the Company or any of its businesses, assets or operations, or the terms and conditions of any operating certificate or licensing agreement, and without derogating from the generality of the above, including the Israel Innovation Authority or the Investment Center at the Ministry of Industry and Trade, the Antitrust Authority and/or the Securities Authority in Israel and/or the U.S.A. and/or in any other country and/or location, the Ministry of Health and/or any competent food and drug administrations in Israel, the U.S.A. |
| 15. | Participation and/or non-participation at Company Board meetings, expression of opinion or view and/or voting and/or abstention from voting at Company Board meetings, including, in each case, any committee thereof, as well as expression of opinion publicly in connection with the service as an Office Holder. |
| 16. | Review and approval of the Company’s financial statements and any specific items or matters within, including any action, consent or approval related to or arising from the foregoing, including, without limitations, engagement of or execution of certificates for the benefit of third parties related to the financial statements. |
| 17. | Violation of laws, rules or regulations requiring the Company to obtain regulatory and governmental licenses, permits and authorizations (including without limitation relating to export, import, encryption, antitrust or competition authorities) or laws related to any governmental grants in any jurisdiction. |
| 18. | Resolutions and/or actions relating to investments in the Company and/or its subsidiaries and/or affiliated companies and/or investment in corporate or other entities and/or investments in other traded or non-traded securities and/or any other form of investment. |
| 19. | Liabilities arising out of advertising, including misrepresentations regarding the Company’s products or services and unlawful distribution of emails. |
| 20. | Management of the Company’s bank accounts, including money management, foreign currency deposits, securities, loans and credit facilities, credit cards, bank guarantees, letters of credit, consultation agreements concerning investments including with portfolio managers, hedging transactions, options, futures, and the like. |
| 21. | All actions, consents and approvals, including any prior discussions, reviews and deliberations, relating to a distribution of dividends, in cash or otherwise, or to any other “distribution” as such term is defined under the Companies Law. |
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| 22. | Any administrative, regulatory, judicial, civil or criminal, actions orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance, violation or breaches alleging potential responsibility, liability, loss or damage (including potential responsibility or liability for costs of enforcement, investigation, cleanup, governmental response, removal or remediation, property damage or penalties, or for contribution, indemnification, cost recovery, compensation or injunctive relief), whether alleged or claimed by customers, consumers, regulators, shareholders or others, arising out of, based on or related to: (a) cyber security, cyber attacks, data loss or breaches, unauthorized access to information, data, or databases (including but not limited to any personally identifiable information or private health information) and use or disclosure of information contained therein, not preventing or detecting the breach or failing to otherwise disclose or respond to the breach; (b) circumstances forming the basis of any violation of any law, permit, license, registration or other authorization required under applicable law governing data security, data protection, network security, information systems, privacy or any cyber environment (including, users, networks, devices, software, processes, information systems, databases, information in storage or transit, applications, services, and systems that can be connected directly or indirectly to networks); (c) failure to implement a reporting system or control, or failure to monitor or oversee the operation of such a system; (d) data destruction, extortion, theft, hacking, and denial of service attacks; losses or liabilities to others caused by errors and omissions, failure to safeguard data or defamation; or (e) security-audit, post-incident public relations and investigative expenses, criminal reward funds, data breach/privacy crisis management (including, management of an incident, investigation, remediation, data subject notification, call management, credit checking for data subjects, legal costs, court attendance and regulatory fines), extortion liability (including, losses due to a threat of extortion, professional fees related to dealing with the extortion), or network security liability (including, losses as a result of denial of access, costs related to data on third-parties and costs related to the theft of data on third-party systems). |
| 23. | Any claim or demand instituted in connection with the acts of the Company and/or its subsidiaries and/or affiliates, as shall exist from time to time, concerning the Company’s field of activities and operations, as shall be conducted from time to time, and including in connection with the research, development, manufacture, commercialization, marketing and/or sale of pharmaceuticals and/or medical instruments and/or any act directly and/or indirectly associated with the execution of the aforesaid acts, including and without derogating from the generality of the above, in connection with clinical and preclinical trials, as well as in connection with actions associated with the promotion, marketing and/or support of products, solutions and technologies in the Company’s field of activity. |
The Limit Amount for all Indemnifiable Persons during each relevant period referred to in Section 1.2 of the Indemnification Agreement for all events described in this Exhibit A (in Sections 1-23 (inclusive) above), shall be the greater of:
(a) twenty-five percent (25%) of the Company’s total shareholders’ equity according to the Company’s most recent financial statements as of the time of the actual payment of indemnification;
(b) US$ 7.5 million;
(c) ten percent (10%) of the Company’s Total Market Cap (which shall mean the average closing price of the Company’s ordinary shares over the 30 trading days prior to the actual payment of indemnification multiplied by the total number of issued and outstanding shares of the Company as of the date of actual payment); and
(d) in connection with or arising out of a public offering of the Company’s securities, the aggregate amount of proceeds from the sale by the Company and/or any shareholder of Company’s securities in such offering. |
| * | Any reference in this Exhibit A to the Company shall include the Company and any entity in which the Indemnitee serves in a Corporate Capacity. |
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ANNEX D
THE COMPANIES LAW, 1999
A LIMITED LIABILITY COMPANY
AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
OF
SCISPARC LTD.
As Adopted on September 15, 2022
Preliminary
| 1. | Definitions; Interpretation. |
| (a) | In these Articles, the following terms (whether or not capitalized) shall bear the meanings set forth opposite them, respectively, unless the subject or context requires otherwise. |
| “Affiliate” | with respect to any specified person, shall mean, any other person who or which, directly or indirectly, controls, is controlled by, or is under common control with such specified person. | |
| “Articles” | shall mean these Amended and Restated Articles of Association, as amended from time to time. | |
| “Board of Directors” | shall mean the Board of Directors of the Company. | |
| “Chairperson” | shall mean the Chairperson of the Board of Directors, or the Chairperson of the General Meeting, as the context implies; | |
| “Companies Law” | shall mean the Israeli Companies Law, 5759-1999 and the regulations promulgated thereunder. The Companies Law shall include reference to the Companies Ordinance (New Version), 5743-1983, of the State of Israel, to the extent in effect according to the provisions thereof. | |
| “Company” | shall mean SciSparc Ltd. | |
| “Director(s)” | shall mean the member(s) of the Board of Directors holding office at a given time. | |
| “Economic Competition Law” | shall mean the Israeli Economic Competition Law, 5758-1988 and the regulations promulgated thereunder. | |
| “Effective Time” | shall mean the effective time of these Articles. | |
| “External Director(s)” | shall have the meaning provided for such term in the Companies Law. | |
| “General Meeting” | shall mean an Annual General Meeting or Special General Meeting of the Shareholders (each as defined in Article 23 of these Articles), as the case may be. | |
| “NIS” | shall mean New Israeli Shekels. | |
| “Office” | shall mean the registered office of the Company at any given time. | |
| “Office Holder” or “Officer” | shall have the meaning provided for such term in the Companies Law. | |
| “Ordinary Resolution” | means a resolution adopted at the (Annual or Special) General Meeting by a majority of those voting and without counting the abstaining votes. | |
| “Securities Law” | shall mean the Israeli Securities Law, 5728-1968, and the regulations promulgated thereunder. | |
| “Shareholder(s)” | shall mean the shareholder(s) of the Company, at any given time. | |
| “Stock Exchange” | shall mean the Nasdaq Stock Market or on any other stock exchange on which the Company’s ordinary shares are then listed for trading. |
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| (b) | Unless the context shall otherwise require: words in the singular shall also include the plural, and vice versa; any pronoun shall include the corresponding masculine, feminine and neuter forms; the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; the words “herein”, “hereof” and “hereunder” and words of similar import refer to these Articles in their entirety and not to any part hereof; all references herein to Articles or clauses shall be deemed references to Articles or clauses of these Articles; any references to any agreement or other instrument or law, statute or regulation are to it as amended, supplemented or restated, from time to time (and, in the case of any law, to any successor provisions or re-enactment or modification thereof being in force at the time); any reference to “law” shall include any law (’din’) as defined in the Interpretation Law, 5741-1981 and any applicable supranational, national, federal, state, local, or foreign statute or law and shall be deemed also to refer to all rules and regulations promulgated thereunder; any reference to a “day” or a number of “days” (without any explicit reference otherwise, such as to business days) shall be interpreted as a reference to a calendar day or number of calendar days; any reference to a business day shall mean each calendar day other than any calendar day on which commercial banks in New York, New York or Tel-Aviv, Israel are authorized or required by applicable law to close; reference to a month or year means according to the Gregorian calendar; any reference to a “person” shall mean any individual, partnership, corporation, limited liability company, association, estate, any political, governmental, regulatory or similar agency or body, or other legal entity; and reference to “written” or “in writing” shall include written, printed, photocopied, typed, any electronic communication (including email, facsimile, signed electronically (in Adobe PDF, DocuSign or any other format)) or produced by any visible substitute for writing, or partly one and partly another, and signed shall be construed accordingly. |
| (c) | The captions in these Articles are for convenience only and shall not be deemed a part hereof or affect the construction or interpretation of any provision hereof. |
| (d) | The specific provisions of these Articles shall supersede the provisions of the Companies Law to the extent permitted thereunder. |
Limited Liability
| 2. | The Company is a limited liability company and each Shareholder’s liability for the Company’s debt is therefore limited (in addition to any liabilities under any contract) to the payment of the full amount (par value (if any) and premium) such Shareholder was required to pay the Company for such Shareholder’s Shares (as defined below) and which amount has not yet been paid by such Shareholder. |
Company’s Objectives
| 3. | Objectives. |
The Company’s objectives are to carry on any business, and do any act, which is not prohibited by law.
| 4. | Donations. |
The Company may donate a reasonable amount of money (in cash or in kind, including the Company’s securities) to worthy purposes such as the Board of Directors may determine in its discretion, even if such donations are not made on the basis or within the scope of business considerations of the Company.
Share Capital
| 5. | Authorized Share Capital. |
| (a) | The authorized share capital of the Company shall consist of 75,000,000 Ordinary Shares without par value (the “Shares”). |
| (b) | The Shares shall rank pari passu in all respects. The Shares may be redeemable to the extent set forth in Article 18. |
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| 6. | Increase of Authorized Share Capital. |
| (a) | The Company may, from time to time, by a Shareholders’ resolution, whether or not all of the Shares then authorized have been issued, and whether or not all of the Shares theretofore issued have been called up for payment, increase its authorized share capital by increasing the number of Shares it is authorized to issue by such amount, and such additional Shares shall confer such rights and preferences, and shall be subject to such restrictions, as such resolution shall provide. |
| (b) | Except to the extent otherwise provided in such resolution, any new Shares included in the authorized share capital increase as aforesaid shall be subject to all of the provisions of these Articles that are applicable to Shares that are included in the existing share capital. |
| 7. | Special or Class Rights; Modification of Rights. |
| (a) | The Company may, from time to time, by a Shareholders’ resolution, provide for shares with such preferred or deferred rights or other special rights and/or such restrictions, whether in regard to dividends, voting, repayment of share capital or otherwise, as may be stipulated in such resolution. |
| (b) | If at any time the share capital of the Company is divided into different classes of shares, the rights attached to any class, unless otherwise provided by these Articles, may be modified or cancelled by the Company by a resolution of the General Meeting of the holders of all shares as one class, without any required separate resolution of any class of shares. |
| (c) | The provisions of these Articles relating to General Meetings shall apply, mutatis mutandis, to any separate General Meeting of the holders of the shares of a particular class, it being clarified that the requisite quorum at any such separate General Meeting shall be Shareholders present in person or by proxy and holding not less than thirty-three and one-third percent (33⅓%) of the issued shares of such class, provided, however, that if (i) such separate General Meeting of the holders of the particular class was initiated by and convened pursuant to a resolution adopted by the Board of Directors and (ii) at the time of such meeting the Company is qualified to use the forms of a “foreign private issuer” under US securities laws, then the requisite quorum at any such separate General Meeting shall be Shareholders (not in default in payment of any sum referred to in Article 13 hereof) present in person or by proxy and holding not less than fifteen percent (15%) of the issued shares of such class. |
| (d) | Unless otherwise provided by these Articles, an increase in the authorized share capital, the creation of a new class of shares, an increase in the authorized share capital of a class of shares, or the issuance of additional shares thereof out of the authorized and unissued share capital, shall not be deemed, for purposes of this Article 7, to modify or derogate or cancel the rights attached to previously issued shares of such class or of any other class. |
| 8. | Consolidation, Division, Cancellation and Reduction of Share Capital. |
| (a) | The Company may, from time to time, by or pursuant to an authorization of a Shareholders’ resolution, and subject to applicable law: |
| (i) | consolidate all or any part of its issued or unissued authorized share capital; |
| (ii) | divide or sub-divide its Shares (issued or unissued) or any of them and the resolution whereby any Share is divided may determine that, as among the holders of the Shares resulting from such subdivision, one or more of the Shares may, in contrast to others, have any such preferred or deferred rights or rights of redemption or other special rights, or be subject to any such restrictions, as the Company may attach to unissued or new shares; |
| (iii) | cancel any authorized Shares which, at the date of the adoption of such resolution, have not been issued to any person nor has the Company made any commitment, including a conditional commitment, to issue such Shares, and reduce the amount of its share capital by the amount of the Shares so canceled; or |
| (iv) | reduce its share capital in any manner. |
| (b) | With respect to any consolidation of issued Shares and with respect to any other action which may result in fractional Shares, the Board of Directors may settle any difficulty which may arise with regard thereto, as it deems fit, and, in connection with any such consolidation or other action which could result in fractional shares, may, without limiting its aforesaid power: |
| (i) | determine, as to the holder of Shares so consolidated, which issued Shares shall be consolidated; |
| (ii) | issue, in contemplation of or subsequent to such consolidation or other action, Shares sufficient to preclude or remove fractional share holdings; |
| (iii) | redeem such Shares or fractional shares sufficient to preclude or remove fractional Share holdings; |
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| (iv) | round up, round down or round to the nearest whole number, any fractional Shares resulting from the consolidation or from any other action which may result in fractional Shares; or |
| (v) | cause the transfer of fractional Shares by certain Shareholders of the Company to other Shareholders thereof so as to most expediently preclude or remove any fractional Share holdings, and cause the transferees of such fractional Shares to pay the transferors thereof the fair value thereof, and the Board of Directors is hereby authorized to act in connection with such transfer, as agent for the transferors and transferees of any such fractional Shares, with full power of substitution, for the purposes of implementing the provisions of this sub-Article 8(b)(v). |
| 9. | Issuance of Share Certificates, Replacement of Lost Certificates. |
| (a) | To the extent that the Board of Directors determines that all Shares shall be certificated or, if the Board of Directors does not so determine, to the extent that any Shareholder requests a share certificate or the Company’s transfer agent so requires, share certificates shall be issued under the corporate seal of the Company or its written, typed or stamped name and shall bear the signature of one Director, the Company’s Chief Executive Officer, or any person or persons authorized therefor by the Board of Directors. Signatures may be affixed in any mechanical or electronic form, as the Board of Directors may prescribe. |
| (b) | Subject to the provisions of Article 9(a), each Shareholder shall be entitled to one numbered certificate for all of the Shares of any class registered in his or her name. Each certificate shall specify the serial numbers of the Shares represented thereby and may also specify the amount paid up thereon. The Company (as determined by an officer of the Company to be designated by the Chief Executive Officer) shall not refuse a request by a Shareholder to obtain several certificates in place of one certificate, unless such request is, in the opinion of such officer, unreasonable. Where a Shareholder has sold or transferred a portion of such Shareholder’s Shares, such Shareholder shall be entitled to receive a certificate in respect of such Shareholder’s remaining Shares, provided that the previous certificate is delivered to the Company before the issuance of a new certificate. |
| (c) | A share certificate registered in the names of two or more persons shall be delivered to the person first named in the Register of Shareholders in respect of such co-ownership. |
| (d) | A share certificate which has been defaced, lost or destroyed, may be replaced, and the Company shall issue a new certificate to replace such defaced, lost or destroyed certificate upon payment of such fee, and upon the furnishing of such evidence of ownership and such indemnity, as the Board of Directors in its discretion deems fit. |
| 10. | Registered Holder. |
Except as otherwise provided in these Articles or the Companies Law, the Company shall be entitled to treat the registered holder of each Share as the absolute owner thereof, and accordingly, shall not, except as ordered by a court of competent jurisdiction, or as required by the Companies Law, be obligated to recognize any equitable or other claim to, or interest in, such Share on the part of any other person.
| 11. | Issuance and Repurchase of Shares. |
| (a) | The unissued Shares from time to time shall be under the control of the Board of Directors (and, to the extent permitted by applicable law, any Committee thereof), which shall have the power to issue or otherwise dispose of Shares and of securities convertible or exercisable into or other rights to acquire from the Company to such persons, on such terms and conditions (including, inter alia, price, with or without premium, discount or commission, and terms relating to calls set forth in Article 13(f) hereof), and at such times, as the Board of Directors (or the Committee, as the case may be) deems fit, and the power to give to any person the option to acquire from the Company any Shares or securities convertible or exercisable into or other rights to acquire from the Company on such terms and conditions (including, inter alia, price, with or without premium, discount or commission), during such time as the Board of Directors (or the Committee, as the case may be) deems fit. |
| (b) | The Company may at any time and from time to time, subject to applicable law, repurchase or finance the purchase of any Shares or other securities issued by the Company, in such manner and under such terms as the Board of Directors shall determine, whether from any one or more Shareholders. Such purchase shall not be deemed as payment of dividends and as such, no Shareholder will have the right to require the Company to purchase his or her Shares or offer to purchase shares from any other Shareholders. |
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| 12. | Payment in Installment. |
If pursuant to the terms of issuance of any Share, all or any portion of the price thereof shall be payable in installments, every such installment shall be paid to the Company on the due date thereof by the then registered holder(s) of the Share or the person(s) then entitled thereto.
| 13. | Calls on Shares. |
| (a) | The Board of Directors may, from time to time, as it, in its discretion, deems fit, make calls for payment upon Shareholders in respect of any sum (including premium) which has not been paid up in respect of Shares held by such Shareholders and which is not, pursuant to the terms of issuance of such Shares or otherwise, payable at a fixed time, and each Shareholder shall pay the amount of every call so made upon him or her (and of each installment thereof if the same is payable in installments), to the person(s) and at the time(s) and place(s) designated by the Board of Directors, as any such times may be thereafter extended and/or such person(s) or place(s) changed. Unless otherwise stipulated in the resolution of the Board of Directors (and in the notice hereafter referred to), each payment in response to a call shall be deemed to constitute a pro rata payment on account of all the Shares in respect of which such call was made. |
| (b) | Notice of any call for payment by a Shareholder shall be given in writing to such Shareholder not less than fourteen (14) days prior to the time of payment fixed in such notice, and shall specify the time and place of payment, and the person to whom such payment is to be made. Prior to the time for any such payment fixed in a notice of a call given to a Shareholder, the Board of Directors may in its absolute discretion, by notice in writing to such Shareholder, revoke such call in whole or in part, extend the time fixed for payment thereof, or designate a different place of payment or person to whom payment is to be made. In the event of a call payable in installments, only one notice thereof need be given. |
| (c) | If pursuant to the terms of issuance of a share or otherwise, an amount is made payable at a fixed time, such amount shall be payable at such time as if it were payable by virtue of a call made by the Board of Directors and for which notice was given in accordance with paragraphs (a) and (b) of this Article 13, and the provision of these Articles with regard to calls (and the non-payment thereof) shall be applicable to such amount or such installment (and the non-payment thereof). |
| (d) | Joint holders of a Share shall be jointly and severally liable to pay all calls for payment in respect of such Share and all interest payable thereon. |
| (e) | Any amount called for payment which is not paid when due shall bear interest from the date fixed for payment until actual payment thereof, at such rate (not exceeding the then prevailing debitory rate charged by leading commercial banks in Israel), and payable at such time(s) as the Board of Directors may prescribe. |
| (f) | Upon the issuance of Shares, the Board of Directors may provide for differences among the holders of such Shares as to the amounts and times for payment of calls for payment in respect of such Shares. |
| 14. | Prepayment. |
With the approval of the Board of Directors, any Shareholder may pay to the Company any amount not yet payable in respect of his or her Shares, and the Board of Directors may approve the payment by the Company of interest on any such amount until the same would be payable if it had not been paid in advance, at such rate and time(s) as may be approved by the Board of Directors. The Board of Directors may at any time cause the Company to repay all or any part of the money so advanced, without premium or penalty. Nothing in this Article 14 shall derogate from the right of the Board of Directors to make any call for payment before or after receipt by the Company of any such advance.
