UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 20-F
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the fiscal year ended December 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No.: 001-37600
NANO DIMENSION LTD.
(Exact name of registrant as specified in its charter)
Translation of registrant’s name into English: Not applicable
State of Israel
(Jurisdiction of incorporation or organization)
2 Ilan Ramon
Ness Ziona
7403635 Israel
(Address of principal executive offices)
Yoav Stern
Chief Executive Officer
+972-073-7509142
yoav.stern@nano-di.com
2 Ilan Ramon
Ness Ziona
7403635 Israel
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
American Depositary Shares each representing one Ordinary
Shares par value NIS 5.00 per share (1) Ordinary Shares, par
value NIS 5.00 per share (2)
Rights to Purchase American Depository Shares, each
American Depositary Share representing one Ordinary
Share, par value NIS 5.00 per share
(1) Evidenced by American Depositary Receipts.
Trading Symbol(s)
NNDM
Name of each exchange on which registered
Nasdaq Capital Market
NNDM
Nasdaq Capital Market
(2) Not for trading, but only in connection with the listing of the American Depositary Shares.
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual
report.
238,596,545 Ordinary Shares, par value NIS 5.00 per share, as of December 31, 2023.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Exchange Act of 1934.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes ☐ No ☒
Yes ☐ No ☒
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-
T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company.
See definition of large accelerated filer, “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer
Emerging growth company
☐
☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has
elected not to use the extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section 13(a) of
the Exchange Act. ☐
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting
Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.
U.S. GAAP ☐
International Financial Reporting Standards as issued by the International Accounting Standards Board ☒
Other ☐
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to
follow.
If this is an annual report, indicate by check mark whether the registrant is a shell company.
☐ Item 17 ☐ Item 18
Yes ☐ No ☒
TABLE OF CONTENTS
INTRODUCTION
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
PART I
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.
OFFER STATISTICS AND EXPECTED TIMETABLE.
KEY INFORMATION.
[Reserved]
Capitalization and Indebtedness.
Reasons for the Offer and Use of Proceeds.
Risk Factors.
INFORMATION ON THE COMPANY.
History and Development of the Company.
Business Overview.
Organizational Structure.
Property, Plants and Equipment.
UNRESOLVED STAFF COMMENTS.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS.
Operating Results.
Liquidity and Capital Resources.
Research and Development, Patents and Licenses, etc.
Trend Information.
Critical Accounting Estimates.
Directors, Senior Management and Employees
Directors and Senior Management.
Compensation.
Board Practices.
Employees.
Share Ownership.
Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.
Major Shareholders.
Related Party Transactions.
Interests of Experts and Counsel.
FINANCIAL INFORMATION.
Consolidated Statements and Other Financial Information.
Significant Changes.
THE OFFER AND LISTING.
Offer and Listing Details.
Plan of Distribution.
Markets.
Selling Shareholders.
Dilution.
Expenses of the Issue.
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ITEM 1.
ITEM 2.
ITEM 3.
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B.
C.
D.
ITEM 4.
A.
B.
C.
D.
ITEM 4A.
ITEM 5.
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B.
C.
D.
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ITEM 6.
A.
B.
C.
D.
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F.
ITEM 7.
A.
B.
C.
ITEM 8.
A.
B.
ITEM 9.
A.
B.
C.
D.
E.
F.
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ITEM 10.
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ITEM 11.
ITEM 12.
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ITEM 13.
ITEM 14.
ITEM 15.
ITEM 16.
ITEM 16A.
ITEM 16B.
ITEM 16C.
ITEM 16D.
ITEM 16E.
ITEM 16F.
ITEM 16G.
ITEM 16H.
ITEM 16I.
ITEM 16J.
ITEM 16K.
ITEM 17.
ITEM 18.
ITEM 19.
ADDITIONAL INFORMATION.
Share Capital.
Memorandum and Articles of Association.
Material Contracts.
Exchange Controls.
Taxation.
Dividends and Paying Agents.
Statement by Experts.
Documents on Display.
Subsidiary Information.
Annual Report to Security Holders.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.
Debt Securities.
Warrants and rights.
Other Securities.
American Depositary Shares.
PART II
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.
CONTROLS AND PROCEDURES.
[Reserved]
AUDIT COMMITTEE FINANCIAL EXPERT.
CODE OF ETHICS.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT.
CORPORATE GOVERNANCE.
MINE SAFETY DISCLOSURE.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
INSIDER TRADING POLICIES
CYBERSECURITY
FINANCIAL STATEMENTS.
FINANCIAL STATEMENTS.
EXHIBITS.
SIGNATURES
PART III
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INTRODUCTION
Our vision is to disrupt electronics and mechanical manufacturing with an environmentally friendly and economically efficient electronics and precision
additive manufacturing Industry 4.0 solution - transforming digital designs into functioning electronic and mechanical devices - on demand, anytime, anywhere.
Our technology strategy is rooted in the application of deep learning based artificial intelligence, or AI, to drive improvements in manufacturing capabilities by
using self-learning and self-improving systems, along with the management of a distributed manufacturing network via the cloud.
We were incorporated under the laws of the State of Israel in December 1960. On March 7, 2016, American Depositary Shares, or ADSs, representing our
Ordinary Shares, commenced trading on the Nasdaq under the symbol “NNDM.” Each one (1) ADS currently represents one (1) Ordinary Share. All
descriptions of our ADS herein, including ADS amounts and per ADS amounts, are presented after giving effect to the ratio change.
Unless otherwise indicated, all references to the “Company,” “we,” “our” and “Nano Dimension” refer to Nano Dimension Ltd. and its subsidiaries, Global
Inkjet Systems Ltd., or GIS, a United Kingdom corporation, Nano Dimension Technologies Ltd., or Nano Tech, an Israeli corporation, Essemtec AG, or
Essemtec and Nano Dimension Swiss GmbH, or Nano Swiss, Swiss corporations, Formatec Holding B.V., or Formatec Holding, Admatec Europe B.V., or
Admatec, and Formatec Technical Ceramics B.V., or Formatec, Dutch corporations, Nano Dimension USA Inc., or Nano USA, a Delaware corporation,
Essemtec USA, LLC, a Delaware limited liability company, Nano Dimension GmbH, or Nano Germany and Essemtec Deutschland GmbH, German
corporations, Nano Dimension Australia Pty Ltd., or Nano Australia, an Australian corporation, Nano Dimension (HK) Limited, a Hong Kong corporation,
Essemtec France SAS, a French corporation, Nano Dimension NY Ltd., a New York corporation, and Nano Dimension Trading (Shenzhen) Ltd., a Chinese
corporation.
References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekel. References to
“Ordinary Shares” are to our Ordinary Shares, par value of NIS 5.00 per share. We report financial information under International Financial Reporting
Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB, and none of the financial statements were prepared in accordance with
generally accepted accounting principles in the United States.
iii
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information included or incorporated by reference in this annual report on Form 20-F may be deemed to be “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forward-looking statements are often characterized by the use of
forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar
words, but are not the only way these statements are identified.
These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain
projections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion
and use of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect,
project, believe or anticipate will or may occur in the future.
Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking
statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,
expected future developments and other factors they believe to be appropriate.
Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking
statements include, among other things:
● changes in our strategy;
● the impact of competition and new technologies;
● shareholder activism;
● the overall global economic environment;
● projected capital expenditures and liquidity;
● litigation; and
● those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating and Financial
Review and Prospects”, as well as in this annual report on Form 20-F generally.
Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20-F which are designed to advise
interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
You should not put undue reliance on any forward-looking statements. Any forward-looking statements in this annual report on Form 20-F are made as of
the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future
events or otherwise, except as required by law.
In addition, the section of this annual report on Form 20-F entitled “Item 4. Information on the Company” contains information obtained from independent
industry sources and other sources that we have not independently verified.
iv
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
PART I
Not applicable
ITEM 3. KEY INFORMATION
A. [Reserved]
B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
D. RISK FACTORS
You should carefully consider the risks described below, together with all of the other information in this annual report on Form 20-F. The risks described
below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also
materially and adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of
our ADSs could decline.
Summary of Risk Factors
Risks Related to Our Financial Condition and Capital Requirements
● We invest significant resources in research and development of our products and anticipate that we may continue to incur losses until we are able to
commercialize our products at a greater scale;
● Although we generate revenues from the sale of our current products, we may never be profitable; and
● Our non-financial assets may lead to impairments in the future.
Risks Related to Our Business and Industry
● We have been engaged, and will continue to engage, in mergers and acquisitions to diversify or expand our business, which may pose risks to our
business and dilute the ownership of our existing shareholders, and we may not realize the anticipated benefits of these mergers or acquisitions;
● We may not be able to introduce products acceptable to customers and we may not be able to improve the technology used in our current systems in
response to changing technology and end-user needs;
● We depend on the commercial success of selling our advanced manufacturing products and services and we may not be able to successfully scale up
their commercialization; and
● We may not be able to successfully manage our planned growth and expansion.
1
Risks Related to Our Intellectual Property
● Lack of patent protection may hinder our market competitiveness and failure to safeguard trade secrets could enable competition to use our proprietary
information;
● Inability to maintain effective proprietary rights for our products, may affect our ability to compete effectively; and
● Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.
Risks Related to the Ownership of the ADSs or our Ordinary Shares
● As a “foreign private issuer” we follow certain home country corporate governance practices instead of otherwise applicable SEC and Nasdaq
requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.
Risks Related to Israeli Law and Our Operations in Israel
● As our headquarters and some of our operations are located in Israel, we could be adversely affected by the implications of political, economic and
military instability in Israel;
● Provisions of Israeli law, our amended and restated articles of association and our rights agreement may delay, prevent or otherwise impede a merger
with, or an acquisition of, our company, which could prevent a change of control, even when the terms of such a transaction are favorable to us and our
shareholders;
● Our operations are subject to currency and interest rate fluctuations; and
● We received Israeli government grants for certain of our research and development activities. The terms of those grants may require us to pay royalties
and to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. If we fail to satisfy these conditions, we
may be required to pay penalties and refund grants previously received.
General Risk Factors
● Raising additional capital would cause dilution to holders of our securities, and may affect the rights of existing shareholders;
● Significant disruptions of our information technology systems or breaches of our data security could adversely affect our business;
● We may be subject to securities litigation, which is expensive and could divert management attention; and
● If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change
their recommendations or publish negative reports regarding our business or our ADSs or Ordinary Shares, the price and trading volume of our ADSs
or Ordinary Shares could decline.
2
Risks Related to Our Financial Condition and Capital Requirements
We invest significant resources in research and development of our products and anticipate that we may continue to incur losses until we are able to
commercialize our products at a greater scale.
Since the date of our inception, and as of December 31, 2023, we have incurred net losses of approximately $591 million.
Between 2014 and 2022, we devoted a significant amount of our financial resources to develop our products and in our acquisitions. Since the beginning of
2023, we have also devoted substantial efforts in the development of new consumables for our machines, mainly inks. We have financed our current operations
primarily through the issuance of equity securities. The amount of our future net losses and our ability to finance our operations will depend, in part, on
completing the development of our products, the rate of our future expenditures, our ability to generate significant revenues from the sales of our products and
our ability to obtain funding through the issuance of our securities, strategic collaborations or grants. We are working on reducing our operational and other
expenses; however, we anticipate that our expenses may increase substantially if and as we:
● continue the development of our products;
● establish a sales, marketing, and distribution infrastructure to successfully commercialize our products;
● seek to identify, assess, license, and/or develop other products and subsequent generations of our current products;
● seek to acquire other entities;
● seek to maintain, protect, and expand our intellectual property portfolio;
● seek to attract and retain skilled personnel; and
● create additional infrastructure to support our operations as a public company and our product development and planned future commercialization
efforts.
Although we generate revenues from the sale of our current products, we may never be profitable.
We began commercializing our products in the fourth quarter of 2017. Our ability to generate significant revenues and achieve profitability depends on our
ability to successfully complete the development of, and to commercialize, our products, including consumables. Our ability to generate future revenue from
product sales depends heavily on our success in many areas, including but not limited to:
● completing development of our products, specifically new consumables;
● penetrating new geographies and markets;
● establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate (in amount and quality) products to
support market demand for our products;
● launching and commercializing products, specifically consumables, either directly or with a collaborator or distributor;
● addressing any competing technological and market developments;
3
● identifying, assessing, acquiring and/or developing new products;
● negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter;
● maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and
● attracting, hiring and retaining qualified personnel.
Our non-financial assets may lead to significant impairments in the future.
We review our cash-generating units, or CGUs, for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying
amount of such CGUs may not be recoverable. In those cases, an impairment to our non-financial assets, including intangible assets and property, plant and
equipment might be recognized. The amount of goodwill, intangible assets and property, plant and equipment on our consolidated balance sheet may increase
following acquisitions or other collaboration agreements. Changes in market conditions or other changes in the future outlook of value may lead to significant
impairments in the future.
The market price of our ADSs has been, and may continue to be, highly volatile, and such volatility could cause the market price of our ADSs to
decrease and could cause you to lose some or all of your investment in our ADSs.
During 2023, the market price of our common stock fluctuated from a high of $3.28 per ADS to a low of $2.21 per ADS, has fluctuated even more in past
years and our share price continues to fluctuate. The market price of our ADSs may continue to fluctuate significantly in response to numerous factors, some of
which are beyond our control, such as:
● our ability to grow our revenue and customer base;
● the announcement of new products or product enhancements by us or our competitors;
● variations in our and our competitors’ results of operations;
● successes or challenges in any future collaborative, licensing, or other arrangements or alternative funding sources;
● developments in the additive manufacturing of electronics, additive manufacturing, surface-mount technology, industrial digital printing and printed
electronics (PE) industries;
● future issuances of ADSs or other securities;
● the addition or departure of key personnel;
● announcements by us or our competitors of acquisitions, investments or strategic alliances;
● general market conditions and other factors, including factors unrelated to our operating performance;
● the Israel-Hamas war; and
● shareholder activism.
4
These and other market and industry factors may cause the market price and demand for our ADSs to fluctuate substantially, regardless of our actual
operating performance, which may limit or prevent investors from readily selling their ADSs and may otherwise negatively affect the liquidity of our ADSs. In
addition, the stock market in general, and technology-based companies in particular, have experienced extreme price and volume fluctuations that have often
been unrelated or disproportionate to the operating performance of these companies. In the past, when the market price of a security has been volatile, holders
of that security have sometimes instituted securities class action litigation against the issuer. If any of the holders of our ADSs were to bring such a lawsuit
against us, we could incur substantial costs defending the lawsuit and the attention of our senior management would be diverted from the operation of our
business. Any adverse determination in litigation could also subject us to significant liabilities.
We maintain our cash at financial institutions, some in balances that exceed federally insured limits.
A portion of our cash is held in accounts at U.S. banking institutions that we believe are of high quality. Cash held in non-interest-bearing and interest-
bearing operating accounts may exceed the Federal Deposit Insurance Corporation, or FDIC, insurance limits. If such banking institutions were to fail, we could
lose all or a portion of those amounts held in excess of such insurance limitations. The FDIC took control of one such banking institution, Silicon Valley Bank,
or SVB, on March 10, 2023 though we did not lose any assets due to this event. The FDIC also took control of Signature Bank on March 12, 2023, though we
do not hold any accounts at this bank.
On March 13, 2023, the U.S. Federal Reserve announced that account holders would not bear the loss of SVB’s collapse and since that time, we have been
able to make payments and move all of the funds held in SVB to other banks in the United States. Thus, we do not view the risk as material to our financial
condition. However, as the FDIC continues to address the situation with SVB, Signature Bank and other similarly situated banking institutions, the risk of loss
in excess of insurance limitations has generally increased. Any material loss that we may experience in the future could have an adverse effect on our ability to
pay our operational expenses or make other payments and may require us to move our accounts to other banks, which could cause a temporary delay in making
payments to our vendors and employees and cause other operational inconveniences.
Risks Related to Our Business and Industry
We have been engaged, and will continue to engage, in mergers and acquisitions to diversify or expand our business, which may pose risks to our
business and dilute the ownership of our existing shareholders, and we may not realize the anticipated benefits of these mergers or acquisition.
As part of our growth and product diversification strategy, we have engaged in mergers and acquisitions and will continue to evaluate opportunities to
acquire or invest in other businesses or existing businesses, intellectual property or technologies and expand the breadth of markets we can address or enhance
our technical capabilities. For example, we acquired all of the issued and outstanding share capital of DeepCube and NanoFabrica in April 2021, all of the
issued and outstanding share capital of Essemtec in November 2021, all of the issued and outstanding share capital of GIS in January 2022, all of the issued and
outstanding share capital of Formatec Holding in July 2022. In addition, we have purchased all of the intellectual property assets of The Plastic Economy,
D.B.A. Additive Flow, or Additive Flow, a U.K.-based company, in August 2023. Mergers or acquisitions, such as the DeepCube, NanoFabrica, Essemtec, GIS,
Formatec Holding share acquisitions, and the Additive Flow asset acquisition that we have entered into and may enter into in the future entail a number of risks
that could materially and adversely affect our business, operating and financial results, including, among others:
● problems integrating the acquired operations, technologies or products into our existing business and products;
● diversion of management’s time and attention from our core business;
● adverse effect on our existing business relationships with customers;
● need for financial resources above our planned investment levels;
● failures in realizing anticipated synergies;
● difficulties in retaining business relationships with suppliers and customers of the acquired company;
● risks associated with entering markets in which we lack experience;
● risks with respect to impairment charges following acquisitions;
● potential loss of key employees of the acquired company; and
● potential write-offs of acquired assets.
Our failure to address these risks successfully may have a material adverse effect on our financial condition and results of operations. Any such acquisition
or investment will likely require a significant amount of capital investment, which would decrease the amount of cash available for working capital or capital
expenditures. In addition, if we use our equity securities to pay for acquisitions, the value of our ADSs and the underlying Ordinary Shares may be diluted. If
we borrow funds to finance acquisitions, such debt instruments may contain restrictive covenants that can, among other things, restrict us from distributing
dividends.
5
Additionally, from March through May 2023, we made several non-binding offers to acquire all of the outstanding ordinary shares of Stratasys Ltd., or
Stratasys. After not proceeding with these offers to acquire all ordinary shares, we made a series of special tender offers from May through July 2023 to acquire
at least 51% of the outstanding shares, inclusive of the 14.1% that we already owned. The offers were dependent on a number of closing conditions being met.
As these conditions were not met, we did not complete the special tender offers. In December 2023, we made an additional offer to buy all remaining shares of
Stratasys, which has not yet been accepted, for $16.50 per share. The proposal was subject to the completion of a satisfactory confirmatory due diligence
process and the negotiation and execution of a mutually satisfactory definitive acquisition agreement. There is no guarantee that the offer will be accepted or
that an acquisition will be completed. Even if it is, the acquisition may deplete our cash and our resources. Additionally, a potential acquisition would require
significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely
affect our business, financial condition, and operating results.
As a part of our strategy, acquisitions are a key pillar. Our failure to invest/acquire on favorable terms and failure to realize expected results from
investments and acquisitions may adversely affect our revenue growth and profitability.
As a part of our strategy focusing on synergetic mergers and acquisitions of systems, materials, software, AI, and solutions that build up to deliver
comprehensive solutions to mutual verticals market segments, we may fail to analyze the acquired business and its potential long-term effect on the business.
Our success depends on our ability to analyze, integrate, and acquire at favorable terms.
We may not be able to introduce products acceptable to customers and we may not be able to improve the technology used in our current systems in
response to changing technology and end-user needs.
The markets in which we operate are subject to rapid and substantial innovation and technological change, mainly driven by technological advances and
end-user requirements and preferences, as well as the emergence of new standards and practices. Our ability to compete in the additive manufacturing,
industrial digital printing and electronics manufacturing markets will depend, in large part, on our future success in enhancing our existing products and
developing new additive manufacturing solutions and consumables that will address the increasingly sophisticated and varied needs of prospective end-users,
and respond to technological advances and industry standards and practices on a cost-effective and timely basis or otherwise gain market acceptance.
It is possible that new systems and technologies that we develop may supplant our existing systems or that our competitors may create highly competitive
systems to ours. As a result, our existing products may be less economically beneficial.
We depend on the commercial success of selling our advanced manufacturing products and services and we may not be able to successfully scale up
their commercialization.
We have invested significant efforts and financial resources in the research and development of our products. Our performance will depend highly on our
ability to commercialize our products successfully and the degree of market acceptance of our products and solutions. We cannot assure you that our
commercialization efforts will lead to a meaningful, continued increase in sales of our products.
We may not be able to successfully manage our planned growth and expansion.
