Annual and transition report of foreign private issuers pursuant to Section 13 or 15(d)

FINANCIAL INSTRUMENTS

v3.23.1
FINANCIAL INSTRUMENTS
 12 Months Ended
Dec. 31, 2022
Disclosure of detailed information about financial instruments [abstract]  
FINANCIAL INSTRUMENTS [Text Block]
NOTE 15:-
FINANCIAL INSTRUMENTS
 
The carrying values of the financial instruments which are measured at fair value through profit and loss as of December 31, 2022 and 2021, summarized in the following table:
 
         
December 31,
  
   
Note
    
2022
    
2021
  
Financial assets:
                  
                   
Investments
  
c,e
 
  
$
2,410
    
$
2,429
  
Derivative assets
        
$
-
    
$
14
  
                       
Financial liabilities:
                      
                       
Warrants
  
b,d
 
  
$
(8
)
  
$
(6,022
)
 
  a.
Management believes that the carrying amount of cash and cash equivalents, trade receivables, other accounts receivable, loans receivables, trade payables, bank loans, other account payables and accrued expenses and purchase consideration payable, and approximate their fair value due to the short-term maturities of these instruments.
 
  b.
For the years ended December 31, 2022 and 2021, the Company recognized a revaluation gain (loss) from remeasurement of Warrants of $nil and $15,929, respectively, in the consolidated statement of profit or loss and other comprehensive income, which unrealized gain is included in finance income (expense). During 2021, amount of $611 of the Warrants was transferred to equity and the rest expired.
 
  c.
On December 26, 2019, IMC entered into a share purchase agreement (the “SPA”) with Xinteza API Ltd. ("Xinteza"), a company with a unique biosynthesis technology.
 
On February 24, 2022, IMC entered into a Simple Agreement for Future Equity (SAFE) with Xinteza, under which IMC Holdings invested US$100 thousand (approximately $125), in exchange for additional future shares of Xinteza.
 
As of December 31, 2022 and 2021, the fair value of the Xinteza was categorized within Level 3 of the fair value hierarchy. The fair value was based on financing rounds for the purchase of preferred shares during 2022.
 
The investment in the investee is accounted for as financial asset measured at fair value through profit or loss. The fair value of the investment as of December 31, 2022 and 2021, was $2,410 and $2,429, respectively.
 
  d.
On May 10, 2021, the Company completed an overnight marketed offering (the “Offering”) of 608,696 Common Shares (each an “Offered Share”) at a price of US$57.5 per Offered Share for aggregate gross proceeds of approximately US$35 million ($42,502). The Company also issued 304,348 Common Share purchase warrants (each an “2021 Warrant”) to the purchasers of Offered Shares, for no additional consideration, that entitle the holders to purchase 304,348 Common Shares of the Company at an exercise price of US$7.2 per Common Share for a term of 5 years from the closing date.
 
As the exercise price of the 2021 Warrants is denominated in US dollars, which is not the functional currency of the Company, the 2021 Warrants are accounted for as a derivative liability, which is measured at fair value. Gross proceeds in the amount of $30,670 were recorded as Share capital and premium, and $11,832 were recorded as a Warrant liability, based on a valuation using the Black & Scholes option pricing model. The transaction costs incurred as a result of the Offering amounted to approximately $3,800, of which approximately $1,296 (attributed to the issuance of the Warrants classified as liabilities) were recorded as an expense in the Company's consolidated statements of profit or loss and approximately $2,539 (attributed to the issuance of share capital) as a deduction from Share capital and premium.
 
As of December 31, 2022 and 2021, there were 304,348 and 304,348 of 2021 Warrants outstanding and the Company re-measured the 2021 Warrants, according to Black & Scholes model, in the amount of $8 and $6,022, respectively. As a result, for the year ended December 31, 2022 and 2021, the Company recognized a revaluation gain of $6,014 and $5,810, in the consolidated statement of profit or loss and other comprehensive income, which unrealized gain is included in finance income (expense), respectively.
 
The 2021 warrants fair value was measured using the Black & Scholes model with the following key assumptions:
 
   
December 31,
    
December 31,
      
   
2022
    
2021
    
Sensitivity
                     
Expected volatility
    
93 %
      
83 %
    
Increase (decrease) in key assumptions would result in increase (decrease) in fair value
Expected life (in years)
    
3.342
      
4.342
    
Risk-free interest rate
    
0.85%
      
0.85%
    
Increase (decrease) in key assumptions would result in decrease (increase) in fair value
Expected dividend yield
    
0%
      
0%
    
Fair value:
                    
                     
Per Warrant (Canadian Dollar)
    
$0.003
      
$1.979
      
Total Warrants (Canadian Dollar in thousands)
    
$8
      
$6,022
      
 
  e.
Financial risk management:
 
The Group has exposure to the following risks from its use of financial instruments:
 
Share price risk:
 
The Group's investments in unlisted shares are sensitive to market price risk arising from uncertainties about future value of these investments. The Group manages the price risk through diversification and by placing limits on individual and total investment in shares.
 