| 15. | Forfeiture and Surrender. |
| (a) | If any Shareholder fails to pay an amount payable by virtue of a call, installment or interest thereon as provided for in accordance herewith, on or before the day fixed for payment of the same, the Board of Directors may at any time after the day fixed for such payment, so long as such amount (or any portion thereof) or interest thereon (or any portion thereof) remains unpaid, forfeit all or any of the Shares in respect of which such payment was called for. All expenses incurred by the Company in attempting to collect any such amount or interest thereon, including, without limitation, attorneys’ fees and costs of legal proceedings, shall be added to, and shall, for all purposes (including the accrual of interest thereon) constitute a part of, the amount payable to the Company in respect of such call. |
Annex D-5
| (b) | Upon the adoption of a resolution as to the forfeiture of a Shareholder’s Share, the Board of Directors shall cause notice thereof to be given to such Shareholder, which notice shall state that, in the event of the failure to pay the entire amount so payable by a date specified in the notice (which date shall be not less than fourteen (14) days after the date such notice is given and which may be extended by the Board of Directors), such Shares shall be ipso facto forfeited, provided, however, that, prior to such date, the Board of Directors may cancel such resolution of forfeiture, but no such cancellation shall stop the Board of Directors from adopting a further resolution of forfeiture in respect of the non-payment of the same amount. |
| (c) | Without derogating from Articles 51 and 55 hereof, whenever Shares are forfeited as herein provided, all dividends, if any, theretofore declared in respect thereof and not actually paid shall be deemed to have been forfeited at the same time. |
| (d) | The Company, by resolution of the Board of Directors, may accept the voluntary surrender of any Share. |
| (e) | Any Share forfeited or surrendered as provided herein, shall become the property of the Company as a dormant Share, and the same, subject to the provisions of these Articles, may be sold, re-issued or otherwise disposed of as the Board of Directors deems fit. |
| (f) | Any person whose Shares have been forfeited or surrendered shall cease to be a Shareholder in respect of the forfeited or surrendered Shares, but shall, notwithstanding, be liable to pay, and shall forthwith pay, to the Company, all calls, interest and expenses owing upon or in respect of such Shares at the time of forfeiture or surrender, together with interest thereon from the time of forfeiture or surrender until actual payment, at the rate prescribed in Article 13(e) above, and the Board of Directors, in its discretion, may, but shall not be obligated to, enforce or collect the payment of such amounts, or any part thereof, as it shall deem fit. In the event of such forfeiture or surrender, the Company, by resolution of the Board of Directors, may accelerate the date(s) of payment of any or all amounts then owing to the Company by the person in question (but not yet due) in respect of all Shares owned by such Shareholder, solely or jointly with another. |
| (g) | The Board of Directors may at any time, before any Share so forfeited or surrendered shall have been sold, re-issued or otherwise disposed of, nullify the forfeiture or surrender on such conditions as it deems fit, but no such nullification shall stop the Board of Directors from re-exercising its powers of forfeiture pursuant to this Article 15. |
| 16. | Lien. |
| (a) | Except to the extent the same may be waived or subordinated in writing, the Company shall have a first and paramount lien upon all the Shares registered in the name of each Shareholder (without regard to any equitable or other claim or interest in such Shares on the part of any other person), and upon the proceeds of the sale thereof, for his or her debts, liabilities and engagements to the Company arising from any amount payable by such Shareholder in respect of any unpaid or partly paid Share, whether or not such debt, liability or engagement has matured. Such lien shall extend to all dividends from time to time declared or paid in respect of such Share. Unless otherwise provided, the registration by the Company of a transfer of Shares shall be deemed to be a waiver on the part of the Company of the lien (if any) existing on such Shares immediately prior to such transfer. |
Annex D-6
| (b) | The Board of Directors may cause the Company to sell a Share subject to such a lien when the debt, liability or engagement giving rise to such lien has matured, in such manner as the Board of Directors deems fit, but no such sale shall be made unless such debt, liability or engagement has not been satisfied within fourteen (14) days after written notice of the intention to sell shall have been served on such Shareholder, his or her executors or administrators. |
| (c) | The net proceeds of any such sale, after payment of the costs and expenses thereof or ancillary thereto, shall be applied in or toward satisfaction of the debts, liabilities or engagements of such Shareholder in respect of such Share (whether or not the same have matured), and the remaining proceeds (if any) shall be paid to the Shareholder, his or her executors, administrators or assigns. |
| 17. | Sale After Forfeiture or Surrender or For Enforcement of Lien. |
Upon any sale of a share after forfeiture or surrender or for enforcing a lien, the Board of Directors may appoint any person to execute an instrument of transfer of the Share so sold and cause the purchaser’s name to be entered in the Register of Shareholders in respect of such Share. The purchaser shall be registered as the Shareholder and shall not be bound to see to the regularity of the sale proceedings, or to the application of the proceeds of such sale, and after his or her name has been entered in the Register of Shareholders in respect of such Share, the validity of the sale shall not be impeached by any person, and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively.
| 18. | Redeemable Shares. |
The Company may, subject to applicable law, issue redeemable shares or other securities and redeem the same upon terms and conditions to be set forth in a written agreement between the Company and the holder of such shares or in their terms of issuance.
Transfer of Shares
| 19. | Registration of Transfer. |
No transfer of Shares shall be registered unless a proper writing or instrument of transfer (in any customary form or any other form satisfactory to the Board of Directors or an officer of the Company to be designated by the Chief Executive Officer) has been submitted to the Company (or its transfer agent), together with any share certificate(s) and such other evidence of title as the Board of Directors or an officer of the Company to be designated by the Chief Executive Officer may require. Notwithstanding anything to the contrary herein, Shares registered in the name of The Depository Trust Company or its nominee shall be transferrable in accordance with the policies and procedures of The Depository Trust Company. Until the transferee has been registered in the Register of Shareholders in respect of the Shares so transferred, the Company may continue to regard the transferor as the owner thereof. The Board of Directors, may, from time to time, prescribe a fee for the registration of a transfer, and may approve other methods of recognizing the transfer of Shares in order to facilitate the trading of the Company’s shares on the Stock Exchange.
| 20. | Suspension of Registration. |
The Board of Directors may, in its discretion to the extent it deems necessary, close the Register of Shareholders of registration of transfers of Shares for a period determined by the Board of Directors, and no registrations of transfers of Shares shall be made by the Company during any such period during which the Register of Shareholders is so closed.
Transmission of Shares
| 21. | Decedents’ Shares. |
Upon the death of a Shareholder, the Company shall recognize the custodian or administrator of the estate or executor of the will, and in the absence of such, the lawful heirs of the Shareholder, as the only holders of the right for the Shares of the deceased Shareholder, after receipt of evidence to the entitlement thereto, as determined by the Board of Directors or an officer of the Company to be designated by the Chief Executive Officer.
| 22. | Receivers and Liquidators. |
| (a) | The Company may recognize any receiver, liquidator or similar official appointed to wind-up, dissolve or otherwise liquidate a corporate Shareholder, and a trustee, manager, receiver, liquidator or similar official appointed in bankruptcy or in connection with the reorganization of, or similar proceeding with respect to a Shareholder or its properties, as being entitled to the Shares registered in the name of such Shareholder. |
Annex D-7
| (b) | Such receiver, liquidator or similar official appointed to wind-up, dissolve or otherwise liquidate a corporate Shareholder and such trustee, manager, receiver, liquidator or similar official appointed in bankruptcy or in connection with the reorganization of, or similar proceedings with respect to a Shareholder or its properties, upon producing such evidence as the Board of Directors (or an officer of the Company to be designated by the Chief Executive Officer) may deem sufficient as to his or her authority to act in such capacity or under this Article, shall with the consent of the Board of Directors or an officer of the Company to be designated by the Chief Executive Officer (which the Board of Directors or such officer may grant or refuse in its absolute discretion), be registered as a Shareholder in respect of such Shares, or may, subject to the regulations as to transfer herein contained, transfer such Shares. |
General Meetings
| 23. | General Meetings. |
| (a) | An annual General Meeting (“Annual General Meeting”) shall be held at such time and at such place, either within or outside of the State of Israel, as may be determined by the Board of Directors. |
| (b) | All General Meetings other than Annual General Meetings shall be called “Special General Meetings”. The Board of Directors may, at its discretion, convene a Special General Meeting at such time and place, within or outside of the State of Israel, as may be determined by the Board of Directors. |
| (c) | If so determined by the Board of Directors, an Annual General Meeting or a Special General Meeting may be held through the use of any means of communication approved by the Board of Directors, provided all of the participating Shareholders can hear each other simultaneously. A resolution approved by use of means of communications as aforesaid, shall be deemed to be a resolution lawfully adopted at such general meeting and a Shareholder shall be deemed present in person at such general meeting if attending such meeting through the means of communication used at such meeting. |
| 24. | Record Date for General Meeting. |
Notwithstanding any provision of these Articles to the contrary, and to allow the Company to determine the Shareholders entitled to notice of or to vote at any General Meeting or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or grant of any rights, or entitled to exercise any rights in respect of or to take or be the subject of any other action, the Board of Directors may fix a record date for the General Meeting, which shall not be more than the maximum period and not less than the minimum period permitted by law. A determination of Shareholders of record entitled to notice of or to vote at a General Meeting shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
| 25. | Shareholder Proposal Request. |
| (a) | Any Shareholder or Shareholders of the Company holding at least the required percentage under the Companies Law of the voting rights of the Company which entitles such Shareholder(s) to require the Company to include a matter on the agenda of a General Meeting (the “Proposing Shareholder(s)”) may request, subject to the Companies Law, that the Board of Directors include a matter on the agenda of a General Meeting to be held in the future, provided that the Board of Directors determines that the matter is appropriate to be considered at a General Meeting (a “Proposal Request”). In order for the Board of Directors to consider a Proposal Request and whether to include the matter stated therein in the agenda of a General Meeting, notice of the Proposal Request must be timely delivered in accordance with applicable law, and the Proposal Request must comply with the requirements of these Articles (including this Article 25) and any applicable law and stock exchange rules and regulations. The Proposal Request must be in writing, signed by all of the Proposing Shareholder(s) making such request, delivered, either in person or by registered mail, postage prepaid, and received by the Secretary (or, in the absence thereof, by the Chief Executive Officer of the Company). To be considered timely, a Proposal Request must be received within the time periods prescribed by applicable law. The announcement of an adjournment or postponement of a General Meeting shall not commence a new time period (or extend any time period) for the delivery of a Proposal Request as described above. In addition to any information required to be included in accordance with applicable law, a Proposal Request must include the following: (i) the name, address, telephone number, fax number and email address of the Proposing Shareholder (or each Proposing Shareholder, as the case may be) and, if an entity, the name(s) of the person(s) that controls or manages such entity; (ii) the number of Shares held by the Proposing Shareholder(s), directly or indirectly (and, if any of such Shares are held indirectly, an explanation of how they are held and by whom), which shall be in such number no less than as is required to qualify as a Proposing Shareholder, accompanied by evidence satisfactory to the Company of the record holding of such Shares by the Proposing Shareholder(s) as of the date of the Proposal Request; (iii) the matter requested to be included on the agenda of a General Meeting, all information related to such matter, the reason that such matter is proposed to be brought before the General Meeting, the complete text of the resolution that the Proposing Shareholder proposes to be voted upon at the General Meeting, and a representation that the Proposing Shareholder(s) intend to appear in person or by proxy at the meeting; (iv) a description of all arrangements or understandings between the Proposing Shareholders and any other person(s) (naming such person or persons) in connection with the matter that is requested to be included on the agenda and a declaration signed by all Proposing Shareholder(s) of whether any of them has a personal interest in the matter and, if so, a description in reasonable detail of such personal interest; (v) a description of all Derivative Transactions (as defined below) by each Proposing Shareholder(s) during the previous twelve (12) month period, including the date of the transactions and the class, series and number of securities involved in, and the material economic terms of, such Derivative Transactions; and (vi) a declaration that all of the information that is required under the Companies Law and any other applicable law and stock exchange rules and regulations to be provided to the Company in connection with such matter, if any, has been provided to the Company. The Board of Directors, may, in its discretion, to the extent it deems necessary, request that the Proposing Shareholder(s) provide additional information necessary so as to include a matter in the agenda of a General Meeting, as the Board of Directors may reasonably require. |
Annex D-8
A “Derivative Transaction” means any agreement, arrangement, interest or understanding entered into by, or on behalf or for the benefit of, any Proposing Shareholder or any of its Affiliates or associates, whether of record or beneficial: (1) the value of which is derived in whole or in part from the value of any class or series of shares or other securities of the Company, (2) which otherwise provides any direct or indirect opportunity to gain or share in any gain derived from a change in the value of securities of the Company, (3) the effect or intent of which is to mitigate loss, manage risk or benefit of security value or price changes, or (4) which provides the right to vote or increase or decrease the voting power of, such Proposing Shareholder, or any of its Affiliates or associates, with respect to any Shares or other securities of the Company, which agreement, arrangement, interest or understanding may include, without limitation, any option, warrant, debt position, note, bond, convertible security, swap, stock appreciation right, short position, profit interest, hedge, right to dividends, voting agreement, performance-related fee or arrangement to borrow or lend Shares (whether or not subject to payment, settlement, exercise or conversion in any such class or series), and any proportionate interest of such Proposing Shareholder in the securities of the Company held by any general or limited partnership, or any limited liability company, of which such Proposing Shareholder is, directly or indirectly, a general partner or managing member.
| (b) | The information required pursuant to this Article shall be updated as of (i) the record date of the General Meeting, (ii) five business days before the General Meeting, and (iii) as of the General Meeting, and any adjournment or postponement thereof. |
| (c) | The provisions of Articles 25(a) and 25(b) shall apply, mutatis mutandis, to any matter to be included on the agenda of a Special General Meeting which is convened pursuant to a request of a Shareholder duly delivered to the Company in accordance with the Companies Law. |
| 26. | Notice of General Meetings; Omission to Give Notice. |
| (a) | The Company is not required to give notice of a General Meeting, subject to any mandatory provision of the Companies Law. |
| (b) | The accidental omission to give notice of a General Meeting to any Shareholder, or the non-receipt of notice sent to such Shareholder, shall not invalidate the proceedings at such meeting or any resolution adopted thereat. |
| (c) | No Shareholder present, in person or by proxy, at any time during a General Meeting shall be entitled to seek the cancellation or invalidation of any proceedings or resolutions adopted at such General Meeting on account of any defect in the notice of such meeting relating to the time or the place thereof, or any item acted upon at such meeting. |
| (d) | In addition to any places at which the Company may make available for review by Shareholders the full text of the proposed resolutions to be adopted at a General Meeting, as required by the Companies Law, the Company may add additional places for Shareholders to review such proposed resolutions, including an internet site. |
Annex D-9
Proceedings at General Meetings
| 27. | Quorum. |
| (a) | No business shall be transacted at a General Meeting, or at any adjournment thereof, unless the quorum required under these Articles for such General Meeting or such adjourned meeting, as the case may be, is present when the meeting proceeds to business. |
| (b) | In the absence of contrary provisions in these Articles, the requisite quorum for any General Meeting shall be Shareholders (not in default in payment of any sum referred to in Article 13 hereof) present in person or by proxy and holding shares conferring in the aggregate at least thirty-three and one-third percent (33⅓%) of the voting power of the Company, provided, however, that if (i) such General Meeting was initiated by and convened pursuant to a resolution adopted by the Board of Directors and (ii) at the time of such General Meeting the Company is qualified to use the forms of a “foreign private issuer” under US securities laws, then the requisite quorum shall be Shareholders (not in default in payment of any sum referred to in Article 13 hereof) present in person or by proxy and holding Shares conferring in the aggregate at least fifteen percent (15%) of the voting power of the Company. |
| (c) | If within half an hour from the time appointed for the meeting a quorum is not present, then without any further notice the meeting shall be adjourned either (i) to the same day in the next week, at the same time and place, (ii) to such day and at such time and place as indicated in the notice of such meeting, or (iii) to such day and at such time and place as the Chairperson of the General Meeting shall determine (which may be earlier or later than the date pursuant to clause (i) above). No business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting as originally called. At such adjourned meeting, if the original meeting was convened by a Shareholder pursuant to a request under Section 63 of the Companies Law, such Shareholder in addition to at least one or more Shareholder, present in person or by proxy, and holding the higher of ten percent (10%) of the voting power of the Company or the number of Shares required for making such request, shall constitute a quorum, but in any other case any Shareholder (not in default as aforesaid) present in person or by proxy, shall constitute a quorum. |
| 28. | Chairperson of General Meeting. |
The Chairperson of the Board of Directors shall preside as Chairperson of every General Meeting of the Company. If at any meeting the Chairperson is not present within fifteen (15) minutes after the time fixed for holding the meeting or is unwilling or unable to act as Chairperson, any of the following may preside as Chairperson of the meeting (and in the following order): a Director designated by the Board of Directors, the Chief Executive Officer, the Chief Financial Officer, the General Counsel, the Secretary or any person designated by any of the foregoing. If at any such meeting none of the foregoing persons is present or all are unwilling or unable to act as Chairperson, the Shareholders present (in person or by proxy) shall choose a Shareholder or its proxy present at the meeting to be Chairperson. The office of Chairperson shall not, by itself, entitle the holder thereof to vote at any General Meeting nor shall it entitle such holder to a second or casting vote (without derogating, however, from the rights of such Chairperson to vote as a Shareholder or proxy of a Shareholder if, in fact, the Chairperson is also a Shareholder or such proxy).
| 29. | Adoption of Resolutions at General Meetings. |
| (a) | Except as required by the Companies Law or these Articles, including, without limitation, Article 39 below, a resolution of the Shareholders shall be adopted if approved by the holders of a simple majority of the voting power represented at the General Meeting in person or by proxy and voting thereon, as one class, and disregarding abstentions from the count of the voting power present and voting. Without limiting the generality of the foregoing, a resolution with respect to a matter or action for which the Companies Law prescribes a higher majority or pursuant to which a provision requiring a higher majority would have been deemed to have been incorporated into these Articles, but for which the Companies Law allows these Articles to provide otherwise (including, Sections 327 and 24 of the Companies Law), shall be adopted by a simple majority of the voting power represented at the General Meeting in person or by proxy and voting thereon, as one class, and disregarding abstentions from the count of the voting power present and voting. |
| (b) | Every question submitted to a General Meeting shall be decided by a show of hands, but the Chairperson of the General Meeting may determine that a resolution shall be decided by a written ballot. A written ballot may be implemented before the proposed resolution is voted upon or immediately after the declaration by the Chairperson of the results of the vote by a show of hands. If a vote by written ballot is taken after such declaration, the results of the vote by a show of hands shall be of no effect, and the proposed resolution shall be decided by such written ballot. |
| (c) | A defect in convening or conducting a General Meeting, including a defect resulting from the non-fulfillment of any provision or condition set forth in the Companies Law or these Articles, including with regard to the manner of convening or conducting the General Meeting, shall not disqualify any resolution passed at the General Meeting and shall not affect the discussions or decisions which took place thereat. |
| (d) | A declaration by the Chairperson of the General Meeting that a resolution has been carried unanimously, or carried by a particular majority, or rejected, and an entry to that effect in the minute book of the Company, shall be prima facie evidence of the fact without proof of the number or proportion of the votes recorded in favor of or against such resolution. |
Annex D-10
| 30. | Power to Adjourn. |
A General Meeting, the consideration of any matter on its agenda, or the resolution on any matter on its agenda, may be postponed or adjourned, from time to time and from place to place: (i) by the Chairperson of a General Meeting at which a quorum is present (and he shall do so if directed by the General Meeting, with the consent of the holders of a majority of the voting power represented in person or by proxy and voting on the question of adjournment), but no business shall be transacted at any such adjourned meeting except business which might lawfully have been transacted at the meeting as originally called, or a matter on its agenda with respect to which no resolution was adopted at the meeting originally called; or (ii) by the Board of Directors (whether prior to or at a General Meeting).
| 31. | Voting Power. |
Subject to the provisions of Article 32(a) and to any provision hereof conferring special rights as to voting, or restricting the right to vote, every Shareholder shall have one vote for each Share held by the Shareholder of record, on every resolution, without regard to whether the vote thereon is conducted by a show of hands, by written ballot, or by any other means.
| 32. | Voting Rights. |
| (a) | No Shareholder shall be entitled to vote at any General Meeting (or be counted as a part of the quorum thereat), unless all calls then payable by him or her in respect of his or her Shares in the Company have been paid. |
| (b) | A company or other corporate body being a Shareholder of the Company may duly authorize any person to be its representative at any meeting of the Company or to execute or deliver a proxy on its behalf. Any person so authorized shall be entitled to exercise on behalf of such Shareholder all the power, which the Shareholder could have exercised if it were an individual. Upon the request of the Chairperson of the General Meeting, written evidence of such authorization (in form acceptable to the Chairperson) shall be delivered to him or her. |
| (c) | Any Shareholder entitled to vote may vote either in person or by proxy (who need not be a Shareholder of the Company), or, if the Shareholder is a company or other corporate body, by representative authorized pursuant to Article (b) above. |
| (d) | If two or more persons are registered as joint holders of any Share, the vote of the senior who tenders a vote, in person or by proxy, shall be accepted to the exclusion of the vote(s) of the other joint holder(s). For the purpose of this Article 32(d), seniority shall be determined by the order of registration of the joint holders in the Register of Shareholders. |
| (e) | If a Shareholder is a minor, under protection, bankrupt or legally incompetent, or in the case of a corporation, is in receivership or liquidation, it may, subject to all other provisions of these Articles and any documents or records required to be provided under these Articles, vote through his, her or its trustees, receiver, liquidator, natural guardian or another legal guardian, as the case may be, and the persons listed above may vote in person or by proxy. |
Annex D-11
Proxies
| 33. | Instrument of Appointment. |
| (a) | An instrument appointing a proxy shall be in writing and shall be substantially in the following form: |
| “I | of | |||
| (Name of Shareholder) | (Address of Shareholder) | |||
| Being a shareholder of SciSparc Ltd. hereby appoints | ||||
| of | ||||
| (Name of Proxy) | (Address of Proxy) | |||
| as my proxy to vote for me and on my behalf at the General Meeting of the Company to be held on the ___ day of _______, _______ and at any adjournment(s) thereof. | ||||
| Signed this ____ day of ___________, ______. | ||||
| (Signature of Appointor)” | ||||
or in any usual or common form or in such other form as may be approved by the Board of Directors. Such proxy shall be duly signed by the appointor of such person’s duly authorized attorney, or, if such appointor is company or other corporate body, in the manner in which it signs documents which binds it together with a certificate of an attorney with regard to the authority of the signatories.