We expect to continue to make investments across our portfolio of products and services along with our go-to-market platform that engages and delivers
these to customers. Our annual operating expenses may increase as we invest in sales and marketing, research and development, manufacturing and production
infrastructure, and develop customer service and support resources for future customers. Our failure to expand operational and financial systems timely or
efficiently could result in operating inefficiencies, which could increase our costs and expenses more than we had planned and prevent us from successfully
executing our business plan. We may not be able to offset the costs of operation expansion by leveraging the economies of scale from our growth in
negotiations with our suppliers and contract manufacturers. Additionally, if we increase our operating expenses in anticipation of the growth of our business and
this growth does not meet our expectations, our financial results will be negatively impacted.
As our business grows, we will have to manage additional product design projects, materials procurement processes, and sales efforts and marketing for an
increasing number of products, as well as expand the number and scope of our relationships with suppliers, distributors and end customers. If we fail to manage
these additional responsibilities and relationships successfully, we may incur significant costs, which may negatively impact our operating results. Additionally,
in our efforts to be first to market with new products with innovative functionality and features, we may devote significant research and development resources
to products and product features for which a market does not develop quickly, or at all. If we are not able to predict market trends accurately, we may not
benefit from such research and development activities, and our results of operations may suffer.
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As our future development and commercialization plans and strategies develop further, we may need additional managerial, operational, sales, marketing,
financial and legal personnel. Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a
substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in
weaknesses in our infrastructure, operational mistakes, loss of business opportunities, failure to deliver and timely deliver our products to customers, loss of
employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial
resources from other projects, such as the development of additional new products. If our management is unable to effectively manage our growth, our expenses
may increase more than expected, our ability to generate and/or grow revenue could be reduced, and we may not be able to implement our business strategy.
Our operating results and financial condition may fluctuate.
Even if we are successful in introducing our products to the market, the operating results and financial condition of our company may fluctuate from
quarter to quarter and year to year and are likely to continue to vary due to a number of factors, many of which will not be within our control. If our operating
results do not meet the information that we provide to the marketplace or the expectations of securities analysts or investors, the market price of our ADSs will
likely decline. Fluctuations in our operating results and financial condition may be due to a number of factors, including those listed below and those identified
throughout this “Risk Factors” section:
● the degree of market acceptance of our products and services;
● the mix of products and services that we sell during any period;
● long sales cycles;
● changes in the amount we spend to develop, acquire or license new products, consumables, technologies or businesses;
● changes in the amounts that we spend to promote our products and services;
● changes in the cost of satisfying our warranty obligations and servicing our installed base of systems;
● delays between our expenditures to develop and market new or enhanced systems and consumables and the generation of sales from those products;
● development of new competitive products and services by others;
● difficulty in predicting sales patterns and reorder rates that may result from a multi-tier distribution strategy associated with new product categories;
● litigation or threats of litigation, including intellectual property claims by third parties and shareholder claims;
● changes in accounting rules and tax laws;
● the geographic distribution of our sales;
● our responses to price competition;
● general economic and industry conditions that affect end-user demand and end-user levels of product design and manufacturing;
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● changes in that affect returns on our cash balances and short-term investments;
● changes in U.S. dollar-NIS exchange rates that affect the value of our net assets, future revenues and expenditures from and/or relating to our activities
carried out in those currencies; and
● the level of research and development activities by us.
Due to all of the foregoing factors, and the other risks discussed in this annual report on Form 20-F, you should not rely on quarter-to-quarter comparisons
of our operating results as an indicator of our future performance.
The markets in which we participate are competitive. Our failure to compete successfully could cause any future revenues and the demand for our
products not to materialize or to decline over time.
Given that we have a diverse portfolio of products, we compete for customers with a variety of manufacturers that fabricate specialty industrial applications
as well as original equipment manufacturers. In general, these applications can be segregated into two categories. The first is high-performance electronic
devices (Hi-PEDs®); mainly printed circuit boards, or PCBs, and electronic components. The second is advanced mechanical components; mainly high
precision and sophisticated polymer, ceramic, metal, and composite applications. Our competitors usually have extensive track records and relationships within
their respective domains. With regard to our electronics businesses, our competitors are electronics design and manufacturing firms. For our mechanical
components businesses, our competitors are parts manufacturers. In both domains, there are incumbents operating traditional technologies, as well as new
entrants bringing disruptive technologies to the market.
Many of our current and potential competitors have longer operating histories and more extensive name recognition than we have and may also have
greater financial, marketing, manufacturing, distribution and other resources than we have. Current and future competitors may be able to respond more quickly
to new or emerging technologies and changes in end-user demands and to devote greater resources to the development, promotion and sale of their products
than we can. Our current and potential competitors may develop and market new technologies that render our existing or future products obsolete, unmarketable
or less competitive (whether from a price perspective or otherwise). We cannot assure you that we will be able to maintain a competitive position or to compete
successfully against current and future sources of competition.
Defects in products could give rise to product returns or product liability, warranty or other claims that could result in material expenses, diversion of
management time and attention, and damage to our reputation.
Even if we are successful in introducing our products to the market, our products may contain undetected defects or errors that, despite testing, are not
discovered until after a product has been used. This could result in delayed market acceptance of those products, claims from distributors, end-users or others,
increased end-user service and support costs and warranty claims, damage to our reputation and business, or significant costs to correct the defect or error. We
may from time to time become subject to warranty or product liability claims that could lead to significant expenses as we need to compensate affected end-
users for costs incurred related to product quality issues.
This risk of product liability claims may also be greater due to the use of certain hazardous chemicals used in the manufacture of certain of our products. In
addition, we may be subject to claims that our additive manufacturing systems have been, or may be, used to create parts that are not in compliance with legal
requirements.
Any claim brought against us, regardless of its merit, could result in material expense, diversion of management time and attention, and damage to our
reputation, and could cause us to fail to retain or attract customers. Currently, we maintain product liability insurance. Our product liability insurance is subject
to deductibles and there is no guarantee that such insurance will be available or adequate to protect against all such claims. Costs or payments made in
connection with warranty and product liability claims and product recalls or other claims could materially affect our financial condition and results of
operations.
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If we are unable to continue to improve our AI models or if our AI models contain errors or are otherwise ineffective, our business, financial condition,
and results of operations may be adversely affected.
As we have made efforts to take our in-house AI from DeepCube and commercialize it into a product available for external customers, our ability to attract
new customers, retain existing customers, or increase sales of our products to existing customers will to a growing extent depend on our ability to maintain a
high degree of accuracy and automation in our advanced computer vision and on our other algorithms and technologies. As with many developing technologies,
AI presents risks and challenges that could affect our products’ further development, adoption, use, and therefore, our business. AI algorithms may be flawed,
and data sets may be insufficient, or of poor quality, or contain biased information. Inappropriate or controversial data practices by data scientists, engineers,
and end-users of our systems could impair the acceptance of AI solutions. If the analyses that AI applications assist in producing are deficient or inaccurate, we
could be subjected to competitive harm, potential legal liability, and brand or reputational harm. For example, if our AI models fail to accurately analyze and
detect upcoming machine failure, or any of the other components of our advanced computer vision fail, we may experience higher than forecasted returns, and
our ability to attract new customers, retain existing customers, or increase sales of our products to existing customers and our business, financial condition, and
results of operations may be adversely affected.
It is possible that our AI models may prove to be less accurate than we expect, or than they have been in the past, for a variety of reasons, including
inaccurate assumptions or other errors made in building or training such models, incorrect interpretations of the results of such models, and failure to timely
update model assumptions and parameters. Further, the successful performance of our AI models relies on the ability to constantly review and process large
amounts of data. If we are unable to attract new customers, retain existing customers, or increase sales of our products to existing customers, the amount of data
reviewed and processed by our AI models will be reduced or fail to grow at a pace that will allow us to continue to maintain or improve the accuracy and
efficiency of our AI models. Additionally, such models may not be able to effectively account for matters that are inherently difficult to predict or are otherwise
beyond our control, such as personal preferences that may not align with AI data. Material errors or inaccuracies in such AI models could lead our customers,
both internal and external to make inaccurate or sub-optimal operational or strategic decisions, which could adversely affect our business, financial condition,
and results of operations.
As the regulatory framework for AI technology evolves, our business, financial condition, and results of operations may be adversely affected.
Our business is increasing its reliance on AI products. However, in recent years, use of these methods has come under increased regulatory scrutiny, and the
regulatory framework for AI technology is evolving and remains uncertain. It is possible that new laws and regulations will be adopted in the United States and
in non-U.S. jurisdictions, or that existing laws and regulations may be interpreted in new ways, that would affect the operation of our Industrial AI solutions
business and the way in which we can sell AI based technologies. Specifically, such laws and regulations may limit our ability to use our AI models or require
us to make changes to our operations that may decrease our operational efficiency, result in an increase to operating costs, or hinder our ability to improve our
services. Further, the cost of complying with such laws, rules, or regulations could be significant and would increase our operating expenses, which could
adversely affect our business, financial condition, and results of operations.
Any failure or perceived failure by us to comply with AI technology-related laws, rules, and regulations could result in proceedings or actions against us by
individuals, consumer rights groups, government agencies, or others. We could incur significant costs in investigating and defending such claims and, if found
liable, pay significant damages or fines or be required to make changes to our business. Further, these proceedings and any subsequent adverse outcomes may
subject us to significant negative publicity, and an erosion of trust. If any of these events were to occur, our business, results of operations, and financial
condition could be adversely affected.
If our relationships with suppliers for our products and services, especially with single source suppliers of components of our products, were to
terminate or our manufacturing arrangements were to be disrupted, our business could be interrupted.
We purchase component parts and raw materials that are used in our products and services from third-party suppliers, some of whom may compete with us.
While there are several potential suppliers of most of these component parts and raw materials that we use, we currently choose to use only one or a limited
number of suppliers for several of these components and materials. Our reliance on a single or limited number of vendors involves a number of risks, including:
● potential shortages of some key components;
● product performance shortfalls, if traceable to particular product components, since the supplier of the faulty component cannot readily be replaced;
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● discontinuation of a product on which we rely;
● potential insolvency of these vendors; and
● reduced control over delivery schedules, manufacturing capabilities, quality and costs.
In addition, we require any new supplier to become “qualified” pursuant to our internal procedures. The qualification process involves evaluations of
varying durations, which may cause production delays if we were required to qualify a new supplier unexpectedly. We generally assemble our systems and parts
based on our internal forecasts and the availability of raw materials, assemblies, components and finished goods that are supplied to us by third parties, which
are subject to various lead times. If certain suppliers were to decide to discontinue production of an assembly, component or raw material that we use, the
unanticipated change in the availability of supplies, or unanticipated supply limitations, could cause delays in, or loss of, sales, increased production or related
costs and consequently reduced margins, and damage to our reputation. If we were unable to find a suitable supplier for a particular component, material or
compound, we could be required to modify our existing products or the end-parts that we offer to accommodate substitute components, material or compounds.
Discontinuation of operations at our manufacturing sites could prevent us from timely filling customer orders and could lead to unforeseen costs for
us.
We currently assemble and test the systems that we sell, and produce consumables for our systems in two major facilities in Israel. Because of our reliance
on all of these production facilities, a disruption at any of those facilities could materially damage our ability to supply systems or consumable materials to the
marketplace in a timely manner. Depending on the cause of the disruption, we could also incur significant costs to remedy the disruption and resume product
shipments. Such disruptions may be caused by, among other factors, war, earthquakes, fire, flood and other natural disasters. Accordingly, any such disruption
could result in a material adverse effect on our revenue, results of operations and earnings, and could also potentially damage our reputation.
Our international operations expose us to additional market and operational risks, and failure to manage these risks may adversely affect our business and
operating results.
We derive a substantial percentage of our sales from international markets. Accordingly, we face significant operational risks from doing business
internationally, including:
● fluctuations in foreign currency exchange rates;
● potentially longer sales and payment cycles;
● potentially greater difficulties in collecting accounts receivable;
● potentially adverse tax consequences;
● reduced protection of intellectual property rights in certain countries, particularly in Asia and Latin America;
● difficulties in staffing and managing foreign operations;
● laws and business practices favoring local competition;
● costs and difficulties of customizing products for foreign countries;
● compliance with a wide variety of complex foreign laws, treaties and regulations;
● an outbreak of a contagious disease, such as COVID-19, which may cause us, third party vendors and manufacturers and/or customers to temporarily
suspend our or their respective operations in the affected city or country;
● tariffs, trade barriers and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets;
● being subject to the laws, regulations and the court systems of many jurisdictions; and
● general market, political and economic conditions in the countries in which we operate including those related to recent unrest and actual or potential
armed conflict in Israel and other parts of the world, such as the Russia-Ukraine war.
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Our failure to manage the market and operational risks associated with our international operations effectively could limit the future growth of our business
and adversely affect our operating results.
Under applicable employment laws, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors
from benefiting from the expertise of some of our former employees.
We generally enter into non-competition agreements with our employees. These agreements prohibit our employees from competing directly with us or
working for our competitors or clients for a limited period after they cease working for us. We may be unable to enforce these agreements under the laws of the
jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefiting from the expertise that our former employees
or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce non-compete undertakings of a former
employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer that
have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of its intellectual property. If we
cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise of our former
employees or consultants and our ability to remain competitive may be diminished.
We are subject to environmental laws due to the import and export of our products, which could subject us to compliance costs and/or potential
liability in the event of non-compliance.
The export of our products internationally from our production facilities subjects us to environmental laws and regulations concerning the import and
export of chemicals and hazardous substances such as the U.S. Toxic Substances Control Act and the Registration, Evaluation, Authorization and Restriction of
Chemical Substances. These laws and regulations require the testing and registration of some chemicals that we ship along with, or that form a part of, our
systems and other products. If we fail to comply with these or similar laws and regulations, we may be required to make significant expenditures to reformulate
the chemicals that we use in our products and materials or incur costs to register such chemicals to gain and/or regain compliance. Additionally, we could be
subject to significant fines or other civil and criminal penalties should we not achieve such compliance.
Our future success depends in part on our ability to retain our executive officers and to attract, retain and motivate other qualified personnel.
We are highly dependent on Yoav Stern, our Chief Executive Officer and a member of the board of directors, Zivi Nedivi, our President, Tomer Pinchas,
our Chief Operating Officer and Chief Financial Officer, and Nick Geddes, our Chief Technology Officer. The loss of their services without a proper
replacement may adversely impact the achievement of our objectives. Messrs. Stern, Nedivi, Pinchas, and Geddes may leave our employment at any time
subject to contractual notice periods, as applicable. Recruiting and retaining other qualified employees, consultants, and advisors for our business, including
scientific and technical personnel, will also be critical to our success. There is currently a shortage of skilled personnel in our industry, which is likely to
continue. As a result, competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract and retain personnel on
acceptable terms given the competition in the industry in which we operate. The inability to recruit and retain qualified personnel, or the loss of the services of
our executive officers, without proper replacement, may impede the progress of our development and commercialization objectives. There is no assurance that
any equity or other incentives that we grant to our employees will be adequate to attract, retain and motivate employees in the future. Moreover, certain of our
competitors or other technology businesses may seek to hire our employees.
We may not be able to integrate our acquisitions efficiently.
We have acquired six businesses in the past three years. Further, we may engage in additional acquisitions such as of Stratasys or other businesses. The
management team and employees of Nano Dimension have dedicated and will continue to dedicate effort and resources to our successful commercial and
technological integration of the acquired companies. An ineffective integration may affect our revenue forecasts and profitability.
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Risks Related to Our Intellectual Property
Lack of patent protection may hinder our market competitiveness and failure to safeguard trade secrets could enable competition to use our
proprietary information.
Since October 2014, we have sought to protect certain of our products, systems, designs and applications with various intellectual property protection tools
such as patents, trade secrets, trademarks and copyright protection. Our continued success depends in large part on our ability to obtain, maintain, monitor and
enforce patent and other intellectual property protection in the United States and in other countries with respect to our proprietary technology and new products.
We have sought to protect our proprietary position and sustain our competitive advantage by filing patent applications in the United States and in other
countries, including where our production and sales take place, and in those countries where our suppliers and main competitors are. Patent prosecution in the
United States and the rest of the world is uncertain, expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable
patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development
output before it is too late to obtain patent protection.
We have a substantial and growing intellectual property portfolio, including over 100 patents issued worldwide and nearly 200 pending applications. Filed
through the U.S. Patent and Trademark Office, or USPTO, World Intellectual Property Organization, or WIPO, and other global patent offices, these patents
cover various regions including China, Japan, Taiwan, Europe, and South Korea. While some patents have already been issued, uncertainties remain regarding
pending applications’ issuance, protection scope, and potential challenges from third parties, impacting commercialization prospects. Any successful opposition
to these patents or any other patents owned by or licensed to us after patent issuance could deprive us of rights necessary for the successful commercialization
of any new products that we may develop.
Furthermore, there is no guarantee of discovering all relevant prior art, which could invalidate patents. Even if patents are issued, challenges from third
parties may lead to narrowing, unenforceability, or invalidation. Patents might not sufficiently protect intellectual property, affecting competition and business
adversely. Our ability to compete effectively depends on maintaining effective patent rights for our products, failure of which could result in our inability to
compete effectively, thereby potentially harming our business and results of operations.
Inability to maintain effective proprietary rights for our products, may affect our ability to compete effectively.
Apart from patents, we also rely on trade secrets and confidentiality agreements to protect certain non-patentable proprietary know-how, processes, and
devices. However, trade secret protection can be challenging. We employ confidentiality agreements and other security measures to safeguard our technology
and data. Nevertheless, breaches or independent discoveries by competitors may potentially impact our intellectual property rights and consequently our
business integrity. We cannot guarantee protection against disclosure or competitors’ access to our trade secrets. Unauthorized disclosure or misappropriation
could harm our competitiveness and business, while inadequate protection measures may limit recourse against third-party misappropriation, affecting our trade
secrets’ security. Agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets and
intellectual property may otherwise become known or be independently discovered by competitors.
We cannot provide any assurances that our trade secrets and other confidential proprietary information will not be disclosed in violation of our
confidentiality agreements. Third-party intellectual property rights may hinder our product commercialization, necessitating litigation or licensing, potentially
costly or unattainable on reasonable terms. Likewise, identifying all relevant third-party patents or applications is challenging, compounded by U.S.
confidentiality rules and publication delays worldwide. Others may have filed patents covering our technology without our knowledge, while amendments to
published applications could adversely affect us. Third parties may assert infringement claims, leading to costly litigation, delays, or product redesigns. Claims’
settlement may be uncertain, while failure could result in prolonged, expensive legal battles preventing commercialization of our products.
Moreover, freedom to operate may be challenging to ensure without infringing on third-party rights, potentially affecting our competitive position. Should
third-party patents cover our products, litigation or licensing may be necessary for further development. Uncertainty exists regarding potential infringement
claims, which could lead to significant damages, product abandonment, or costly licensing agreements. Availability of licenses on reasonable terms is also
uncertain.
Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.
It is inherently difficult to conclusively assess our freedom to operate without infringing on third party rights. Our competitive position may be adversely
affected if existing patents or patents resulting from patent applications issued to third parties or other third-party intellectual property rights are held to cover
our products or elements thereof, or our manufacturing or uses relevant to our development plans. In such cases, we may not be in a position to develop or
commercialize products or our product candidates unless we successfully pursue litigation to nullify or invalidate the third-party intellectual property right
concerned, or enter into a license agreement with the intellectual property right holder, if available on commercially reasonable terms. There may also be
pending patent applications that if they result in issued patents, could be alleged to be infringed by our new products. If such an infringement claim should be
brought and be successful, we may be required to pay substantial damages, be forced to abandon our new products or seek a license from any patent holders. No
assurances can be given that a license will be available on commercially reasonable terms, if at all.
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Any third-party patents held by a competent court to cover aspects of our formulations, processes or designs, or methods of use, may enable the holders of
any such patents to block our ability to develop and commercialize product candidates unless we obtain a license or until such patent expires or is finally
determined to be invalid or unenforceable. Regardless, such a license may not be available at all. In addition, third parties’ claims against us may secure
injunctions, halting product development. Defending these claims, regardless of merit, is costly and diverts resources. Successful infringement claims could
lead to substantial damages, royalties, product redesign, or challenging licensing agreements.
Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and
commercialize one or more of our products. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a
substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial
damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses
from third parties, which may be impossible or require substantial time and monetary expenditure.
Patent policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement
or defense of any issued patents.
Changes in patent laws or their interpretations, in the U.S. and globally, might affect the scope of our patents. Foreign laws may offer less protection.
