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Financial Instruments

12 Months Ended

Dec. 31, 2021

Disclosure of financial instruments [abstract]

Note 17: - Financial Instruments

Classification of financial assets and liabilities

The financial assets liabilities in the balance sheet are classified by groups of financial instruments pursuant to IFRS 9:

	December 31,
	2021		2020
	U.S. Dollars in thousands
Financial assets

Financial assets at fair value through profit or loss:
Foreign exchange forward contracts	$	-	$	-

Financial assets at fair value through other comprehensive income:
Cash flow hedges		73		457
Marketable debt securities		-		-
Total Financial assets at fair value through other comprehensive income:	$	73	$	457
Financial assets at cost:
Cash and cash equivalent		18,587		70,197
Short term bank deposits		-		39,069
Total Financial assets at cost	$	18,587	$	109,266

Total financial assets	$	18,660	$	109,723

Financial liabilities

Financial liabilities at fair value through profit or loss:
Contingent consideration in business combination		21,995		-
Foreign exchange forward contracts	$	-	$	9
		21,995
Financial liabilities measured at amortized cost:

Assumed liabilities through business combination		61,915		-
Bank loans		20,038		274
Leases		4,314		4,665
Total Financial liabilities measured at amortized cost:	$	86,267	$	4,939

Total financial and lease liabilities	$	108,262	$	4,948

Financial risk factors

The Company’s activities expose it to various financial risks, such as market risk (foreign currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Company’s investment policy focuses on activities that will preserve the Company’s capital. The Company utilized derivatives to hedge certain exposures to risk.

Risk management is the responsibility of the Company’s management and specifically that of the Chief Executive Officer (CEO) and Company Chief Financial Officer (CFO), in accordance with the policy approved by the Board of Directors. The Board of Directors provides principles for the overall risk management.

Market risks

Foreign exchange risk

The Company operates in an international environment and is exposed to foreign exchange risk resulting from the exposure to different currencies, mainly the NIS and EUR. Foreign exchange risks arise from recognized assets and liabilities denominated in a foreign currency other than the functional currency, such as trade and other accounts receivables, trade and other accounts payables, loans and capital leases.

As of December 31, 2021 and 2020, the Company has a position in financial derivatives intended to hedge changes in the exchange rate of the USD vs. the NIS and the EUR (see also Note 17f. below).

Price risk

As of December 31, 2020 the company divested all its investments in debt securities (corporate and government) consequently the Company do not expose to price risk. As of December 31, 2020, the Company has financial instruments, classified as financial assets measured at fair value through other comprehensive income for which the Company is exposed to risk of fluctuations in the security price that is determined by reference to the quoted market price.

Credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, short-term bank deposits, trade receivables and foreign currency derivative contracts.

Cash, cash equivalent and short term investments:

The Company holds cash, cash equivalents, short term deposits and other financial instruments at major financial institutions in Israel. In accordance with Company policy, evaluations of the relative strength of credit of the various financial institutions are made on an ongoing basis.

Short-term investments include short-term deposits with low risk for a period less than one year.

Trade receivables:

The Company regularly monitors the credit extended to its customers and their general financial condition, and, when necessary, requires collateral as security for the debt such as letters of creditor and down payments. In addition, the Company partially insures its overseas sales with foreign trade risk insurance. Refer to Note 8 for additional information.

The Company keeps constant track of customer debt and the Financial Statements include an allowance for doubtful accounts that adequately reflects, in the Company’s assessment, the loss embodied in the debts the collection of which is in doubt.

The Company’s maximum exposure to credit risk for the components of the statement of financial position as of December 31, 2021 and 2020 is the carrying amount of trade receivables.

Foreign currency derivative contracts:

The Company is exposed to foreign currency exchange movements, primarily in USD vs. NIS and EUR. Consequently, it enters into various foreign currency exchange contracts with major financial institutions (see also Note 17f. below).

Interest rate risk:

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term liabilities with floating interest.

Liquidity risk

The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments:

December 31, 2021

	Less than one year		1 to 2		2 to 3		3 to 5		6 and thereafter		Total

Trade payables	$	25,104									$	25,104
Assumed liabilities (1)		17,986		11,203		4,671		7,598		20,457		61,915
Other accounts payables		7,142										7,142
Bank loans (including interest)		3,049		4,773		4,677		8,689		-		21,188
Lease liabilities (including interest)		1,307		1,100		849		1,485		31		4,772

	$	54,588	$	17,076	$	10,197	$	17,772	$	20,488	$	120,121

(1)

Due the nature of the account which include infinite payments for royalties and milestones to third party the assumed liabilities reflect the discounted amount. see Note 19e

December 31, 2020

	Less than one year		1 to 2		2 to 3		3 to 5		6 and thereafter		Total

Trade payables	$	16,110									$	16,110
Other accounts payables		7,547										7,547
Bank loans (including interest)		244		37								281
Lease liabilities (including interest)		1,238		1,002		806		1,436		748		5,230

