NOTE 4 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and cash flow interest rate risk), credit risk and liquidity risk. The Group's risk management plan focuses on the uncertainty of the financial markets seeking to minimize potential negative impacts on the Group’s financial performances. Group’s risk management is carried out under policies approved by senior management. This policy relates to management of market risks, credit risks, liquidity risks and capital risks (cash management risks).

1)	Market risks:

Foreign exchange risks

The Group operates internationally and is exposed to fluctuations in exchange rates of various currencies, primarily with respect to the exchange rates of the NIS, Euro, GPB and AUD against the US Dollar.

Foreign exchange risks arise from commercial transactions, assets or liabilities, or net investments in foreign operations which are denominated in a currency which is not the entity’s functional currency. The following table presents a sensitivity test as of December 31, 2024, 2023 and 2022 to reasonably possible changes in the exchange rates, when all other variables remain unchanged. The impact on pre-tax income of the Group is due to changes in financial assets and liabilities.

		Sensitivity test for changes in exchange rate
Foreign currency	Years	Income (loss) from change
		10% increase in exchange rate			10% decrease in exchange rate
		US Dollars in thousands
NIS	2024		(3,524	)		3,524
	2023		(1,762	)		1,762
	2022		(2,168	)		2,168
EUR	2024		(1,644	)		1,644
	2023		(1,698	)		1,698
	2022		1,288			(1,288	)
GPB	2024		316			(316	)
	2023		123			(123	)
	2022		713			(713	)
AUD	2024		233			(233	)
	2023		40			(40	)
	2022		201			(201	)

Risk in respect of interest rate change

Risks related to interest rates stem from changes in interest rates, which may have an adverse effect on the Group’s net income or cash flows. Changes in interest rates trigger changes in the Group’s interest income and expenses in respect of interest-bearing assets and liabilities.

The Company has loans from an Israeli bank which have the, variable interest rate, Secured Overnight Financing Rate (SOFR) and prime rate.

2)	Credit risks

Credit risk is managed on a Group level. Credit risks arise mainly from cash and cash equivalents, bank deposits, and credit exposures to receivables. The Group carries out a risk assessment by assessing the credit quality of each customer, taking into account the customer's financial position, past experience, and other factors. The Group settles the processing fee before remitting funds to the customers.

The loss allowance for trade receivables as of December 31, 2024 and 2023 was determined as follows:

December 31, 2024	Not overdue		Over 30 days overdue		Over 60 days overdue		Over 120 days overdue			Total
	US Dollar in thousands
Gross carrying amount – trade receivables		45,592		2,629		465		10,787			59,473
Less – provision of allowance for credit loss		-		-		-		(3,779	)		(3,779	)
Trade receivable		45,592		2,629		465		7,008			55,694

December 31, 2023	Not overdue		Over 30 days overdue		Over 60 days overdue		Over 120 days overdue			Total
	US Dollar in thousands
Gross carrying amount – trade receivables		25,023		1,818		3,851		12,474			43,166
Less – provision of allowance for credit loss		-		-		-		(1,866	)		(1,866	)
Trade receivable		25,023		1,818		3,851		10,608			41,300

Most of the Group’s cash and cash equivalents as of December 31, 2024 and 2023 were deposited with Israeli, European and American banks. In the opinion of the Group, the credit risk arising from those balances with banks is low. In respect of the processing activity, the Group has a restricted cash balance for transfer to customers and is also entitled to receive proceeds from international processing companies. In the opinion of the Group, the credit risk arising from the balances with those processing companies is low.

3)	Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and credit facilities to fund operations. In view of the dynamic nature of its business activity, the Group maintains financing flexibility through maintaining the availability of credit facilities from banks and investments in share capital.

The table below analyzes the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities. The amounts presented in the table represent undiscounted cash flows.

	Less than one year		Between 1 and 2 years		Between 3 and 5 years		More than 5 years		Total
	US Dollars in thousands
December 31, 2024:
Short-term loans		25,276		-		-		-		25,276
Long-term bank loans		6,009		11,213		9,566		1,812		28,600
Lease liabilities		3,072		3,724		627		26		7,449
Payables in respect of processing activity		132,612		-		-		-		132,612
Trade payables		21,059		-		-		-		21,059
Other payables		33,887		-		-		-		33,887
Total		221,915		14,937		10,193		1,838		248,883

	Less than one year		Between 1 and 2 years		Between 3 and 5 years		More than 5 years		Total
	US Dollars in thousands
December 31, 2023:
Short-term loans		47,477		-		-		-		47,477
Long-term bank loans		1,110		370		-		-		1,480
Long-term loans from others		3,835		-		-		-		3,835
Liability in respect of purchase of servers		99		74		-		-		173
Lease liabilities		2,325		1,897		2,022		495		6,739
Payables in respect of processing activity		104,523		-		-		-		104,523
Trade payables		17,464		-		-		-		17,464
Other payables		25,650		-		-		-		25,650
Total		202,483		2,341		2,022		495		207,341

Group Management periodically reviews the ratio between future cash flows that will arise from maturities of its liabilities and the future cash flows that will arise from maturities of its financial assets; where necessary, the Group changes its liability mix and the timing of their maturity.