| (b) | Subject to the Companies Law, the original instrument appointing a proxy or a copy thereof certified by an attorney (and the power of attorney or other authority, if any, under which such instrument has been signed) shall be delivered to the Company (at its Office, at its principal place of business, or at the offices of its registrar or transfer agent, or at such place as notice of the meeting may specify) not less than forty eight (48) hours (or such shorter period as the notice shall specify) before the time fixed for such meeting. Notwithstanding the above, the Chairperson shall have the right to waive the time requirement provided above with respect to all instruments of proxies and to accept instruments of proxy until the beginning of a General Meeting. A document appointing a proxy shall be valid for every adjourned meeting of the General Meeting to which the document relates. |
Annex D-12
| 34. | Effect of Death of Appointer of Transfer of Share and or Revocation of Appointment. |
| (a) | A vote cast in accordance with an instrument appointing a proxy shall be valid notwithstanding the prior death or bankruptcy of the appointing Shareholder (or of his or her attorney-in-fact, if any, who signed such instrument), or the transfer of the Share in respect of which the vote is cast, unless written notice of such matters shall have been received by the Company or by the Chairperson of such meeting prior to such vote being cast. |
| (b) | Subject to the Companies Law, an instrument appointing a proxy shall be deemed revoked (i) upon receipt by the Company or the Chairperson, subsequent to receipt by the Company of such instrument, of written notice signed by the person signing such instrument or by the Shareholder appointing such proxy canceling the appointment thereunder (or the authority pursuant to which such instrument was signed) or of an instrument appointing a different proxy (and such other documents, if any, required under Article 33(b) for such new appointment), provided such notice of cancellation or instrument appointing a different proxy were so received at the place and within the time for delivery of the instrument revoked thereby as referred to in Article 33(b) hereof, or (ii) if the appointing Shareholder is present in person at the meeting for which such instrument of proxy was delivered, upon receipt by the Chairperson of such meeting of written notice from such Shareholder of the revocation of such appointment, or if and when such Shareholder votes at such meeting. A vote cast in accordance with an instrument appointing a proxy shall be valid notwithstanding the revocation or purported cancellation of the appointment, or the presence in person or vote of the appointing Shareholder at a meeting for which it was rendered, unless such instrument of appointment was deemed revoked in accordance with the foregoing provisions of this Article 34(b) at or prior to the time such vote was cast. |
Board of Directors
| 35. | Powers of the Board of Directors. |
| (a) | The Board of Directors may exercise all such powers and do all such acts and things as the Board of Directors is authorized by law or as the Company is authorized to exercise and do and are not hereby or by law required to be exercised or done by the General Meeting. The authority conferred on the Board of Directors by this Article 35 shall be subject to the provisions of the Companies Law, these Articles and any regulation or resolution consistent with these Articles adopted from time to time at a General Meeting, provided, however, that no such regulation or resolution shall invalidate any prior act done by or pursuant to a decision of the Board of Directors which would have been valid if such regulation or resolution had not been adopted. |
| (b) | Without limiting the generality of the foregoing, the Board of Directors may, from time to time, set aside any amount(s) out of the profits of the Company as a reserve or reserves for any purpose(s) which the Board of Directors, in its absolute discretion, shall deem fit, including without limitation, capitalization and distribution of bonus Shares, and may invest any sum so set aside in any manner and from time to time deal with and vary such investments and dispose of all or any part thereof, and employ any such reserve or any part thereof in the business of the Company without being bound to keep the same separate from other assets of the Company, and may subdivide or re-designate any reserve or cancel the same or apply the funds therein for another purpose, all as the Board of Directors may from time to time think fit. |
Annex D-13
| 36. | Exercise of Powers of the Board of Directors. |
| (a) | A meeting of the Board of Directors at which a quorum is present in accordance with Article 45 shall be competent to exercise all the authorities, powers and discretion vested in or exercisable by the Board of Directors. |
| (b) | A resolution proposed at any meeting of the Board of Directors shall be deemed adopted if approved by a majority of the Directors present, entitled to vote and voting thereon when such resolution is put to a vote. |
| (c) | The Board of Directors may adopt resolutions, without convening a meeting of the Board of Directors, in writing or in any other manner permitted by the Companies Law. |
| (d) | Notwithstanding anything to the contrary herein, including under Articles 36(a) and 36(b), and without derogating from any other approvals required pursuant to these Articles or applicable law, the following actions shall require the affirmative consent of at least three-quarters (3/4) of the Directors then in office and entitled to vote thereon: |
| (i) | Any resolution to enter into a merger, consolidation, acquisition, amalgamation, business combination, issue equity securities or debt securities convertible into equity or other similar transaction (collectively, a “Transaction”), in each case that would reasonably be expected to result (A) in any person (together with its Affiliates) becoming, as a result of such Transaction, a beneficial owner (as determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of fifteen percent (15%) or more of the Ordinary Shares issued and outstanding immediately following the consummation of such Transaction or (B) in the increase in the beneficial ownership of Ordinary Shares of any person (together with its Affiliates) who immediately prior to the consummation of such Transaction holds fifteen percent (15%) or more of the then issued and outstanding Ordinary Shares; |
| (ii) | Any resolution to directly or indirectly sell, assign, convey, transfer, lease or otherwise dispose, in one or series of related transactions, of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to any person; |
| (iii) | Any resolution to effect any material change to the principal business of the Company, enter into new lines of business that are materially different from the Company’s then current line of business, or exit the then current line of business of the Company, or otherwise materially change the Company’s strategy and/or policies with respect to its main lines of business; or |
| (iv) | Any resolution to transfer the headquarters of the Company outside of Israel. |
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| 37. | Delegation of Powers. |
| (a) | The Board of Directors may, subject to the provisions of the Companies Law, delegate any or all of its powers to committees (in these Articles referred to as a “Committee of the Board of Directors”, or “Committee”), each consisting of one or more persons (who may or may not be Directors), and it may from time to time revoke such delegation or alter the composition of any such Committee. Any Committee so formed shall, in the exercise of the powers so delegated, conform to any regulations imposed on it by the Board of Directors, subject to applicable law. No regulation imposed by the Board of Directors on any Committee and no resolution of the Board of Directors shall invalidate any prior act done or pursuant to a resolution by the Committee which would have been valid if such regulation or resolution of the Board of Directors had not been adopted. The meetings and proceedings of any such Committee of the Board of Directors shall, mutatis mutandis, be governed by the provisions herein contained for regulating the meetings of the Board of Directors, to the extent not superseded by any regulations adopted by the Board of Directors. Unless otherwise expressly prohibited by the Board of Directors, in delegating powers to a Committee of the Board of Directors, such Committee shall be empowered to further delegate such powers. |
| (b) | The Board of Directors may from time to time appoint a Secretary to the Company, as well as Officers, agents, employees and independent contractors, as the Board of Directors deems fit, and may terminate the service of any such person. The Board of Directors may, subject to the provisions of the Companies Law, determine the powers and duties, as well as the salaries and compensation, of all such persons. |
| (c) | The Board of Directors may from time to time, by power of attorney or otherwise, appoint any person, company, firm or body of persons to be the attorney or attorneys of the Company at law or in fact for such purposes(s) and with such powers, authorities and discretions, and for such period and subject to such conditions, as it deems fit, and any such power of attorney or other appointment may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Board of Directors deems fit, and may also authorize any such attorney to delegate all or any of the powers, authorities and discretions vested in him or her. |
| 38. | Number of Directors. |
| (a) | The Board of Directors shall consist of such number of Directors (not less than three (3) nor more than eight (8), including the External Directors, if any were elected) as may be fixed from time to time by resolution of the Board of Directors. |
| 39. | Election and Removal of Directors. |
| (a) | The Directors of the Company shall be appointed or re-appointed by Ordinary Resolution at the Annual General Meeting (other than External Directors, if any) following the expiration of the term of office of the Directors of that class of Directors will be for a term of office that expires on the third annual general meeting following such election or re-election, such that from the Annual General Meeting of 2021 and thereafter, each year the term of office of only one class of Directors will expire, unless their office is vacated pursuant to any law or as stipulated in these Articles. |
This Section 39 (a) shall not be amended unless an affirmative vote of 65% of the voting power represented at a general meeting of shareholders and voting thereon has been obtained, provided that such majority constitutes more than 33.33% of the Company’s total issued and outstanding share capital at the record date for such general meeting.
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| (b) | In accordance with the provisions of Section 39 (a) above, the Directors (excluding the External Directors if any were elected), shall be classified, with respect to the term for which they each severally hold office, into three classes, as nearly equal in number as practicable, hereby designated as Class I, Class II and Class III (each, a “Class”). |
| (c) | In accordance with the provisions of Section 39 (a) above, at each Annual General Meeting, each Nominee or Alternate Nominee (each as defined below) elected at such Annual General Meeting to serve as a Director in a Class whose term shall have expired at such Annual General Meeting shall be elected to hold office until the third Annual General Meeting next succeeding his or her election and until his or her respective successor shall have been elected and qualified. Notwithstanding anything to the contrary, each Director shall serve until his or her successor is elected and qualified or until such earlier time as such Director’s office is vacated. |
| (d) | If the number of Directors (excluding External Directors, if any were elected) that comprises the Board of Directors is hereafter changed by the Board of Directors, any newly created directorships or decrease in directorships shall be so apportioned by the Board of Directors among the classes as to make all classes as nearly equal in number as is practicable, provided that no decrease in the number of Directors constituting the Board of Directors shall shorten the term of any incumbent Director. |
| (e) | Prior to every General Meeting of the Company at which Directors are to be elected, and subject to clauses(a), (b) and (h) of this Article, the Board of Directors (or a Committee thereof) shall select, by a resolution adopted by a majority of the Board of Directors (or such Committee), a number of persons to be proposed to the Shareholders for election as Directors at such General Meeting (the “Nominees”). |
| (f) | Any Proposing Shareholder requesting to include on the agenda of a General Meeting a nomination of a person to be proposed to the Shareholders for election as Director (such person, an “Alternate Nominee”), may so request provided that it complies with this Article 39(f), Article 25 and applicable law. Unless otherwise determined by the Board of Directors, a Proposal Request relating to an Alternate Nominee is deemed to be a matter that is appropriate to be considered only at an Annual General Meeting. In addition to any information required to be included in accordance with applicable law, such a Proposal Request shall include information required pursuant to Article 25, and shall also set forth: (i) the name, address, telephone number, fax number and email address of the Alternate Nominee and all citizenships and residencies of the Alternate Nominee; (ii) a description of all arrangements, relations or understandings during the past three (3) years, and any other material relationships, between the Proposing Shareholder(s) or any of its Affiliates and each Alternate Nominee; (iii) a declaration signed by the Alternate Nominee that he or she consents to be named in the Company’s notices and proxy materials and on the Company’s proxy card relating to the General Meeting, if provided or published, and that he or she, if elected, consents to serve on the Board of Directors and to be named in the Company’s disclosures and filings; (iv) a declaration signed by each Alternate Nominee as required under the Companies Law and any other applicable law and stock exchange rules and regulations for the appointment of such an Alternate Nominee and an undertaking that all of the information that is required under law and stock exchange rules and regulations to be provided to the Company in connection with such an appointment has been provided (including, information in respect of the Alternate Nominee as would be provided in response to the applicable disclosure requirements under Form 20-F (or Form 10-K, if applicable) or any other applicable form prescribed by the U.S. Securities and Exchange Commission (the “SEC”)); (v) a declaration made by the Alternate Nominee of whether he or she meets the criteria for an independent director and, if applicable, External Director of the Company under the Companies Law and/or under any applicable law, regulation or stock exchange rules, and if not, then an explanation of why not; and (vi) any other information required at the time of submission of the Proposal Request by applicable law, regulations or stock exchange rules. In addition, the Proposing Shareholder(s) and each Alternate Nominee shall promptly provide any other information reasonably requested by the Company, including a duly completed director and officer questionnaire, in such form as may be provided by the Company, with respect to each Alternate Nominee. The Board of Directors may refuse to acknowledge the nomination of any person not made in compliance with the foregoing. The Company shall be entitled to publish any information provided by a Proposing Shareholder or Alternate Nominee pursuant to this Article 39(f) and Article 25, and the Proposing Shareholder and Alternate Nominee shall be responsible for the accuracy and completeness thereof. |
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| (g) | The Nominees or Alternate Nominees shall be elected by a resolution adopted at the General Meeting at which they are subject to election. Notwithstanding Articles 25(a) and 25(c), in the event of a Contested Election, the method of calculation of the votes and the manner in which the resolutions will be presented to the General Meeting shall be determined by the Board of Directors in its discretion. In the event that the Board of Directors does not or is unable to make a determination on such matter, then the method described in clause (ii) below shall apply. The Board of Directors may consider, among other things, the following methods: (i) election of competing slates of Director nominees (determined in a manner approved by the Board of Directors) by a majority of the voting power represented at the General Meeting in person or by proxy and voting on such competing slates, (ii) election of individual Directors by a plurality of the voting power represented at the General Meeting in person or by proxy and voting on the election of Directors (which shall mean that the nominees receiving the largest number of “for” votes will be elected in such Contested Election), (iii) election of each nominee by a majority of the voting power represented at the General Meeting in person or by proxy and voting on the election of Directors, provided that if the number of such nominees exceeds the number of Directors to be elected, then as among such nominees the election shall be by plurality of the voting power as described above, and (iv) such other method of voting as the Board of Directors deems appropriate, including use of a “universal proxy card” listing all Nominees and Alternate Nominees by the Company. For the purposes of these Articles, election of Directors at a General Meeting shall be considered a “Contested Election” if the aggregate number of Nominees and Alternate Nominees at such meeting exceeds the total number of Directors to be elected at such meeting, with the determination thereof being made by the Secretary (or, in the absence thereof, by the Chief Executive Officer of the Company) as of the close of the applicable notice of nomination period under Article 25 or under applicable law, based on whether one or more notice(s) of nomination were timely filed in accordance with Article 25, this Article 39 and applicable law; provided, however, that the determination that an election is a Contested Election shall not be determinative as to the validity of any such notice of nomination; and provided, further, that, if, prior to the time the Company mails its initial proxy statement in connection with such election of Directors, one or more notices of nomination of an Alternate Nominee are withdrawn such that the number of candidates for election as Director no longer exceeds the number of Directors to be elected, the election shall not be considered a Contested Election. Shareholders shall not be entitled to cumulative voting in the election of Directors, except to the extent specifically set forth in this clause (g). |
| (h) | Notwithstanding anything to the contrary in these Articles, the election, qualification, removal or dismissal of External Directors, if so elected, shall be only in accordance with the applicable provisions set forth in the Companies Law. |
| 40. | Commencement of Directorship. |
Without derogating from Article 39, the term of office of a Director shall commence as of the date of his or her appointment or election, or on a later date if so specified in his or her appointment or election.
| 41. | Continuing Directors in the Event of Vacancies. |
The Board of Directors (and, if so determined by the Board of Directors, the General Meeting) may at any time and from time to time appoint any person as a Director to fill a vacancy (whether such vacancy is due to a Director no longer serving or due to the number of Directors serving being less than the maximum number stated in Article 38 hereof). In the event of one or more such vacancies in the Board of Directors, the continuing Directors may continue to act in every matter, provided, however, that if the number of Directors serving is less than the minimum number provided for pursuant to Article 38 hereof, they may only act in an emergency or to fill the office of a Director which has become vacant up to a number equal to the minimum number provided for pursuant to Article 38 hereof, or in order to call a General Meeting of the Company for the purpose of electing Directors to fill any or all vacancies. The office of a Director that was appointed by the Board of Directors to fill any vacancy shall only be for the remaining period of time during which the Director whose service has ended was filled would have held office, or in case of a vacancy due to the number of Directors serving being less than the maximum number stated in Article 38 hereof the Board of Directors shall determine at the time of appointment the class pursuant to Article 39 to which the additional Director shall be assigned.
| 42. | Vacation of Office. |
The office of a Director shall be vacated and he shall be dismissed or removed:
| (a) | ipso facto, upon his or her death; |
| (b) | if he or she is prevented by applicable law from serving as a Director; |
| (c) | if the Board of Directors determines that due to his or her mental or physical state he or she is unable to serve as a director; |
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| (d) | if his or her directorship expires pursuant to these Articles and/or applicable law; |
| (e) | by a resolution adopted at an Annual General Meeting by a majority of at least 65% of the total voting power of the Shares (with such removal becoming effective on the date fixed in such resolution); |
| (f) | by his or her written resignation, such resignation becoming effective on the date fixed therein, or upon the delivery thereof to the Company, whichever is later; or |
| (g) | with respect to an External Director, if so elected, and notwithstanding anything to the contrary herein, only pursuant to applicable law. |
| 43. | Conflict of Interests; Approval of Related Party Transactions. |
| (a) | Subject to the provisions of applicable law and these Articles, no Director shall be disqualified by virtue of his or her office from holding any office or place of profit in the Company or in any company in which the Company shall be a Shareholder or otherwise interested, or from contracting with the Company as vendor, purchaser or otherwise, nor shall any such contract, or any contract or arrangement entered into by or on behalf of the Company in which any Director shall be in any way interested, be avoided, nor, other than as required under the Companies Law, shall any Director be liable to account to the Company for any profit arising from any such office or place of profit or realized by any such contract or arrangement by reason only of such Director’s holding that office or of the fiduciary relations thereby established, but the nature of his or her interest, as well as any material fact or document, must be disclosed by him or her at the meeting of the Board of Directors at which the contract or arrangement is first considered, if his or her interest then exists, or, in any other case, at no later than the first meeting of the Board of Directors after the acquisition of his or her interest. |
| (b) | Subject to the Companies Law and these Articles, a transaction between the Company and an Office Holder, and a transaction between the Company and another entity in which an Office Holder of the Company has a personal interest, in each case, which is not an Extraordinary Transaction (as defined by the Companies Law), shall require only approval by the Board of Directors or a Committee of the Board of Directors. Such authorization, as well as the actual approval, may be for a particular transaction or more generally for specific type of transactions. |
| (c) | Notwithstanding anything to the contrary in these Articles, the Company shall not engage in any Business Combination (as defined below) with any Shareholder and/or any of its Affiliates and/or investors for a period of three years following (i) with respect to any Shareholder holding as of the Effective Time fifteen percent (15%) or more of the voting power of the Shares, the Effective Time and (ii) with respect to all Shareholders, each time as such Shareholder and/or any of its Affiliates and/or investors become(s) (other than due to a buyback, redemption or cancellation of shares by the Company) the holder(s) (beneficially or of record) of fifteen percent (15%) or more of the issued and outstanding voting power of the Shares (the “Threshold” and such shareholder, an “Interested Shareholder”), except if the Board of Directors approves either the Business Combination or the transaction which resulted in such Shareholder and/or any of its Affiliates and/or investors becoming an Interested Shareholder prior to consummation of a Business Combination. As used in this Article 43 only, “Business Combination” means (i) a merger or consolidation of the Company in which the holders of a majority of the Ordinary Shares issued and outstanding immediately prior to the consummation of such transaction hold immediately following the consummation of such transaction less than 50% of the issued and outstanding share capital of the surviving, acquiring or resulting company (or if the surviving, acquiring or resulting company is a wholly owned subsidiary of another company immediately following the consummation of such transaction, the parent company of such surviving, acquiring or resulting company) or (ii) a disposition of assets of the Company with an aggregate market value equal to 10% or more of the Company’s assets or of its outstanding shares. |
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Proceedings of the Board of Directors
| 44. | Meetings. |
| (a) | The Board of Directors may meet and adjourn its meetings and otherwise regulate such meetings and proceedings as the Board of Directors thinks fit. |
| (b) | A meeting of the Board of Directors shall be convened by the Secretary upon instruction of the Chairperson or upon a request of at least two (2) Directors which is submitted to the Chairperson or in any event that such meeting is required by the provisions of the Companies Law. In the event that the Chairperson does not instruct the Secretary to convene a meeting upon a request of at least two (2) Directors within seven (7) days of such request, then such two (2) Directors may convene a meeting of the Board of Directors. Any meeting of the Board of Directors shall be convened upon not less than two (2) days’ notice, unless such notice is waived in writing by all of the Directors as to a particular meeting or by their attendance at such meeting or unless the matters to be discussed at such meeting are of such urgency and importance that notice is reasonably determined by the Chairperson as ought to be waived or shortened under the circumstances. |
| (c) | Notice of any such meeting shall be given orally, by telephone, in writing or by mail, facsimile, email or such other means of delivery of notices as the Company may apply, from time to time. |
| (d) | Notwithstanding anything to the contrary herein, failure to deliver notice to a Director of any such meeting in the manner required hereby may be waived by such Director, and a meeting shall be deemed to have been duly convened notwithstanding such defective notice if such failure or defect is waived prior to action being taken at such meeting, by all Directors entitled to participate at such meeting to whom notice was not duly given as aforesaid. Without derogating from the foregoing, no Director present at any time during a meeting of the Board of Directors shall be entitled to seek the cancellation or invalidation of any proceedings or resolutions adopted at such meeting on account of any defect in the notice of such meeting relating to the date, time or the place thereof or the convening of the meeting. |
| 45. | Quorum. |
Until otherwise unanimously decided by the Board of Directors, a quorum at a meeting of the Board of Directors shall be constituted by the presence in person or by any means of communication of a majority of the Directors then in office who are lawfully entitled to participate and vote in the meeting. No business shall be transacted at a meeting of the Board of Directors unless the requisite quorum is present (in person or by any means of communication on the condition that all participating Directors can hear each other simultaneously) when the meeting proceeds to business. If within thirty (30) minutes from the time appointed for a meeting of the Board of Directors a quorum is not present, the meeting shall stand adjourned at the same place and time forty-eight (48) hours thereafter unless the Chairperson has determined that there is such urgency and importance that a shorter period is required under the circumstances. If an adjourned meeting is convened in accordance with the foregoing and a quorum is not present within thirty (30) minutes of the announced time, the requisite quorum at such adjourned meeting shall be, any two (2) Directors, if the number of Directors then serving is up to five (5), and any three (3) Directors, if the number of Directors then serving is more than five (5), in each case who are lawfully entitled to participate in the meeting and who are present at such adjourned meeting. At an adjourned meeting of the Board of Directors the only matters to be considered shall be those matters which might have been lawfully considered at the meeting of the Board of Directors originally called if a requisite quorum had been present, and the only resolutions to be adopted are such types of resolutions which could have been adopted at the meeting of the Board of Directors originally called.
