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Financial Instruments and Financial Risk Management | 12 Months Ended
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Dec. 31, 2023
Financial Instruments and Financial Risk Management [Abstract] |
FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT | NOTE 3 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT: Financial risk management The Company’s activities expose it to a variety of financial risks. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance. Risk management is carried out by the Company’s finance department in accordance with a policy approved by the Board of Directors. The Company’s finance department identifies, evaluates and hedges the financial risks. The Board of Directors provides written principles for the overall management of the risks. Credit risk Credit risk arises mainly from cash and cash equivalents, bank deposits, and trade receivables. The Company estimates that since the liquid instruments are mainly invested with highly rated institutions, the credit and interest risks associated with these balances are low. Credit risk of trade receivables is the risk that customers may fail to pay their debts. The Company mitigates the risk by ensuring its customers have sufficient funds to meet their needs and by selling to customers of high credit quality. No credit limits were exceeded in 2023 and 2022 and management does not expect any losses from non-performance by these counterparties beyond those that have already been recognized. Foreign exchange risk The Company operates internationally and is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the New Israeli Shekel (“NIS”). Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities denominated in foreign currency. These foreign currency-denominated transactions consist primarily of personnel, leases and other overhead costs. For the years ended December 31, 2023 and 2022, foreign currency exchange gains and losses were immaterial. Liquidity risk Prudent liquidity risk management requires maintaining sufficient cash and cash equivalents. The Company works to maintain sufficient cash and cash equivalents, taking into account forecasts as to the cash flows required to fund its activities, in order to minimize the liquidity risk to which it is exposed. Cash flow forecasting is performed by the Company’s finance department on a consolidated basis. The Company monitors rolling forecasts of the Company’s liquidity requirements to ensure it has sufficient cash to meet operational needs. Surplus cash held by the operating entities of the Company over and above the balance required for working capital management is invested in interest bearing current accounts and time deposits, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the abovementioned forecasts. The table below categorizes non-derivative financial liabilities into relevant maturity groupings based on the remaining period at financial position date to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are essential for an understanding of the timing of the cash flows.
|  | Less than one year |  |  | Between one to two years |  |  | More than two years |
|  | U.S. dollars in thousands |
December 31, 2023: |  |  |  |  |  |  |  |  |
Lease liabilities |  |  | 370 |  |  |  | 303 |  |  |  | 220 |
Long-term loans |  |  | 290 |  |  |  | 782 |  |  |  | 20 |
Accounts payable and accruals |  |  | 2,808 |  |  |  | - |  |  |  | - |
|  |  | 3,468 |  |  |  | 1,085 |  |  |  | 240 |
December 31, 2022: |  |  |  |  |  |  |  |  |  |  |  |
Lease liabilities |  |  | 204 |  |  |  | 13 |  |  |  | - |
Short-term bank loans |  |  | 1,606 |  |  |  | - |  |  |  | - |
Long-term loans |  |  | 617 |  |  |  | 540 |  |  |  | 66 |
Accounts payable and accruals |  |  | 4,517 |  |  |  | - |  |  |  | - |
|  |  | 6,944 |  |  |  | 553 |  |  |  | 66 |
Fair value estimation Below analyzes financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
| ● | Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
| ● | Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and
| ● | Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
Level 3 financial instruments As of December 31, 2023 and 2022, the Company has several financial liabilities measured at fair value through profit or loss, which met the level 3 criteria (see below). The following table presents the changes in level 3 financial liabilities for each of the three years in the period ended December 31, 2023:
|  | Derivative financial instruments |
Balance as of January 1, 2023 |  |  | 26 |