Scientific discoveries are often published after patent filings, making it uncertain if we were first to claim these. Changes in patent application procedures could
have a material adverse effect on our business and financial condition and could further heighten uncertainties and costs, impacting our business and finances.
We may be involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming, and unsuccessful.
Competitors might infringe our intellectual property. If we pursue legal action, they could counterclaim patent invalidity or unenforceability, common in
U.S. patent litigation. Challenges could include lack of novelty or lack of inventive step. Post-grant proceedings add further uncertainty to patent validity,
making legal outcomes unpredictable. Likewise, derivation proceedings, initiated by third parties or us, may resolve invention priority or patent scope disputes
not in our favor, which may halt technology use, require costly licensing and harm business, diverting resources and funds from research and development
partnerships. Furthermore, intellectual property litigation entails extensive discovery, risking disclosure of confidential information. Our defense of litigation or
interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. Public
announcements of proceedings’ results could negatively affect our share price if perceived unfavorably by securities analysts and/or investors, and could have a
material adverse effect on the price of our Ordinary Shares.
We are exposed to intellectual property risks from current and former employees and/or collaborators.
We have experienced past litigation disputes over intellectual property ownership, including a 2015 claim in Tel Aviv alleging misappropriation by our
officers and employees from a previous employer. While settled without major business impact, we employ individuals that came from competitors,
necessitating safeguards against inadvertent use of others’ proprietary information. Litigation defense against such claims, successful or not, entails substantial
costs and management distractions. Additionally, we may face claims from former employees or collaborators asserting rights to compensation or ownership in
our patents or intellectual property. Disputes may arise over conflicting obligations, requiring litigation; the failure to defend that could result in loss of
intellectual property rights. Successful defense, while costly, could still distract management and employees.
We may not be able to protect our intellectual property rights throughout the world.
Securing and protecting patents globally for our products and processes is financially daunting. Intellectual property rights in some countries are less
stringent than in the U.S., allowing competitors to exploit our technologies. Competing products developed or exported in jurisdictions with weaker
enforcement may undermine our market position despite future patent efforts. Protecting intellectual property rights abroad can be challenging, especially in
jurisdictions where legal systems are less favorable to enforcement. This difficulty may allow competitors to market products infringing on our rights.
Enforcing patents overseas can incur significant costs and divert resources. Moreover, such proceedings could risk invalidating or narrowing future patents,
potentially inviting counterclaims. Overall, our efforts to safeguard intellectual property globally may not yield substantial commercial advantage.
Risks Related to the Ownership of the ADSs or our Ordinary Shares
We do not anticipate paying any dividends, except as related to the repurchase of our Ordinary Shares as provided under the Companies Law.
In accordance with the provisions of the Israeli Companies Law 5759-1999, or the Companies Law, and the regulations promulgated thereunder, repurchase
of shares is considered a dividend distribution. Except as detailed in Item 16E below, in relation to the repurchase of our Ordinary Shares, no dividends have
been paid on our Ordinary Shares. We do not intend to pay cash dividends on our Ordinary Shares in the foreseeable future, and anticipate that profits, if any,
received from operations will be reinvested in our business. Any decision to pay dividends will depend upon our profitability at the time, cash available and
other relevant factors including, without limitation, the conditions set forth in the Companies Law.
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As a “foreign private issuer” we follow certain home country corporate governance practices instead of otherwise applicable SEC and Nasdaq
requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.
Our status as a foreign private issuer also exempts us from compliance with certain SEC laws and regulations and certain regulations of the Nasdaq Stock
Market, including the proxy rules, the short-swing profits recapture rules, and certain governance requirements such as independent director oversight of the
nomination of directors and executive compensation. In addition, we will not be required under the Securities Exchange Act of 1934, as amended, or the
Exchange Act, to file current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are
registered under the Exchange Act and we will generally be exempt from filing quarterly reports with the SEC. Also, although the Companies Law, requires us
to disclose the annual compensation of our five most highly compensated senior office holders on an individual basis, this disclosure is not as extensive as that
required of a U.S. domestic issuer. For example, the disclosure required under Israeli law would be limited to compensation paid in the immediately preceding
year without any requirement to disclose option exercises and vested stock options, pension benefits or potential payments upon termination or a change of
control. Furthermore, as a foreign private issuer, we are also not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the
Exchange Act.
These exemptions and leniencies will reduce the frequency and scope of information and protections to which you are entitled as an investor.
We may be a “passive foreign investment company”, or PFIC, for U.S. federal income tax purposes in 2023 or in any subsequent taxable year. There
generally would be adverse tax consequences for U.S. taxpayers that are holders of our ADSs or Ordinary Shares if we are or were to become a PFIC.
Based on the projected composition of our income and valuation of our assets, we believe that we may be a PFIC for 2023, although we do not intend to
conduct an analysis to obtain assurance of this. The determination of whether we are a PFIC is made on an annual basis and will depend on the composition of
our income and assets from time to time. We will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (1) at least 75%
of our gross income is “passive income” or (2) on average at least 50% of our assets by value produce passive income or are held for the production of passive
income. Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities and
securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes amounts derived by reason of
the temporary investment of funds, including those raised in a public offering. In determining whether a non-U.S. corporation is a PFIC, a proportionate share
of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account. The tests for
determining PFIC status are applied annually, and it is difficult to make accurate projections of future income and assets which are relevant to this
determination. In addition, our PFIC status may depend in part on the market value of our ADSs or Ordinary Shares. Accordingly, because we do not intend to
conduct an analysis to confirm our PFIC status, there can be no assurance that we currently are not or will not become a PFIC in the future. If we are a PFIC in
any taxable year during which a U.S. taxpayer holds our ADSs or Ordinary Shares, such U.S. taxpayer would be subject to certain adverse U.S. federal income
tax rules. In particular, if the U.S. taxpayer did not make an election to treat us as a “qualified electing fund,” or QEF, or make a “mark-to-market” election, then
“excess distributions” to the U.S. taxpayer, and any gain realized on the sale or other disposition of our ADSs or Ordinary Shares by the U.S. taxpayer: (1)
would be allocated ratably over the U.S. taxpayer’s holding period for the ADSs or Ordinary Shares; (2) the amount allocated to the current taxable year and
any period prior to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (3) the amount allocated to each of
the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the
deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. In addition, if the U.S. Internal Revenue
Service, or the IRS, determines that we are a PFIC with respect to a certain year, it may be too late for a U.S. taxpayer to make a timely QEF or mark-to-market
election. U.S. taxpayers that have held our ADSs or Ordinary Shares during a period when we were a PFIC will be subject to the foregoing rules, even if we
cease to be a PFIC in subsequent years, subject to exceptions for U.S. taxpayer who made a timely QEF or mark-to-market election. A U.S. taxpayer can make a
QEF election by completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions thereto. We do not intend to notify U.S.
taxpayers that hold our ADSs or Ordinary Shares if we believe we will be treated as a PFIC for any taxable year in order to enable U.S. taxpayers to consider
whether to make a QEF election. In addition, we do not intend to furnish such U.S. taxpayers annually with information needed in order to complete IRS Form
8621 and to make and maintain a valid QEF election for any year in which we or any of our subsidiaries are a PFIC. U.S. taxpayers that hold our ADSs or
Ordinary Shares are strongly urged to consult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and
consequences to them of making a QEF or mark-to-market election with respect to our ADSs or Ordinary Shares in the event that we are a PFIC. See “Item
10.E. Taxation — U.S. Federal Income Tax Considerations — Passive Foreign Investment Companies” for additional information.
14
ADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable results
to the plaintiff(s) in any such action.
The deposit agreement governing the ADSs representing our Ordinary Shares provides that holders and beneficial owners of ADSs irrevocably waive the
right to a trial by jury in any legal proceeding arising out of or relating to the deposit agreement or the ADSs, including claims under federal securities laws,
against us or the depositary to the fullest extent permitted by applicable law. If this jury trial waiver provision is prohibited by applicable law, an action could
nevertheless proceed under the terms of the deposit agreement with a jury trial. To our knowledge, the enforceability of a jury trial waiver under the federal
securities laws has not been finally adjudicated by a federal court. However, we believe that a jury trial waiver provision is generally enforceable under the laws
of the State of New York, which govern the deposit agreement, by a court of the State of New York or a federal court, which have non-exclusive jurisdiction
over matters arising under the deposit agreement, applying such law. In determining whether to enforce a jury trial waiver provision, New York courts and
federal courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party has
knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit agreement and the ADSs. In addition, New York courts
will not enforce a jury trial waiver provision in order to bar a viable setoff or counterclaim sounding in fraud or one which is based upon a creditor’s negligence
in failing to liquidate collateral upon a guarantor’s demand, or in the case of an intentional tort claim (as opposed to a contract dispute), none of which we
believe are applicable in the case of the deposit agreement or the ADSs. No condition, stipulation or provision of the deposit agreement or ADSs serves as a
waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any provision of the federal securities laws. If you or any other
holder or beneficial owner of ADSs brings a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, you
or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging
lawsuits against us and / or the depositary. If a lawsuit is brought against us and / or the depositary under the deposit agreement, it may be heard only by a judge
or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different results than a trial by jury
would have had, including results that could be less favorable to the plaintiff(s) in any such action, depending on, among other things, the nature of the claims,
the judge or justice hearing such claims, and the venue of the hearing.
ADS holders may not have the same voting rights as the holders of our Ordinary Shares and may not receive voting materials in time to be able to
exercise the right to vote.
Holders of the ADSs are not able to exercise voting rights attaching to the Ordinary Shares underlying the ADSs on an individual basis. Instead, holders of
the ADSs will only be able to exercise the voting rights attaching to the Ordinary Shares represented by ADSs indirectly by giving voting instructions to the
depositary in accordance with and subject to the provisions of the deposit agreement. Holders of ADSs may not receive voting materials in time to instruct the
depositary to vote, and it is possible that they, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to
exercise a right to vote. Furthermore, the depositary will not be liable for any failure to carry out any instructions to vote, for the manner in which any vote is
cast or for the effect of any such vote. As a result, you may not be able to exercise voting rights and may lack recourse if your ADSs are not voted as requested.
Holders of ADSs are not treated as shareholders of our Company.
Holders of ADSs are not treated as shareholders of our Company unless they withdraw the Ordinary Shares underlying the ADSs from Bank of New York
Mellon, as depositary, which holds the Ordinary Shares underlying the ADSs. Holders of ADSs therefore do not have any rights as shareholders of our
Company, other than the rights that they have pursuant to the deposit agreement with the depositary. For example, in your capacity as ADS holder, you will not
be able to bring a derivative action, examine certain records of the Company or exercise appraisal rights.
ADS holders may be subject to limitations on transfer of their ADSs.
ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems
expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally
when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law
or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the
deposit agreement.
ADS holders may not receive the same distributions or dividends as those we make to the holders of our Ordinary Shares, and, in some limited
circumstances, they may not receive dividends or other distributions on our Ordinary Shares and they may not receive any value for them, if it is
illegal or impractical to make them available to ADS holders.
The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on our Ordinary Shares or other
deposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Ordinary
Shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any
holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the
Securities Act of 1933, as amended, or the Securities Act, but that are not properly registered or distributed under an applicable exemption from registration. In
addition, conversion into U.S. dollars from foreign currency that was part of a dividend or distribution made in respect of deposited Ordinary Shares may
require the approval or license of, or a filing with, a government or an agency thereof, which may be unobtainable. In these cases, the depositary may determine
not to distribute such property and hold it as “deposited securities” or may seek to effect a substitute dividend or distribution, including net cash proceeds from
the sale of the dividends or distributions in accordance with the terms of the deposit agreement. We have no obligation to register under U.S. securities laws any
ADSs, Ordinary Shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the
distribution of ADSs, Ordinary Shares, rights or anything else to holders of ADSs. In addition, the depositary may withhold from such dividends or distributions
its fees and an amount on account of taxes or other governmental charges. This means that you may not receive the same distributions or dividends as those we
make to the holders of our Ordinary Shares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal
or impractical for us to make them available to you. These restrictions may cause a material decline in the value of the ADSs.
15
Risks Related to Israeli Law and Our Operations in Israel
As our headquarters and some of our operations are located in Israel, we may be adversely affected by the implications of political, economic and
military instability in Israel.
Our executive offices are located in Israel. In addition, most of our officers and directors are residents of Israel. Accordingly, political, economic and
military conditions in Israel and the surrounding region may directly affect our business. Any armed conflicts, political instability, terrorism, cyberattacks or any
other hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could affect adversely our operations.
Ongoing and revived hostilities in the Middle East or other Israeli political or economic factors, could harm our operations and product development and cause
any future sales to decrease.
On October 7, 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military
targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other
areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers. Following the attack, Israel’s
security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and
terror attacks.
The intensity and duration of Israel’s current war is difficult to predict, as are such war’s implications on our business and operations. On October 7, 2023,
the Company’s warehouse located in the south of Israel suffered physical damage due to a direct missile hit. While said damage did not affect our supply chains,
the ongoing war may create supply and demand irregularities in Israel’s economy in general or lead to macroeconomic indications of a deterioration of Israel’s
economic standing, which may have a material adverse effect on us and our ability to effectively conduct our operations.
In connection with the Israeli security cabinet’s declaration of war against Hamas and possible or currently occurring hostilities with other state or non-state
actors, several hundred thousand of Israeli military reservists were drafted to perform military service. 29 of our 450 employees, none of whom are members of
our management, have been called to active military duty since October 7, 2023. Some of these employees have since returned, but there can be no assurance
that they will not be called to military service in the future. Five employees are still in active military duty as of March 15, 2024. In addition, we rely on service
providers located in Israel and their employees may be called for service in the current or future wars or other armed conflicts with Hamas and such persons
may be absent from their positions for a period of time. As of March 15, 2024, any impact as a result of the number of absences of our personnel and personnel
at our service providers or counterparties located in Israel has been manageable. However, military service call ups that result in absences of personnel from our
service providers or contractual counterparties in Israel may disrupt our operations and absences for an extended period of time may materially and adversely
affect our business, prospects, financial condition and results of operations.
Following the attack by Hamas on Israel’s southern border, Hezbollah in Lebanon has also launched missile, rocket, and shooting attacks against Israeli
military sites, troops, and Israeli towns in northern Israel. In response to these attacks, the Israeli army has carried out a number of targeted strikes on sites
belonging to Hezbollah in southern Lebanon. It is possible that other terrorist organizations, including Palestinian military organizations in the West Bank or the
Houthis in Yemen, as well as other hostile countries, such as Iran, will join the hostilities. Such hostilities may include terror and missile attacks. Any hostilities
involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations.
Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government
currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, and although we received compensation from the
Israeli government for damages our warehouse suffered due to a direct missile hit related to the current war, we cannot assure that this government coverage
will be maintained or that it will sufficiently cover our potential damages. Any losses or damage incurred by us could have a material adverse effect on our
business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations.
Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the
State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or the
expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could also adversely impact our
business.
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Prior to the Hamas attack in October 2023, the Israeli government pursued extensive changes to Israel’s judicial system. In response to the foregoing
developments, individuals, organizations and institutions, both within and outside of Israel, have voiced concerns that the proposed changes may negatively
impact the business environment in Israel including due to reluctance of foreign investors to invest or conduct business in Israel, as well as to increased
currency fluctuations, downgrades in credit rating, increased interest rates, increased volatility in securities markets, and other changes in macroeconomic
conditions. The risk of such negative developments has increased, and in some cases has been realized, in light of the recent Hamas attacks and the war against
Hamas declared by Israel, regardless of the proposed changes to the judicial system and the related debate. To the extent that any of these negative
developments do occur, they may have an adverse effect on our business, our results of operations and our ability to raise additional funds, if deemed necessary
by our management and board of directors.
Provisions of Israeli law, our amended and restated articles of association and our rights agreement may delay, prevent or otherwise impede a merger
with, or an acquisition of, our company, which could prevent a change of control, even when the terms of such a transaction are favorable to us and
our shareholders.
Provisions of Israeli law, our amended and restated articles of association and our rights agreement could have the effect of delaying or preventing a change
in control and may make it more difficult for a third party to acquire us or our shareholders to elect different individuals to our board of directors, even if doing
so would be considered to be beneficial by some of our shareholders, and may limit the price that investors may be willing to pay in the future for our Ordinary
Shares or ADSs. Among other things:
● Israeli corporate law regulates mergers and requires that a tender offer be effected when more than a specified percentage of shares in a company are
purchased;
● Israeli corporate law does not provide for shareholder action by written consent, thereby requiring all shareholder actions to be taken at a general
meeting of shareholders;
● our amended and restated articles of association divide our directors into three classes, each of which is elected once every three years;
● our amended and restated articles of association require a vote of the holders of a majority of our outstanding Ordinary Shares entitled to vote present
and voting on the matter at a general meeting of shareholders (referred to as simple majority), and the amendment of a limited number of provisions,
such as the provision dividing our directors into three classes, requires a vote of the holders of 70% of our outstanding Ordinary Shares entitled to vote
at a general meeting; and
● our amended and restated articles of association provide that director vacancies may be filled by our board of directors.
In January 2024, we entered into a rights agreement, or the Rights Plan, with the intention to protect the long-term interests of our ADS holders and enable
them to realize the full potential value of their investment in the Company. The Rights Plan is designed to reduce the likelihood that any entity, person or group
would gain control of, or significant influence over our Company. Pursuant to the Rights Plan, we issued one special purchase right for every one ADS
outstanding at the close of business on February 5, 2024. Each right allows its holder to purchase from us one-half (0.5) of one ADS, at a purchase price of
$0.01 per ADS, once the rights become exercisable. The rights would become exercisable only if an entity, person or group acquires beneficial ownership of
10% or more of our outstanding Ordinary Shares in a transaction not approved by our board of directors. The rights will expire on January 25, 2025. For more
information about the Rights Plan, see exhibit 2.2 filed with this annual report on Form 20-F.
Further, Israeli tax considerations may make potential transactions undesirable to us or to some of our shareholders whose country of residence does not
have a tax treaty with Israel granting tax relief to such shareholders from Israeli tax. With respect to mergers, Israeli tax law allows for tax deferral in certain
circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including a holding period of two years from the date of the
transaction during which certain sales and dispositions of shares of the participating companies are restricted. See “Item 10.E. Taxation—Israeli Tax
Considerations and Government Programs” for additional information.
Our operations are subject to currency and interest rate fluctuations.
We incur expenses in U.S. dollars and NIS, but our functional currency is the U.S. dollar and our financial statements are denominated in U.S. dollars. The
U.S. dollar is the currency that represents the principal economic environment in which we operate. As a result, we are affected by foreign currency exchange
fluctuations through both translation risk and transaction risk. As a result, we are exposed to the risk that the U.S. dollar may appreciate relative to the NIS, or,
if the U.S. dollar instead devalues relative to the NIS, that the inflation rate in Israel may exceed such rate of devaluation of the NIS, or that the timing of such
devaluation may lag behind inflation in Israel. In any such event, the NIS cost of our operations in Israel would increase and our dollar-denominated results of
operations would be adversely affected.
We received Israeli government grants for certain of our research and development activities. The terms of those grants may require us to pay
royalties and to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. If we fail to satisfy these
conditions, we may be required to pay penalties and refund grants previously received.
Our research and development efforts have been financed in part through royalty-bearing grants in an aggregate amount of approximately $3,843,000 that
we received from Israel’s Innovation Authority, or the IIA, as of March 15, 2024. As of December 31, 2023 our contingent liabilities regarding IIA grants
received by us were in an aggregate amount of $1,986,000. With respect to the royalty-bearing grants we are committed to pay royalties at a rate of 3% to 3.5%
on sales proceeds from our products that were developed under IIA programs up to the total amount of grants received, linked to the U.S. dollar and bear
interest. Until October 25, 2023, the interest was calculated at a rate based on 12-month London Interbank Offered Rate, or LIBOR, applicable to U.S. dollar
deposits. However, on October 25, 2023, the IIA published a directive concerning changes in royalties to address the expiration of the LIBOR. Under such
directive, regarding IIA grants approved by the IIA prior to January 1, 2024 but which are outstanding thereafter, as of January 1, 2024 the annual interest is
calculated at a rate based on 12-month Secured Overnight Financing Rate, or SOFR, or at an alternative rate published by the Bank of Israel plus 0.71513%;
and, for grants approved on or following January 1, 2024 the annual interest shall be the higher of (i) the 12 months SOFR interest rate, plus 1%, or (ii) a fixed
annual interest rate of 4%.