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| 46. | Chairperson of the Board of Directors. |
The Board of Directors shall, from time to time, elect one of its members to be the Chairperson of the Board of Directors, remove such Chairperson from office and appoint in his or her place. The Chairperson of the Board of Directors shall preside at every meeting of the Board of Directors, but if there is no such Chairperson, or if at any meeting he is not present within fifteen (15) minutes of the time fixed for the meeting or if he is unwilling to take the chair, the Directors present shall choose one of the Directors present at the meeting to be the Chairperson of such meeting. The office of Chairperson of the Board of Directors shall not, by itself, entitle the holder to a second or casting vote.
| 47. | Validity of Acts Despite Defects. |
All acts done or transacted at any meeting of the Board of Directors, or of a Committee of the Board of Directors, or by any person(s) acting as Director(s), shall, notwithstanding that it may afterwards be discovered that there was some defect in the appointment of the participants in such meeting or any of them or any person(s) acting as aforesaid, or that they or any of them were disqualified, be as valid as if there were no such defect or disqualification.
Chief Executive Officer
| 48. | Chief Executive Officer. |
The Board of Directors shall from time to time appoint one or more persons, whether or not Directors, as Chief Executive Officer of the Company who shall have the powers and authorities set forth in the Companies Law, and may confer upon such person(s), and from time to time modify or revoke, such titles and such duties and authorities of the Board of Directors as the Board of Directors may deem fit, subject to such limitations and restrictions as the Board of Directors may from time to time prescribe. Such appointment(s) may be either for a fixed term or without any limitation of time, and the Board of Directors may from time to time (subject to any additional approvals required under, and the provisions of, the Companies Law and of any contract between any such person and the Company) fix their salaries and compensation, remove or dismiss them from office and appoint another or others in his, her or their place or places.
Minutes
| 49. | Minutes. |
Any minutes of the General Meeting or the Board of Directors or any Committee thereof, if purporting to be signed by the Chairperson of the General Meeting, the Board of Directors or a Committee thereof, as the case may be, or by the Chairperson of the next succeeding General Meeting, meeting of the Board of Directors or meeting of a Committee, as the case may be, shall constitute prima facie evidence of the matters recorded therein.
Dividends
| 50. | Declaration of Dividends. |
The Board of Directors may, from time to time, declare, and cause the Company to pay dividends as permitted by the Companies Law. The Board of Directors shall determine the time for payment of such dividends and the record date for determining the shareholders entitled thereto.
| 51. | Amount Payable by Way of Dividends. |
Subject to the provisions of these Articles and subject to the rights or conditions attached at that time to any Share in the capital of the Company granting preferential, special or deferred rights or not granting any rights with respect to dividends, any dividend paid by the Company shall be allocated among the Shareholders (not in default in payment of any sum referred to in Article 13 hereof) entitled thereto on a pari passu basis in proportion to their respective holdings of the issued and outstanding Shares in respect of which such dividends are being paid.
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| 52. | Interest. |
No dividend shall carry interest as against the Company.
| 53. | Payment in Specie. |
If so declared by the Board of Directors, a dividend declared in accordance with Article 50 may be paid, in whole or in part, by the distribution of specific assets of the Company or by distribution of paid up Shares, debentures or other securities of the Company or of any other companies, or in any combination thereof, in each case, the fair value of which shall be determined by the Board of Directors in good faith.
| 54. | Implementation of Powers. |
The Board of Directors may settle, as it deems fit, any difficulty arising with regard to the distribution of dividends, bonus shares or otherwise, and in particular, to issue certificates for fractions of shares and sell such fractions of shares in order to pay their consideration to those entitled thereto, or to set the value for the distribution of certain assets and to determine that cash payments shall be paid to the Shareholders on the basis of such value, or that fractions whose value is less than NIS 0.01 shall not be taken into account. The Board of Directors may instruct to pay cash or convey these certain assets to a trustee in favor of those people who are entitled to a dividend, as the Board of Directors shall deem appropriate.
| 55. | Deductions from Dividends. |
The Board of Directors may deduct from any dividend or other moneys payable to any Shareholder in respect of a Share any and all sums of money then payable by him or her to the Company on account of calls or otherwise in respect of Shares of the Company and/or on account of any other matter of transaction whatsoever.
| 56. | Retention of Dividends. |
| (a) | The Board of Directors may retain any dividend or other moneys payable or property distributable in respect of a Share on which the Company has a lien, and may apply the same in or toward satisfaction of the debts, liabilities, or engagements in respect of which the lien exists. |
| (b) | The Board of Directors may retain any dividend or other moneys payable or property distributable in respect of a Share in respect of which any person is, under Articles 21 or 22, entitled to become a Shareholder, or which any person is, under said Articles, entitled to transfer, until such person shall become a Shareholder in respect of such Share or shall transfer the same. |
| 57. | Unclaimed Dividends. |
All unclaimed dividends or other moneys payable in respect of a Share may be invested or otherwise made use of by the Board of Directors for the benefit of the Company until claimed. The payment of any unclaimed dividend or such other moneys into a separate account shall not constitute the Company a trustee in respect thereof, and any dividend unclaimed after a period of one (1) year (or such other period determined by the Board of Directors) from the date of declaration of such dividend, and any such other moneys unclaimed after a like period from the date the same were payable, shall be forfeited and shall revert to the Company, provided, however, that the Board of Directors may, at its discretion, cause the Company to pay any such dividend or such other moneys, or any part thereof, to a person who would have been entitled thereto had the same not reverted to the Company. The principal (and only the principal) of any unclaimed dividend of such other moneys shall be if claimed, paid to a person entitled thereto.
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| 58. | Mechanics of Payment. |
Any dividend or other moneys payable in cash in respect of a Share, less the tax required to be withheld pursuant to applicable law, may, as determined by the Board of Directors in its sole discretion, be paid by check or warrant sent through the post to, or left at, the registered address of the person entitled thereto or by transfer to a bank account specified by such person (or, if two (2) or more persons are registered as joint holders of such Share or are entitled jointly thereto in consequence of the death or bankruptcy of the holder or otherwise, to any one of such persons or his or her bank account or the person who the Company may then recognize as the owner thereof or entitled thereto under Article 21 or 22 hereof, as applicable, or such person’s bank account), or to such person and at such other address as the person entitled thereto may by writing direct, or in any other manner the Board of Directors deems appropriate. Every such check or warrant or other method of payment shall be made payable to the order of the person to whom it is sent, or to such person as the person entitled thereto as aforesaid may direct, and payment of the check or warrant by the banker upon whom it is drawn shall be a good discharge to the Company. Every such check shall be sent at the risk of the person entitled to the money represented thereby.
Accounts
| 59. | Books of Account. |
The Company’s books of account shall be kept at the Office of the Company, or at such other place or places as the Board of Directors may think fit, and they shall always be open to inspection by all Directors. No shareholder, not being a Director, shall have any right to inspect any account or book or other similar document of the Company, except as explicitly conferred by law or authorized by the Board of Directors. The Company shall make copies of its annual financial statements available for inspection by the Shareholders at the principal offices of the Company. The Company shall not be required to send copies of its annual financial statements to the Shareholders.
| 60. | Auditors. |
The appointment, authorities, rights and duties of the auditor(s) of the Company, shall be regulated by applicable law, provided, however, that in exercising its authority to fix the remuneration of the auditor(s), the Shareholders in General Meeting may act (and in the absence of any action in connection therewith shall be deemed to have so acted) to authorize the Board of Directors (with right of delegation to a Committee thereof or to management) to fix such remuneration subject to such criteria or standards, and if no such criteria or standards are so provided, such remuneration shall be fixed in an amount commensurate with the volume and nature of the services rendered by such auditor(s). The General Meeting may, if so recommended by the Board of Directors, appoint the auditors for a period that may extend until the third Annual General Meeting after the Annual General Meeting in which the auditors were appointed.
| 61. | Fiscal Year. |
The fiscal year of the Company shall be the 12 months period ending on December 31 of each calendar year.
Supplementary Registers
| 62. | Supplementary Registers. |
Subject to and in accordance with the provisions of Sections 138 and 139 of the Companies Law, the Company may cause supplementary registers to be kept in any place outside Israel as the Board of Directors may think fit, and, subject to all applicable requirements of law, the Board of Directors may from time to time adopt such rules and procedures as it may think fit in connection with the keeping of such branch registers.
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Exemption, Indemnity and Insurance
| 63. | Insurance. |
Subject to the provisions of the Companies Law with regard to such matters, the Company may enter into a contract for the insurance of the liability, in whole or in part, of any of its Office Holders imposed on such Office Holder due to an act performed by or an omission of the Office Holder in the Office Holder’s capacity as an Office Holder of the Company arising from any matter permitted by law, including the following:
| (a) | a breach of duty of care to the Company or to any other person; |
| (b) | a breach of his or her duty of loyalty to the Company, provided that the Office Holder acted in good faith and had reasonable grounds to assume that act that resulted in such breach would not prejudice the interests of the Company; |
| (c) | a financial liability imposed on such Office Holder in favor of any other person; and |
| (d) | any other event, occurrence, matters or circumstances under any law with respect to which the Company may, or will be able to, insure an Office Holder, and to the extent such law requires the inclusion of a provision permitting such insurance in these Articles, then such provision is deemed to be included and incorporated herein by reference (including, without limitation, in accordance with Section 56h(b)(1) of the Securities Law, if and to the extent applicable, and Section 50P of the Economic Competition Law). |
| 64. | Indemnity. |
| (a) | Subject to the provisions of the Companies Law, the Company may retroactively indemnify an Office Holder of the Company to the maximum extent permitted under applicable law, including with respect to the following liabilities and expenses, provided that such liabilities or expenses were imposed on such Office Holder or incurred by such Office Holder due to an act performed by or an omission of the Office Holder in such Office Holder’s capacity as an Office Holder of the Company: |
| (i) | a financial liability imposed on an Office Holder in favor of another person by any court judgment, including a judgment given as a result of a settlement or an arbitrator’s award which has been confirmed by a court; |
| (ii) | reasonable litigation expenses, including legal fees, expended by the Office Holder (A) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (1) no indictment (as defined in the Companies Law) was filed against such Office Holder as a result of such investigation or proceeding; and (2) no financial liability in lieu of a criminal proceeding (as defined in the Companies Law) was imposed upon him or her as a result of such investigation or proceeding or if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent or (B) in connection with a financial sanction; |
| (iii) | reasonable litigation costs, including legal fees, expended by an Office Holder or which were imposed on an Office Holder by a court in proceedings filed against the Office Holder by the Company or in its name or by any other person or in a criminal charge in respect of which the Office Holder was acquitted or in a criminal charge in respect of which the Office Holder was convicted for an offence which did not require proof of criminal intent; and |
| (iv) | any other event, occurrence, matter or circumstance under any law with respect to which the Company may, or will be able to, indemnify an Office Holder, and to the extent such law requires the inclusion of a provision permitting such indemnity in these Articles, then such provision is deemed to be included and incorporated herein by reference (including, without limitation, in accordance with Section 56h(b)(1) of the Israeli Securities Law, if and to the extent applicable, and Section 50P(b)(2) of the RTP Law). |
Annex D-23
| (b) | Subject to the provisions of the Companies Law, the Company may undertake to indemnify an Office Holder, in advance, with respect to those liabilities and expenses described in the following Articles: |
| (i) | Sub-Article 64(a)(i)(a)(ii) to 64(a)(iv); and |
| (ii) | Sub-Article 64(a)(i), provided that: |
| (1) | the undertaking to indemnify is limited to such events which the Directors shall deem to be foreseeable in light of the operations of the Company at the time that the undertaking to indemnify is made and for such amounts or criterion which the Directors may, at the time of the giving of such undertaking to indemnify, deem to be reasonable under the circumstances; and |
| (2) | the undertaking to indemnify shall set forth such events which the Directors shall deem to be foreseeable in light of the operations of the Company at the time that the undertaking to indemnify is made, and the amounts and/or criterion which the Directors may, at the time of the giving of such undertaking to indemnify, deem to be reasonable under the circumstances. |
| 65. | Exemption. |
Subject to the provisions of the Companies Law, the Company may, to the maximum extent permitted by law, exempt and release, in advance, any Office Holder from any liability for damages arising out of a breach of a duty of care.
| 66. | General. |
| (a) | Any amendment to the Companies Law or any other applicable law adversely affecting the right of any Office Holder to be indemnified, insured or exempt pursuant to Articles 63 to 65 and any amendments to Articles 63 to 65 shall be prospective in effect, and shall not affect the Company’s obligation or ability to indemnify, insure or exempt an Office Holder for any act or omission occurring prior to such amendment, unless otherwise provided by applicable law. |
| (b) | The provisions of Articles 63 to 65 (i) shall apply to the maximum extent permitted by law (including, the Companies Law, the Securities Law and the Economic Competition Law); and (ii) are not intended, and shall not be interpreted so as to restrict the Company, in any manner, in respect of the procurement of insurance and/or in respect of indemnification (whether in advance or retroactively) and/or exemption, in favor of any person who is not an Office Holder, including, without limitation, any employee, agent, consultant or contractor of the Company who is not an Office Holder; and/or any Office Holder to the extent that such insurance and/or indemnification is not specifically prohibited under law. |
Winding Up
| 67. | Winding Up. |
If the Company is wound up, then, subject to applicable law and to the rights of the holders of Shares with special rights upon winding up, the assets of the Company available for distribution among the Shareholders shall be distributed to them in proportion to the number of issued and outstanding Shares held by each Shareholder.
Notices
| 68. | Notices. |
| (a) | Any written notice or other document may be served by the Company upon any Shareholder either personally, by facsimile, email or other electronic transmission, or by sending it by prepaid mail (airmail if sent internationally) addressed to such Shareholder at his or her address as described in the Register of Shareholders or such other address as the Shareholder may have designated in writing for the receipt of notices and other documents. |
Annex D-24
| (b) | Any written notice or other document may be served by any Shareholder upon the Company by tendering the same in person to the Secretary or the Chief Executive Officer of the Company at the principal office of the Company, by facsimile transmission, email or other electronic submission, or by sending it by prepaid registered mail (airmail if posted outside Israel) to the Company at its Office. |
| (c) | Any such notice or other document shall be deemed to have been served: |
| (i) | in the case of mailing, forty-eight (48) hours after it has been posted, or when actually received by the addressee if sooner than forty-eight hours after it has been posted, or |
| (ii) | in the case of overnight air courier, on the next business day following the day sent, with receipt confirmed by the courier, or when actually received by the addressee if sooner than three business days after it has been sent; |
| (iii) | in the case of personal delivery, when actually tendered in person, to such addressee; |
| (iv) | in the case of facsimile, email or other electronic transmission, on the first business day (during normal business hours in place of addressee) on which the sender receives automatic electronic confirmation by the addressee’s facsimile machine that such notice was received by the addressee or delivery confirmation from the addressee’s email or other communication server. |
| (d) | If a notice is, in fact, received by the addressee, it shall be deemed to have been duly served, when received, notwithstanding that it was defectively addressed or failed, in some other respect, to comply with the provisions of this Article 68. |
| (e) | All notices to be given to the Shareholders shall, with respect to any Share to which persons are jointly entitled, be given to whichever of such persons is named first in the Register of Shareholders, and any notice so given shall be sufficient notice to the holders of such Share. |
| (f) | Any Shareholder whose address is not described in the Register of Shareholders, and who shall not have designated in writing an address for the receipt of notices, shall not be entitled to receive any notice from the Company. |
| (g) | Notwithstanding anything to the contrary contained herein, notice by the Company of a General Meeting, containing the information required by applicable law and these Articles to be set forth therein, which is published, within the time otherwise required for giving notice of such meeting, in either or several of the following manners (as applicable) shall be deemed to be notice of such meeting duly given, for the purposes of these Articles, to any Shareholder whose address as registered in the Register of Shareholders (or as designated in writing for the receipt of notices and other documents) is located either inside or outside the State of Israel: |
| (i) | if the Company’s Shares are then listed for trading on a national securities exchange in the United States or quoted in an over-the-counter market in the United States, publication of notice of a General Meeting pursuant to a report or a schedule filed with, or furnished to, the SEC pursuant to the Securities Exchange Act of 1934, as amended; and/or |
| (ii) | on the Company’s internet site. |
| (h) | The mailing or publication date and the record date and/or date of the meeting (as applicable) shall be counted among the days comprising any notice period under the Companies Law and the regulations thereunder. |
Amendment
| 69. | Amendment. |
Any amendment of these Articles shall require, in addition and prior to the approval of the General Meeting of Shareholders in accordance with these Articles, also the approval of the Board of Directors with the affirmative vote of at least three-quarters (3/4) of the Directors then in office and entitled to vote thereon.
Annex D-25
Forum for Adjudication of Disputes
| 70. | Forum for Adjudication of Disputes. |
| (a) | Unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America, shall be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the U.S. Securities Act of 1933, as amended, including all causes of action asserted against any defendant to such complaint. For the avoidance of doubt, this provision is intended to benefit and may be enforced by the Company, its officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional or entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering. The foregoing provisions of this Article 70 shall not apply to causes of action arising under the U.S. Securities Exchange Act of 1934, as amended. |
| (b) | Unless the Company consents in writing to the selection of an alternative forum, the competent courts in Tel Aviv, Israel shall be the exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s shareholders, or (iii) any action asserting a claim arising pursuant to any provision of the Companies Law or the Securities Law. |
| (c) | Any person or entity purchasing or otherwise acquiring or holding any interest in shares of the Company shall be deemed to have notice of and consented to the provisions of this Article 70. |
* * *
Annex D-26
ANNEX E
OPINION OF E.D.B. CONSULTING AND INVESTMENTS LTD.
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
“Automax Motors Ltd”
Company Valuation
Drafted on January 4, 2024
This valuation of “Automax Motors Ltd” (hereinafter - Automax or the Group) was commissioned by Mr. Oz Adler, CEO of “SCISPARC Ltd”. This valuation is a commercial document solely intended to convey information to the organs of SCISPARC, to Automax, its advisors and anyone the Company’s management determines it should be presented to. This document includes data, assessments, forecasts and plans of Automax regarding its operations which constitute forward looking information, as such term is defined in the Israel Securities Law, 1968 (hereinafter: the “Securities Law”), the manifestation of which is uncertain and not exclusively within Automax’s control. Forward looking information is based on assessments made by Automax’s management, which, inter alia, are based on the information known by the management at the time this document was prepared. Only partial information and details are included in this document, they are presented in a condensed format solely for convenience purposes, and they should be read jointly with the details, descriptions, clarifications, assumptions, qualifications, assessments and overview of the risk factors included in the Company’s periodic and annual reports published on the Israel Securities Authority distribution website (“MAYA”). There is no certainty that the data and/or assessments and/or forecasts and/or plans will be achieved, in whole or in part, and they may manifest differently than as presented in the document, inter alia, due to them being dependent on external factors not within Automax’s control, including: Changes in the competitive and commercial environment and the manifestation of any of the risk factors applicable to Automax. Additionally, the document may include data taken from external sources not independently verified by Automax, and Automax should therefore not be held responsible for their accuracy. The document may also include information not presented in the Company’s financial statements and immediate reports and/or information which may be presented or applied differently. It should be clarified that the document is no substitute to the Company’s public reports, and in any event of any inconsistency between the data presented in this document and the public reports, the data in the aforementioned public reports should prevail. The forecasts and assessments in this document are based on the information held by the Company at the time the document was being prepared, and the Company is not subject to any obligation to update and/or change said forecasts and/or assessments, in order to reflect events and/or developments which may occur after the document has been drafted. All calculated assessments applied in this valuation were done on the basis of my professional assessments which are based on more than 35 years of experience.
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-1
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
Preface
In order to perform this valuation I received the Company’s audited balance sheets for the 2020-2022 annual periods, an unaudited balance sheet as of June 30, 2023, and a budget and business plan prepared by the Company’s management for the 2024-2028 5-year period, quantitative data about the Company’s sales, progress about the bus marketing project and the direct import of the electric vehicle from China.
I also met with the Company’s managers, including the VP and Director of Business Development as well as with current and former officers and advisors.
I visited the Company’s head branch in Jerusalem and I examined public materials regarding competitors and about the vehicle import market in Israel.