The Company's Board of directors reviews and approves all decisions related to investments in shares.
 
At the reporting date, the Group's exposure to investments in unlisted shares measured at fair value was $2,410.
 
Credit risk:
 
The maximum credit exposure as of December 31, 2022, is the carrying amount of cash and cash equivalents, trade receivables and other current assets. The Group does not have significant credit risk with respect to outstanding trade receivables. All cash and cash equivalents are placed with major Israeli financial institutions.
 
Liquidity risk:
 
As of December 31, 2021, the Group's financial liabilities with liquidity risk consist of trade payables and other accounts payable which have contractual maturity dates within one year, bank loans and lease liabilities. The Group manages its liquidity risk by reviewing its capital requirements on an ongoing basis. Based on the Group's working capital position at December 31, 2022, management considers liquidity risk to be moderate. The table below summarizes the maturity profile of the Group’s bank loans and lease liabilities based on contractual undiscounted payments (including interest payments):
 
December 31, 2022
 
   
Less than one year
    
1 to 5 years
    
6 to 10
Years
    
>10
years
  
                         
Lease liabilities
  
$
922
    
$
1,830
    
$
598
    
$
-
  
Bank loans and others
  
$
9,246
    
$
399
    
$
-
    
$
-
  
                                 
Total
  
$
10,168
    
$
2,229
    
$
598
    
$
-
  
 
December 31, 2021
 
   
Less than one year
    
1 to 5 years
    
6 to 10
Years
    
>10
years
  
                         
Lease liabilities
  
$
3,130
    
$
11,781
    
$
12,760
    
$
2,620
  
Bank loans
    
9,502
      
-
      
-
      
-
  
                                 
Total
  
$
12,632
    
$
11,781
    
$
12,760
    
$
2,620
  

The maturity profile of the Group's other financial liabilities with liquidity risk (trade payables, other account payable and accrued expenses) as of December 31, 2022 and 2021, are less than one year.
 
Currency rate risk:
 
As of December 31, 2022, a portion of the Group's financial assets and liabilities held in Euro, NIS and USD consist of cash and cash equivalents in the amount of EUR 30 thousand (approximately $44), NIS 6,045 thousand (approximately $2,328), USD 29 thousand (approximately $39), respectively. The Group's objective in managing its foreign currency risk is to minimize its net exposure to foreign currency cash flows by transacting, to the greatest extent possible, with third parties in NIS. The Group does not currently use foreign exchange contracts to hedge its exposure of its foreign currency cash flows as management has determined that this risk is not significant at this point of time.

 

  f.
Changes in liabilities arising from financing activities:
 
   
Loans
    
Lease
liabilities
    
Warrants
    
Total
liabilities
arising from
financing
activities
  
                         
Balance as of January 1, 2021
  
$
-
    
$
990
    
$
16,540
    
$
17,530
  
                                 
Issuance of new warrants
    
-
      
-
      
11,832
      
11,832
  
Additions for new loans
    
8,504
      
-
      
-
      
8,504
  
Additions for new leases
    
-
      
1,678
      
-
      
1,678
  
Additions related to acquisitions
    
1,957
      
17,222
      
-
      
19,179
  
Repayments
    
(700
)
    
(1,980
)
    
-
      
(2,680
)
Effective interest
    
-
      
1,347
      
-
      
1,347
  
Other changes
    
133
      
117
      
(611
)
    
(361
)
Effect of changes in fair value
    
-
      
-
      
(21,739
)
    
(21,739
)
                                 
Balance as of December 31, 2021
    
9,894
      
19,374
      
6,022
      
35,290
  
                                 
Additions for new loans
    
4,660
      
-
      
-
      
4,660
  
Additions for new leases
    
-
      
613
      
-
      
613
  
Repayments
    
-
      
(3,085
)
    
-
      
(3,085
)
Effective interest
    
-
      
1,429
      
-
      
1,429
  
Effect of exchange rate differences
    
(1,135
)
    
(2,056
)
    
-
      
(3,191
)
Deconsolidation of Trichome
    
(3,774
)
    
(14,386
)
    
-
      
(18,160
)
Effect of changes in fair value
    
-
      
-
      
(6,014
)
    
(6,014
)
                                 
Balance as of December 31, 2022
  
$
9,645
    
$
1,889
    
$
8
    
$
11,542