17
Regardless of any royalty payment, we are further required to comply with the requirements of the Israeli Encouragement of Industrial Research and
Development Law, 5744-1984, as amended, and related regulations, or the Research Law, with respect to those past grants. When a company develops know-
how, technology or products using IIA grants, the terms of these grants and the Research Law restrict the transfer of such know-how, and the transfer of
manufacturing or manufacturing rights of such products, technologies or know-how outside of Israel, without the prior approval of the IIA. Therefore, the
discretionary approval of an IIA committee would be required for any transfer to third parties inside or outside of Israel of know-how or manufacturing or
manufacturing rights related to those aspects of such technologies. We may not receive those approvals. Furthermore, the IIA may impose certain conditions on
any arrangement under which it permits us to transfer technology or development out of Israel.
The transfer of IIA-supported technology or know-how outside of Israel may involve the payment of significant amounts, depending upon the value of
the transferred technology or know-how, our research and development expenses, the amount of IIA support, the time of completion of the IIA-supported
research project and other factors. These restrictions and requirements for payment may impair our ability to sell or otherwise transfer our technology assets
outside of Israel or to outsource or transfer development or manufacturing activities with respect to any product or technology outside of Israel. Furthermore,
the consideration available to our shareholders in a transaction involving the transfer outside of Israel of technology or know-how developed with IIA funding
(such as a merger or similar transaction) may be reduced by any amounts that we are required to pay to the IIA.
Inflation could adversely affect our business and results of operations.
While inflation in the United States and global markets was relatively low before 2020, during 2021 and 2022, the economy in the United States and global
markets encountered a material increase in the level of inflation. The impact of geopolitical developments such as the Russia-Ukraine and Israel-Hamas
conflicts and global supply chain disruptions continue to increase uncertainty in the outlook of near-term and long-term economic activity, including whether
inflation will continue and how long, and at what rate. Increases in inflation raise our costs for commodities, labor, materials and services and other costs
required to grow and operate our business, and failure to secure these on reasonable terms may adversely impact our financial condition. Additionally, increases
in inflation, along with the uncertainties surrounding geopolitical developments and global supply chain disruptions, have caused, and may in the future cause,
global economic uncertainty and uncertainty about the interest rate environment, which may make it more difficult, costly or dilutive for us to secure additional
financing. A failure to adequately respond to these risks could have a material adverse impact on our financial condition, results of operations or cash flows.
It may be difficult to enforce a judgment of a United States court against us and our officers and directors in Israel or the United States, to assert
United States securities laws claims in Israel or to serve process on our officers and directors and these experts.
We are incorporated under the laws of the State of Israel. Service of process upon us and upon our directors and officers, a substantial majority of whom
reside outside of the United States, may be difficult to obtain within the United States. Furthermore, because the majority of our assets and a substantial number
of our directors and officers are located outside of the United States, a judgment obtained against us, or any of these persons, including a judgment based on the
civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not be enforced by an Israeli court. It also may
be difficult for you to effect service of process on these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel.
Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action with respect to U.S. securities laws in Israel. Israeli courts may
refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israeli court is not the most appropriate forum in which to bring such a
claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is
found to be applicable, the content of applicable U.S. law must be proven as a fact by expert witnesses, which can be a time-consuming, and costly process.
Certain matters of the procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above.
Additionally, Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our
non-U.S. officers and directors. Moreover, an Israeli court will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the
enforcement of judgments of Israeli courts (subject to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of the State of
Israel, if it was obtained by fraud or in the absence of due process, if it is at variance with another valid judgment that was given in the same matter between the
same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel at the time the foreign action was brought.
As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a U.S. or
foreign court.
Your rights and responsibilities as a shareholder will be governed by Israeli law, which differs in some material respects from the rights and
responsibilities of shareholders of U.S. companies.
We are incorporated under Israeli law. The rights and responsibilities of holders of our Ordinary Shares are governed by our amended and restated articles
of association and the Companies Law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical
U.S. corporations. In particular, pursuant to the Companies Law, each shareholder of an Israeli company has to act in good faith and in a customary manner in
exercising his or her rights and fulfilling his or her obligations toward the Company and other shareholders and to refrain from abusing his or her power in the
Company, including, among other things, in voting at the general meeting of shareholders, on amendments to a company’s articles of association, increases in a
company’s authorized share capital, mergers and certain transactions requiring shareholders’ approval under the Companies Law. In addition, a controlling
shareholder of an Israeli company or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or who has the power
to appoint or prevent the appointment of a director or officer in the Company, or has other powers toward the Company has a duty of fairness toward the
Company. However, Israeli law does not define the substance of this duty of fairness. There is little case law available to assist in understanding the
implications of these provisions that govern shareholder behavior.
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General Risk Factors
Raising additional capital would cause dilution to holders of our securities, and may affect the rights of existing shareholders and ADS holders.
We may seek additional capital through a combination of private and public equity offerings, debt financing and collaborations and strategic and licensing
arrangements. To the extent that we raise additional capital through the issuance of equity or convertible debt securities, your ownership interest will be diluted,
and the terms may include liquidation or other preferences that adversely affect your rights as a holder of our ADSs.
Significant disruptions of our information technology systems or breaches of our data security could adversely affect our business.
A significant invasion, interruption, destruction or breakdown of our information technology systems and/or infrastructure by persons with authorized or
unauthorized access could negatively impact our business and operations. We could also experience business interruption, information theft and/or reputational
damage from cyber-attacks, which may compromise our systems and lead to data leakage either internally or at our third-party providers. Our systems have
been, and are expected to continue to be, the target of malware and other cyber-attacks. Although we have invested in measures to reduce these risks, we cannot
assure you that these measures will be successful in preventing compromise and/or disruption of our information technology systems and related data.
We may be subject to securities litigation, which is expensive and could divert management attention.
In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be
the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources,
which could seriously hurt our business. Any adverse determination in litigation could also subject us to significant liabilities.
Additionally, we have invested substantial resources, both financial and management attention, in litigating claims filed by our activist shareholder,
Murchinson Ltd. For more information on the lawsuits, please see “Item 8.A – Legal Proceedings.” Our management devotes attention and resources to these
claims, and any adverse determination in litigation could also subject us to significant liabilities.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely
change their recommendations or publish negative reports regarding our business or our ADSs or Ordinary Shares, the price and trading volume of
our ADSs or Ordinary Shares could decline.
The trading market for our ADSs or Ordinary Shares will be influenced by the research and reports that industry or securities analysts may publish about
us, our business, our market or our competitors. We do not have any control over these analysts and we cannot provide any assurance that analysts will cover us
or provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding our ADSs or Ordinary Shares, or
provide more favorable relative recommendations about our competitors, the price of our ADSs or Ordinary Shares would likely decline. If any analyst who
may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn
could cause the price or trading volume of our ADSs or Ordinary Shares to decline.
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ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
Our legal and commercial name is Nano Dimension Ltd. We were incorporated in the State of Israel in December 1960, and are subject to the Companies
Law. In August 2014, we acquired 100% of the share capital of Nano Tech. Nano Tech was incorporated in the State of Israel in July 2012.
From 2012 until 2021, we operated solely as a 3D printing company focused on designing and manufacturing systems used in the fabrication of electronics.
During this time, we leveraged our expertise in printing two materials in the same system to product PCBs and electronic devices.
Starting in April 2021, we commenced a mergers and acquisitions program, which continues to this day, that has resulted in a number of transformative
transactions that have changed the Company considerably. On April 23, 2021, we acquired all of the issued and outstanding share capital of DeepCube.
DeepCube technology applies numerous patented breakthrough algorithms to improve data analysis and deployments of advanced Deep Learning-based
artificial intelligence systems. The machine learning application includes faster and more accurate training of deep learning models, and drastically improves
inference performance and real-time metrics. Its proprietary framework can be deployed on top of any hardware, especially fitting edge devices and real-time
applications. DeepCube’s artificial intelligence / machine learning / deep learning solutions demonstrate 10 times speed improvements and memory reduction,
allowing efficient deployment of deep leaning models on edge devices and for real-time applications. In September 2022, DeepCube was merged with Nano
Tech.
On April 26, 2021, we acquired all of the issued and outstanding share capital of NanoFabrica. NanoFabrica is a prominent player in the field of precision
digital manufacturing. Its industrial additive manufacturing systems have an unprecedented micron-resolution with ultra-fine features, details, accuracy, and
precision – enabled by the innovative micro adaptive projection technology. NanoFabrica brings the power of additive manufacturing to applications that
require high precision, overlapping our typical target markets of Nano Dimension, such as aerospace, aviation, high-end electronics and automotive, medical,
optics, research, education and more. NanoFabrica’s technology and machines are designed to enable digital mass manufacturing of precise and complex parts.
In September 2022, NanoFabrica was merged with Nano Tech.
On November 2, 2021, we acquired all of the issued and outstanding share capital of Essemtec. Essemtec is a leader in adaptive highly flexible surface
mount technology, or SMT, pick-and-place equipment, sophisticated dispenser suitable for both high-speed and micro-dispensing, and intelligent production
material storage and logistic system. Its products are equipped with a sophisticated software package which makes extensive and efficient material management
possible.
On January 4, 2022, we acquired all of the issued and outstanding share capital of GIS. GIS is a leading developer and supplier of high-performance
control electronics, software, and ink delivery systems. GIS is known for inventing and delivering state-of-the-art 2D and 3D printing inkjet hardware and
unique operating software. GIS has more than 130 customers around the world with a focus on high-value, precision-oriented applications such as specialized
direct-to-container packaging, printed electronics functional fluids, and 3D printing, which can all be controlled by the proprietary software system.
On July 7, 2022, we acquired all of the issued and outstanding share capital of Formatec Holding. Formatec Holding has two subsidiaries - Admatec and
Formatec, based in the Netherlands, are comprised of two complementary businesses operating together. They are a leading developer and manufacturer of
additive manufacturing and 3D printing systems for ceramic and metal end-user parts. Their industry-grade systems - powered by digital light processing
technology - use materials with superior mechanical, electrical, thermal, biological, and chemical properties to produce an array of parts for medical, jewelry,
industrial, and investment casting uses. Admatec and Formatec’s industrial production service division is a design-to-production partner for industrial-scale
customers via its service bureau platform that combines the advantages of injection molding and additive manufacturing. Both means of production have served
as a strategic advantage in working with customers, from early-stage ideas into serial production of end-use parts.
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On August 11, 2023, we acquired all of the intellectual property assets of Additive Flow. Additive Flow develops high-performance and high-quality
simulation software for mechanical, thermal, thermo-mechanical properties, along with frequency and fatigue across a range of materials and processes. Its
product addresses design, production, and quality decisions, while optimizing for cost, weight, manufacturing productivity, and manufacturing yield – all
simultaneously.
Additionally, from March through May 2023, we made several non-binding offers to acquire all of the outstanding ordinary shares of Stratasys. After not
proceeding with these offers to acquire all ordinary shares, we made a series of special tender offers from May through July 2023 to acquire at least 51% of the
outstanding shares, inclusive of the 14.1% that we already owned. The offers were dependent on a number of closing conditions being met. As these conditions
were not met, we did not complete the special tender offers. In December 2023, we made an additional offer to buy all remaining shares of Stratasys, which has
not yet been accepted, for $16.50 per share. The proposal was subject to the completion of a satisfactory confirmatory due diligence process and the negotiation
and execution of a mutually satisfactory definitive acquisition agreement. There is no guarantee that the offer will be accepted or that an acquisition will be
completed.
ADSs representing our Ordinary Shares currently trade in the United States on the Nasdaq Capital Market under the symbol “NNDM.”
Our registered office and principal place of business is located at 2 Ilan Ramon St., Ness Ziona 7403635, Israel. Our telephone number in Israel is +972-73-
7509142.
Our website address is www.nano-di.com. The information contained on our website or available through our website is not incorporated by reference into
and should not be considered a part of this annual report on Form 20-F, and the reference to our website in this annual report on Form 20-F is an inactive textual
reference only. The SEC also maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers that
file electronically with the SEC. Our filings with the SEC will also be available to the public through the SEC’s website at www.sec.gov. Nano USA is our
agent in the United States, and its address is 300 5th Ave., Suite 1010, Waltham, MA 02451.
We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exempts us
from compliance with certain laws and regulations of the SEC and certain regulations of the Nasdaq Stock Market, including the proxy rules, the short-swing
profits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation.
In addition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S.
domestic companies registered under the Exchange Act.
Our cash used in investing activities for 2021, 2022 and 2023 amounted to $496,680,000, $67,673,000 and $166,600,000, respectively. The cash was used
primarily for investment in bank deposits and purchases of fixed assets. Our purchases of fixed assets primarily include leasehold improvements, computers,
and equipment used for the development of our products, and we financed these expenditures primarily from cash on hand.
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B. Business Overview
Our vision is to disrupt electronics and mechanical manufacturing with an environmentally friendly and economically efficient electronics and precision
additive manufacturing Industry 4.0 solution - transforming digital designs into functioning electronic and mechanical devices - on demand, anytime, anywhere.
At Nano Dimension, we believe that additive manufacturing (AM), which is known to some as 3D printing, of electronics and precision applications are
key to future growth in the manufacturing industry. According to an Emergen Research report titled “3D Printing Market”, published in March 2022, a 3D
HUBS trend report titled “3D Printing Trend Report 2022”, published in May 2022, and an IDTechEx report titled “3D Electronics/Additive Electronics 2022-
2032” from April 2022, the additive manufacturing and additively manufactured electronics, or AME, market, which consists of the sales of parts and the
systems that make them, is expected to grow from $16 billion to more than $100 billion by 2030 at a compound annual growth rate, or CAGR, of above 20%.
Our technology strategy is rooted in the application of deep learning-based AI to drive improvements in manufacturing capabilities by using self-learning
and self-improving systems, along with the management of a distributed manufacturing network via the cloud.
Our deep learning-based AI led manufacturing systems are used to 3D print and assemble high-performance electrical and mechanical applications. Our
series of 3D printing, robotics, and control systems enable key enhancements such as weight reduction, miniaturization, agile innovation, and rapid fabrication
of critical components that have met the needs of thousands of customers in the most technologically advanced, competitive, and innovative industries such as
aerospace/defense, automotive, electronics and PCB, industrial, medical, and research and development/academia.
Our deep learning-based AI platform “Deepcube” is novel compared to other AI solutions based on its ability to improve hardware performance; thus,
enabling its application on a distributed network of manufacturing solutions. This is based on DeepCube’s pioneering software inference accelerator, which
drastically improves yield, quality, and throughput on additive manufacturing hardware. DeepCube’s propriety algorithms increase the speeds of data analysis
tenfold, making it a unique hardware performance accelerator. In July 2023, we announced that we have made notable progress in accelerating our plans to
commercialize the industrial AI services of DeepCube by making its propriety technology available for use by external customers. We signed an agreement with
a large multinational electronics company to leverage DeepCube’s deep learning-based AI technology. We also entered a memorandum of understanding with
another international industrial company and are in the latter stages of discussions with several more leading industrial and advanced manufacturing companies
for the commercial use of its DeepCube technology.
Our portfolio of 3D printers include: (i) AME inkjet printers known as DragonFly IV that produce PCBs and electronic devices by simultaneously
depositing proprietary conductive and dielectric substances while integrating in situ capacitors, antennas, coils, transformers, and electromechanical
components, (ii) Micro Additive Manufacturing (Micro-AM) Digital Light Processing, or DLP, printers known as Fabrica 2.0 that achieve production-grade
micron-level resolution polymer and composite parts, and (iii) Industrial AM DLP printers known as Admaflex utilizing a patented DLP foil system that
fabricates strong and complex ceramic and metal parts. Our 3D printing portfolio is complemented by a range of consumables, also known as materials,
including: inks, resins, and slurries. We also offer software to provide engineers with the tools to bring precision and electrical parts from design-to-
manufacturing.
Our suite of Additive Electronics robotics includes: (i) SMT suite of production equipment for Hi-PEDs® and PCB assembly via Essemtec, and (ii) Ink
Delivery Systems, or IDS, technology covering hardware and software solutions via GIS.
We have a suite of software products and services that support the aforementioned offerings. While there is an extensive list of these products, one to note
is Additive Flow. It is a key enabling software for design and simulation, which is one of the key steps in 3D printing.
In 2021, 2022 and 2023, we increased our sales and commercialization efforts to broaden the synergies of our different groups. As a part of scaling our
operations, we have offices spanning across the United States, Germany, UK, Switzerland, Australia, the Netherlands and Israel. These offices serve to broaden
our customer engagement across regions and serve as focal points for advancing our strategic objectives to lead in Western markets.
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Industry Overview
Limitation of traditional manufacturing and the potential of additive manufacturing.
The global manufacturing industry for electronics (PCB and high-performance electronics) and mechanical manufacturing (injection molding, CNC
(Computer Numerical Control) machining, sheet metal, and casting) is comprised primarily of subtractive technologies with numerous difficulties and
limitations. Designers and engineers have been limited to the constraints of existing processes that have impacted their end products, thus affecting the firm’s
bottom line and the value provided to their customers. Existing means of manufacturing also place a high reliance on leveraging suppliers and partners in the
Far East, which adds time and risk of IP theft.
Additive manufacturing is the process of making a three-dimensional solid object from a digital model. Using an additive process, where successive layers
of material are laid down in different shapes. Additive manufacturing is considered distinct from traditional machining techniques, which mostly rely on the
removal of material by methods such as cutting or drilling (subtractive processes).
Additive manufacturing provides numerous advantages compared to traditional electronics and mechanical manufacturing. Additive manufacturing
provides:
● Design flexibility: Traditional manufacturing methods, such as electronics and mechanical manufacturing, have limited design flexibility. This is
because they rely on subtractive manufacturing techniques, where material is removed from a solid block or sheet of material to create the desired
shape. On the other hand, additive manufacturing allows for the creation of complex geometries and shapes that would be difficult or impossible to
produce using traditional methods.
● Low setup costs: Traditional manufacturing methods often require expensive tooling and setup costs. This makes them less suitable for small
production runs or custom projects. On the other hand, additive manufacturing does not require tooling and setup costs and is, therefore more cost-
effective for quick turnaround prototyping and small production runs.
● Accelerated time-to-market: Traditional manufacturing methods can have long lead times due to the time required for tooling and setup. On the other
hand, additive manufacturing eliminates the need for extensive tooling and setup, thus enabling shorter lead times.
● Assembly consolidation: Traditional manufacturing methods often require multiple components to be manufactured separately and then assembled
together, which can add additional costs and time to the manufacturing process. On the other hand, additive manufacturing can consolidate multiple
components into a single, complex part, reducing the need for assembly and further streamlining the manufacturing process.
● Material savings: Traditional manufacturing methods often produce significant material wastage, especially in subtractive manufacturing techniques
where excess material is removed. On the other hand, additive manufacturing can produce parts with little to no wastage, which is more
environmentally friendly and cost-effective.
Additive manufacturing as a pillar of Industry 4.0
Industry 4.0, also known as the Fourth Industrial Revolution, refers to the current trend of integrating advanced technologies such as AI, the Internet of
Things, or IoT, robotics, and automation into manufacturing and other industries. The goal of Industry 4.0 is to create more intelligent, efficient, flexible, and
productive manufacturing solutions.
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We perceive that additive manufacturing is at a defining inflection point, given an ever-growing commitment to industry 4.0 transformation by large and
small companies. To underscore the potential of additive manufacturing, several Fortune 500 and other tier-one companies operating across a number of distinct
industries have made substantial investments to decisively enter the additive manufacturing market. Examples include leading companies in aerospace and
defense, dental/cosmetics, and apparel and footwear. With the production world increasingly depending on additive manufacturing, we see exciting
advancements internally and externally focused on new technologies, materials, and the integration of additional industry 4.0 solutions such as robotics and AI.
The industry 4.0 manufacturing revolution includes the electrical and mechanical precision manufacturing of mission-critical products across multiple
industries, from satellites to medical devices and IoT devices that require precision and electronic components. We believe that fully additively manufactured
smart connected products are the next phase of industry 4.0.
Additive manufacturing has the potential to be key in the re-shoring trend.
Recent geopolitical, economic, and supply chain events have caused many advanced Western firms to consider re-shoring manufacturing and/or their
manufacturing suppliers. According to a survey conducted by Thomas titled “83% of North American Manufacturers Are Likely to Reshore Their Supply
Chains in 2021” published in July 2021, a leading online sourcing platform, 83% of North American manufacturers are considering re-shoring production. Re-
shoring provides supply chain resilience, cost savings, customization, in-house/local IP, and industry 4.0 solutions offer tools with the potential capabilities to
leverage this opportunity.
Additive manufacturing has historically been used for prototyping and proof of concept manufacturing.