Based on my study of the materials in recent weeks I am presenting the valuation document containing six chapters:
Chapter A - Which will include an exhaustive overview of the Company and its activities in the parallel import segment.
Chapter B - Which will include an overview of both the Israeli and global sector in which it operates and competes.
Chapter C - Which will include an overview of the Company’s planned activities for the sale of TEMSA buses in Israel.
Chapter D - Which will include an overview of the Company’s planned activities for the sale of HYCAN electric vehicles in Israel.
Chapter E - Which will propose a valuation of the Company’s enterprise value based on multiplier methodologies and the net DCF methodology which, unlike the multiplier methodology, is forward looking.
Chapter F - In which I will summarize my work and in which I will argue an enterprise value of USD 44.8 million, based on the independent valuation I presented in the previous chapter, which is a cautious and conservative assessment of the Company’s activities which I rely upon.
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-2
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
Chapter A - The “Group” - A general and historic overview of the Group and of the parallel import industry
Automax Motors Ltd (hereinafter: “Automax” or the “Group”) is a public company which has been listed on the Tel Aviv Stock Exchange since 2021 and which owns multiple companies, primarily “Global Automax Ltd” - an indirect (parallel) importer of vehicles to Israel.
On March 24, 2021, “Global Automax Ltd” (“Global Automax”) merged via a share swap transaction into the public shell company “Matomy Media Group” which changed its name to “Automax Motors” and which holds Global Automax’s entire issued share capital as of the merger date (see the description in the Group’s financial statements and in the prospectus).
“Global Automax” is the largest indirect parallel importer in Israel, and imports thousands of vehicles, with annual sales turnover of ILS 400-450 million, which it sells via 12 showrooms throughout Israel. It owns facilities to store vehicles, a PDI (pre-delivery inspection) licensing site and facility. The Company also operates a vehicle transport network, a replacement part storage facility, and it is licensed to import replacement parts and has agreements with a national service center network.
In addition to Global Automax, the Group also owns a controlling stake in “Automax Trade-In” which operates a used vehicle sales branch at Glilot Junction, and it also owns a controlling stake in “Dalhom Automax” which is the direct importer of TEMSA-Skoda buses to Israel.
The Group has equity totaling tens of millions of shekels, and it is consistently growing on an annual basis. The Group has approximately 120 employees. The optimal utilization of central headquarters (finance, logistics, HR, IT, etc.) and its strong commercial and financial position, allow the Group to launch new activities at the core of vehicle importing which in turn are expected to bolster profitability.
Automax Leasing (under formation) is one of these operating segments and it will operate as an independent company, jointly owned by “Global Automax” (30%) and a group of investors. The company has also entered into an agreement with a Chinese vehicle manufacturer - HYCAN - for direct import activities. This operating segment is expected to become the Group’s primary operating segment and materially impact its activities.
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-3
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
Presented below are the Group’s operating results (on a consolidated basis) for the 2022 annual period in ILS 000’s:
| For the period ended December 31, 2022 | ||||
| Revenues | 453,617 | |||
| Cost of sales | (392,918 | ) | ||
| Gross profit | 60,699 | |||
| Sales and marketing expenses | (27,612 | ) | ||
| Issuance related expenses | - | |||
| Administrative and general expenses | (16,849 | ) | ||
| Granting options to employees | (9,976 | ) | ||
| Other incomes | 226 | |||
| Operating profit (loss) | 6,488 | |||
| Net financing expenses | (5,232 | ) | ||
| Profit (loss) when the Company’s share in the losses of companies that are handled according to the method of the balance sheet value is neutralized | 1,256 | |||
| Company’s share in losses of companies handled according to the book value method | (585 | ) | ||
| Profit (loss) before taxes on income | 671 | |||
| (Taxes on income) tax benefit | (1,931 | ) | ||
| Total profit (loss) for the year | (1,260 | ) | ||
| Adjusted profit (loss) before tax deducted by options granted to employees, non-cash-flow rate differences with respect to the Optimatic transaction and expenses related to the merger transaction | 10,421 | |||
| EBITDA, adjusted for options granted to employees, issuance related expenses relating to the merger transaction | 24,352 | |||
“Global Automax”
“Global Automax Ltd” (hereinafter: “Automax” or the “Company”) was established in 2015 with the stated objective of importing new vehicles to Israel via indirect (parallel) imports. The Company is engaged in importing and marketing a range of private vehicle models to and in Israel. The Company holds an indirect importer license, as defined under Section 42 of the Vehicle Industry Services and Professions Licensing Law, 2016 (hereinafter: the “Vehicle Services Licensing Law”), with respect to a wide range of models produced by 27 vehicle manufacturers. The Company operates 12 showrooms - Jerusalem, Rishon Letzion, Petah Tikva, Raanana, Beer Sheva, Haifa, Afula, Akko, Netanya, Glilot, Ashkelon and Ashdod, and it is licensed to import an unrestricted number of new vehicles to Israel.
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-4
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
The Company’s branches in Jerusalem, Haifa, Afula, Petah Tikva and Rishon Letzion are directly operated by the Group; the Company’s branches in Netanya, Raanana, Ashdod, Ashkelon and Glilot are operated by companies jointly owned by a subsidiary and third-parties, and the two remaining branches, in Akko and Beer Sheva, are operated by the Company’s authorized retailers.
Presented below is a map of the Company’s branches in Israel:
The Company has an international network of suppliers, primarily in Europe and in North America, which supply it with various brand and model vehicles, subject to orders, and an import structure which includes procurement, shipping, vehicle customs release handling, and vehicle storage facilities in Israel.
Indirect (parallel) importing
Indirect (parallel) importing is a process under which a particular consumer product is imported not through the direct importer (the official importer), but rather through indirect competing importers, which comply with statutory requirements and which personally import the product from a manufacturer’s overseas direct agents. This process exists in many industries including the food, pharmaceutical, cellular, and electric product markets, and now also in the vehicle market.
Countries around the world, including Israel, often apply import restrictions to various sectors, including the vehicle market, in order to ensure the quality and safety of the products sold to their citizens and/or to protect local industry.
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-5
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
It was previously common practice for each manufacturer to have a sole importer licensed to market that manufacturer’s products in their country, and which would be responsible vis-a-vis the government authorities to comply with regulatory rules. This arrangement, convenient for all parties (apart from consumers), resulted in uncompetitive and over-priced markets. In order to generate competition, some of the regulators required manufacturers to appoint multiple official representatives in their country; however, the most significant measure which has succeeded and become commonplace around the world is to allow for parallel importing regulated by law and overseen by the same regulator with identical tools and metrics used with respect to the direct importer. The importing process, the standards and requirements and the customs and tax rules are identical to both kinds of importers.
The direct importer benefits from an annual allocation of vehicles broken down into various models, with a set schedule, and in a set currency; while the parallel importer is able to choose the manufacturer, model, country of origin and currency at any time and to maximize its profits and/or compete and lower vehicle prices.
Direct importers in different countries choose to sell some of their allocated vehicles to parallel importers depending on market and currency conditions in their home countries and in order to become eligible for financial incentives for meeting annual sales targets.
The big advantage of parallel importing is flexibility with choosing the mix of vehicles the parallel importer can import and the ability to quickly respond to changing market conditions. The parallel importer is not limited to a specific brand and is not committed to a fixed mix of models or a particular technology and it is able to easily adjust the supply of products and models imported by it in response to changes in local demand and international supply.
The Vehicle and Transportation Services Licensing Law
In 2009 the Israeli government adopted a formal resolution to increase competition in the Israeli vehicle market by opening the vehicle sector up to parallel imports, the law was subsequently amended to allow vehicles purchased from a manufacturer’s authorized agent (a “dealer”) to be imported to Israel, and not just vehicles directly purchased from the manufacturer.
The parallel import of vehicles to Israel only actually started in 2012 (by Ayalon Motors importing Ford vehicles), which led to operating and control procedures being established by the Ministry of Transport.
Until 2016 the parallel import of vehicles to Israel was subject to the “Products and Services Control Order - Vehicle Import”. The order defined the conditions the parallel importer is required to meet in order to receive a license, but it did not explicitly specify how the vehicles are to be purchased abroad. This ambiguity created an opening for various interpretations between the relevant regulators (the Ministry of Transport and the Tax Authority) and it created an opening for various arguments against the parallel importers operating at that time.
In July 2016 the “Vehicle and Transportation Services Licensing Law” which consolidated all the orders, regulations and procedures in the sector into a single law, which clearly and more conveniently clarifies various issues including the parallel import of vehicles to Israel was approved by the Knesset (Israeli parliament) at its third reading. The law removes various barriers in the field.
The law includes the following primary matters:
| 1. | The law makes a distinction between four kinds of importers: |
| ● | Direct importer - being the “original” importer which is party to an agreement with the vehicle manufacturer. i.e., the direct importer. |
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-6
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
| ● | Indirect importer - an importer which is party to an agreement with one of the vehicle manufacturer’s international authorized agents. i.e., a parallel importer. |
| ● | Small importer - an importer which is party to an agreement with the vehicle manufacturer or authorized agent or with an international party established by the Minister of Transport, and restricted to importing up to 20 vehicles annually. |
| ● | Personal import agent - someone who provides brokerage and consulting services for importing a vehicle but is not personally an importer. |
The law establishes the conditions for all importers, the requirements for agreements with manufacturers/agents, the scope of equity, the existence of maintenance service infrastructure, etc., for each importer.
| 2. | The law subjects the direct importers to an obligation to issue service bulletins (recalls) and to be liable for all the vehicles manufactured by the make imported by them (even if imported by a parallel importer) from January 1, 2017. |
| 3. | The parallel importer, who until then could have imported a vehicle via an authorized agent, is now able to import via a secondary agent (a retailer). |
| 4. | The indirect importer is permitted to import new vehicles (up to 150km) even if the vehicle is already registered abroad. |
| 5. | The restriction on the number of products an indirect importer is able to import was cancelled. Products not formally imported to Israel were also permitted to be indirectly imported. |
| 6. | As a first, the new law gives the Minister of Transport the ability to establish conditions and restrictions applicable to the licensee - i.e., licensed vehicle importers - including to not issue or renew an import license if the licensee fails to meet established conditions, including adversely impacting competition. |
There are currently dozens of companies in Israel engaged in parallel importing vehicles, the largest being Automax which imports approximately 2,500 vehicles annually (on average) and Ayalon Motors which imports approximately 1,300 vehicles annually (on average).
There are also hundreds of companies which operate in the small import segment (up to 20 vehicles per company annually) and personal import agencies which provide advisement, logistics and purchasing services for personal import. Approximately 2,000 vehicles are personally imported to Israel annually, almost entirely in the luxury segment. This kind of import has significant disadvantages relative to direct or parallel import - difficulties with implementing the vehicle warranty, various restrictions on selling the vehicle, and others.
The market segment for parallel (and small) import is relatively negligible and totals approximately 3.5% of the market compared with approximately 10% on average in Europe. (There is a big difference between Eastern European countries such as Poland with 30% and Italy with only 2%).
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-7
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
Presented below is a breakdown of the parallel import market in 2023 (based on the quantity of vehicles, excluding small imports, by importer):
*Based on a five-year calculation, the market segment of each of the first three importers is identical.
Automax is the leading company in the parallel vehicle import segment and it is intending to also maintain its status in the future unrelated to it expanding to other fields.
Vehicle manufacturers’ response to parallel import (and export)
The scale of manufacturing and employment give the vehicle manufacturers significant financial and political clout which they use to entrench and protect their interests in the countries they operate in.
In general, vehicle manufacturers designate various models to each region based on general preferences in that region, weather restrictions, the applicable standards and purchasing power, and they try to prevent models from “leaking” between regions due to engineering and “anti-competitive” reasons - in order to maintain their ability to implement price discrimination between regions/continents based on exchange rates, tax rates and the competitive standing of the manufacturer in that region.
However, volatility with business cycles, regulatory changes and changing preferences constantly create excess supply in some parts of the world and pressure the manufacturers to export vehicles between regions. Arbitrage differentials are not a passing opportunistic phenomenon but an inherent part of the market (similar to a certain extent to the “zero km” phenomenon in Israel). As a result, approximately 10% of global vehicle trade is performed as “parallel” trade between brokers/merchants and not directly vis-a-vis the manufacturer.
US antitrust law prohibits vehicle manufacturers from preventing vehicle exports from the US by dealers, and prohibits the manufacturer from owning the dealerships which retail its products (these dealerships form alliances and act as a counterforce against the manufacturer’s power).
Unlike the US, in Europe there is no legal prohibition against manufacturers owning retail agencies (dealerships) and therefore some of the largest distributors are wholly or partially owned by the manufacturers. However, European antitrust laws prohibit manufacturers from preventing exports between European countries, and even impose significant financial sanctions for associated breaches.
In practice, most vehicle manufacturers subject agents exporting vehicles to more or less legal barriers, including prohibiting agents from selling to companies suspected of engaging in parallel export, agreements preventing shipping companies from transporting vehicles the subject of parallel import or which require them to report such to the manufacturer, and the like.
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-8
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
Therefore, most parallel importers try to operate “under the radar”, and typically need to purchase the vehicles from the agent in the territory permitted to it via local companies, to pay taxes and VAT in the country of origin and to personally export them. This activity requires an extensive logistical basis and significant interim financing capabilities (for the taxes and VAT).
When the manufacturer identifies that a company is purchasing and exporting the vehicles it includes them on a “black list” of companies which cannot be sold to, and the parallel importer needs to engage new retail companies.
One of the other common barriers in the field, primarily in Europe, is the manufacturer refusing to issue original manufacturing certificates - these certificates are required where Israeli customs authorities request the European customs house to validate the original certificate which gives the vehicle preferential customs treatment, and without which the parallel importer is required to pay additional customs tax (7% of the total value including taxes) even if the vehicle is manufactured in a country with a preferential status. The Israeli Customs Tariff Order was recently amended (in September 2023) to exempt a parallel importer from presenting the original certificate of models imported by direct importers and which requires customs to rely on the original certificate furnished by the direct importer.
As aforementioned, Automax has established and experienced purchasing networks and contractual agreements with some of the largest vehicle manufacturer agents in Europe and Canada, which allow it to purchase from production batches especially manufactured for export with almost no restriction. The Company purchases most of the models it imports in three or four different currency regions, in order to mitigate the exposure to exchange rates or other blockage attempts, and to enable it to have consistent supply.
Company’s sales:
See details about the new vehicles sold by the Group as of December 31, 2022 and December 31, 2021:
| For the period ended December 31, 2022 | For a Period ended on December 31, 2021 | |||||||||||||
| Total Sales | Sales Rate for Institutional Customers | Total Sales | Sales Rate for Institutional Customers | |||||||||||
| 2,048 | 35.84 | % | 2,462 | 26.69 | % | |||||||||
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-9
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
See sales of vehicles imported by the Group, split by make:
| Product | For the period ended December 31, 2022 | For a Period ended on December 31, 2021 | ||||||||||||||
| Quantity | Sales Rate | Quantity | Sales Rate | |||||||||||||
| Toyota | 497 | 24.27 | % | 669 | 27.17 | % | ||||||||||
| Honda | 471 | 23 | % | |||||||||||||
| Jeep | 377 | 18.41 | % | 389 | 15.8 | % | ||||||||||
| Hyundai | 245 | 11.96 | % | 586 | 23.8 | % | ||||||||||
| BMW | 100 | 4.88 | % | 1 | 0.04 | % | ||||||||||
| Ford | 97 | 4.74 | % | 14 | 0.57 | % | ||||||||||
| Volkswagen | 78 | 3.81 | % | 179 | 7.27 | % | ||||||||||
| Mercedes | 50 | 2.44 | % | 4 | 0.16 | % | ||||||||||
| Skoda | 29 | 1.42 | % | 382 | 15.52 | % | ||||||||||
| Seat | 21 | 1.03 | % | 115 | 4.67 | % | ||||||||||
| Mazda | 17 | 0.83 | % | 2 | 0.08 | % | ||||||||||
| Volvo | 16 | 0.78 | % | 90 | 3.66 | % | ||||||||||
| Mini | 16 | 0.78 | % | |||||||||||||
| Audi | 13 | 0.63 | % | 1 | 0.04 | % | ||||||||||
| Land Rover | 8 | 0.39 | % | 9 | 0.37 | % | ||||||||||
| Fiat | 20 | 0.81 | % | |||||||||||||
| Other | 13 | 0.63 | % | 1 | 0.04 | % | ||||||||||
Over January-September 2023, Automax delivered approximately 1,550 vehicles based on the following breakdown (according to licensing data):
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-10
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
Impact of macro-economic factors on the Company in 2023:
The operating segment is inherently sensitive to external and macro-economic factors: The Company’s financial results in 2023 were adversely impacted as a result of these factors and, in my view, it (and the entire market) knew how to adjust the price level for sales and purchasing and to adapt to the current market conditions, therefore, I assess that 2023 was not a representative year for its operating activities. Presented below is an overview of the relevant trends and their impact on the Company:
| Trend | Local Influence (Seller-Side) | Global Influence (Buyer-Side) | ||
| Recovery
of the Automotive Industry from the “Global Chip Shortage” of 2020-2023 (= increase in vehicle inventory). |
Increasing market competition creates pricing pressure. | Pricing pressure and buying opportunities; Return of the supply of low-priced cars that last year were almost unattainable. | ||
| Rising in local and global interest rate. | Decrease in household disposable income causes decrease in demand of cars, especially amongst luxury vehicle market segment. | Increase in bargaining power of the Company vis-a-vis its suppliers. | ||
| Civil protests due to the Israeli legal reform proposal. | Decrease in Consumer confidence index (CCI) moderates demand; NIS depreciation vis-à-vis main foreign currencies used for purchasing stock, causing an increase in the cost of sales. | |||
| Massive market penetration of Chinese brands to the Israeli market. | Expansion in new brands’ market segment at the expense of the market segment that is relevant to Company’s brands. | Chinese manufacturers that did not consider investing in Israeli market penetration, increasingly start to show interest. | ||
| “Swords
of Iron” War (October 7, 2023 War) |
Decrease in Consumer confidence index (CCI) moderates demand; Increase in maritime transportation costs and supply delays due to the “The Houthi Crisis in the Red Sea”, causing an increase in the cost of sales. |
Chapter B – The Israeli vehicle market
There are approximately 3.4 million private vehicles on Israel’s roads. These include approximately 3.1 million vehicles which are privately owned by individuals and approximately 300,000 vehicles owned by corporations and institutional entities (primarily leasing companies). Approximately 260,000-290,000 new vehicles are sold annually (and another approximately 500,000 used cars are sold), and approximately 200,000 cars are written off (wear and tear, scrap metal, accidents and thefts). The institutional market’s share of new vehicle purchases is significantly greater than its general share of the vehicle market and is estimated at approximately 40% of total purchases.
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-11
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
The average vehicle age in Israel is approximately 6.9 years - slightly below the European average. The vehicle penetration level in Israel (the number of vehicles per 1,000 people) is relatively low for the Western World and is consistently growing - approximately 380 vehicles per thousand people vs. approximately 600-650 vehicles per thousand people in Western Europe and approximately 700-900 in the US.
Presented below is a graph of vehicle deliveries in Israel over time (in 000’s):
Over 2020-2022 there was a decline in the global vehicle supply associated with the COVID-19 crisis which also impacted the volume of deliveries in Israel.
Presented below is an overview of monthly vehicle deliveries in the first nine months of the year compared with the previous year:
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-12
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
The average price of a new vehicle in Israel has consistently risen over time and it is currently ILS 193,000:
This increase is consistent with rises in the CPI. In recent years, as a corollary of the COVID-19 crisis and the associated short-supply, there was also an increase in used vehicle prices - this phenomenon (for used vehicles) is expected to reverse in coming years.
Index of new and used vehicle prices, years 2008-2022
Source: Israeli Central Bureau of Statistics, Ministry of Transportation’s data, processed by the Israeli Tax Authority
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-13
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
Presented below is a breakdown of new vehicle sales in 2023 by price (importer’s pricelist):
Automax mainly focuses on the primary market segments (ILS 130,000-350,000).
| - | Over the last decade Israeli consumers (and consumers generally around the world) started to have a clear preference for Crossover SUV models and therefore Automax is focused on importing these models - presented below is the scope of sales in recent years according to vehicle structure: |
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-14
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
| - | In recent years Chinese vehicles have started to penetrate the market en masse and they are almost at 20% of Israeli vehicle sales (!). The top ten models in 2023 include 3 Chinese models, and not a single European model. Presented below is a graph of vehicle sales in Israel in recent years based on country of manufacture: |
Another trend apparent in recent years which is anticipated to continue is a significant increase in the market share of electric vehicles on account of the market share of gasoline and diesel motor vehicles:
Israeli vehicle importers - Direct import
The Israeli vehicle market is a concentrated market - the 12 largest vehicle import groups, which import approximately 55 different brands of private vehicles and buses, trucks and motorcycles have almost 100% of the vehicle market share in Israel.
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-15
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
The five leading vehicle brands generally comprise approximately 50% of vehicle deliveries, while the five leading importers are responsible for approximately 70% of the total vehicle deliveries in Israel. Presented below is a breakdown of the market in 2023 by importer:
Presented below is a breakdown of the market by vehicle brand: As aforementioned, the share of western brands has been declining over time in favor of Korean, Japanese and Chinese brands:
The breakdown of the market between companies and the different brands changes according to public preferences, the development of models by the manufacturers and exchange rates. Exchange rates play a critical role in the importer’s competitiveness, there is accordingly a high correlation between the exchange rate of the currencies relevant to the production of the vehicles and the market segments of the various brands.