	$	25,139	$	1,039	$	806	$	1,436	$	748	$	29,168

Changes in liabilities arising from financing activities

	January 1, 2021		Payments			Foreign exchange movement			New loans and leases		Business combination		Revaluation		Write off			December 31, 2021
	U.S. Dollars in thousands
Contingent consideration (1)	-		-			-			-		21,705		290		-			21,995
Assumed liabilities		-		-			-					61,211		704		-			61,915
Bank loans	$	274		(205	)		(31	)		20,000						-		$	20,038
Leases		4,665		(1,221	)		150			845						(125	)		4,314
Total	$	4,939	$	(1,426	)	$	119		$	20,845	$	82,916	$	994	$	(125	)	$	108,262

	(1)	The contingent consideration fair value as of December 31,2021 was based on an Option Pricing Method (OPM), “Monte Carlo Simulation” model. In measuring the contingent consideration liability, the Company used an appropriate risk- adjusted discount rate of 10.5 % and volatility of 10.6 %. totaled $21,995 thousands.

Fair value

The following table demonstrates the carrying amount and fair value of the financial assets and liabilities presented in the financial statements not at fair value:

	Carrying Amount				Fair Value
	December 31,				December 31,
	2021		2020		2021		2020
	U.S. Dollars in thousands

Assumed liabilities		61,915		-		61,915		-
Bank loans		20,038		274		19,502		278
Leases		4,314		4,665		4,608		4,935
Total Financial liabilities	$	108,262	$	4,939	$	108,020	$	5,213

The fair value of the bank loans ,leases and the assumed liabilities was based on standard pricing valuation model such as a discounted cash-flow model which considers the present value of future cash flows discounted by an interest rate that reflects market conditions (Level 3).

The carrying amount of cash and cash equivalents, short term bank deposits, trade and other receivables, trade and other payables approximates their fair value, due to the short term maturities of the financial instruments.

Classification of financial instruments by fair value hierarchy

Financial assets (liabilities) measured at fair value:

Financial assets (liabilities) measured at fair value:	Level 1		Level 2		Level 3 (1)
	U.S. Dollars in thousands

December 31, 2021
Derivatives instruments		-		73
Contingent consideration						(21,995	)
	$	-	$	73	$	(21,995	)

(1)

For changes in Contingent liability see above

	Level 1		Level 2
	U.S. Dollars in thousands

December 31, 2020
Derivatives instruments		-		448
	$	-	$	448

During 2021 and 2020 there was no transfer due to the fair value measurement of any financial instrument from Level 1 to Level 2, and furthermore, there were no transfers to or from Level 3 due to the fair value measurement of any financial instrument.

Sensitivity tests and principal work assumptions

The selected changes in the relevant risk variables were determined based on management’s estimate as to reasonable possible changes in these risk variables.

The Company has performed sensitivity tests of principal market risk factors that are liable to affect its reported operating results or financial position. The sensitivity tests present the profit or loss in respect of each financial instrument for the relevant risk variable chosen for that instrument as of each reporting date. The test of risk factors was determined based on the materiality of the exposure of the operating results or financial condition of each risk with reference to the functional currency and assuming that all the other variables are constant.

	December 31,
	2021			2020
	U.S. Dollars in thousands

Sensitivity test to changes in Interest rate risk
Gain (loss) from change:
1% increase in in basis points of SOFR	$	(23	)	$	-
1% decrease in in basis points of SOFR	$	22		$

Sensitivity test to changes in foreign currency:
Gain (loss) from change:
5% increase in NIS	$	(30	)	$	(24	)
5% decrease in NIS	$	30		$	24
5% increase in Euro	$	(450	)	$	(552	)
5% decrease in Euro	$	450		$	552

Linkage terms of financial liabilities by groups of financial instruments pursuant to IFRS 9:

	December 31,
	2021		2020
	U.S. Dollars in thousands

In NIS:
Bank loans measured at amortized cost	$	38	$	274
Leases measured at amortized cost		4,314		4,665

	$	4,352	$	4,939
In USD:
Contingent consideration at fair value through profit or loss		21,995		-
Assumed liabilities measured at amortized cost		61,915		-
Bank loans measured at amortized cost		20,000		-
	$	103,910	$	-

Derivatives and hedging:

Derivatives instruments not designated as hedging

The Company has foreign currency forward contracts designed to protect it from exposure to fluctuations in exchange rates, mainly of NIS and EUR, in respect of its trade receivables, trade payables and inventory. Foreign currency forward contracts are not designated as cash flow hedges, fair value or net investment in a foreign operation. These derivatives are not considered as hedge accounting. As of December 31, 2021 the fair value of the derivative instruments not designated as hedging was financial assets of $20 thousands. The open transactions for those derivatives were in an amount of $19,906 thousands.

Cash flow hedges:

As of December 31, 2021, the Company held NIS/USD hedging contracts (cylinder contracts) designated as hedges of expected future salaries expenses and for expected future purchases from Israeli suppliers.

The main terms of these positions were set to match the terms of the hedged items. As of December 31, 2021 the fair value of the derivative instruments designated as hedge accounting was an asset of $53 thousands. The open transactions for those derivatives were in an amount of $226 thousands.

Cash flow hedges of the expected salaries and suppliers expenses in December 31, 2021 was estimated as effective and accordingly a net unrecognized income was recorded in other comprehensive income in the amount of $303 thousands net. The ineffective portion were allocated to finance expense.