Additive manufacturing has mainly been used for prototyping and proof of concept because it offers a high degree of design freedom and flexibility in
creating complex geometries that may be difficult or impossible to produce using traditional manufacturing methods. Additionally, additive manufacturing
allows for rapid iteration and testing of multiple design concepts, reducing the time and cost associated with product development. However, advancements in
additive manufacturing technology have made it possible to produce high-quality parts at larger scales, enabling its use in production applications, thus playing
an increasingly important role in future manufacturing processes.
Market Opportunity
We are positioned to continue to take advantage of manufacturing industry trends. The future of manufacturing looks promising; businesses across
industries such as aerospace/defense, automotive, electronics and PCB, industrial, medical, and research and development/academia have started researching
and acquiring advanced additive manufacturing systems and solutions. We estimate market potential by looking at several market references. According to an
Emergen Research report titled “3D Printing Market”, published in March 2022, a 3D HUBS trend report titled “3D Printing Trend Report 2022”, published in
May 2022, and an IDTechEx report titled “3D Electronics/Additive Electronics 2022-2032” from April 2022, the additive manufacturing and AME, market are
together expected to grow from $16 billion to more than $100 billion by 2030 at a CAGR of above 20%.
The current industry practices present challenges to electronics and manufacturing, including poor energy efficiency, slow production time and high costs,
long time to get to market, and potential risks for IP theft. We provide systems and solutions for additive precision and electronics manufacturing, a unique
offering that enables a compelling proposition to the most innovative and advanced manufacturers seeking rapid fabrication of high-performance components.
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Strategy
Our goal is to expedite our growth and to further advance our breakthrough technologies and commercialization efforts. To achieve these objectives, we are
focused on three main pillars:
● Research & development (R&D): We are committed to the development of systems, materials, software, AI, and solutions that will advance our
capabilities and core technology surrounding additive manufacturing of electronic and precision applications. Since our founding, we have invested
significant resources into the development of our existing portfolio. In connection of our acquisitions in 2021 and 2022, we have acquired significant
R&D resources and talent that expand our R&D base. R&D is a core pillar, approximately 40% of our employees are focused on R&D or application
development (who are significantly involved in supporting development and feedback for our R&D), and approximately 30 employees are data
scientists and algorithm engineers dedicated to AI development.
● Go-To-Market (GTM): We are advancing our commercialization efforts and infrastructure to connect, development relationships, and make sales. Our
GTM efforts are led by management with prior successes in building and growing technology-focused sales and marketing organizations. Our
organization is global, with offices in the United States, Netherlands, the United Kingdom, Switzerland, Germany, Israel, Hong Kong and Australia,
providing significant reach and local market expertise. We have invested in creating the critical talent, technology, and physical infrastructure for the
Go-To-Market of advanced manufacturing for our existing portfolio and the base for any new releases or acquisitions.
● Mergers & acquisitions (M&A): We are focusing on synergetic M&A of systems, materials, software, AI, and solutions that build up to deliver
comprehensive solutions to mutual vertical market segments. We have a team of M&A professionals and partners who have and continue to help us
identify and evaluate a range of opportunities, most of which are in North America and Europe, that will help us deliver on the above strategy, while
also providing a return-on-investment for shareholders. In December 2023, we submitted a preliminary all cash proposal to purchase all the
outstanding shares of Stratasys that we did not already own for $16.50 per share in cash. We currently own approximately 14.02% of Stratasys’
outstanding shares and have been its largest shareholder since July 2022. Our offer has not yet been accepted. The proposal was subject to the
completion of a satisfactory confirmatory due diligence process and the negotiation and execution of a mutually satisfactory definitive acquisition
agreement. There is no guarantee that the offer will be accepted or that an acquisition will be completed.
Products
3D printers
● AME systems, which are inkjet printers (DragonFly series) that produce Hi-PEDs® by simultaneously depositing proprietary conductive and dielectric
substances while integrating in situ capacitors, antennas, coils, transformers, and electromechanical components.
● Micro additive manufacturing systems, which are DLP printers (Fabrica series) that achieve production-grade polymer and composite parts with ultra-
high features, details, accuracy, and precision.
● Industrial additive manufacturing systems, which are DLP printers (Admaflex series) utilizing a patented foil system that fabricates strong and
complex ceramic and metal parts.
Additive Electronics Robotics and control systems
● SMT, for electronics assembly equipment for electronic components on Hi-PEDs® and PCBs, catering to various manufacturing and volume
requirements.
● IDS, which are control electronics, software, and ink delivery systems for digital printing.
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Consumables and technology
We offer a range of complementary consumables and technology for use with each of our 3D printers, robotics, and systems:
● Materials: We sell a range of materials that are developed in-house for each of our 3D printers, which include: nanoparticle conductive and dielectric
inks, polymer and composite resins, and ceramic and metal slurries. The sale of these materials provides a recurring revenue stream from customers of
our 3D printers.
● Software: We offer software for each of our solutions. For industrial AI, our DeepCube offering is at the core of our in-house and customer oriented
work in improving the efficiency of industrial systems through visual inspection and maintenance. For our 3D printers, the software enables design and
manufacturing and includes (i) our “FLIGHT” software for our AME system, (ii) AM printer software for Fabrica and Admaflex systems providing in-
process monitoring, traceability, and print preparation, and (iii) simulation software for mechanical, thermal, thermo-mechanical properties, along with
frequency and fatigue across a range of materials and processes by Additive Flow. For our SMT solutions, our SMART software suite provides all the
requirements for a modern electronic manufacturing environment. For our IDS solutions, our Atlas software provides a unique, modular software suite
to manage the entire data path from image to print for the inkjet industry.
Intellectual Property
We seek patent protection as well as other effective intellectual property rights for our products, services and technologies in the United States and
internationally. Our policy is to pursue, maintain and defend intellectual property rights developed internally and to protect the technology, inventions and
improvements that are commercially important to the development of our business.
We have an ever-growing portfolio of over 100 issued U.S. and foreign patents and approximately 200 provisional and non-provisional patent applications
with the USPTO, WIPO filed through the Patent Cooperation Treaty, and with the respective patent offices of China, Europe, South Korea, Japan and Taiwan. A
provisional patent application is a preliminary application that can be filed less formally than a non-provisional application, and establishes a priority date for
the patenting process for the invention disclosed therein.
Our growing patent portfolio can be divided into five main areas:
1. Mechanical: covering various printers’ components and peripherals, for example- granted U.S. patents (9,227,444, 9,259,933, 9,878,549 and 11,141,909)
for ink jet 3D printers, indirect stereo lithography and DLP, as well as several patent applications, directed to components and systems varying from print heads
regeneration systems, print heads cleaning and ink recycling systems.
2. Chemical: covering ink compositions and related nanoparticles, both dielectric and conducting. For example, several were granted in the U.S.
(10,385,175, 10,626,233, 11,155,004), Chinese (112955326) and South Korean (10-2017-7013551) patent offices. Other chemical applications are directed to
flexible ink (10,893,612), Ceramic Ink Compositions (US 11,155,004), and support inks (11,629,261).
3. Applications: covering 3D printing applications and computer applications. The 3D printing applications are directed to various methods of printing
additive manufacturing electronics, flexible printed circuits (FPCs) and high-density interconnects (HDIs) circuits with embedded components. Additional
filings were directed inter-alia to composite printing, shielded traces (10,905,017), fabricating SMT mounting sockets (11,395,412), bridging members between
integrated circuits, or ICs, vertically embedded wells and their interconnectivity, as well as coreless transformers (US 11,694,837). Additional applications are
directed to the method of controlling a deposition system comprising a print head array (11,633,961, 11,780,239).
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4. Industrial Design/Design: covering the ornamental aspects of the printer and various printer components. While currently there are no design patents
granted, or pending, we intend to file design patents when appropriate, for example for Ink containers and ink cartridges’ adapters.
5. Artificial Intelligence/ Deep Learning: Covering an efficient technique of machine learning that is provided for training a plurality of convolutional
neural networks with increased speed and accuracy using a genetic evolutionary model (US 10,339,450); storing sparse neural network (US 10,366,322);
approximating multi-synaptic/filters neural network that can be partially-activated by iteratively executing partial pathways to generate partial outputs (US
10,515,306, 10,878,321); mimicking pre-trained target model without access to the pre-trained target model or its original training dataset (US 10,699,194);
training or prediction of a neural network (US 11,055,617); training or prediction of neural networks using a cluster-connected neural networks (US
11,164,084); system and method for mimicking a neural network without access to the original training dataset or the target model (US 11,907,854); and system
and method for efficient evolution of deep convolutional neural networks using filter-wise recombination and propagated mutations (US 11,710,044).
In addition to patent applications, in September 2014, we entered into an exclusive license agreement with the Research and Development Company of the
Hebrew University of Jerusalem, Ltd., or Yissum, for two patents that cover the unique method of manufacturing our consumable nano-conductive ink for the
3D printing of electronic circuits. The agreement was amended and restated in April 2015. Pursuant to the license agreement, we will be required to pay Yissum
low to mid-single digit percentage royalties on sales of our conductive ink. The exclusive license agreement is in effect for the longer of remaining usable life of
the patents and patent applications, or 15 years from the first commercial sale of a product relating to the licensed technology in the country in which the first
commercial sale occurred.
In addition, we have identified several trade secrets associated with chemical formulations, combination of jigs (manufacturing aids), and preferred
suppliers and have taken the necessary steps to maintain these trade secrets.
In addition to the patent portfolio describe above, in our Admatec division, our patent portfolio can be divided to three main areas:
1. Mechanical: covering foils (e.g., UK 3094478), conditioning units (e.g., US 11,141,909), laserflex (e.g., NL 2015381), and abrasive;
2. Applications: control of glass temperature (e.g., NL 2021611); and
3. Materials: metals and precursors (e.g., 2018890)
In addition to the patent portfolio describe above, our Essemtec division filed a provisional application (63/542,334) directed to assemblies and methods for
heating PCBs, ICs, advanced packaging, or APs, wafers and the like, in material dispensing processes, using an assembly operable to create a customizable hot-
air bath accounting for surface topology, for soaking the PCBs, ICs, APs, wafers and the like.
In addition to the patent portfolio describe above, in our GIS division, our patent portfolio can be divided into two main areas:
1. Direct to shape: methods for printing onto 3-dimensional surface (e.g., US 11,463,603); and
2. Drive electronics: electronics for improved performance when driving piezo inkjet print heads (e.g., US 9,079,396 and US 8,860,388).
Competition
We compete with suppliers of additive manufacturing solutions, printers, materials, and software, as well as suppliers for traditional manufacturing of
electronics and precision mechanical parts. The development of new technologies or techniques not encompassed by the patents that we own may result in
additional future competition.
Many companies provide solutions for additive manufacturing over a range of product segments that can often be split by type of applications depending
on materials, size, and accuracy. The additive manufacturing industry is rapidly growing, and the market is still in its infancy. We differentiate ourselves from
other companies in the industry by (i) focusing on key applications areas that are not the focus of other players in the market, such as AME, precision-AM, and
high-performance ceramics and metal AM, (ii) patented and/or differentiated features developed from continued R&D for our portfolio, and (iii) combining our
printer and solutions multidisciplinary vertically integrated portfolio for precision manufacturing and electronics with our leading AI (Deep Learning) platform
DeepCube that together provide industry-leading performance and compounding future performance enhancements.
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Research and Development
From time to time, we explore the application of our technology to additional areas within 3D printing and other industries.
In January 2023, we announced the delivery of the Admaflex130 Evolution, which is the first of its next generation high precision ceramics and metal
fabrication system, to the Karlsruhe Institute of Technology.
In February 2023, we announced a purchase order from a supplier to the U.S. government defense industry, for our DragonFly IV. In March 2023, we
received another purchase order from a leading Western intelligence agency for our DragonFly IV. In June 2023, we announced the sale of our DragonFly IV
system to the University of Stuttgart, Germany, Institute of Smart Sensors and 3rd Institute of Physics.
In July 2023, we announced that we had closed a series of landmark sales of additive manufacturing printers and additive electronics robotics systems in
the second quarter of 2023, which sales are material given their size and customer profiles, which are leading, large-scale businesses and organizations. While
the names of the customers cannot be shared as they are defense related and/or focus on IP sensitive work, a partial list of the organizations includes: a space
exploration company, a satellite equipment innovator, a national defense agency, a nuclear research group, and a computer manufacturer.
In August 2023, we announced that we received our largest single purchase order in our history, both in terms of the dollar value and number of systems,
for digital manufacturing additive robotics solutions from a leading western highly advanced industrial leader. The sale includes multiple robotics systems
designed and made by integrated technologies from Nano Dimension’ divisions. The advanced Additive Robotics manufacturing equipment are critical in
modern digital-industrial production.
In September 2023, we announced the filing of a new patent titled “Large Language Models for the Log File Analysis of Industrial Machines,” or the LLM
Log Patent, which is critical for real-time data analysis and scalable deployment across our own systems as well as industrial solutions provided to outside
customers. The focus of the LLM Log Patent is “log data alpha-numeric streams”, which relate to the operation and parameters of a given industrial process and
can generate hundreds of parallel subsystems. Currently, real-time analysis of these logs is not possible given the quantity of data; thus, queries and
investigations are usually reserved for failure cases long after the occurrence and are limited in scale.
In November 2023, we announced a breakthrough in the development of a material that is a critical enabler for the advancement of AME. Materials, which
are commonly known as consumables, are an important factor in the success of additive manufacturing at industrial scale. The functionality of the materials and
their acceptance according to industry standards are both critical. Our launch of INSU200, a dielectric ink boasting industry-leading thermo-mechanical
properties, addresses both with increased functionality and greater alignment with industry standards, even going so far as to set new standards. In terms of
functionality, the new material can withstand the rigorous demands of Restriction of Hazardous Substances, or ROHS, compliant reflow soldering processes.
With regards to industry standards, the new material aligns with a number of reliability standards set by IPC (Association Connecting Electronics Industries),
the leading global association for the electronics industry, and the FED (Fachverband Elektronik-Design e.V.) in Europe.
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In January 2024, we announced the filing of a new patent application titled “Large Language Models for Efficient Anomaly Detection in Log Files of
Industrial Machines,” or the Log Analysis Patent, which is targeted for real-time data analysis and scalable deployment across our own systems and industrial
solutions provided to outside customers. The Log Analysis Patent addresses one of the core challenges for automated anomaly detection. While machine logs
are usually a valuable source of information for industrial systems, they are increasingly difficult and expensive to analyze as the underlying systems have
grown in complexity and the volume of log data they contain has multiplied. Furthermore, logs are typically analyzed after events have happened and not in
real-time, thereby missing the opportunity to apply corrective actions. To overcome these problems, we have extended our existing AI patents with a Large
Language Model that can operate independently of engineering labels. With this, the technology exploits the existing sentiment that is expressed in the machine
logs. This enables a fully automated process of AI-powered prediction of manufacturing anomalies before they occur, based either solely on logs or in
combination with other machine data and being efficient enough to process billions of log lines.
For the years ended December 31, 2021, 2022 and 2023, we incurred $41,686,000, $75,763,000 and $62,004,000, respectively, of research and
development expenses.
Grants from Israel’s Innovation Authority
Our research and development efforts are financed in part through royalty-bearing grants from the IIA. As of December 31, 2023, we have received the
aggregate amount of $3,843,000 from the IIA for the development of our additive manufacturing system and nano-inks. With respect to such grants, we are
committed to pay royalties of 3% to 3.5% on sales proceeds from our products that were developed under IIA programs up to the total amount of grants
received, linked to the U.S. dollar and bearing interest. Until October 25, 2023, the interest was calculated at a rate based on 12-month LIBOR applicable to
U.S. Dollar deposits. However, on October 25, 2023, the IIA published a directive concerning changes in royalties to address the expiration of the LIBOR.
Under such directive, regarding IIA grants approved by the IIA prior to January 1, 2024 but which are outstanding thereafter, as of January 1, 2024 the annual
interest is calculated at a rate based on 12-month SOFR, or at an alternative rate published by the Bank of Israel plus 0.71513%; and, for grants approved on or
following January 1, 2024 the annual interest shall be the higher of (i) the 12 months SOFR interest rate, plus 1%, or (ii) a fixed annual interest rate of 4%.
Regardless of any royalty payment, we are further required to comply with the requirements of the Research Law, with respect to those past grants. When a
company develops know-how, technology or products using IIA grants, the terms of these grants and the Research Law restrict the transfer of such know-how,
change of control transactions and the transfer of manufacturing or manufacturing rights of such products, technologies or know-how outside of Israel, without
the prior approval of the IIA. In addition, any change of control and any change of ownership of our Ordinary Shares that would make a non-Israel citizen or
resident an “interested party,” as defined in the Research Law, requires prior written notice from the IIA. We do not believe that these requirements will
materially restrict us in any way.
Production and Manufacturing
We purchase the raw materials required for the production of our products, including components of additive manufacturing systems and materials to
produce our nano-inks products. To date, the majority of our manufacturing equipment are assembled in-house.
With respect to our ink products, we intend to keep full control of the value chain, from research and development through self-manufacturing and global
sales. We have a production facility to support the commercialization and production of our proprietary nano-conductive ink and dielectric ink for our
DragonFly additive manufacturing system. We believe that the size and capacity of this facility, located in the same building as our offices, will be sufficient to
support our future commercialization activities. We are certified by the SII (Standard Institute of Israel) for three international standards- the ISO 45001:2018
for occupational health and safety within the workplace, the ISO 14001:2015 Standard – EMS (Environmental Management System) and the ISO 9001:2015 for
quality throughout in our production processes.
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Sales and Marketing
We have a global sales and marketing organization. In some instances we have sales and marketing leaders selling several products from our portfolio, in
other instances we have dedicated people selling certain products. The focus of our efforts are in Western markets, along with some sales in the Asia-Pacific
Region. We work through a combination of direct sales and through channel partners.
C. Organizational Structure
We currently have the following wholly owned subsidiaries: GIS, which is incorporated in the United Kingdom, Essemtec, which is incorporated in
Switzerland and has three subsidiaries, Nano Tech, which is incorporated in the State of Israel, Nano USA Inc., which is incorporated in Delaware, Nano
Dimension GmbH, which is incorporated in Germany, Nano Dimension (HK) Limited, which is incorporated in Hong Kong, Nano Dimension Australia PTY
Ltd, which is incorporated in Australia, Formatec Holding, Admatec and Formatec, which are incorporated in the Netherlands, and other insignificant
subsidiaries.
D. Property, Plant and Equipment
Our offices, research and development facility, manufacturing facility and in-house laboratory are located at our headquarters at 2 Ilan Ramon, and Ilan
Ramon 6, Ness Ziona 7403635, Israel, where we currently occupy altogether approximately 90,000 square feet. We lease our headquarters under nine separate
leases. Three of the leases, which account for about 33% of our office space, will end in August 2024, three of the leases, which account for about 33% of our
office space, end in 2026, three of the leases, which account for about 33% of our office space, end in 2027. We have an option to extend our lease agreements
for an additional two to five years with an approximately 5% to 10% increase of the monthly rental fee. The total monthly rent payment for the facilities in
Israel is currently approximately $170,000. We also have a facility in Azrieli Center, Tel-Aviv, Israel, where we currently lease and occupy approximately 6,700
square feet. The total monthly rent payment for the facilities in Tel-Aviv is currently approximately $25,000. Our U.S. office is in Waltham, Massachusetts,
where we currently lease and occupy approximately 25,400 square feet. The total monthly rent payment for the facilities in Waltham is currently approximately
$65,000. In addition, in December 2022, we opened an additional office in Munich, Germany to house expanded sales operations and customer support. We
currently lease and occupy 13,500 square feet in our Munich, Germany office, and our monthly rent payment for the facilities is approximately $35,000. We
also have smaller offices in Australia. Essemtec has offices in Aesch, Switzerland, which are owned by us. GIS has offices in Cambridge, United Kingdom,
Admatec has offices in Alkmaar, the Netherlands, and Formatec has offices in Goirle, the Netherlands.
We consider that our current office space is sufficient to meet our anticipated needs for the foreseeable future and is suitable for the conduct of our
business.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
30
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annual
report on Form 20-F. This discussion and other parts of this annual report on Form 20-F contain forward-looking statements based upon current expectations
that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking
statements as a result of several factors, including those set forth under “Item 3.D. Risk Factors” and elsewhere in this annual report in Form 20-F. We report
financial information under IFRS as issued by the IASB and none of the financial statements were prepared in accordance with generally accepted accounting
principles in the United States. Our discussion and analysis for the year ended December 31, 2022 can be found in our annual report on Form 20-F for the fiscal
year ended December 31, 2022, filed with the SEC on March 31, 2023.