As aforementioned, the scope of vehicles imported from China to Israel has consistently been increasing which also directly correlates with the increase in the number of electric vehicles being imported to Israel.
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-16
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
Presented below is data about the scope and range of electric vehicles imported from China to Israel over January-September 2023:
| Group | Manufacturer | Model | Deliveries until September 2023 | Import Price in NIS (Entry Model) | Total Volume of Money in NIS | Importer | ||||||||||||
| Leapmotor | Leapmotor | T03 | 424 | 99,990 | 42,395,760 | Metro | ||||||||||||
| Chery | Chery | Small Ant | 2 | 110,000 | 220,000 | Carasso Motors | ||||||||||||
| GWM | Ora | Funky Cat | 792 | 137,900 | 109,216,800 | Colmobil | ||||||||||||
| BYD Auto | BYD Auto | Dolphine | 241 | 141,900 | 34,197,900 | Shlomo Sixt | ||||||||||||
| JAC | JAC | S4 | 145 | 142,900 | 20,720,500 | Automotive Equipment (AEV) | ||||||||||||
| SAIC | MG | 4 | 1,228 | 144,900 | 177,937,200 | Lubinski | ||||||||||||
| DFSK | SERES | E3 | 653 | 149,900 | 97,884,700 | Talcar Motors | ||||||||||||
| Chery | Chery | FX | 2,534 | 149,950 | 379,973,300 | Carasso Motors | ||||||||||||
| Geely | Geely | Geometry C | 6,217 | 158,900 | 987,881,300 | Union Motors | ||||||||||||
| Chery | Chery | Tiggo 7 Pro | 2,166 | 159,900 | 346,343,400 | Carasso Motors | ||||||||||||
| EVeasy | Eveasy | Limo | 351 | 159,990 | 56,156,490 | Carasso Motors | ||||||||||||
| SAIC | MG | ZS SUV | 424 | 164,900 | 69,917,600 | Lubinski | ||||||||||||
| BYD Auto | BYD Auto | Atto 3 | 13,022 | 165,000 | 2,148,630,000 | Shlomo Sixt | ||||||||||||
| SAIC | MG | 5 | 82 | 172,000 | 14,104,000 | Lubinski | ||||||||||||
| Chery | Chery | Tiggo 8 Pro | 5,682 | 174,990 | 994,293,180 | Carasso Motors | ||||||||||||
| SAIC | Maxus | e Deliver 3 | 58 | 178,900 | 10,376,200 | China Motors | ||||||||||||
| Dongfeng | Forthing | Friday | 8 | 179,990 | 1,439,920 | UMI | ||||||||||||
| Aiways | Aiways | U5 | 363 | 184,900 | 67,118,700 | Blilious Group | ||||||||||||
| SAIC | MG | HS | 2,596 | 188,900 | 490,384,400 | Lubinski | ||||||||||||
| SAIC | Maxus | V80 | 3 | 194,900 | 584,700 | China Motors | ||||||||||||
| WM | WM | W5 | 4 | 198,900 | 795,600 | Automotive Equipment (AEV) | ||||||||||||
| BYD Auto | BYD Auto | ETP-3 | 1 | 199,000 | 199,000 | Shlomo Sixt | ||||||||||||
| SAIC | MG | Marvel R | 296 | 205,900 | 60,946,400 | Lubinski | ||||||||||||
| SKYWELL | SKYWELL | ET 5 | 570 | 209,900 | 119,643,000 | Caduri | ||||||||||||
| Aiways | Aiways | U6 | 6 | 219,000 | 1,314,000 | Blilious Group | ||||||||||||
| BYD Auto | BYD Auto | Seal | 3 | 229,990 | 689,970 | Shlomo Sixt | ||||||||||||
| XPENG | XPENG | P7 | 230,000 | Carasso Motors | ||||||||||||||
| Geely | Lynk & Co. | 1 | 371 | 231,800 | 85,997,800 | Mayer | ||||||||||||
| SAIC | Maxus | EUNIQ 6 | 129 | 232,800 | 30,997,800 | China Motors | ||||||||||||
| DFSK | SERES | 5 | 38 | 234,900 | 8,926,200 | Talcar Motors | ||||||||||||
| SAIC | Maxus | EUNIQ 5 | 55 | 237,200 | 13,046,000 | China Motors | ||||||||||||
| GWM | WEY | Coffee 02 | 8 | 239,900 | 1,919,200 | Samelet | ||||||||||||
| Geely | Polestar | Polestar2 | 225 | 282,989 | 63,672,525 | Mayer | ||||||||||||
| GWM | WEY | Coffee 01 | 368 | 284,900 | 104,843,200 | Samelet | ||||||||||||
| BYD Auto | BYD Auto | Tang | 245 | 315,500 | 77,297,500 | Shlomo Sixt | ||||||||||||
| XPENG | XPENG | G9 | 1 | 330,000 | 330,000 | Carasso Motors | ||||||||||||
| BYD Auto | BYD Auto | Han | 114 | 334,990 | 38,188,860 | Shlomo Sixt | ||||||||||||
| NIO | NIO | eT5 | 344,000 | Delek | ||||||||||||||
| Geely | LEVC | TX | 22 | 350,000 | 7,700,000 | Automotive Equipment (AEV) | ||||||||||||
| Dongfeng | Voyah | Free | 134 | 399,900 | 53,586,600 | Metro | ||||||||||||
| Honggi | Honggi | E-HS9 | 80 | 419,900 | 33,592,000 | Samelet | ||||||||||||
| NIO | NIO | eS8 | 465,000 | Delek | ||||||||||||||
| NIO | NIO | eT7 | 499,000 | Delek | ||||||||||||||
| Total | 39,661 | 6,752,495,105 | ||||||||||||||||
| Mean | 170,255 | |||||||||||||||||
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-17
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
Even if we examine the sales data of all vehicles in Israel over January-September 2023 we can easily see the revolution in the market with the 10 leading models. There are three Chinese manufactured models and not a single European model. It can cautiously be said that the “Western” brands are slowly disappearing from the market.
The data are presented below:
| Manufacturer | Model | Jan-Sep 2023 | Jan-Sep 2022 | Jan-Sept 2019 | ||||||||||
| BYD Auto | Atto 3 | 12,913 | ||||||||||||
| Kia | Niro | 8,140 | 3,662 | 5,885 | ||||||||||
| Hyundai | Elantra | 7,189 | 5,108 | 1,673 | ||||||||||
| Toyota | Yaris Cross | 6,388 | 5,985 | |||||||||||
| Geely | Geometry C | 6,173 | 4,254 | |||||||||||
| Kia | Picanto | 5,665 | 11,129 | 7,360 | ||||||||||
| Chery | Tiggo 8 Pro | 5,639 | ||||||||||||
| Hyundai | Tucson | 5,583 | 7,061 | 6,835 | ||||||||||
| Mazda | 2 | 4,844 | 4,730 | 2,475 | ||||||||||
| Mitsubishi | Outlander | 4,737 | 2,326 | 5,740 | ||||||||||
Chapter C - “Dalhom Automax” (direct import of “TEMSA-Skoda” brand buses)
In June 2022, the Company, jointly with Dalhom
Motors Ltd. (hereinafter: “Dalhom”), established a SPV to import TEMSA brand buses. The Company signed an agreement with the
manufacturer under which the common company will serve as the direct importer of TEMSA brand buses to Israel. TEMSA has multiple electric,
gasoline or diesel engine model buses and minibuses designed to serve tourism and public transportation, all of which are suitable to
be marketed in Israel.
The Company is currently completing the establishment of a central bus service center with a total area of 4,000 sqm in Hod Hasharon.
The company is one of the Group’s growth engines, and is anticipated to generate significant profits under the plan.
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-18
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
TEMSA Skoda
Temsa Skoda is a leader in production of buses and minibuses worldwide:
* A manufacturing plan of 500,000 sqm in Turkey
* Leading in electric buses
* Production capabilities of 10,000 vehicles, including Motor Coach, Midibus, Light Trucks
* Selling in 66 countries worldwide
Presented below is an overview of the specifications of the central service center and garage:
| ● | Area of 4,000 sqm. |
| ● | Bus service center of 2,000 sqm. |
| ● | Offices - Located at the entrance and split over 2 floors: First floor: Service center, office reception and waiting area. Second floor: Offices + employee rest area. |
| ● | Work stations (Diagnostics + mechanics + electric + HVAC) |
| ● | 6 work stations (including one station with a “safety line” for working on the top part of the bus roof) + another work station (with a pit jack) - 7 stations in total. |
| ● | Metal work area: |
| ● | 5 work stations + one area for preparing the bus before paint + painting area. |
| ● | Between the general work stations and the metal work area there is a dividing wall separating the areas. |
| ● | Parking areas: |
| ● | Officially - 8 parking spaces, 16 parking spaces in reality. |
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-19
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
| ● | The company is currently negotiating leasing another 1,000 sqm on the site next to the new service center, which is meant to add another 30 parking spaces. |
The Company is planning to apply for tenders issued by public transportation companies starting in 2024.
The Israeli commuter transportation market:
| ● | Approximately 2,500 buses are sold annually in Israel, half of which are sold for public transportation purposes (to large companies which win operating tenders) and half of which are sold to tour and commuter companies (small and medium companies and authorized dealers). |
| ● | 933 commuter companies are registered in Israel, 532 of which are actively operating (hold a valid license to operate a commuter service). |
| ● | Approximately 400 commuter companies operate full-size buses (more than 44 seats). |
| ● | The commuter sector operates approximately 11,000 buses (more than 19 seats), and approximately 16,000 minibuses (up to 19 seats). |
| ● | Average fleet size of a commuter company: 5-80 buses. |
| ● | The average age in the sector is 6 years, and the maximum age is 12 years. |
| ● | The annual mileage of a bus is 50,000-80,000km. The average daily mileage in the industry is approximately 220km. |
| ● | The daily cost of operating a bus is approximately ILS 1,300. |
| ● | The commuter sector is extremely competitive and diverse, and is subject to geopolitical changes and business cycles. |
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-20
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
Division of bus fleets by year of production, type, as of year-end 2019
| Vehicle Type / Year of Manufacture | Total | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | Until 2008 | |||||||||||||||||||||||||||||||||||||||
| Public Bus for Special Transportation | 8,598 | 530 | 914 | 960 | 847 | 823 | 777 | 605 | 370 | 481 | 458 | 401 | 1,432 | |||||||||||||||||||||||||||||||||||||||
| Public Bus for Tour | 1,592 | 70 | 110 | 112 | 110 | 41 | 141 | 100 | 73 | 133 | 156 | 86 | 460 | |||||||||||||||||||||||||||||||||||||||
| Public Minibus | 5,330 | 158 | 274 | 512 | 707 | 510 | 390 | 456 | 457 | 485 | 445 | 310 | 626 | |||||||||||||||||||||||||||||||||||||||
| Public Minibus for Tour | 38 | 4 | 8 | 12 | 2 | 5 | 7 | |||||||||||||||||||||||||||||||||||||||||||||
| Public Minibus for Special Transportation | 3,214 | 239 | 715 | 614 | 454 | 260 | 248 | 212 | 140 | 138 | 88 | 42 | 64 | |||||||||||||||||||||||||||||||||||||||
| Private Bus | 709 | 15 | 42 | 41 | 48 | 47 | 64 | 24 | 38 | 51 | 52 | 48 | 239 | |||||||||||||||||||||||||||||||||||||||
| Private Minibus | 6,852 | 34 | 93 | 108 | 128 | 125 | 165 | 261 | 365 | 429 | 536 | 490 | 4,118 | |||||||||||||||||||||||||||||||||||||||
| Touring Car | 215 | 18 | 21 | 41 | 51 | 28 | 9 | 21 | 18 | 3 | 2 | 3 | ||||||||||||||||||||||||||||||||||||||||
| Total | 26,548 | 1,064 | 2,173 | 2,388 | 2,353 | 1,846 | 1,794 | 1,679 | 1,461 | 1,722 | 1,742 | 1,380 | 6,946 | |||||||||||||||||||||||||||||||||||||||
Sales of buses and public transport brands
| Make | 2020 | 2021 | 2022 | H1 2023 | ||||||||||||
| Volvo | 220 | 366 | 372 | 285 | ||||||||||||
| Golden Dragon | 150 | 522 | 459 | 215 | ||||||||||||
| HIGER | 58 | 111 | 438 | 197 | ||||||||||||
| Mercedes | 191 | 396 | 284 | 151 | ||||||||||||
| OTOKAR | 25 | 97 | 67 | 142 | ||||||||||||
| BYD Auto | 1 | 1 | 67 | 53 | ||||||||||||
| Isuzu | 5 | 41 | 34 | 52 | ||||||||||||
| TEMSA | 79 | 24 | 43 | 43 | ||||||||||||
| Zhongtong | 34 | 3 | 48 | 39 | ||||||||||||
| Irizar | 14 | 12 | 27 | 34 | ||||||||||||
| OTHER | 289 | 453 | 316 | 68 | ||||||||||||
| Total | 1,276 | 2,534 | 2,532 | 1,279 | ||||||||||||
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-21
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
According to the Company’s business plan, presented below is a proforma profit and loss statement for the garage activities and an operating budget for the bus sales activities:
| Profit & Loss Forcast (in NIS) | ||||||||||||
| Hod Hasharon Garage | ||||||||||||
| Section / Period | 2024 | 2025 | 2026 | |||||||||
| Incomes from mechanical work | 7,393,350 | 8,502,353 | 8,927,470 | |||||||||
| Incomes from spare parts (mechanics) | 3,696,675 | 4,251,176 | 4,463,735 | |||||||||
| Incomes from works outsourcing mechanical works | 1,232,225 | 1,417,059 | 1,487,912 | |||||||||
| PDI for new buses | 124,800 | |||||||||||
| Total income from mechanical work | 12,447,050 | 14,170,588 | 14,879,117 | |||||||||
| Incomes from metal works (‘body work’) | 9,556,704 | 10,990,210 | 11,539,720 | |||||||||
| Incomes from metal works spare parts | 9,556,704 | 10,990,210 | 11,539,720 | |||||||||
| Incomes from outsourcing metal working | 2,123,712 | 2,442,269 | 2,564,382 | |||||||||
| Total Income from metal working | 21,237,120 | 24,422,688 | 25,643,822 | |||||||||
| Income from mobile vehicles | 2,112,000 | 2,428,800 | 2,550,240 | |||||||||
| Total Income | 35,796,170 | 41,022,076 | 43,073,179 | |||||||||
| Cost of Sales | ||||||||||||
| Mechanics | 11,575,757 | 13,178,646 | 13,837,579 | |||||||||
| Metal works | 13,804,128 | 15,874,747 | 16,668,485 | |||||||||
| Total Cost of Sales | 25,379,885 | 29,053,394 | 30,506,063 | |||||||||
| % of Income | 70.9 | % | 70.8 | % | 70.8 | % | ||||||
| Gross Profit | 10,416,286 | 11,968,682 | 12,567,116 | |||||||||
| % of Income | 29.2 | % | 29.2 | % | 29.1 | % | ||||||
| Sales General & Administrative (G&A) Expenses | ||||||||||||
| Salaries and Payroll Expenses | 3,948,000 | 4,046,700 | 4,147,868 | |||||||||
| Rent | 1,440,000 | 1,596,000 | 1,599,900 | |||||||||
| Rates (Tax) | 288,000 | 295,000 | 302,580 | |||||||||
| Advertising & Marketing | 72,000 | 72,000 | 72,000 | |||||||||
| Car Maintenance and Travel Expenses | 312,000 | 312,000 | 312,000 | |||||||||
| Professional Services (Fees) | 24,000 | 24,000 | 24,000 | |||||||||
| Maintenance | ||||||||||||
| Office Supplies (Electricity, Water, Gas) | 54,000 | 59,400 | 59,400 | |||||||||
| Phone & Communication Expenses | 13,200 | 13,200 | 13,200 | |||||||||
| Office Supplies & IT Services | 24,000 | 25,200 | 25,200 | |||||||||
| Insurances | 180,000 | 180,000 | 180,000 | |||||||||
| Towing/Transportation | 180,000 | 180,000 | 189,000 | |||||||||
| Mobile Units Services | 180,000 | 180,000 | 189,000 | |||||||||
| Food & Drink (Refreshments) | 18,000 | 18,000 | 18,900 | |||||||||
| Unexpected Expenses | 103,920 | 150,000 | 150,000 | |||||||||
| Depreciation and Amortization | 650,000 | 650,000 | 650,000 | |||||||||
| Expenses | ||||||||||||
| Expenses | ||||||||||||
| Total Sales and G&A Expenses | 7,933,048 | 7,801,700 | 7,944,048 | |||||||||
| % of Income | 20.9 | % | 19.0 | % | 18.4 | % | ||||||
| Operating Profit | 2,929,166 | 4,166,982 | 4,634,069 | |||||||||
| % of Income | 10.8 | % | 10.2 | % | 10.8 | % | ||||||
| Financing Expenses | 600,000 | 600,000 | 320,000 | |||||||||
| % of Income | 1.7 | % | 1.5 | % | 0.7 | % | ||||||
| Earning Before Tax (EBT) | 2,329,166 | 3,566,982 | 4,314,069 | |||||||||
| % of Income | 6.5 | % | 8.7 | % | 10.0 | % | ||||||
| Income Tax | 2,181,836 | 1,077,181 | 2,181,836 | |||||||||
| % of Income | 1.5 | % | 2.6 | % | 5.1 | % | ||||||
| Net Income/Loss | 1,793,457 | 2,489,801 | 2,132,232 | |||||||||
| % of Income | 5.0 | % | 6.1 | % | 0.0 | % | ||||||
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-22
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
| Dalhom Automax - Budget in NIS | ||||
| 2024 | ||||
| Incomes | ||||
| Incomes from Sale of Buses | 105,954 | |||
| Incomes from Sale of Commercial Vehicles | 530 | |||
| Incomes from Sale of Used Vehicles | 3,219 | |||
| Incomes from Sale of Spare Parts | 600 | |||
| Total Income | 110,303 | |||
| Cost of Sales | ||||
| Direct Cost of Buses | 95,546 | |||
| Direct Cost of Commercial Vehicles | 389 | |||
| Direct Cost of Used Vehicles | 1,744 | |||
| Spare Parts | 204 | |||
| Llicensing, Tests & PDI | 2,076 | |||
| Transportation | 139 | |||
| Total Direct Cost | 100,109 | |||
| Gross Profit | 10,194 | |||
| 9.24 | % | |||
| Operating Cost | ||||
| Salaries | 1,568 | |||
| Marketing, Advertising & Sales Promotion | 720 | |||
| Lot/Warehouse Rent | 264 | |||
| Translation & Editing | 60 | |||
| Mobile Unit Services | 180 | |||
| Towing Services | 180 | |||
| Garage Services | 180 | |||
| Insurances | 180 | |||
| Travel Expenses | 180 | |||
| Car Maintenance | 240 | |||
| Hospitality | 180 | |||
| Unexpected Expenses | 240 | |||
| Total General & Administrative (G&A) Expenses | 4,172 | |||
| Total Operating Cost | ||||
| G&A | ||||
| Bookkeeping, Accountancy & Audit | 180 | |||
| Legal | 96 | |||
| Rates (Tax) | 24 | |||
| Unexpected Expenses | 120 | |||
| Total General & Administrative (G&A) Expenses | 420 | |||
| Gross Profit | 5,602 | |||
| Financing cost (FC) | 1,440 | |||
| Net Profit | 4,162 | |||
| 3.77 | % | |||
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-23
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
As stated above, Automax owns 50% of “Dalhom Automax” and the company still does not have a multi-year business plan for selling the buses. The 2024 budget has a forecasted net profit of approximately ILS 4 million and a similar anticipated profit under the three-year business plan for the service center operations.
There is no doubt that Automax entering the bus import and maintenance sector is likely to be profitable and will be one of the central factors of growth for the Company, if not the central factor for growth.
Chapter D - “HYCAN Automax” (direct import of “HYCAN” brand electric vehicles (from China))
Automax has entered into a commercial agreement with the Chinese electric vehicle manufacturer HYCAN.
HYCAN is a leading and innovative vehicle manufacturer which specializes in manufacturing electric and high-tech vehicles for the global market.
The company was established in 2018 under the name “GAC-NIO” - a reference to the joint venture by its investors - GAC - the state-owned vehicle manufacturer, and NIO - the US electric vehicle manufacturer. HYCAN benefits from the expertise and resources of its parent companies, GAC and NIO, both of which are well established in the Chinese and global electric vehicle market. The brand was officially launched in 2020 and focuses on manufacturing exceptional electric vehicles. HYCAN also established a global R&D center in Silicon Valley, California. The center focuses on developing advanced technologies for electric vehicles, including autonomous driving and smart mobility solutions.
By establishing a R&D center in Silicon Valley, HYCAN will be able to take advantage of the rich skill-set and innovative culture in the area and to collaborate with leading tech companies and research institutes. This allows HYCAN to be at the forefront of electric vehicle technologies and to develop advanced technologies which improve the driving experience and which reduce the environmental impact of its vehicles.
In 2021 HYCAN announced that they are planning to expand their business globally and to sell their electric vehicles in selected markets in Europe, the Middle East and in South-East Asia. The brand is therefore expected to expand its global reach in coming years with a wide range of new EV model vehicles. The company plans to gradually enter these markets and is focusing on specific regions and countries with high demand for electric vehicles.