Initial recognition of financial liability |  |  | 1,197 |
Classification of financial liability to equity |  |  | (1,116 | )
Changes within profit or loss |  |  | 2 |
Balance as of December 31, 2023 |  |  | 109 |
|  | Derivative financial instruments |
Balance as of January 1, 2022 |  |  | 488 |
Changes within profit or loss |  |  | (462 | )
Balance as of December 31, 2022 |  |  | 26 |
|  | Contingent consideration |  |  | Derivative financial instruments |  |  | Total |
Balance as of January 1, 2021 |  |  | 1,599 |  |  |  | 1,448 |  |  |  | 3,047 |
Payment of contingent consideration |  |  | (915 | ) |  |  | - |  |  |  | (915 | )
Changes within profit or loss |  |  | (684 | ) |  |  | (960 | ) |  |  | (1,644 | )
Balance as of December 31, 2021 |  |  | - |  |  |  | 488 |  |  |  | 488 |
Financial instruments Financial assets
|  | Financial assets measured at fair value |  |  | Financial assets at amortized cost |  |  | Total |
|  | U.S. dollars in thousands |
December 31, 2023 |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | - |  |  |  | 10,872 |  |  |  | 10,872 |
Accounts receivable (excluding prepaid expenses) |  |  | - |  |  |  | 2,194 |  |  |  | 2,194 |
Long-term restricted deposits |  |  | - |  |  |  | 3 |  |  |  | 3 |
Long-term deposits |  |  | - |  |  |  | 104 |  |  |  | 104 |
Equity securities |  |  | 82 |  |  |  | - |  |  |  | 82 |
|  |  | 82 |  |  |  | 13,173 |  |  |  | 13,255 |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | - |  |  |  | 3,290 |  |  |  | 3,290 |
Accounts receivable (excluding prepaid expenses) |  |  | - |  |  |  | 2,236 |  |  |  | 2,236 |
Short-term restricted deposits |  |  | - |  |  |  | 560 |  |  |  | 560 |
Long-term restricted deposits |  |  | - |  |  |  | 127 |  |  |  | 127 |
Long-term deposits |  |  | - |  |  |  | 21 |  |  |  | 21 |
|  |  | - |  |  |  | 6,234 |  |  |  | 6,234 |
Financial liabilities
|  | Financial liabilities measured at fair value |  |  | Financial liabilities at amortized cost |  |  | Total |
|  | U.S. dollars in thousands |
December 31, 2023 |  |  |  |  |  |  |  |  |
Lease liabilities |  |  | - |  |  |  | 893 |  |  |  | 893 |
Accounts payable and accruals |  |  | - |  |  |  | 2,808 |  |  |  | 2,808 |
Long-term loans |  |  | - |  |  |  | 1,092 |  |  |  | 1,092 |
Derivative financial instruments |  |  | 109 |  |  |  | - |  |  |  | 109 |
|  |  | 109 |  |  |  | 4,793 |  |  |  | 4,902 |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |
Lease liabilities |  |  | - |  |  |  | 217 |  |  |  | 217 |
Accounts payable and accruals |  |  | - |  |  |  | 4,517 |  |  |  | 4,517 |
Short-term bank loans |  |  | - |  |  |  | 1,606 |  |  |  | 1,606 |
Long-term loans |  |  | - |  |  |  | 1,223 |  |  |  | 1,223 |
Derivative financial instruments |  |  | 26 |  |  |  | - |  |  |  | 26 |
|  |  | 26 |  |  |  | 7,563 |  |  |  | 7,589 |
Assets and liabilities which are not measured on a recurring basis at fair value, are presented at their carrying amount, which approximates their fair value. Valuation processes of the Company The Company used the Binomial model to evaluate the fair value of derivative financial instruments related to warrants previously granted to investors as of December 31, 2023 and 2022, using the following principal assumptions:
|  | Year ended December 31 |
|  | 2023 |  |  | 2022 |
Risk-free interest rate |  |  | 5.32 | % |  |  | 4.59 | %
Expected term (in years) |  |  | 0.43 |  |  |  | 1.43 |
Expected volatility |  |  | 91 | % |  |  | 69.28 | %
The Company also used the Black-Scholes model to evaluate the fair value of derivative financial instruments related to several warrants previously granted to investors as of December 31, 2023 and 2022, using the following principal assumptions:
|  |  | Year ended December 31 |
|  |  | 2023 |  |  |  | 2022 |
Risk-free interest rate |  |  | 4.01%-4.92% |  |  |  | 4.11%-4.73% |
Expected term (in years) |  |  | 0.86-2.99 |  |  |  | 0.92-3.99 |
Expected volatility |  |  | 81.07%-94.33% |  |  |  | 69.93%-98.87% |
As of December 31, 2023 and 2022, derivative financial instruments totaled to $109 thousand and $26 thousand, respectively. The Company issued warrants to investors under a private placement on September 14, 2023. See Note 14 for details regarding the valuation processes of the Company with respect to these warrants through the year ended December 31, 2023. See Note 12 for details regarding the valuation processes of the Company with respect to options and RSUs granted through the years ended December 31, 2023 and 2022.

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