Overview
To date, we have generated revenues from the sale of our products. In the fourth quarter of 2017 we began commercializing our products and our ability to
generate significant revenues and achieve profitability depends on our ability to successfully complete the development of, and to continue to commercialize,
our products, including consumables. As of December 31, 2023, we had an accumulated deficit of $591,207,000. Our financing activities are described below
under “Liquidity and Capital Resources.” We currently estimate that we have the necessary capital in order to establish our commercial infrastructure.
5. A Operating Results
Operating Expenses
Our current operating expenses consist of three components – research and development expenses, sales and marketing expenses, and general and
administrative expenses.
Research and Development Expenses
Our research and development expenses consist of salaries and related personnel expenses, share-based payments expenses, subcontractors expenses,
materials ,depreciation, rental fees, patent registration fees, and other related research and development expenses.
The following table discloses the breakdown of research and development expenses:
(in thousands of U.S dollars)
Payroll
Share-based payment expenses
Subcontractors
Patent registration
Materials
Rental fees and maintenance
Depreciation
Other expenses
Total
Year ended December 31,
2022
2023
35,638
17,424
10,344
506
6,881
642
3,038
1,290
75,763
33,462
7,722
6,717
689
6,584
1,081
3,859
1,890
62,004
Subcontractors expenses include expenses for development consultants and service providers, who are not employees. The services provided by these
consultants and service providers include, but are not limited to, chemistry consulting, software and electronics subcontractors and consulting and chip
processing consulting.
Sales and Marketing Expenses
Sales and marketing expenses consist of salaries and related expenses, marketing and advertising services, travel expenses, share-based payments expenses,
depreciation, rental fees and other related sales and marketing expenses.
31
The following table discloses the breakdown of sales and marketing expenses:
(in thousands of U.S dollars)
Payroll
Share-based payment expenses
Marketing and advertising
Depreciation
Travel abroad
Rental fees and maintenance
Other expenses
Total
General and Administrative Expenses
Year ended December 31,
2022
2023
20,057
8,616
5,057
1,502
2,567
392
642
38,833
19,075
2,490
4,685
1,369
2,555
319
1,214
31,707
General and administrative expenses consist of professional services, salaries and related expenses, share-based payments expenses, office expenses,
depreciation, travel expenses, fees and other general and administrative expenses.
The following table discloses the breakdown of general and administrative expenses:
(in thousands of U.S dollars)
Payroll
Share-based payments
Professional services
Office expenses
Depreciation
Travel abroad
Rental fees and maintenance
Other expenses
Total
32
Year ended December 31,
2022
2023
9,321
4,940
9,701
2,704
563
743
286
2,199
30,457
14,032
8,448
29,122
1,613
926
674
515
2,924
58,254
Comparison of the year ended December 31, 2023 to the year ended December 31, 2022
Results of Operations
(in thousands of U.S dollars)
Consolidated Statements of Operations Data
Revenues
Cost of revenues
Cost of revenues - write-down of inventories and amortization of assets recognized in business combination and
technology
Gross profit
Research and development expenses, net
Sales and marketing expenses
General and administrative expenses
Other income, net
Impairment losses on intangible assets
Operating loss
Finance expense (income), net
Loss before taxes
Taxes benefit
Loss for the year
Loss attributable to non-controlling interests
Loss attributable to owners
Revenues
Year ended December 31,
2022
2023
43,633
24,943
4,639
14,051
75,763
38,833
30,457
—
40,523
(171,525)
56,506
(228,031)
(264)
(228,295)
(872)
(227,423)
56,314
30,759
97
25,458
62,004
31,707
58,254
1,627
—
(124,880)
(69,282)
(55,598)
(62)
(55,660)
(1,110)
(54,550)
Our revenues for the year ended December 31, 2023 amounted to $56,314,000, representing an increase of $12,681,000 or 29%, compared to $43,633,000
for the year ended December 31, 2022. The increase is attributed mostly to increased and more effective sales efforts across our product lines, including our 3D
printers and robotics systems, especially in Western Europe and the United States.
Cost of Revenues
Our cost of revenues excluding write-down of inventories and amortization of assets recognized in business combination and technology for the year ended
December 31, 2023 amounted to $30,759,000, representing an increase of $5,816,000 or 23%, compared to $24,943,000, for the year ended December 31,
2022. Cost of revenues consists mainly of raw materials, materials and consumables in the amount of $18,696,000, payroll and related expenses in the amount
of $9,586,000 and other related costs (depreciation and rental maintenance expenses) in the amount of $2,477,000. The increase resulted primarily from the
above-mentioned increase in revenues.
Gross Profit
Our gross profit for the year ended December 31, 2023, amounted to $25,458,000, compared to a gross profit of $14,051,000 for the year ended December
31, 2022. The increase resulted from an increase in our revenues, improved operational efficiencies and a decrease in write-down of inventories and
amortization of assets recognized in business combination and technology.
33
Research and Development Expenses, net
Our research and development expenses for the year ended December 31, 2023 amounted to $62,004,000, representing a decrease of $13,759,000, or 18%,
compared to $75,763,000 for the year ended December 31, 2022. The decrease is attributed to a decrease of $9,702,000 in share-based payments expenses, as
well as decrease of $3,627,000 in subcontractors’ expenses and a decrease of $2,176,000 in payroll and related expenses.
Sales and marketing Expenses
Our sales and marketing expenses amounted to $31,707,000 for the year ended December 31, 2023, a decrease of $7,126,000 or 18%, compared to
$38,833,000 for the year ended December 31, 2022. The decrease resulted primarily from a decrease of $6,126,000 in share-based payments expenses and a
decrease of $982,000 in payroll and related expenses.
General and Administrative Expenses
Our general and administrative expenses totaled $58,254,000 for the year ended December 31, 2023, an increase of $27,797,000 or 91%, compared to
$30,457,000 for the year ended December 31, 2022. The increase resulted primarily from an increase of $19,421,000 in professional services, mainly from
proxy contest related expenses, including the matters relating to activist shareholders and ADS holders, such as proxy advisory, voting, and litigation, as well as
an increase of $3,508,000 in share-based payments expenses and an increase of $4,711,000 in payroll and related expenses. See “Item 8.A Consolidated
Statements and Other Financial Instruments - Legal Proceedings” for more information.
Other Income, Net
Our other income, net for the year ended December 31, 2023 was $1,627,000 compared to $0 for the year ended December 31, 2022. The increase was
attributed to additional compensation from government authorities for damaged inventory, less reorganization costs which we incurred during 2023.
Impairment Losses
During 2022, there was a decline in our share price, such that as of December 31. 2022, our fair value, which is based on the share price, was lower than
our book value of equity. Hence, we evaluated our CGUs to which goodwill is allocated. Given the recoverable amount of the said CGUs, determined on the
basis of the value in use of the units, the goodwill, intangibles and property, plant and equipment relating to the groups of the said CGUs was reduced by
approximately $40,523,000. In 2023, no impairment losses were recognized.
Operating Loss
As a result of the foregoing, our operating loss for the year ended December 31, 2023 was $124,880,000, as compared to an operating loss of $171,525,000
for the year ended December 31, 2022, a decrease of $46,645,000 or 27%.
Finance Expense and Income
Finance expense and income mainly consist of bank interest, revaluation of financial assets and liabilities and lease liabilities, revaluation of liability in
respect of government grants, bank fees, and exchange rate differences.
We recognized net financial income of $69,282,000 for the year ended December 31, 2023, compared to net financial expenses of $56,506,000 for the year
ended December 31, 2022. The change is primarily due to an increase of $86,253,000 from revaluation of our investment in Stratasys, which is measured at fair
value, as well as an increase of $27,455,000 in bank interest income, and an increase of $17,703,000 due to exchange rate differences. These were partially
offset by a decrease of $4,977,000 in financial income due to revaluation of financial liabilities at fair value through profit or loss.
34
Total Loss
As a result of the foregoing, our total loss for the year ended December 31, 2023 was $55,660,000, as compared to $228,295,000 for the year ended
December 31, 2022, a decrease of $172,635,000, or 76%.
5.B Liquidity and Capital Resources
Overview
Since our inception through December 31, 2023, we have funded our operations principally with $1,550,642,000 from the issuance of Ordinary Shares,
warrants and convertible notes. As of December 31, 2023, and following (i) the execution of a $96 million Repurchase Plan during 2023; and (ii) the acquisition
of the Stratasys shares, we had $309,571,000 in cash and cash equivalents and an additional $541,967,000 in short-term unrestricted bank deposits.
The table below presents our cash flows:
(in thousands of U.S. dollars)
Operating activities
Investing activities
Financing activities
Net decrease in cash
Operating Activities
December 31,
2022
2023
(92,054)
(105,069)
(67,673)
(166,600)
(5,273)
(105,414)
(168,264)
(375,791)
Net cash used in operating activities of $105,069,000 during the year ended December 31, 2023 was primarily used for payment of salaries and related
personnel expenses, payments for materials and inventory, rent, travel, professional services and other miscellaneous expenses.
Net cash used in operating activities of $92,054,000 during the year ended December 31, 2022 was primarily used for payment of salaries and related
personnel expenses, payments for materials and inventory, rent, travel, professional services and other miscellaneous expenses.
Investing Activities
Net cash used in investing activities of $166,600,000 during the year ended December 31, 2023 was primarily used for investments of our cash in bank
deposits and fixed assets.
Net cash used in investing activities of $67,673,000 during the year ended December 31, 2022 was used for investment in securities and fixed assets, as
well as acquisition of subsidiaries, less cash invested in bank deposits.
35
In August 2023, we announced that we acquired the technology and intellectual property of the U.K.-based company Additive Flow, which supplies
solutions for 3D design simulation and optimization, for GBP 1.76 million. Additive Flow has developed high-performance and high-quality simulation
software for mechanical, thermal, thermo-mechanical properties, along with frequency and fatigue across a range of materials and processes. Their product
addresses design, production, and quality decisions, while optimizing for cost, weight, manufacturing productivity, and manufacturing yield.
Financing Activities
Net cash used in financing activities of $105,414,000 in the year ended December 31, 2023 was mainly due to repurchase of our ADSs and lease payments.
Net cash provided by financing activities of $5,273,000 in the year ended December 31, 2022 was mainly due to lease payments.
In February 2023, we announced that we would put into action our previously announced share repurchase plan, or the $100 million Repurchase Plan,
allowing us to invest up to $100 million to repurchase our ADSs from time to time, in open market transactions, and/or in privately negotiated transactions or in
other legally permissible ways, depending on market conditions, share price, trading volume and other factors. The $100 million Repurchase Plan was approved
by the Israeli court in in August 2022 for a period of up to 12 months and was later extended by an additional two months. The $100 million Repurchase Plan
expired on October 12, 2023, with $4,160,138 remaining, and thereafter no longer eligible for repurchases under such plan. All repurchases made in 2023 were
made pursuant to the $100 million Repurchase Plan.
In August 2023, our board of directors authorized a repurchase plan, or the $200 million Repurchase Plan, allowing us to invest up to $200 million to
repurchase ADSs from time to time, in open market transactions, and/or in privately negotiated transactions or in any other legally permissible ways, depending
on market conditions, share price, trading volume and other factors. The Israeli court approved the $200 million Repurchase Plan on October 17, 2023 for a
twelve-month period. As of March 15, 2024, 17,110,217 shares have been repurchased under the Repurchase Plan.
Under the aforementioned repurchase plans, we may repurchase all or a portion of the authorized repurchase amount. The plans do not obligate us to
repurchase any specific number of the Ordinary Shares represented by ADS, and may be suspended or terminated at any time at management’s discretion. See
“Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers” for additional information.
Current Outlook
To date, we have not achieved profitability and have sustained net losses in every fiscal year since our inception, and we have financed our operations
primarily through proceeds from issuance of our Ordinary Shares, warrants and convertible notes. Our primary requirements for liquidity and capital resources
are to finance working capital, capital expenditures, general corporate purposes and to advance our M&A strategy. We believe that our current resources will be
sufficient to meet our business needs for at least the next 12 months.
In addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional funds
sooner than planned. Our future capital requirements will depend on many factors, including:
● the progress and costs of our research and development activities;
● the progress of commercial sales of our products;
● the costs of manufacturing our products;
● the costs of filing, prosecuting, enforcing and defending patent claims, intellectual property rights and other legal claims;
36
● the potential costs of contracting with third parties to provide marketing and distribution services for us or for building such capacities internally; and
● the magnitude of our general and administrative expenses.
5.C Research and development, patents and licenses, etc.
For a description of our research and development programs and the amounts that we have incurred over the last two years pursuant to those programs,
please see “Item 5. Operating and Financial Review and Prospects— A. Operating Results— Operating Expenses— Research and Development Expenses” and
“Item 5. Operating and Financial Review and Prospects— A. Operating Results— Comparison of the year ended December 31, 2023 to the year ended
December 31, 2022— Research and Development Expenses”
5.D Trend Information
The trends impacting us are described elsewhere in this annual report on Form 20-F, including in Items 4.B. and 5.B. As noted therein, among other trends,
we have been engaged, and plan to continue to engage, in mergers and acquisitions to diversify or expand our business, which may pose risks to our business,
and we may not realize the anticipated benefits of these mergers or acquisitions.
5.E Critical Accounting Estimates
We describe our material Accounting Policies more fully in Note 3 to our financial statements for the year ended December 31, 2023, included elsewhere in
this annual report on Form 20-F. We believe that the accounting policies described in Note 3 to our financial statements are critical in order to fully understand
and evaluate our financial condition and results of operations.
We prepare our financial statements in accordance with IFRS as issued by the IASB. At the time of the preparation of the financial statements, our
management is required to use estimates, evaluations, and assumptions which affect the application of the accounting policy and the amounts reported for
assets, obligations, income, and expenses. Any estimates and assumptions are continually reviewed. The changes to the accounting estimates are credited during
the period in which the change to the estimate is made.
Other financial and operating data:
(In thousands of U.S. dollars)
EBITDA (loss)
Adjusted EBITDA (loss)
Year Ended
December 31,
2023
(94,958)
(99,942)
EBITDA is a non-IFRS measure and is defined as earnings before interest income, income tax, depreciation and amortization. We believe that EBITDA, as
described above, should be considered in evaluating the company’s operations. EBITDA facilitates operating performance comparisons from period to period
and company to company by backing out potential differences caused by variations in capital structures (affecting interest expenses (income), net), and the age
and depreciation charges and amortization of fixed and intangible assets, respectively (affecting relative depreciation and amortization expense, respectively)
and EBITDA is useful to an investor in evaluating our operating performance because it is widely used by investors, securities analysts and other interested
parties to measure a company’s operating performance without regard to the items mentioned above.
37
Adjusted EBITDA is a non-IFRS measure and is defined as earnings before other financial income, income tax, depreciation and amortization, share-based
payments and other extraordinary income, net, which consists of additional compensation for damaged inventory, less reorganization costs (see Notes 6 and
18(C) to our financial statements). Other financial expense (income), net includes exchange rate differences as well as finance income for revaluation of assets
and liabilities. We believe that Adjusted EBITDA, as described above, should also be considered in evaluating the company’s operations. Like EBITDA,
Adjusted EBITDA facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused
by variations in capital structures (affecting other financial expenses (income), net), and the age and depreciation charges and amortization of fixed and
intangible assets, respectively (affecting relative depreciation and amortization expense, respectively), as well as from share-based payment expenses, and
Adjusted EBITDA is useful to an investor in evaluating our operating performance because it is widely used by investors, securities analysts and other
interested parties to measure a company’s operating performance without regard to non-cash items, such as expenses related to share-based payments.
The following is a reconciliation of net loss to EBITDA and Adjusted EBITDA:
(In thousands of U.S. dollars)
Net loss
Tax expenses
Depreciation
Interest income
EBITDA (loss)
Finance income from revaluation of assets and liabilities
Exchange rate differences
Share-based compensation expenses
Other extraordinary income, net
Adjusted EBITDA (loss)
38
For the
Year Ended
December 31,
2023
(55,660)
62
6,544
(45,904)
(94,958)
(21,887)
(1,571)
20,101
(1,627)
(99,942)
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
The following table sets forth information regarding our executive officers, key employees and directors as of March 15, 2024:
Name
Yoav Stern
Tomer Pinchas
Nick Geddes
Zivi Nedivi
Yoav Nissan-Cohen (1)
Simon Anthony-Fried (1)
Michael X. Garrett (1)
Oded Gera (1) (2) (3)
Roni Kleinfeld (1) (2) (3)
J. Christopher Moran (1) (2) (3)
Age
70
Position
Chief Executive Officer, Director
50
48
65
74
50
62
71
67
64
Chief Financial Officer & Chief Operating Officer
Chief Technology Officer
President
Chairman of the Board of Directors
Director
Director
Director
Director
Director
Indicates independent director under Nasdaq Stock Market rules.
(1)
(2) Member of our Audit Committee and Financial Statements Examination Committee.
(3) Member of our Compensation Committee.
In September 2023, Col. (Ret.) Channa Caspi announced that she will be stepping down from our board of directors due to personal medical circumstances.
In October 2023, as part of setting our board of directors to be efficient and effective, we followed Institutional Shareholder Services guidelines, thereby
announcing that Mr. Igal Rotem and Mr. Amit Dror will be stepping down from our board of directors effective immediately as part of a planned transition. At
the same time, Mr. Amit Dror also resigned from his position as our Customer Success Officer.
In December 2023, we terminated our employment agreement with Mr. Hanan Gino, who served as our Chief Product Officer and Head of Technology
M&A since April 2021.
In March 2024, we terminated our employment agreement with Mrs. Yael Sandler, who served as our Chief Financial Officer since June 2015 until January
2024.
Yoav Stern, Chief Executive Officer and Director
Mr. Yoav Stern has served as our Chief Executive Officer since January 2020. Mr. Stern has served as our Chairman of the board of directors from May
2021 until September 2023, and has continued to serve on the board of directors since then. Mr. Stern has been an investor, chief executive officer and/or
chairman of hi-tech companies. Mr. Stern has led companies in the fields of software and IT, video surveillance, audio and voice over IP, semiconductors
equipment, fiber optics, defense-technologies, communication solutions, aerospace, and homeland security. Mr. Stern spent most of his business career in the
United States, running both public and private companies with global operations including in United Kingdom, Germany, Australia, India and Singapore. Since
1997, Mr. Stern has also served as the Co-Chairman of Bogen Communication International and Bogen Corporation, and prior to joining Nano Dimension, from
2011 to 2016, Mr. Stern was the president and chief executive officer of DVTEL Inc., headquartered in New Jersey, USA. Mr. Stern has a B.Sc. in Mathematics
and Computer Science, a Diploma in Automation and Mechanical Engineering and an M.A. in International Relations from New York University. Mr. Stern is a
graduate of the Israeli Air Force Academy and served as an F-15 Pilot and D. Squadron Commander, as well as the Commander of the Combat Operational
Training Unit of the Israeli Air Force.
39
Tomer Pinchas, Chief Financial Officer and Chief Operating Officer
Mr. Tomer Pinchas has served as our Chief Operating Officer since October 2022. Mr. Pinchas also served as interim Chief Financial Officer from August
2023 until he assumed the role permanently in January 2024. Mr. Pinchas brings 18 years of global experience in finance, M&A and operations management.
He recently served as a Chief Financial Officer at Kryon Systems Ltd. from March 2018 to August 2022, a global company that offers intelligence robotic
process automation for enterprises digital transformation solution, responsible for all financial management, legal and revenue operations functions. Prior to
joining Kryon Systems Ltd., Mr. Pinchas served as a Chief Financial Officer at myThings Inc. from July 2016 to March 2018, a personalized retargeting
company providing advertisers with display advertisements in real time. Previously, Mr. Pinchas served as a Chief Financial Officer at DVTel, Inc. from 2007
to 2016, a developer of IP video surveillance solutions, where he led the due diligence, negotiation and acquisition of DVTel, Inc. by FLIR Systems Inc. Mr.
Pinchas’ experience also includes working at top public accounting firms, including PwC in New York City from 2005 to 2006. Mr. Pinchas is a graduate of the
General Management Program at Harvard Business School and holds a B.A in Accounting and Finance from the College of Management.
Nick Geddes, Chief Technology Officer
Mr. Nick Geddes has served as our Chief Technology Officer since July 2022. Mr. Geddes co-founded GIS in 2006 and served as GIS’s Chief Operating
Officer and Chief Technology Officer from 2006 through 2021. Mr. Geddes has remained deeply involved in both the technical and commercial areas of GIS,
driving innovative solutions from conception through to product. Prior to GIS, Nick worked as inkjet consultant, and for six years at USB Investment Bank as a
Director in Debt Capital Markets. Nick has a master’s degree from Cambridge University in Computer Science.