It should be noted that HYCAN will have to deal with difficult competition from other companies established in the global electric vehicle market. However, the company’s focus on technology, sustainability and premium designs can be a differentiating factor which attracts customers in new markets. All in all, HYCAN’s plans for international sales demonstrate their aspirations to become a global player in the electric vehicle market. As the demand for electric vehicles continues to grow around the world, companies such as HYCAN will have significant opportunities to expand their business activity and to offer innovative solutions to customers in different regions and markets.
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-24
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
 |
 |
As part of HYCAN’s efforts to become independent and enter global markets, in 2022 the Chinese investment company Pearl River invested in HYCAN and it currently controls the company with a 65.5% ownership stake. The GAC group owns 25% and NIO owns the remaining minority stake comprising just 4.5%. Pearl River Investments is a Chinese investment company which focuses on the vehicle industry. The Company also invests in various industrial sectors, including electric vehicles, autonomous driving and smart mobility solutions. Pearl River aspires to identify and invest in innovative companies in the vehicle industry which are able to generate value for their customers and stakeholders.
HYCAN is committed to creating innovative, reliable, sustainable and high performance electric vehicles which offer a unique driving experience. The vehicles are designed with advanced technology, premium design and features which aspire to provide exceptional performance, safety and reliability. The product basket includes a range of electric vehicles, including Sedans, SUVs, MPVs and Crossovers, all with advanced electric engine systems, innovative battery technology and smart communication systems.
The HYCAN vehicle activities will be performed by a subsidiary of Global Automax/Automax Motors.
The company will operate in addition to and not instead of Automax’s parallel import activities.
The company will operate through Automax’s existing infrastructure (showrooms, sales channels, PDI system, head-office and the like), and no independent infrastructure will be set up for it.
Sales will be performed at all Automax showrooms, one of which will be converted into a flagship showroom for the brand.
One central service center will be established for the brand, in addition to the network of external service centers currently with an arrangement with Automax.
The brand will have a significant launch campaign over 2024-2025.
| ● | The transition to electric vehicle gives the Chinese vehicle industry a relative advantage over its global competitors and allows it to more easily meet the relevant standards requirements. |
| ● | Israel is considered to be a “gateway” to Europe for many Chinese manufacturers and is the subject of significant interest for the Chinese vehicle industry. |
| ● | Approximately 41,103 of the vehicles sold over January-September this year were manufactured in China (16.6%) compared with only 12,736 vehicles in the same period the previous year. |
According to Automax’s business plan, the Company will commence selling HYCAN model vehicles already in Q4 2024 and its sales target is approximately 400 vehicles, while the sales target forecasts annual vehicle sales totaling approximately 2,400 vehicles within 4 years.
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-25
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
Presented below is the basis of the plan:
| 2024 | 2025 | 2026 | Representive Year | |||||||||||||
| Sales (Quantity of Vehicles) | 400 | 800 | 1,600 | 2,400 | ||||||||||||
| Vehicle’s CIF Average Cost (in Thousand NIS) | 85 | 85 | 85 | 85 | ||||||||||||
| After-Tax & Tariff Cost (Average Tax for an Electric Vehicle 40%, Tariff 7%) | 127.33 | 127.33 | 127.33 | 127.33 | ||||||||||||
| Average Selling Price (ASP) | 151.58 | 151.58 | 155.28 | 155.28 | ||||||||||||
| Gross | 16 | % | 16 | % | 18 | % | 18 | % | ||||||||
| Pro Forma Balance Sheet (in Thousand NIS) | ||||||||||||||||
| Vehicles Inventory | 8,500 | 17,000 | 34,000 | 51,000 | ||||||||||||
| Spare Parts Inventory | 255 | 510 | 1,020 | 1,530 | ||||||||||||
| Fixed Assets (Garage, Showroom) | 500 | 3,000 | 3,000 | 4,000 | ||||||||||||
| Demo Cars | 255 | 425 | 850 | 850 | ||||||||||||
| Total Assets | 95,510 | 20,935 | 38,870 | 57,380 | ||||||||||||
| Statements of Income Pro Forma (in Thousand NIS) | ||||||||||||||||
| Income from Sales of Vehicles | 60,633 | 121,267 | 248,449 | 372,673 | ||||||||||||
| Cost of Sales | 50,932 | 101,864 | 203,728 | 305,592 | ||||||||||||
| Net Revenue from Sales of Spare Parts and Garage Services | 1,819 | 4,244 | 9,938 | 18,634 | ||||||||||||
| Gross profit | 11,520 | 23,647 | 54,659 | 85,715 | ||||||||||||
| Marketing & Advertising | 3,000 | 6,000 | 3,000 | 3,000 | ||||||||||||
| Designated HQ | 1,200 | 1,440 | 1,728 | 2,074 | ||||||||||||
| Rent & Rent Bills (Garage and Showroom) | 1,800 | 1,800 | 1,800 | 1,800 | ||||||||||||
| Travel and Living Expenses Abroad | 800 | 800 | 800 | 800 | ||||||||||||
| Depreciation and Amortization | 144.29 | 562.14 | 695.71 | 911.43 | ||||||||||||
| Financing | 665.7 | 1,465.45 | 2,720.90 | 4,016.60 | ||||||||||||
| Total Expenses | 7,610 | 12,068 | 10,745 | 12,602 | ||||||||||||
| Pre-tax Profit | 3,910 | 11,579 | 43,914 | 73,113 | ||||||||||||
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-26
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
It is apparent that the Company’s target is to achieve annual sales totaling approximately 2,400 HYCAN vehicles a year within 4 years by primarily using the Company’s existing platform (showrooms, sales personnel, etc.), which is meant to achieve a pretax annual profit of approximately ILS 73 million.
Granted, the Israeli vehicle import market is becoming more and more competitive primarily in the electric vehicle segments, and each month we are seeing new models and companies (the vast majority of which are Chinese) enter the Israeli market, primarily through the large vehicle importers.
However, despite the significant competition and considering the fact that Automax is already operating in the market, it appears that the sales target the Company has set for itself is realistic (in reality it involves approximately 0.8% of the total annual vehicle imports to Israel) and it is certainly achievable through proper marketing work.
Chapter E - Calculation of the Enterprise Value
First, I will refer to the simple valuation method relevant to public companies listed on the TASE and the simple argument that the Company’s market value reflected in the value of its shares on TASE is the Company’s real value and I will explain why I did not find it correct to refer to this valuation.
The reasons are as follows:
| - | There is little “public float”, 5-7 shareholders of the Company’s controlling group own the majority of shares (approximately 80%). The trading volume in the market is extremely low. |
| - | The Israeli stock exchange on which the Company’s remaining shares are traded is not developed. |
| - | In the last two years there has generally been correlation between market trends and the direction of the share. |
| - | In recent years there have been multiple events which prevent reasonable value assessments (COVID-19, the legal reform and the war). |
| - | The Israeli capital market operates differently than any other prominent capital market around the world. |
| - | The stock market is self-correcting in the long-run and good years are therefore being forecasted. |
| - | Just as on January 21, 2021, the Company’s value on the Tel Aviv Stock Exchange came to approximately ILS 278 million (based on a share price of ILS 310), reflecting a value of approximately USD 84.7 million (based on an exchange rate of 3.28), and in January 2022 the Company’s value on the Tel Aviv Stock Exchange came to approximately ILS 197 million (based on a share price of ILS 220), reflecting a value of approximately USD 63.5 million (based on an average exchange rate of 3.1) - being high values which do not reflect the Company’s real value; so too, the Company’s low value on January 1, 2024 on the Tel Aviv Stock Exchange coming to approximately ILS 36 million (based on a share price of ILS 40), reflecting a value of approximately USD 9.9 million (based on an exchange rate of 3.65), is also not representative of its real value. |
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-27
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
I will now present the calculations of the valuations based on two alternative methodologies.
The representative profit multiplier methodology
The EBITDA multiplier and the profit multiplier are two metrics commonly used to assess the value of a company. Both metrics measure the ratio between the share price and the company’s profit, but do so in different ways.
The EBITDA multiplier measures the ratio between the share price and the company’s gross operating profit. The gross operating profit is the company’s profit before financing expenses, taxes and depreciation.
The profit multiplier measures the ratio between the share price to the company’s net profit. The net profit is the company’s profit after financing expenses, taxes and depreciation.
Theoretically, this multiplier methodology is the simplest methodology for a valuation and it is primarily used to compare the value of companies.
Profit data, whether it is EBITDA, operating profit or net cashflow, are consistently announced and the relevant profit multiplier can be calculated for each company by dividing the company’s market cap by the relevant profit line-item. This can also be done by taking a reported profit figure and by multiplying it by the relevant multiplier and to assess the enterprise value.
The profit generally represents past results already recorded. Thus, the disadvantage of the multiplier methodology is that it is based on figures from the past, inherently without tools to consider the potential for future profit.
This disadvantage makes this method ineffective for establishing the enterprise value. This is because this methodology does not take into account the effect of the Company’s existing significant growth engines, and which are meant to result in the Company doubling or more its sales turnover and annual profit within a few years.
Notwithstanding, I have decided to present the results of this metric to reflect a kind of starting point to gauge the Company’s enterprise value.
I chose to take the average of the two common multiplier methodologies, the EBITDA and profit multipliers, which I assess are appropriate for the Company’s characteristics.
As I already noted above, the 2023 annual period cannot be used as a representative year due to the multitude of macro events which impacted the commercial results of many companies in the economy including Automax. The 2022 annual period was therefore chosen as the representative year for the assessments.
EBITDA multiplier
The EBITDA multiplier is a financial metric used to assess the enterprise value of a company. It is calculated by dividing the value of the company’s operations by its gross operating profit (EBITDA).
Formula: EBITDA multiplier = enterprise value / EBITDA
EBITDA is the earnings before financing expenses, tax, depreciation and amortization. This metric determines the company’s operating profitability prior to expenses not directly related to its operating activities.
The EBITDA multiplier is a popular metric for valuing companies since it allows for a comparison to be made between companies with different capital structures. Financing expenses, taxes, depreciation and amortization can significantly change between companies, and therefore the use of net income to value a company can result in an imprecise comparison.
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-28
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
The EBITDA multiplier in the Israeli parallel vehicle import sector ranges between 2 to 3.5. The meaning is that companies in the sector are traded based on a multiplier of 2-3.5 times their gross operating profit.
The average multiplier in the parallel vehicle import sector is approximately 2.5. However, there are companies which are traded at higher or lower multipliers, based on different factors, including:
The size of the company, its profitability, forecasted future growth, commercial risks.
Presented below are some examples of EBITDA multipliers of companies in the Israeli parallel vehicle import sector:
Union Motors is traded at a multiplier of 2.8
Eldan is traded at a multiplier of 2.3
Semel is traded at a multiplier of 3.2
Presented below are various factors which may impact the EBITDA multiplier in the Israeli parallel vehicle import sector:
Competition in the sector, changes in government policy, changes in exchange rates, volatility with vehicle prices.
To calculate Automax’s value through the EBITDA multiplier methodology and considering the fact that the Company has stable operations and is the largest player in its sector in Israel I have chosen a multiplier of 3 as being representative.
The profit multiplier
The profit multiplier is a financial ratio used to assess the enterprise value of a company. It is calculated by dividing the market cap of the company by its net annual profit.
Formula: Profit multiplier = Market cap / Net profit.
The profit multiplier provides us with an indication of how much investors are prepared to pay for each shekel of profit generated by the company. A higher profit multiplier means that investors expect that the company will continue to grow and increase its profits in the future. A lower profit multiplier can be indicative of the fact that the company is not growing or that it is in a difficult financial position.
However, it is important to emphasize that the profit multiplier is only a single tool to assess the enterprise value of a company. There are other factors that should be considered, including:
Forecasted future growth, commercial risks, competition, management.
Limitations of the profit multiplier:
The profit multiplier does not take into account the company’s accounting.
The profit multiplier is impacted by external factors, such as the interest in the economy.
The profit multiplier is not always precise.
The profit multiplier in the Israeli parallel vehicle import sector ranges between 5 to 10. The meaning is that companies in the sector are traded based on a multiplier of 5-10 times their net profit.
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-29
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
The average multiplier in the sector is approximately 7.5. However, there are companies which are traded at higher or lower multipliers, based on different factors, including:
The size of the company, its profitability, forecasted future growth, commercial risks.
Presented below are some examples of profit multipliers of companies in the Israeli parallel vehicle import sector:
Union Motors is traded at a multiplier of 8.2
Eldan is traded at a multiplier of 6.8
Semel is traded at a multiplier of 9.1
I have chosen a multiplier of 8 as being representative for Automax.
Based on the assumptions presented above, presented below is an assessment of the enterprise value based on the EBITDA methodology and the representative profit multiplier methodology:
| Description | Value | |||
| EBITDA 2022 | 24,818 | |||
| Operating Profit Multiplier | 3 | |||
| Operating Value Estimate in Thousands of NIS | 74,454 | |||
| Operating Value Estimate in Thousands of Dollars | 20,682 | |||
| Operating Profit | 10,431 | |||
| Operating Profit Multiplier | 8 | |||
| Operating Value Estimate in Thousands of NIS | 83,448 | |||
| Operating Value Estimate in Thousands of Dollars | 22,862 | |||
| Average Operating Value Estimate in Thousands of Dollars | 21,772 | |||
i.e., Automax’s enterprise value, according to the average of both commonly used multiplier methodologies and with an emphasis on the fact that this methodology does not take into account the Company’s new and significant growth engines, is approximately USD 21.77 million (based on an exchange rate of ILS 3.65 per USD 1).
As stated above, the objective of this valuation was solely to establish a starting point and comparison tool prior to performing a more comprehensive valuation which takes into account the Company’s business plan which includes significant growth engines.
Below I shall present a valuation based on the future cashflow forecast
Assessing enterprise value through a DCF methodology
Under this methodology we assess the company’s future net cashflow and discount it to the present.
It is therefore necessary to estimate the profit and loss for future years, typically for just a few years, until the profitability plateaus at a terminal year which we assume represents the permanent net annual amount.
Presented below is an explanation about the calculation of the total cost of capital used to finance the company’s activities (WACC) and the calculation of the discounted cashflow to assess the enterprise value:
The WACC (weighted average cost of capital) of a company is the total cost of the capital used to finance the company’s activities.
WACC is assessed by calculating the relative weights of the company’s debt and equity, and calculating the cost of each kind of capital.
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-30
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
Cost of equity
The cost of equity is the return required by the company’s shareholders. It is established based on factors, including the risk entailed in investing in the company, as well as the possible return on alternate investments.
There are various ways to assess the cost of equity, including:
| ● | Capital asset pricing model (CAPM) |
| ● | Internal rate of rate model (IRR) |
| ● | Average rate of rate model (ARR) |
Cost of debt
The cost of debt is the return required by the company’s lenders. It is established based on the present interest rate of similar bonds.
The cost of debt can be reduced by the tax rate, since the company is able to deduct the interest costs from its taxable revenues.
Weighting
The weighting refers to the relative share of any kind of capital, the total debt and equity of the company.
For example, if the company has equity totaling ILS 100 million and debt totaling ILS 50 million, its weighting would be 0.67 and 0.33, respectively.
Calculating the WACC to determine the present value of the company
WACC, or the weighted average cost of capital, is the rate of return required for a company’s entire capital, including equity and debt. It is used to discount the company’s future cashflows in order to establish its present value.
The following formula is used to calculate the WACC:
WACC = (E / (E + D)) * RE + (D / (E + D)) * RD * (1 - T)
| ● | E is the company’s equity |
| ● | D is the company’s debt |
| ● | RE is the cost of the equity |
| ● | RD is the cost of the debt |
| ● | T is the tax rate |
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-31
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
Capital asset pricing model (CAPM)
Is used to assess the cost of equity of the investment. It is based on the assumption that shareholders require a higher rate of return on higher risk investments.
The following is the formula for calculating a company’s cost of equity.
RE = Rf + β * (Rm - Rf)
Where:
| ● | RE is the cost of the equity |
| ● | Rf is the rate of return required for risk-free assets, such as government bonds |
| ● | β is the risk parameter of the asset |
| ● | Rm is the average rate of return in the market |
Rate of return required for risk-free assets
The rate of return required for zero risk assets is the return required for risk-free investments. It is used as the basis to assess the cost of equity of higher risk assets.
Risk parameter
The risk parameter measures the risk entailed in investing in an asset. It is calculated by comparing the historical return of the asset against the historical return of the market.
Average market return
The average market return is the average rate of return of the assets in the market. It is used as a metric of the systemic risk entailed in investing in the market.
Example
Let’s assume that the rate of return required for risk-free assets is 5%, the parameter of risk of a particular asset is 1.2, and the average market return is 10%.
Based on the formula, the cost of equity of the asset is 11.2%.
RE = 5% + 1.2 * (10% - 5%) = 11.2%
I calculated the capital and interest for the discount rate for the valuation model for Automax based on these explanations. Presented below is the calculation methodology:
Calculating the WACC for the Company
Calculating the cost of equity (CAPM)
It is difficult to unequivocally establish the interest rate which reflects the risk premium prevailing in the Israeli share market, appropriate for the vehicle parallel import sector. This is because it is dependent on multiple factors, as mentioned earlier.
However, it can be assessed that this interest rate will be relatively high due to the high risks entailed in operating in this sector. These factors include:
Fierce competition: The Israeli vehicle import market is extremely competitive, and parallel importers are forced to compete with official importers and local manufacturers.
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-32
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
Regulatory changes: The Israeli vehicle market is subject to strict regulation, and regulatory changes are liable to significantly impact the activities of parallel importers.
Volatility in the foreign exchange market: The USD exchange rate impacts the cost of purchasing vehicles abroad, and exchange rate volatility is liable to cause losses.
Financing risks: Parallel importers require significant equity and bank financing for their activities, a fact which increases the financial risk.
Size of investment: Large investments generally require a higher interest rate.
Entrepreneurial experience: Entrepreneurs with proven experience in the sector are likely to accept a lower interest rate.
Collateral: Issuing collateral for a loan may reduce the risk for the lender and may make it possible to receive a lower interest rate.
Based on these factors, it can be assessed that the interest rate which reflects the risk premium in the Israeli vehicle parallel import sector ranges between 10%-12%.
In order to perform a more accurate assessment, I performed the following calculation:
| Rate of return of risk-free capital assets | 6.00% | See Appendix 1 - Data from the Bank of Israel and others | |
| Risk parameter | 1.5 | See Appendix 2 | |
| Average market return | 10.00% | See Appendix 3 |
Calculation of the weight of the equity
| ILS millions | % of total | ||
| Equity | |||
| Share capital | 2,389 | ||
| Share premium | 67,382 | ||
| Options | 1,457 | ||
| Share-based payments | 17,466 | ||
| Total | 88,694 | 30% | |
| Debt | |||
| Bonds | 42,543 | ||
| Lease liabilities | 13,855 | ||
| Long-term credit | 3,675 | ||
| Short-term credit | 141,392 | ||
| Current maturities | 4,177 | ||
| Total | 205,642 | 70% | |
| Total general | 294,336 |
Calculation of the weighted average cost of capital (WACC):
| 12.00% | Cost of equity |
| 7.90% | Cost of debt |
| 23.00% | Tax rate |
| 70% | Weight of equity |
| 30% | Weight of debt |
| WACC | |
| 10.22% | Weighted cost of capital |
I am able to present the forecasted cashflow model after having established the weighted interest rate for the model at 10.22%.