4)	Capital risk:

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stockholders and to maintain an optimal capital structure to reduce the cost of capital.

From time to time the Group assesses, as applicable, the need to raise funds from external investors.

Changes in financial liabilities, the cash flows in respect of which are classified as cash flows from financing activities:

	Short-term credit			Long-term bank loans			Loans from others			Lease liabilities			Other liabilities			Total
	US Dollars in thousands
Balance at January 1, 2024		47,477			1,428			3,920			6,294			170			59,289

Changes in 2024:
Liabilities added in respect of new leases		-			-			-			1,875			-			1,875
Liabilities added in respect of loans from banks and others		-			22,835			-			-			-			22,835
Liabilities added in respect of acquisitions		561			-			-			1,519			-			2,080
Cash flows paid		(23,315	)		(3,177	)		(3,837	)		(2,655	)		(47	)		(33,031	)
Amounts recognized in profit or loss and other changes		553			1,497			(83	)		12			(123	)		1,856
Balance at December 31, 2024:		25,276			22,583			-			7,045			-			54,904

Balance at January 1, 2023		7,684			2,496			7,367			8,150			362			26,059
Changes in 2023:
Liabilities added in respect of new leases		-			-			-			595			-			595
Liabilities added in respect of loans from banks and others		39,135			-			-			-			-			39,135
Cash flows paid		-			(998	)		(3,626	)		(2,182	)		(182	)		(6,988	)
Amounts recognized in profit or loss and other changes		658			(70	)		179			(269	)		(10	)		488
Balance at December 31, 2023:		47,477			1,428			3,920			6,294			170			59,289

Balance at January 1 2022		-			5,166			3,220			6,895			721			16,002
Changes in 2022:
Liabilities added in respect of new leases		-			-			-			2,014			-			2,014
Liabilities added in respect of loans from banks and others		5,874			-			6,908			-			-			12,782
Liabilities added in respect of acquisitions		2,000			-			-			1,696			-			3,696
Cash flows paid		-			(2,282	)		(2,577	)		(2,146	)		(288	)		(7,293	)
Amounts recognized in profit or loss and other changes		(190	)		(388	)		(184	)		(309	)		(71	)		(1,142	)
Balance at December 31 2022:		7,684			2,496			7,367			8,150			362			26,059

5)	Fair Value Measurement:

The Company measures certain financial instruments and non-financial assets at fair value on a recurring or non-recurring basis in accordance with IFRS 13. The fair value hierarchy categorizes the inputs used in valuation techniques into three levels, as defined below:

•

Level 1: Quoted prices in active markets for identical assets or liabilities.

•

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

•

Level 3: Inputs for the asset or liability that are not based on observable market data.

The following table shows the fair value hierarchy of financial instruments measured at fair value as of December 31, 2024 and 2023:

Assets	Level 2		Level 3			Total
January 1, 2024		42		1,831			1,873
Initialy recognized		3,139		-			3,139
Changes in fair value		428		(1,436	)		(1,008	)
December 31, 2024		3,609		395			4,004

January 1, 2023		-		-			-
Initialy recognized		42		1,918			1,960
changes in fair value		-		(87	)		(87	)
December 31, 2023		42		1,831			1,873

Liabilities	Level 2			Level 3			Total
January 1, 2024		(1,484	)		(12,141	)		(13,625	)
Initialy recognized		-			(2,132	)		(2,132	)
Changes in fair value		559			(1,137	)		(578	)
December 31, 2024		(925	)		(15,410	)		(16,335	)

January 1, 2023		(1,448	)		-			(1,448	)
Initialy recognized		-			(12,141	)		(12,141	)
changes in fair value		(36	)		-			(36	)
December 31, 2023		(1,484	)		(12,141	)		(13,625	)

For each level, the following key assumptions were applied:

•

Level 2: The fair value of Level 2 instruments is derived using observable inputs, including interest rates, yield curves, credit spreads, and foreign exchange rates. Valuation techniques such as discounted cash flow models, Black and Scholes and comparable market transactions are utilized, with inputs obtained from reputable market data sources.

•

Level 3: Instruments classified under Level 3 are valued using models that incorporate significant unobservable inputs. These may include company's assumptions regarding future cash flows, discount rates, market liquidity, and counterparty credit risk. The valuation process involves management judgment, and sensitivity analyses are conducted to assess the impact of changes in key assumptions.