Zivi Nedivi, President
Mr. Zivi Nedivi has served as our President since April 2021. Mr. Nedivi has been the chief executive officer of several technology companies, including
Cyalume Technologies Inc., a world leader in chemical-lighting solutions that manufactures chemiluminescent ammunition and infra-red devices used by U.S.
and NATO military forces as well as law enforcement agencies. He was also the chief operating officer of Lumenis Ltd., a developer of innovative energy-based
technologies. From 1990 to 2005, he was the chief executive officer of Kellstrom Industries, Inc., an advanced data management company. A graduate of the
Israel Air Force Academy, he was a F-15 fighter pilot for seven years and held the rank of major.
Yoav Nissan-Cohen, Chairman of the Board of Directors
Mr. Yoav Nissan-Cohen has served on our board of directors since December 2022 and has been Chairman of the board of directors since September 2023.
Mr. Nissan-Cohen’s career covers almost 40 years of scientific research, technology development, and executive management. He worked as a research scientist
in General Electric’s Research and Development Center in New York from 1988 to 1991. In 1991, he joined National Semiconductor, and in 1993 he was one of
the founders of Tower Semiconductor Ltd. (TLV: TSEM), where he served as chief executive officer, took the company public on the Nasdaq Capital Market,
and built a $1.5 billion advanced semiconductor facility. Mr. Nissan-Cohen was a venture partner in a large VC fund, and later served as the chairman and chief
executive officer of Amimon, Inc., a semiconductor company, from 2005 to 2013, providing the only solution for a zero-latency wireless camera link for
various medical and other video applications. Mr. Nissan-Cohen has been an executive board member in Weebit Nano (ASX: WBT) since January 2018, a
semiconductor company developing a new class of semiconductor memory chips, and the chairman of VisionLab Ltd., a company specializing in advanced
vision-based solutions for industrial and military applications, as well as TeraCyte Analytics Ltd., a biotechnology company which developed a platform for
high throughput temporal analysis of live single-cells, with breakthrough applications for research, discovery, and development of new drugs and therapies. Mr.
Nissan-Cohen holds a Ph.D. in physics from the Hebrew University in Jerusalem.
40
Simon Anthony-Fried, Director
Mr. Simon Fried has served on our board of directors since August 2014. Mr. Anthony-Fried is one of our co-founders and served as our Chief Business
Officer from August 2014 until December 2017. In January 2018, Mr. Anthony-Fried relocated to California, and was appointed as the President of our wholly-
owned subsidiary, Nano USA. In June 2019, Mr. Anthony-Fried returned to Israel and served as our Chief Business Officer until December 2019. Mr. Anthony-
Fried was a co-founder of Diesse Solutions Ltd., a project management, risk and marketing consultancy, and served as its chief executive officer from 2004 to
2014. He has worked as a risk management and corporate governance consultant to the Financial Services Authority in the United Kingdom and as a senior
strategy consultant at Monitor Company, a Boston based boutique strategy consulting firm from 2000 to 2002. Mr. Anthony-Fried has a background that covers
marketing and sales strategy, management, business development, financial services regulation, fundraising and c-suite consulting. Mr. Anthony-Fried has
worked extensively on global projects in both the B2B and B2C markets driving significant strategic change to global marketing organizations. He also
currently serves as a director of the Milk & Honey Distillery Ltd. Mr. Anthony-Fried holds a B.Sc. in Experimental Psychology from University College
London, an M.Sc. in Judgment and Risk from Oxford University and an M.B.A. from SDA Bocconi in Milan.
Michael X. Garrett, Director
Mr. Garrett has served on our board of directors since October 2023. General Garrett is a retired United States Army four-star general with nearly 40 years
of service, most recently serving as Commanding General, United States Army Forces Command, the largest command in the U.S. Army, from March 2019
until his retirement in July 2022. General Garrett’s 38-year active military career culminated in three years commanding U.S. Army Forces Command and its
750,000 combat and support personnel across the United States, from 2019 to 2022. His earlier command tours include U.S. Army Central and its Army
Soldiers serving throughout the Middle East; U.S. Army Alaska; and the U.S. Army’s first Alaska-based airborne brigade, which Garrett established and
deployed into Iraq in the mid-2000s. General Garrett served nearly 40 years on active duty as an Infantryman, Paratrooper, and Ranger who ultimately rose to
the rank of four-star general as Commander of U.S. Army Forces Command from 2019 to 2022. General Garrett’s military decorations include the
Distinguished Service and Defense Superior Service medals; he is also a Distinguished Member of the 75th Ranger Regiment. General Garrett is a member of
the board of directors of Textron Inc., First Command Financial Planning, Inc., and Semper Fi & America’s Fund. He is Chairman of the Board of
Commissioners for the American Battle Monuments Commission and serves as an Executive in Residence for Fayetteville State University.
Oded Gera, Director
Mr. Oded Gera has served on our board of directors since April 2021. Mr. Gera has served as Senior Global Advisor in Rothschild & Co. Global Advisory
from 2018. He is the former Chairman and Founder of Rothschild & Co. in Israel. Mr. Gera has served as Lord Jacob Rothschild’s Entrepreneur in Residence
from 2004 to 2007, as well as an advisor to the board of directors of Robeco Sustainable Private Equity Fund from 1998 to 2006. Prior to his service at
Rothchild & Co., Mr. Gera was the Chief Executive Officer of The Israel Diamond Exchange, which was subsequently bought by a public company in 1996.
Previously, he was the founder and owner of the Oded Gera fashion house, which became a household name in Israel.
Roni Kleinfeld, Director
Mr. Roni Kleinfeld has served on our board of directors since November 2012. He has over 25 years of experience as a chief executive officer in public and
private companies. He was the chief executive officer of Maariv Holdings Ltd. from 1993 to 2002, the chief executive officer of Hed Artzi Records Ltd. from
2002 to 2007, the chief executive officer of Maariv- Modiin Publishing House Ltd. from 2007 to 2010, and the chief executive officer of OMI Ltd. from 2010 to
2011. Mr. Kleinfeld has also served as director of many companies over the past ten years, including: Excite Ltd. from 2007 to 2011, Makpel Ltd. from 2007 to
2010, Elbit Imaging Ltd. (Nasdaq: EMITF) since 2010, Elran Ltd. from 2010 to 2016, Dancher Ltd. from 2012 to 2014, Mendelson Ltd. from 2012 to 2016,
White Smoke Ltd. since 2012, Edri – El Ltd. since 2015, Cofix Group Ltd. since 2015, and Luzon Group since 2017. Mr. Kleinfeld has a B.A. in economics
from the Hebrew University in Jerusalem.
41
J. Christopher Moran, Director
Mr. J. Christopher Moran has served on our board of directors since February 2020. Mr. Moran is a Vice-President of Lockheed Martin Corporation and
the Executive Director and General Manager of Lockheed Martin Ventures, the venture capital investment arm of Lockheed Martin Corporation. Mr. Moran is
responsible for leading the corporation’s investments in small technology companies, which support Lockheed Martin’s strategic business objectives. Prior to
joining Lockheed Martin in 2016, and from 1984 to 2016, Mr. Moran served in a variety of increasingly responsible positions at Applied Materials, Inc. Most
recently, Mr. Moran was the head of the Business Systems and Analytics group in the Applied Global Services Organization. Mr. Moran was with Applied for
over 32 years, including as the head of Corporate Strategy and the General Manager of Applied Ventures LLC, the strategic investing arm of Applied Materials.
Mr. Moran is a graduate of the Massachusetts Institute of Technology where he obtained both his Bachelor and master’s degrees in Mechanical Engineering.
Family Relationships
There are no family relationships between any members of our executive management and our directors.
Arrangements for Election of Directors and Members of Management
There are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive management
or our directors were selected.
B. Compensation
The following table presents in the aggregate all compensation we paid to all of our directors and senior management as a group for the year ended
December 31, 2023. The table does not include any amounts we paid to reimburse any of such persons for costs incurred in providing us with services during
this period.
All amounts reported in the tables below reflect the cost to the Company, in thousands of U.S. dollars, for the year ended December 31, 2023. Amounts
paid in NIS are translated into U.S. dollars at the rate of NIS 3.627 = U.S. dollar 1.00, and amounts paid in GBP are translated into U.S. dollars at the rate of
GBP 0.785 = U.S. dollar 1.00 based on the rate of exchange as reported by the Bank of Israel on December 29, 2023.
All directors and senior management as a group, consisting of 16 persons
$
5,126 $
Salary and
Related
Benefits,
including
Pension,
Retirement
and Other
Similar
Benefits
Share-Based
Compensation
7,100
(1) Includes Mrs. Yael Sandler, who was terminated from her position as our Chief Financial Officer in March 2024, Mr. Amit Dror, who resigned from his
position as Chief Customer Success Officer in October 2023, and Mr. Hanan Gino, who was terminated from his position as our Chief Product Officer and
Head of M&A in December 2023.
42
In accordance with the Companies Law, the table below reflects the compensation granted to our five most highly compensated officers and directors
during or with respect to the year ended December 31, 2023.
Annual Compensation- in thousands of U.S. dollars – Convenience Translation (*)
Executive Officers and Directors
Yoav Stern
Zivi Nedivi
Nick Geddes
Hanan Gino
Tomer Pinchas
Salary and
Related
Benefits,
including
Pension,
Retirement
and Other
Similar
Benefits
Share-Based
Compensation(1)
Total
$
$
$
$
$
1,125 $
— $
545 $
2,665 $
1,064 $
1,172 $
390 $
1,588 $
414 $
1,004 $
1,125
3,210
2,236
1,978
1,418
(*) Using the exchange rate as of December 29, 2023, which was 3.627 (NIS/USD) and 0.785 (GBP/USD)
(1) Computed based on Black-Scholes-Merton formula, binomial pricing model or Monte Carlo simulations.
Employment and Services Agreements with Executive Officers
We have entered into written employment or services agreements with each of our executive officers. All of these agreements contain customary provisions
regarding noncompetition, confidentiality of information and assignment of inventions. However, the enforceability of the noncompetition provisions may be
limited under applicable law. In addition, we have entered into agreements with each executive officer and director pursuant to which we have agreed to
indemnify each of them up to a certain amount and to the extent that these liabilities are not covered by directors’ and officers’ insurance. Some members of our
senior management are eligible for bonuses each year. The bonuses are payable upon meeting objectives and targets that are set by our chief executive officer,
and by our board of directors for our chief executive officer, and approved annually according to the Companies Law requirements.
For a description of the terms of our options and option plan, see “Item 6.E. Share Ownership” below.
Directors’ Service Contracts
We currently do not have written agreements with any director providing for benefits upon the termination of his employment with our company.
C. Board Practices
Introduction
Our board of directors presently consists of seven members. We believe that Messrs. Nissan-Cohen, Fried, Garrett, Gera, Kleinfeld, and Moran, are
“independent” for purposes of Nasdaq Stock Market rules. Our amended and restated articles of association provides that the number of board of directors’
members shall be set by the general meeting of the shareholders provided that it will consist of not less than three and not more than twelve members. Pursuant
to the Companies Law, the supervision of the management of our business is vested in our board of directors. Our board of directors may exercise all powers
and may take all actions that are not specifically granted to our shareholders or to management. Our executive officers are responsible for our day-to-day
management and have individual responsibilities established by our board of directors. Pursuant to the Companies Law, our Chief Executive Officer is
appointed by, and serves at the discretion of, our board of directors.
43
Mr. Yoav Stern has been our Chief Executive Officer since January 20, 2020, and has been compensated in accordance with the terms of an agreement, or
the Amended and Restated Management Services Agreement, approved by our shareholders on July 7, 2020, by and between the Company and Mr. Yoav Stern,
through his fully owned entity, DoubleShore Inc. The term of Mr. Stern’s agreement was for a period of three years and was set to expire on December 31,
2022. On December 19 and 20, 2022, our compensation committee and board of directors, respectively, approved the renewal of Mr. Stern’s agreement as of
January 1, 2023 and until the next general meeting of shareholders. The renewed agreement was approved in accordance the Companies Law exemptions
regarding interested party transactions (regulation 1B4), according to which, the compensation committee and the board of directors may decide to renew the
engagement with its Chief Executive Officer or Director in terms which are not materially different from his/her previous terms or in terms which are not
favorable compared to the previous engagement, provided in any case that they adhere with our compensation policy. On September 7, 2023, a general meeting
of shareholders was held and Mr. Stern’s agreement expired and all payments due to Mr. Stern in connection therewith were made. Since September 7, 2023,
Mr. Stern has received no compensation for his ongoing services and there is no certainty when Mr. Stern shall have an approved compensatory arrangement
with the Company for his services, if at all. Per the approval of our compensation committee and board of directors, the Company pays for expenses incurred in
connection with Mr. Stern’s role as our Chief Executive Officer.
All other executive officers are appointed by our Chief Executive Officer. If the executive officers are also officer holders as defined under the Companies
Law, their terms of employment are subject to the approval of the compensation committee and the board of directors, and if such terms of employment are not
consistent with our compensation policy, then such terms require the approval of our shareholders.
Our directors (other than the external directors, when applicable) are divided into three classes that are each elected at the third annual general meeting of
our shareholders, in a staggered fashion (such that one class is elected each annual general meeting), and serve on our board of directors unless they are
removed by a vote of 70% of the total voting power of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, in
accordance with the Companies Law and our amended and restated articles of association.
In addition, our amended and restated articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors or in
addition to the acting directors (subject to the limitation on the number of directors), for the remaining period of time during which the director whose service
has ended was filled would have held office, or in case of a vacancy due to the number of directors serving being less than the maximum number pursuant to
Article 38 to our amended and restated articles of association.
Under the Companies Law, nominations for directors may be made by any shareholder holding at least one percent of our outstanding voting power.
However, any such shareholder may make such a nomination only if a written notice of such shareholder’s intent to make such nomination has been given to
our board of directors. Any such notice must include certain information, the consent of the proposed director nominee(s) to serve as our director(s) if elected
and a declaration signed by the nominee(s) declaring that there is no limitation under the Companies Law preventing their election and that all of the
information that is required to be provided to us in connection with such election under the Companies Law and our amended and restated articles of
association has been provided.
However, under new exemptions applicable as of March 12, 2024, generally referred to as the New Exemptions, one or more shareholders of an Israeli
company whose shares are listed outside of Israel (e.g. Nasdaq), may request its company’s board of directors to include an appointment of a candidate for a
position on the board of directors or the termination of a board member as an item on the agenda of a future general meeting, provided that the shareholder hold
at least five percent of the voting rights of the company, instead of the one percent required in the past. The decision whether to include the suggested item on
the agenda is subject to the Company’s discretion, under the provisions of the Companies Law.
44
Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financial
expertise. In determining the number of directors required to have such expertise, our board of directors must consider, among other things, the type and size of
the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number of directors of our company who
are required to have accounting and financial expertise is two.
The board of directors may elect one director to serve as the chairman of the board of directors to preside at the meetings of the board of directors, and may
also remove that director as chairman. Pursuant to the Companies Law, neither the chief executive officer nor any of his or her relatives is permitted to serve as
the chairman of the board of directors, and a company may not vest the chairman or any of his or her relatives with the chief executive officer’s authorities. In
addition, a person who reports, directly or indirectly, to the chief executive officer may not serve as the chairman of the board of directors; the chairman may
not be vested with authorities of a person who reports, directly or indirectly, to the chief executive officer; and the chairman may not serve in any other position
in the company or a controlled company, but he or she may serve as a director or chairman of a controlled company. However, the Companies Law permits a
company’s shareholders to determine, for a period not exceeding three years from each such determination, that the chairman or his or her relative may serve as
chief executive officer or be vested with the chief executive officer’s authorities, and that the chief executive officer or his or her relative may serve as chairman
or be vested with the chairman’s authorities. Such determination of a company’s shareholders requires either: (1) the approval of at least two-thirds of the shares
of those shareholders present and voting on the matter (other than controlling shareholders and those having a personal interest in the determination); or (2) that
the total number of shares opposing such determination does not exceed 2% of the total voting power in the company (“special majority”). On May 25, 2021,
our shareholders approved in a special majority that Mr. Stern will serve as the chairman and the chief executive officer for a period of three years. On
September 15, 2023, we announced that Mr. Yoav Nissan-Cohen was appointed to serve as the chairman of our board of directors, while Mr. Stern continues to
serve as our chief executive officer and director.
The board of directors may, subject to the provisions of the Companies Law, delegate any or all of its powers to committees of the board, and it may, from
time to time, revoke such delegation or alter the composition of any such committees, subject to certain limitations. Unless otherwise expressly provided by the
board of directors, the committees shall not be empowered to further delegate such powers. The composition and duties of our audit committee, financial
statement examination committee and compensation committee are described below.
The board of directors oversees how management monitors compliance with our risk management policies and procedures, and reviews the adequacy of the
risk management framework in relation to the risks faced by us. The board of directors is assisted in its oversight role by an internal auditor. The internal auditor
undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to our audit committee.
External Directors
Under the Companies Law, except as provided below, companies incorporated under the laws of the State of Israel that are publicly traded, including Israeli
companies with shares listed on the Nasdaq, are required to appoint at least two external directors who meet the qualification requirements set forth in the
Companies Law. The definitions of an external director under the Companies Law and independent director under Nasdaq Stock Market rules are similar such
that it would generally be expected that the external directors will also comply with the independence requirement under Nasdaq Stock Market rules.
Pursuant to regulations under the Companies Law, the board of directors of a company such as us is not required to have external directors if: (i) the
company does not have a controlling shareholder (as such term is defined in the Companies Law); (ii) a majority of the directors serving on the board of
directors are “independent,” as defined under Nasdaq Rule 5605(a)(2); and (iii) the company follows Nasdaq Rule 5605(e)(1), which requires that the
nomination of directors be made, or recommended to the board of directors, by a Nominating Committee of the board of directors consisting solely of
independent directors, or by a majority of independent directors. The Company meets all these requirements. On November 20, 2017, our board of directors
resolved to adopt the corporate governance exemption set forth above, and accordingly we no longer have external directors as members of our board of
directors.
45
Fiduciary Duties of Office Holders
The Companies Law imposes a duty of care and a duty of loyalty on all office holders of a company.
The term “office holder” is defined in the Companies Law as a general manager, chief business manager, deputy general manager, vice general manager,
any other person assuming the responsibilities of any of these positions regardless of that person’s title, a director and any other manager directly subordinate to
the general manager.
The duty of care requires an office holder to act with the level of skill with which a reasonable office holder in the same position would have acted under
the same circumstances. The duty of care of an office holder includes a duty to use reasonable means to obtain:
● information on the advisability of a given action brought for his or her approval or performed by him or her by virtue of his or her position; and
● all other important information pertaining to these actions.
The duty of loyalty of an office holder requires an office holder to act in good faith and for the benefit of the company, and includes a duty to:
● refrain from any conflict of interest between the performance of his or her duties in the company and his performance of his other duties or personal
affairs;
● refrain from any action that constitutes competition with the company’s business;
● refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and
● disclose to the company any information or documents relating to the company’s affairs which the office holder has received due to his or her position
as an office holder.
Approval of Related Party Transaction under Israeli Law
General
Under the Companies Law, we may approve an action by an office holder from which the office holder would otherwise have to refrain, as described
above, if:
● the office holder acts in good faith and the act or its approval does not cause harm to the company; and
● the office holder disclosed the nature of his or her interest in the transaction (including any significant fact or document) to the company at a
reasonable time before the company’s approval of such matter.
46
Disclosure of Personal Interests of an Office Holder
The Companies Law requires that an office holder disclose to the company, promptly, and, in any event, not later than the board meeting at which the
transaction is first discussed, any direct or indirect personal interest that he or she may have and all related material information known to him or her relating to
any existing or proposed transaction by the company. If the transaction is an extraordinary transaction, the office holder must also disclose any personal interest
held by:
● the office holder’s relatives; or
● any corporation in which the office holder or his or her relatives holds 5% or more of the shares or voting rights, serves as a director or general
manager or has the right to appoint at least one director or the general manager.
An office holder is not, however, obliged to disclose a personal interest if it derives solely from the personal interest of his or her relative in a transaction
that is not considered an extraordinary transaction. Under the Companies Law, an extraordinary transaction is a transaction:
● not in the ordinary course of business;
● not on market terms; or
● that is likely to have a material effect on the company’s profitability, assets or liabilities.
The Companies Law does not specify to whom within us nor the manner in which required disclosures are to be made. We require our office holders to
make such disclosures to our board of directors.