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-33
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
The valuation model is presented below:
| Mean | Forecast | |||||||||||||||||||||||||||||||
| 2029 | 2028 | 2027 | 2026 | 2025 | 2024 | 2022 | ||||||||||||||||||||||||||
| Total Sales | 816,627 | 742,388 | 674,899 | 613,544 | 557,767 | 480,834 | 453,617 | |||||||||||||||||||||||||
| Rate of Change (ROC) | 10.3 | % | 10.0 | % | 10.0 | % | 10.0 | % | 10.0 | % | 16.0 | % | 6.0 | % | ||||||||||||||||||
| Cost Of Sales* | 558,605 | 702,300 | 638,454 | 580,413 | 527,648 | 479,680 | 423,134 | 392,918 | ||||||||||||||||||||||||
| Gross Profit | 89,072 | 114,328 | 103,934 | 94,486 | 85,896 | 78,087 | 57,700 | 60,699 | ||||||||||||||||||||||||
| Rate of Profit | 13.7 | % | 14.0 | % | 14.0 | % | 14.0 | % | 14.0 | % | 14.0 | % | 12.0 | % | 13.0 | % | ||||||||||||||||
| Operating Expense (OpEx) | ||||||||||||||||||||||||||||||||
| Other | 7,500 | 7,000 | 7,000 | 7,000 | 7,000 | 7,000 | 10,000 | 15,567 | ||||||||||||||||||||||||
| Rate | 1.2 | % | 0.9 | % | 0.9 | % | 1.0 | % | 1.1 | % | 1.3 | % | 2.1 | % | 3.4 | % | ||||||||||||||||
| Sales and Advertising | 31,582 | 36,919 | 33,563 | 31,964 | 30,442 | 28,993 | 27,612 | 27,612 | ||||||||||||||||||||||||
| Rate | 4.9 | % | 4.5 | % | 4.5 | % | 4.7 | % | 5.0 | % | 5.2 | % | 5.7 | % | 6.1 | % | ||||||||||||||||
| G&A | 21,199 | 24,781 | 22,528 | 21,455 | 20,434 | 19,461 | 18,534 | 16,849 | ||||||||||||||||||||||||
| Rate | 3.3 | % | 3.0 | % | 3.0 | % | 3.2 | % | 3.3 | % | 3.5 | % | 3.9 | % | 3.7 | % | ||||||||||||||||
| Total | 60,281 | 68,700 | 63,091 | 60,419 | 57,876 | 55,454 | 56,146 | 60,028 | ||||||||||||||||||||||||
| Rate | 9.5 | % | 8.4 | % | 8.5 | % | 9.0 | % | 9.4 | % | 9.9 | % | 11.7 | % | 13.2 | % | ||||||||||||||||
| Operating Profit | 28,791 | 45,628 | 40,843 | 34,067 | 28,020 | 22,633 | 1,554 | 671 | ||||||||||||||||||||||||
| Rate of Profit | 4.2 | % | 5.6 | % | 5.5 | % | 5.0 | % | 4.6 | % | 4.1 | % | 0.3 | % | 0.1 | % | ||||||||||||||||
| Tax Rate | 23.0 | % | 23.0 | % | 23.0 | % | 23.0 | % | 23.0 | % | 23.0 | % | 23.0 | % | 25 | % | ||||||||||||||||
| Working Capital | 58,291 | 73,496 | 66,815 | 60,741 | 55,219 | 50,199 | 43,275 | 41,703 | ||||||||||||||||||||||||
| Working Capital Ratio | 9.0 | % | 9.0 | % | 9.0 | % | 9.0 | % | 9.0 | % | 9.0 | % | 9.0 | % | 9 | % | ||||||||||||||||
| Net Operating Profit | 22,169 | 35,133 | 31,449 | 26,231 | 21,576 | 17,428 | 1,197 | 503 | ||||||||||||||||||||||||
| Depreciation and Amortization | 7,888 | 7,888 | 7,888 | 7,888 | 7,888 | 7,888 | 7,888 | 2,500 | ||||||||||||||||||||||||
| Fixed Capital | -4,000 | -4,000 | -4,000 | -4,000 | -4,000 | -4,000 | -4,000 | -3,815 | ||||||||||||||||||||||||
| Cashflow for Capitalization | 26,057 | 39,021 | 35,337 | 30,119 | 25,464 | 21,316 | 5,085 | |||||||||||||||||||||||||
| Capitalization rate Rate | 10.22 | % | ||||||||||||||||||||||||||||||
| Growth | 2.0 | % | ||||||||||||||||||||||||||||||
| Operational Value | 393,585 | |||||||||||||||||||||||||||||||
| Fiscal | -300,848 | |||||||||||||||||||||||||||||||
| Investments | 94,379 | |||||||||||||||||||||||||||||||
| Change in Capital Ratio | -23,741 | |||||||||||||||||||||||||||||||
| Total Assets | -230,210 | |||||||||||||||||||||||||||||||
| Enterprise Value (EV) in NIS | 163,375 | |||||||||||||||||||||||||||||||
| Enterprise Value (EV) in USD | 44,760 | |||||||||||||||||||||||||||||||
| ● | See Appendix 4 |
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-34
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
Various short explanations for the assumptions underlying the cashflow model are presented below:
| 1. | 2023 was a transition year from there being a shortage of supply due to the chip crisis associated with COVID-19 (buying high and selling high) to full supply (buying low and selling low), the need to replace expensive stock together with a sharp and quick decline of the Shekel due to the judicial reform and associated civil unrest and the Swords of Iron war in Q4 adversely impacted the Company’s results - the Company assesses that this adverse response has ended because vehicle prices adjust themselves to the currencies, and the Company’s current purchasing prices have also decreased - 2022 was therefore selected as the base year for the model. | |
| 2. | Sales, management and general expenses will increase from 2025 at a lower rate of the increase in revenues - 5% annually. | |
| 3. | From Q4 2024 the Company will start directly importing a Chinese brand of electric vehicles and therefore the gross profitability is anticipated to increase. There will be a greater impact in 2025. | |
| 4. | From Q4 2024 the Company will start consolidating the earnings of “Automax Leasing” and the profitability of the bus company will increase. There will be a greater impact in 2025. | |
| 5. | From 2024 there will be a 15% annual decline in financing costs (equivalent to interest of approximately 1.2%) which will be offset with a similar increase in the scope of the financial debt. | |
| 6. | Apart from inventory of vehicles, there will be no material changes in fixed property, including intangible license asset and therefore depreciation costs will remain similar at ILS 7,888 thousands per year). | |
| 7. | Revenues - The point of departure is the Company’s business plan prepared in September 2023. The plan referred to the Company’s new growth engines in the bus import and Chinese electric vehicle direct import segments in addition to the Company’s parallel vehicle import activities. The business plan also relied on 2022 as the basis and referred to a 5-year model for 2024-2028. The base assumption was a significant 20% increase in sales in 2024, with continued annual growth of 10% until stabilizing in 2028. As noted above, 2023 cannot be referred to as a representative year for the current commercial activities due to the multitude of events that occurred throughout the year which impacted activity in the economy. For similar reasons I chose to be extra cautious with my working assumptions also for 2024 which started in a state of war and with significant uncertainty for subsequent months. I therefore assumed that the sales target presented in the business plan will be achieved in 2029, and that there will only be a growth rate of 6% in 2024, the growth rate in 2025 will increase to 16% and the growth rate will stabilize at 10% from 2026-2029, which will also serve as a terminal year for calculating the discounted revenues. |
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-35
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
stabilizing in 2028. As noted above, 2023 cannot be referred to as a representative year for the current commercial activities due to the multitude of events that occurred throughout the year which impacted activity in the economy. For similar reasons I chose to be extra cautious with my working assumptions also for 2024 which started in a state of war and with significant uncertainty for subsequent months. I therefore assumed that the sales target presented in the business plan will be achieved in 2029, and that there will only be a growth rate of 6% in 2024, the growth rate in 2025 will increase to 16% and the growth rate will stabilize at 10% from 2026-2029, which will also serve as a terminal year for calculating the discounted revenues.
As aforementioned, the working assumption is that the period of war we anticipate for the coming months will only have a short-term impact on the scope of sales. Past experience shows that vehicle demand in Israel (and around the world) is inelastic, and that vehicle demand is only adversely impacted in the short-run during periods of severe crisis but subsequently reverts. The main reasons for this include:
- Vehicle demand has “cumulative” features - a person who typically replaces their vehicle once every 4 years and who experiences an external crisis at the planned replacement time, will slightly postpone the replacement but will not skip it - unlike, for example, the consumption of tourism or recreational services - where someone who “misses” a meal at a restaurant will not return twice the next day.
- Vehicles are also a sensitive purchase and people tend to “treat” themselves after tense periods.
- 90% of the demand is intended to address an increased population (new drivers in the market) and vehicle write-offs (thefts, accidents, old vehicle operating faults or vehicles not worth repairing) - this component of demand is relatively inelastic.
Presented below is a diagram which presents the annual scope of sales of vehicles in Israel over 1997-2023 while highlighting crisis periods. We can clearly see that vehicle demand is inelastic and self-correcting after crisis periods.
Rapid recovery from crises
The exchanges of private vehicles in Israel over time
| 8. | Corporate tax rate - 23%. | |
| 9. | Discount rate for the terminal year - the discount interest rate of the model, 10.22% less a permanent 2% annual increase, i.e., 8.22%. |
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-36
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
| 10. | Investment in working capital - I assumed an average rate of working capital by subtracting the Company’s current liabilities from its current assets based on its 2022 balance sheet and set a fixed rate of 9%. |
Based on these assumptions I came to an enterprise value totaling approximately ILS 393.6 million or USD 107.8 million based on an exchange rate of ILS 3.65 per USD 1.
| - | Enterprise value should also consider the value of the Company’s net assets in the 2022 base year. |
| - | Cash value is equal to the value of cash, less cash liabilities - ILS 300,848 thousands. |
| - | The value of investments includes fixed property, working capital, and total other assets including intangible assets - ILS 94,379 thousands. |
| - | Change in working capital considers the value of the difference between the working capital in the base year (2022) and the terminal year (2029) capitalized based on the established discount interest rate - ILS 23,741. |
| - | Total assets - ILS 230,210 thousands. |
After referring to the net asset value I came to an enterprise value for the Company totaling ILS 163.4 million, or USD 44.8 million.
Considering that the valuation is based on working assumptions which take into account future forecasts, I found it correct to examine the sensitivity of the result of the valuation to changes with two of the model’s primary variables, the discount interest rate and the growth in the Company’s sales after stabilizing from 2026 through 2029 - the terminal year.
A sensitivity table is presented below:
Sensitivity of company valuation in thousands of $ to discount rate and profit growth rate from 2026
| Growth Rate | 9.0% | 9.5% | 10.0% | 10.22% | 10.5% | 11.0% | 11.5% | |||||||||||||||||||||
| 8.5% | 52,240 | 44,198 | 37,178 | 34,303 | 30,998 | 25,519 | 20,629 | |||||||||||||||||||||
| 9.0% | 56,471 | 48,070 | 41,356 | 37,744 | 34,294 | 28,575 | 23,471 | |||||||||||||||||||||
| 9.5% | 60,758 | 52,002 | 45,539 | 41,230 | 37,632 | 31,670 | 26,350 | |||||||||||||||||||||
| 10.0% | 65,098 | 55,980 | 49,719 | 44,760 | 41,014 | 34,804 | 29,265 | |||||||||||||||||||||
| 10.5% | 69,486 | 60,000 | 53,898 | 48,336 | 44,439 | 37,988 | 32,218 | |||||||||||||||||||||
| 11.0% | 73,918 | 64,058 | 58,078 | 51,958 | 47,908 | 41,195 | 35,208 | |||||||||||||||||||||
| 11.5% | 78,472 | 68,226 | 62,258 | 55,627 | 51,421 | 44,451 | 38,236 |
65-66 Bareket Street, Mevasseret Zion 9078750 Tel: 02-5333857
Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-37
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
Chapter F - Summary and conclusions
Automax is the largest parallel importer of vehicles in Israel. The vehicle market in Israel, just like in most of the world, is currently in the midst of a revolution led by two trends: first - a transition to electric vehicles; second - an increasing number of Chinese manufactured vehicles.
Automax’s management has adjusted itself to the market trends and entered into an agreement with the Chinese company HYCAN to sell its vehicles in Israel as a direct importer. Automax plans on continuing to operate as the leading company in Israel in the parallel import sector and to also use the existing platform of showrooms and sales personnel to sell HYCAN vehicles. This activity is anticipated to commence at the end of 2024 and will become the Company’s primary growth engine in the coming years.
Another growth engine is the joint establishment of a company with Dalhom Motors Ltd. to import TEMSA brand buses. The Company signed an agreement with the manufacturer under which the joint company will serve as the direct importer of TEMSA brand buses to Israel. TEMSA has multiple electric, gasoline and diesel engine model buses and minibuses designed to serve tourism and public transportation, all of which are suitable to be marketed in Israel. The Company is currently completing the establishment of a central bus service center with a total area of 4,000 sqm in Hod Hasharon.
In this document I presented calculations to value Automax under two methodologies. The multiplier methodology and the DCF (discounted cashflow) methodology. I also explained why the enterprise value apparent from the Company’s share price on the Tel Aviv Stock Exchange should not be relied upon as the representative value.
As emphasized, the multiplier methodology is only based on past data and does not refer to future data, whereby it cannot be used as an appropriate metric to assess the enterprise value which is anticipated to double or even more the scope of its operations in the coming years.
However, a current valuation of the Company can certainly serve as a point of departure and be used as a comparison for a valuation based on the DCF methodology - as it refers to forecasted future activities and indeed appears to be so. The valuation based on the multiplier methodology assessed the enterprise value at approximately USD 21.7 million and the valuation based on the DCF methodology assessed the enterprise value at approximately USD 44.8 million. The Company’s anticipated growth is meant to double its activities and also increase its profitability which certainly strengthens the reliability of the valuation.
The fact should also be emphasized that the working assumptions applied to the Company’s business plan were examined in-depth by me and were found to be completely realistic. The existing infrastructure of showrooms and trained sales personnel together with efficient management and marketing are a good basis for meeting the planned targets. Furthermore, I was exceptionally conservative considering the prevailing situation in Israel and the short-term uncertainty and I moderated the Company’s growth forecast in the model’s assumptions and chose an interest rate which incorporates risk components appropriate for the Company’s operating sector.
Based on that stated above, I determine that the current value of Automax is approximately USD 44.8 million.
Appendix 1
Sources for establishing the risk-free interest rate for the period.
The risk-free interest rate calculated for the model is 6%.
This rate was taken from the Bank of Israel banking interest rate data records, returns on shares, government bonds and more.
Current Bank of Israel data 2/1/2024 (Original - Bank of Israel)
LIBOR interest rate
Telbond - corporate interest rate spreads
Stated Bank of Israel interest
Bank of Israel overnight interest rate (for banks)
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Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-38
E.D.B Consulting and Investments Ltd.
Co. no. 514752195
Appendix 2
Risk interest for the sector
The risk interest for the sector depends on various market factors:
The Company will be sensitive to changes in the vehicle market.
Market competition: Companies compete for the same target market; the Company is therefore expected to be adversely impacted by the operations of other companies.
The volatility in the share market, the value of the Company’s shares is liable to be extremely volatile. This is attributable to these companies being dependent on the vehicle market and due to volatility in the general share market.
Risk interest can come to a 5%-10% premium on top of the basic risk-free interest applicable in the market.
The model applied a risk parameter of 1.5%, i.e., risk interest of 6%.
Appendix 3
Average market return
The average market return changes based on the examined period of time. The average market return is calculated at approximately 10% over the long-run. This is based on data from the global share markets over the preceding 100 years.
The average market return may be higher or lower than 10% in the short-run. For example, in the 10 years prior to 2016, the average market return of the US S&P 500 index was approximately 14%. However, in the 5 years prior to 2016, the average market return of this index was approximately 9%. In recent years (2011-2023) this index had a significantly higher average return.
S&P index return - (28% total average) 2011-2023
The average market return is impacted by various factors, including:
Economic growth: Strong economic growth causes an increase in market returns, since it leads to an increase in corporate earnings.
Inflation: High inflation causes a decline in market returns as it is responsible for a decline in the value of money.
Base interest: An increase in the base interest rate causes a decline in market returns as it is responsible for an increase in loan costs.
The valuation model applied a conservative rate of 10% for the market return for the calculation.
Appendix 4
Comments regarding the data for the valuation taken from the Company’s financial statements:
Grant of employee options - see the note in the financial statements. The options plan ended in Q1 2023.
Other capital expenses and losses (profits) - In 2023 there was a capital gain of ILS 4 million due to the sale of shares in Automax Leasing to a third-party.
Net financing costs - Less exchange rate gains/losses from currency hedging transactions. No profits or losses were seen from hedging activities after Q1 2023.
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Email: ebrik10@gmail.com Cell: 052-3817124
Annex E-39
PART II
INFORMATION NOT REQUIRED IN PROXY STATEMENT/PROSPECTUS
Item 20. Indemnification of Directors and Officers
Under the Israeli Companies Law, 5759-1999, or the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if a provision authorizing such exculpation is included in its articles of association. SciSparc’s Amended and Restated Articles of Association include such a provision. An Israeli company may not exculpate a director from liability arising out of a prohibited dividend or distribution to shareholders.
Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed as an office holder, either in advance of an event or following an event, provided a provision authorizing such indemnification is contained in its articles of association:
| ● | a financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the abovementioned events and amount or criteria; |
| ● | reasonable litigation expenses, including legal fees, incurred by the office holder (1) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability, such as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; |
| ● | reasonable litigation expenses, including legal fees, incurred by the office holder or imposed by a court (i) in proceedings instituted against him or her by the company, on its behalf or by a third-party, or (ii) in connection with criminal proceedings in which the office holder was acquitted, or (iii) as a result of a conviction for an offense that does not require proof of criminal intent; and |
| ● | expenses, including reasonable litigation expenses and legal fees, incurred by an office holder in relation to an administrative proceeding instituted against such office holder, or certain compensation payments made to an injured party imposed on an office holder by an administrative proceeding, pursuant to certain provisions of the Israeli Securities Law, 1968, or the Israeli Securities Law. |
An Israeli company may insure an office holder against the following liabilities incurred for acts performed as an office holder if and to the extent provided in the company’s articles of association:
| ● | a breach of the duty of loyalty to the company, to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; | |
| ● | a breach of the duty of care to the company or to a third-party, including a breach arising out of the negligent conduct of the office holder; |
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| ● | a financial liability imposed on the office holder in favor of a third-party; |
| ● | a financial liability imposed on the office holder in favor of a third-party harmed by a breach in an administrative proceeding; and |
| ● | expenses, including reasonable litigation expenses and legal fees, incurred by the office holder as a result of an administrative proceeding instituted against him or her, pursuant to certain provisions of the Israeli Securities Law. |
An Israeli company may not indemnify or insure an office holder against any of the following:
| ● | a breach of the duty of loyalty, except to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; |
| ● | a breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder; |
| ● | an act or omission committed with intent to derive illegal personal benefit; or |
| ● | a fine or forfeit levied against the office holder. |
Under the Companies Law, exculpation, indemnification and insurance of office holders must be approved by the compensation committee, the board of directors and, with respect to directors and the chief executive officer, by the shareholders. However, under regulations promulgated under the Companies Law, the insurance of office holders shall not require shareholder approval and may be approved by only the compensation committee, if the engagement terms are determined in accordance with the company’s compensation policy, and that policy was approved by the shareholders by the same special majority required to approve a compensation policy, provided that the insurance policy is on market terms and the insurance policy is not likely to materially impact the company’s profitability, assets or obligations.
SciSparc’s Amended and Restated Articles of Association allow SciSparc to exculpate, indemnify and insure its office holders for any liability imposed on them as a consequence of an act (including any omission) which was performed by virtue of being an office holder. SciSparc’s office holders are currently covered by a directors and officers liability insurance policy.
SciSparc has entered into agreements with each of its directors and executive officers exculpating them in advance, to the fullest extent permitted by law, from liability to SciSparc for damages caused to us as a result of a breach of duty of care, and undertaking to indemnify them to the fullest extent permitted by law. This indemnification is limited to events determined as foreseeable by the board of directors based on its activities, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances.
The maximum indemnification amount set forth in such agreements is limited to an amount equal to 25% of SciSparc’s total shareholders’ equity as reflected in SciSparc’s most recent consolidated financial statements prior to the date on which the indemnity payment is made. The maximum amount set forth in such agreements is in addition to any amount paid (if paid) under insurance and/or by a third-party pursuant to an indemnification arrangement.
In the opinion of the Securities and Exchange Commission, or the SEC, however, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policy and therefore unenforceable.
SciSparc has purchased and currently intends to maintain insurance on behalf of each and every person who is or was a director or officer of the company against any loss arising from any claim asserted against him or her and incurred by him or her in any such capacity, subject to certain exclusions.
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Item 21. Exhibits And Financial Statements Schedules
(a) Exhibits
The following exhibits are filed as part of this Registration Statement:
| ** | To be filed by amendment. |
| + | Indicates a management contract, compensatory plan or arrangement. |
| † | Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request. |
(b) Financial Statements
The financial statements filed with this Registration Statement on Form F-4 are set forth on the Financial Statement Index and is incorporated herein by reference.
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Item 22. Undertakings.
The undersigned registrant hereby undertakes:
| ● | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: | |
| ● | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; | |
| ● | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; | |
| ● | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. | |
| ● | That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. | |
| ● | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. | |
| ● | To file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need not be furnished, provided that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (1)(d) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. |
That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
| ● | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; | |
| ● | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; | |
| ● | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and | |
| ● | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
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The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
The registrant undertakes that every prospectus: (a) that is filed pursuant to the immediately preceding paragraph, or (b) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes (i) to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means; and (ii) to arrange or provide for a facility in the U.S. for the purpose of responding to such requests. The undertaking in subparagraph (i) above includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Tel Aviv, State of Israel, on the 26th day of September, 2024.
| SCISPARC LTD. | |||
| By: | /S/ Oz Adler | ||
| Name: | Oz Adler | ||
| Title: | Chief Executive Officer | ||
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned constitutes and appoints each of Oz Adler and Amitay Weiss, each acting alone, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities, to sign this Registration Statement on Form F-4, or other appropriate form, and all amendments thereto, including post-effective amendments, of SciSparc Ltd., and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that any such attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by each of the following persons in the capacities and on the dates indicated:
| Signature | Title | Date | ||
| /s/ Oz Adler | Chief Executive Officer and Chief Financial Officer | September 26, 2024 | ||
| Oz Adler | (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | |||
| /s/ Amitay Weiss | Chairman of the Board of Directors | September 26, 2024 | ||
| Amitay Weiss | ||||
| /s/ Amnon Ben Shay | Director | September 26, 2024 | ||
| Amnon Ben Shay | ||||
| /s/ Alon Dayan | Director | September 26, 2024 | ||
| Alon Dayan | ||||
| /s/ Moshe Revach | Director | September 26, 2024 | ||
| Moshe Revach | ||||
| /s/ Itschak Shrem | Director | September 26, 2024 | ||
| Itschak Shrem | ||||
| /s/ Liat Sidi | Director | September 26, 2024 | ||
| Liat Sidi | ||||
| /s/ Lior Vider | Director | September 26, 2024 | ||
| Lior Vider |
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SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
Pursuant to the Securities Act of 1933, as amended, the undersigned, Puglisi & Associates duly authorized representative in the United States of SciSparc Ltd., has signed this registration statement on September 26, 2024.
| PUGLISI & ASSOCIATES | |
| /s/ Donald J. Puglisi | |
| Donald J. Puglisi | |
| Managing Director |
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