Intangible Assets

12 Months Ended

Dec. 31, 2021

Intangible Assets [Abstract]

Intangible assets

Note 8 – Intangible assets

A. Movement in carrying amount

	Goodwill			Technology			Development Costs			Other			Total
	Thousands USD			Thousands USD			Thousands USD			Thousands USD			Thousands USD
Cost
As of January 1, 2020		-			-			7,672			-			7,672
As of December 31, 2020		-			-			7,672			-			7,672
Acquisitions through		89,244			39,987			-			2,853			132,084
business combinations
As of December 31, 2021		89,244			39,987			7,672			2,853			139,756
Amortization and impairment losses
As of January 1, 2020		-			-			(2,461	)		-			(2,461	)
Amortization for the year		-			-			(771	)		-			(771	)
As of December 31, 2020		-			-			(3,232	)		-			(3,232	)
Amortization for the year		-			(3,189	)		(775	)		(301	)		(4,265	)
Impairment loss		(89,244	)		(36,798	)		(3,665	)		(2,552	)		(132,259	)
As of December 31, 2021		(89,244	)		(39,987	)		(7,672	)		(2,853	)		(139,756	)
Carrying amount
As of December 31, 2020		-			-			4,440			-			4,440
As of December 31, 2021		-			-			-			-			-

B. Development Costs

Intangible assets include development costs that were capitalized. The expenditure capitalized in respect of development activities includes the cost of materials, direct labor and overhead costs that are directly attributable to preparing the asset for its intended use. See also Note 3.E.(2).

C. Amortization

The current amortization of technology is allocated both to the cost of revenues and to the research and development expenses, net. The current amortization of development costs, backlogs (included in Other) is recognized in cost of revenues as inventory is sold. Furthermore, the current amortization of trademarks (included in other) is recognized in selling and distribution expenses.

D. Impairment testing for cash-generating units containing goodwill

For the purposes of goodwill impairment testing, goodwill acquired in a business combination is allocated to a group of cash-generating units, including those existing in the Group before the business combination, that are expected to benefit from the synergies of the combination. Therefore, the Group tests the goodwill acquired from the acquisition of DeepCube, NanoFabrica and Essemtec, at the Group’s level, since the goodwill cannot be allocated to individual cash-generating units. Moreover, the Group recognized technology assets that were acquired in business combinations, as corporate assets that do not generate separate cash inflows and are utilized by more than one cash-generating unit. Those technology assets cannot be allocated reasonably and consistently to cash-generating units and therefore are allocated to the Group level.

The estimated recoverable amount of the cash generating units was based on the value-in-use of the Group and was determined by discounting the future cash flows to be generated from the continuing use of the Group, with the assistance of independent valuers. The carrying amount of the cash-generating units was determined to be higher than its recoverable amount and an impairment loss of $140,290 thousand was recognized. The impairment loss was allocated to goodwill, intangible assets and property plant and equipment, and is included in other expenses.

E. Key assumptions used in calculation of recoverable amount

Key assumptions used in the calculation of recoverable amounts are discount rates, revenues terminal value growth rates and EBITDA (earnings before income tax, financing, depreciation and amortization) margins. These assumptions are as follows:

(1) Discount rate

The discount rate was estimated based on an industry average weighted average cost of capital, without debt leveraging, and was estimated to 20%. The discount rate is based on the risk-free rate for 20-year debentures issued by the government in the relevant market, and adjusted for a risk premium to reflect the increased risk of investing in equities, a small stock premium and a company specific risk premium.

(2) Revenues and revenues terminal growth rate

The Company’s estimated revenues are based on the Company's budget, growth plans and available market information. In total, revenues annual growth rate is expected to gradually decrease from 33.33% in 2026 to 5% in 2029. From 2030 onward, revenues are expected to increase at an annual rate of 3%, which reflects the long-term growth rate assumed.

(3) EBITDA margin

EBITDA margin is expected to gradually increase from negative 280.7% in 2022 to 17.1% in 2030 onward, which represents the EBITDA margin assumed for the long-term. This estimation is supported by a sample of projected EBITDA margin of comparable companies, according to analyst reports.

(4) Tax expense

The effective tax rate during the projection period is 16%.

(5) Assets that were not impaired

The estimated fair value less cost of sell of some property, plant and equipment assets and right of use assets was higher than its carrying amount, and therefore there was no need to impair them.