Under the Companies Law, once an office holder complies with the above disclosure requirement, the board of directors may approve a transaction
between the company and an office holder, or a third party in which an office holder has a personal interest, unless the articles of association provide otherwise
and provided that the transaction is not detrimental to the company’s interest. If the transaction is an extraordinary transaction, first the audit committee and
then the board of directors, in that order, must approve the transaction. Under specific circumstances, shareholder approval may also be required. A director who
has a personal interest in an extraordinary transaction, which is considered at a meeting of the board of directors or the audit committee, may not be present at
this meeting or vote on this matter, unless a majority of the board of directors or the audit committee, as the case may be, has a personal interest. If a majority of
the board of directors has a personal interest, then shareholder approval is generally also required.
Under the Companies Law, all arrangements as to compensation of office holders require approval of the compensation committee and board of directors,
and compensation of office holders who are the Chief Executive Officer or directors must also be approved, subject to certain exceptions, by the shareholders,
by a special majority, in that order.
Disclosure of Personal Interests of a Controlling Shareholder
Under the Companies Law, the disclosure requirements that apply to an office holder also apply to a controlling shareholder of a public company.
Extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, including a private placement in which a
controlling shareholder has a personal interest, as well as transactions for the provision of services whether directly or indirectly by a controlling shareholder or
his or her relative, or a company such controlling shareholder controls, and transactions concerning the terms of engagement of a controlling shareholder or a
controlling shareholder’s relative, whether as an office holder or an employee, require the approval of the audit committee or the compensation committee, as
the case may be, the board of directors and a majority of the shares voted by the shareholders of the company participating and voting on the matter in a
shareholders’ meeting. In addition, the shareholder approval must fulfill one of the following requirements:
● at least a majority of the shares held by shareholders who have no personal interest in the transaction and are voting at the meeting must be voted in
favor of approving the transaction, excluding abstentions; or
● the shares voted by shareholders who have no personal interest in the transaction who vote against the transaction represent no more than 2% of the
voting rights in the company.
47
In addition, any extraordinary transaction with a controlling shareholder or in which a controlling shareholder has a personal interest with a term of more
than three years requires the above mentioned approval every three years; however, such transactions not involving the receipt of services or compensation can
be approved for a longer term, provided that the audit committee determines that such longer term is reasonable under the circumstances. Under the Companies
Law regulations, subject to certain terms, such transactions can be extended or approved after three years only by the audit committee and the Board.
The Companies Law requires that every shareholder that participates, in person, by proxy or by voting instrument, in a vote regarding a transaction with a
controlling shareholder, must indicate in advance or in the ballot whether or not that shareholder has a personal interest in the vote in question. Failure to so
indicate will result in the invalidation of that shareholder’s vote.
The term “controlling shareholder” is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, other than by
virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of the voting rights in a
company or has the right to appoint the majority of the directors of the company or its general manager. In certain related party transactions, a shareholder who
holds 25% or more of the voting rights at the general meeting of the company will be referred to as the “controlling shareholder”, if no other shareholder holds
more than 50% of the voting rights in the company.
Duties of Shareholders
Under the Companies Law, a shareholder has a duty to refrain from abusing its power in the company and to act in good faith and in an acceptable manner
in exercising its rights and performing its obligations to the company and other shareholders, including, among other things, voting at general meetings of
shareholders on the following matters:
● amendment of the articles of association;
● increase in the company’s authorized share capital;
● merger; and
● the approval of related party transactions and acts of office holders that require shareholder approval.
A shareholder also has a general duty to refrain from oppressing other shareholders.
The remedies generally available upon a breach of contract will also apply to a breach of the above-mentioned duties, and in the event of oppression of
other shareholders, additional remedies are available to the injured shareholder.
In addition, any controlling shareholder, any shareholder that knows that its vote can determine the outcome of a shareholder vote and any shareholder that,
under a company’s articles of association, has the power to appoint or prevent the appointment of an office holder, or has another power with respect to a
company, is under a duty to act with fairness towards the company. The Companies Law does not describe the substance of this duty except to state that the
remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness, taking the shareholder’s position
in the company into account.
48
Committees of the Board of Directors
Our board of directors has established seven standing committees, the audit committee (which also acts as the Financial Statements committee), the
compensation committee, the independent committee, the strategy committee, the M&A and operation committee, the litigation – proxy fight committee and the
ESG committee.
Audit Committee
Under the Companies Law, we are required to appoint an audit committee. Our audit committee, acting pursuant to a written charter, is comprised of
Messrs. Gera, Moran and Kleinfeld.
Our audit committee acts as a committee for review of our financial statements as required under the Companies Law, and in such capacity oversees and
monitors our accounting; financial reporting processes and controls; audits of the financial statements; compliance with legal and regulatory requirements as
they relate to financial statements or accounting matters; the independent registered public accounting firm’s qualifications, independence and performance; and
provides the board of directors with reports on the foregoing.
Under the Companies Law, our audit committee is responsible for:
i.
determining whether there are deficiencies in the business management practices of our company, and making recommendations to the board of
directors to improve such practices;
ii. determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest and whether
such transaction is extraordinary or material under Companies Law) (see “Item 7.B. Approval of Related Party Transactions under Israeli Law”);
iii. examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools to dispose
of its responsibilities;
iv. examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors or
shareholders, depending on which of them is considering the appointment of our auditor; and
v.
establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided to such
employees.
Our audit committee may not conduct any discussions or approve any actions requiring its approval (see “Item 7.B. Approval of Related Party Transactions
under Israeli Law”), unless at the time of the approval a majority of the committee’s members are present.
Nasdaq Stock Market Requirements for Audit Committee
Under the Nasdaq Stock Market rules, we are required to maintain an audit committee consisting of at least three members, all of whom are independent
and are financially literate and one of whom has accounting or related financial management expertise.
As noted above, the members of our audit committee include Mr. Kleinfeld, Mr. Moran and Mr. Gera, each of whom is “independent,” as such term is
defined in under Nasdaq Stock Market rules. Mr. Gera serves as the chairman of our audit committee. All members of our audit committee meet the
requirements for financial literacy under the Nasdaq Stock Market rules. Our board of directors has determined that each member of our audit committee is an
audit committee financial expert as defined by the SEC rules and has the requisite financial experience as defined by the Nasdaq Stock Market rules.
49
Financial Statement Examination Committee
Under the Companies Law, the board of directors of a public company in Israel must appoint a financial statement examination committee, which consists
of members with accounting and financial expertise or the ability to read and understand financial statements. According to a resolution of our board of
directors, the audit committee has been assigned the responsibilities and duties of a financial statement examination committee, as permitted under relevant
regulations promulgated under the Companies Law. The function of a financial statement examination committee is to discuss and provide recommendations to
its board of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection
with the preparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the
financial statements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; and (5) value
evaluations, including the assumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent
registered public accounting firm and our internal auditor are invited to attend all meetings of the audit committee when it is acting in the role of the financial
statement examination committee.
Compensation Committee
Under the Companies Law, the board of directors of any public company must establish a compensation committee. Under the Nasdaq rules, we are
required to maintain a compensation committee consisting entirely of independent directors (or the determination of such compensation solely by the
independent members of our board of directors).
Our compensation committee is acting pursuant to a written charter, and consists of Messrs. Gera, Moran and Kleinfeld, each of whom is “independent,” as
such term is defined under Nasdaq rules. Our compensation committee complies with the provisions of the Companies Law, the regulations promulgated
thereunder, and our amended and restated articles of association. Our compensation committee also complies with committee membership and charter
requirements prescribed under the Nasdaq Stock Market rules.
Our compensation committee reviews and recommends to our board of directors: (1) the annual base compensation of our office holders and directors; (2)
annual incentive bonus plans, including the specific goals and amount; (3) equity compensation; (4) employment agreements, severance arrangements, and
change in control agreements/provisions; (5) retirement grants and/or retirement bonuses; and (6) any other benefits, compensation, compensation policies or
arrangements.
The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagement
of office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering the
recommendations of the compensation committee. The compensation policy is then brought for approval by our shareholders. On December 26, 2018, our
shareholders approved our compensation policy, which was further approved on July 7, 2020, for three more years. In June 2022, our shareholders approved our
amended compensation policy. The amended compensation policy provided, among other things, for annual restricted share units grants for our non-executive
board members and one-time grants for new non-executive directors appointed by our board of directors or elected by annual general meeting of our
shareholders.
The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders and directors,
including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The
compensation policy must relate to certain factors, including advancement of the company’s objectives, the company’s business and its long-term strategy, and
creation of appropriate incentives for executives. It must also consider, among other things, the company’s risk management, size and the nature of its
operations. The compensation policy must furthermore consider the following additional factors:
● the knowledge, skills, expertise and accomplishments of the relevant director or executive;
● the director’s or executive’s roles and responsibilities and prior compensation agreements with him or her;
50
● the relationship between the terms offered and the average and median compensation of the other employees of the company;
● the impact of disparities in salary upon work relationships in the company;
● the possibility of reducing variable compensation at the discretion of the board of directors; and the possibility of setting a limit on the exercise value
of non-cash variable compensation; and
● as to severance compensation, the period of service of the director or executive, the terms of his or her compensation during such service period, the
company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and the maximization
of its profits, and the circumstances under which the person is leaving the company.
The compensation policy must also include the following principles:
● the link between variable compensation and long-term performance and measurable criteria;
● the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;
● the conditions under which a director or executive would be required to repay compensation paid to him or her if it was later shown that the data upon
which such compensation was based was inaccurate and was required to be restated in the company’s financial statements;
● the minimum holding or vesting period for variable, equity-based compensation; and
● maximum limits for severance compensation.
The compensation policy must also consider appropriate incentives from a long-term perspective and maximum limits for severance compensation.
The compensation committee is responsible for (1) recommending the compensation policy to a company’s board of directors for its approval (and
subsequent approval by our shareholders); (2) administration of the Company’s clawback policy; and (3) duties related to the compensation policy and to the
compensation of a company’s office holders as well as functions previously fulfilled by a company’s audit committee with respect to matters related to approval
of the terms of engagement of office holders, including:
● recommending whether a compensation policy should continue in effect, if the then-current policy has a term of greater than three years (approval of
either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);
● recommending to the board of directors periodic updates to the compensation policy;
● assessing implementation of the compensation policy; and
● determining whether the compensation terms of the chief executive officer of the company need not be brought to approval of the shareholders.
51
Nasdaq Stock Market Requirements for Compensation Committee
Under Nasdaq rules, we are required to maintain a compensation committee consisting of at least two members, all of whom are independent. In addition,
in affirmatively determining the independence of any director who will serve on the compensation committee of a board of directors, the board of directors must
consider all factors specifically relevant to determining whether a director has a relationship to the company which is material to that director’s ability to be
independent from management in connection with the duties of a compensation committee member.
As noted above, the members of our compensation committee include Messrs. Moran, Gera and Kleinfeld, each of whom is “independent,” as such term is
defined under Nasdaq rules. Mr. Oded Gera serves as the chairman of our compensation committee.
Internal Auditor
Under the Companies Law, the board of directors must also appoint an internal auditor nominated by the audit committee. Our internal auditor is Yisrael
Gewirtz from Fahn Kanne Control Management Ltd. Grant Thornton Israel. The role of the internal auditor is to examine whether a company’s actions comply
with the law and proper business procedure. The internal auditor may not be an interested party or office holder, or a relative of any interested party or office
holder, and may not be a member of the company’s independent accounting firm or its representative. The Companies Law defines an interested party as a
holder of 5% or more of the shares or voting rights of a company, any person or entity that has the right to nominate or appoint at least one director or the
general manager of the company or any person who serves as a director or as the general manager of a company. Our internal auditor is not our employee, but
the managing partner of a firm which specializes in internal auditing.
Remuneration of Directors
Under the Companies Law, remuneration of directors is subject to the approval of the compensation committee, thereafter by the board of directors and
thereafter by the general meeting of the shareholders. If the remuneration of the directors is in accordance with the regulations applicable to remuneration of the
external directors, if any, then such remuneration shall be exempt from the approval of the general meeting of the shareholders.
Insurance
Under the Companies Law, a company may, if specified in its articles of association, obtain insurance for any of its office holders for:
● a breach of duty of care to the company or to any other person;
● a breach of duty of loyalty to the company, provided that the office holder acted in good faith and had reasonable grounds to assume that the act that
resulted in such breach would not prejudice the interests of the company; and
● a financial liability imposed on such office holder in favor of any other person.
Our amended and restated articles of association also allow us to obtain insurance for any of our officer holders for any other event, occurrence, matter or
circumstance under any law with respect to which the Company may, or will be able to, insure an office holder, and to the extent such law requires the inclusion
of a provision permitting such insurance in our amended and restated articles of association, then such provision shall be deemed to be included in our amended
and restated articles of association (including, without limitation, in accordance with Section 56h(b)(1) of the Israeli Securities Law, if and to the extent
applicable, and Section 50P of the Israeli Economic Competition Law).
We currently have directors’ and officers’ liability insurance, providing total coverage of $30 million for the benefit of all of our directors and officers, in
respect of which we paid a twelve-month premium of $733,340, which expires on November 4, 2024.
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Indemnification
Subject to the provisions of the Companies Law, the Company may retroactively indemnify an office holder of the Company, if specified in its articles of
association, with respect to the following liabilities and expenses, provided that such liabilities or expenses were imposed on such office holder or incurred by
such office holder due to an act performed by or an omission of the office holder in such office holder’s capacity as an office holder of the Company:
i.
ii.
financial liability imposed on an office holder in favor of another person by any court judgment, including a judgment given as a result of a settlement
or an arbitrator’s award which has been confirmed by a court in respect of an act performed by the office holder;
reasonable litigation expenses, including attorneys’ fees, expended by the office holder as a result of an investigation or proceeding instituted against
him or her by an authority authorized to conduct such investigation or proceeding, or in connection with a financial sanction, provided that (1) no
indictment (as defined in the Companies Law) was filed against such office holder as a result of such investigation or proceeding; and (2) no financial
liability in lieu of a criminal proceeding (as defined in the Companies Law) was imposed upon him or her as a result of such investigation or
proceeding or if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and
iii.
reasonable litigation costs, including attorney’s fees, expended by an office holder or which were imposed on an office holder by a court in
proceedings filed against the office holder by the Company or in its name or by any other person or in a criminal charge in respect of which the office
holder was acquitted or in a criminal charge in respect of which the office holder was convicted for an offense which did not require proof of criminal
intent.
iv. any other event, occurrence, matter or circumstance under any law with respect to which the Company may, or will be able to, insure an office holder,
and to the extent such law requires the inclusion of a provision permitting such insurance in our amended and restated articles of association, then such
provision shall be deemed to be included and incorporated in our amended and restated articles of association (including, without limitation, in
accordance with Section 56h(b)(1) of the Israeli Securities Law, if and to the extent applicable, and Section 50P of the Israeli Economic Competition
Law).
Our amended and restated articles of association allow us to indemnify our office holders up to a certain amount. The Companies Law also permits a
company to undertake in advance to indemnify an office holder, provided that if such indemnification relates to financial liability imposed on him or her, as
described above, then the undertaking should be limited to sub-sections i to iii described above, and to sub-section iv described above, provided that:
● the undertaking to indemnify is limited to such events which our board of directors shall deem to be likely to occur in light of the operations of the
Company at the time that the undertaking to indemnify is made and for such amounts or criterion which our directors may, at the time of the giving of
such undertaking to indemnify, deem to be reasonable under the circumstances; and
● the undertaking to indemnify shall set forth such events which our directors shall deem to be likely to occur in light of the operations of the Company
at the time that the undertaking to indemnify is made, and the amounts and/or criterion which our directors may, at the time of the giving of such
undertaking to indemnify, deem to be reasonable under the circumstances.
53
We have entered into indemnification agreements with all of our directors and with certain members of our senior management. Each such indemnification
agreement provides the office holder with indemnification permitted under applicable law and up to a certain amount, and to the extent that these liabilities are
not covered by directors’ and officers’ insurance.
Exemption
Subject to the provisions of the Companies Law and the Securities Law, the Company may exempt and release, in advance, if specified in its articles of
association, any office holder from any liability to the Company for damages arising out of a breach of the office holder’s duty of care towards the Company.
Notwithstanding the foregoing, the Company may not exempt its directors in advance from his liability for damages with respect to violation of his duty of
care to the Company with respect to distributions. In addition, the Company may not exempt an office holder from his liability to the Company with regard to a
resolution and/or a transaction in which the controlling shareholder and/or any office holder has a personal interest.
Limitations
The Companies Law provides that we may not exculpate or indemnify an office holder nor enter into an insurance contract that would provide coverage for
any liability incurred as a result of any of the following: (1) a breach by the office holder of his or her duty of loyalty unless (in the case of indemnity or
insurance only, but not exculpation) the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice us; (2) a breach
by the office holder of his or her duty of care if the breach was carried out intentionally or recklessly (as opposed to merely negligently); (3) any action taken
with the intent to derive an illegal personal benefit; or (4) any fine levied against the office holder.
The foregoing descriptions summarize the material aspects and practices of our board of directors. For additional details, we also refer you to the full text
of the Companies Law, as well as of our amended and restated articles of association, which are exhibits to this annual report on Form 20-F and are
incorporated herein by reference.
There are no service contracts between us or our subsidiaries, on the one hand, and our directors in their capacity as directors, on the other hand, providing
for benefits upon termination of service.
Special General Meeting of Shareholders by Murchinson
In January 2023, Murchinson Ltd., or Murchinson (which is an advisor or sub-advisor of one of our major ADS holders), submitted a request to our board
of directors for us to convene a special general shareholders meeting which would include certain amendments to our amended and restated articles of
association as well as removal of four currently serving directors – Mr. Stern, Mr. Gera, Mr. Rotem and Mr. Nissan-Cohen- and appointment of two new
director nominees, proposed by Murchinson. After careful consideration, our board of directors rejected Murchinson’s request because it failed to comply with
requirements under laws and regulations in Israel and the United States, as well as with our amended and restated articles of association.
In March 2023, despite our rejection, Murchinson conducted an illegal shareholders meeting. Due to the illegality of the shareholders meeting, our board of
directors does not recognize the results of this shareholders meeting.
On September 7, 2023, we convened an Annual General Meeting of Shareholders, or the AGM. At the AGM, our shareholders approved the re-election of a
slate of nominees, comprised of the following individuals, together constituting the Nano Slate, as Class III directors until the third annual general meeting of
shareholders following such re-election and until he or she ceases to serve in office in accordance with the provisions of the Company’s articles of association
or any law, whichever is the earlier: Yoav Nissan Cohen, Oded Gera and Col. (Res.) Channa (Hanny) Caspi; The shareholders further approved an amendment
to article 42 of our amended and restated articles of association and rejected a proposal to amend same put forth by Murchinson. The shareholders further
rejected proposals put forth by Murchinson to remove Mr. Stern, Mr. Dror, Mr. Anthony-Fried, Mr. Moran, and Mr. Kleinfeld from the board of directors.
Under the New Exemptions, one or more shareholders of an Israeli company whose shares are listed outside of Israel may request its company’s board of
directors to include an appointment of a candidate for a position on the board of directors or the termination of a board member as an item on the agenda of a
future general meeting, provided that the shareholder hold at least five percent of the voting rights of the company, instead of the one percent required in the
past. The decision whether to include the suggested item on the agenda is subject to the Company’s discretion, under the provisions of the Companies Law.
Moreover, under the New Exemptions, the board of directors of an Israeli company whose shares are listed outside of Israel shall convene a special meeting
at the request of one or more shareholders holding at least 10 percent of the issued and outstanding share capital, instead of five percent as required in the past,
or the Non Exempted Holding, and at least one percent of the voting rights in the company, or one or more shareholders holding at least 10 percent of the voting
rights in the company, provided that if the applicable law as applicable to companies incorporated in the country which the Company is listed for trade,
establishes a right to demand convening of such a meeting for those holding a percentage of holdings lower than 10 percent , then the Non Exempted Holding
shall apply.
54
D. Employees.
As of December 31, 2021, we had seven senior management, full-time employees, two of whom also served as directors in our Company. In addition, we
had 338 employees. Ten employees were located in Hong Kong, and China, 95 employees were located in Europe, 31 employees were located in the United
States and the rest were located in Israel.
As of December 31, 2022, we had 11 senior management, full-time employees, one of whom also served as a director in our Company. In addition, we had
553 employees. Eleven employees were located in Asia Pacific, 228 employees were located in Europe, 40 employees were located in the United States and the
rest were located in Israel
As of December 31, 2023, we had 10 senior management, full-time employees, one of whom also served as a director in our Company. In addition, we had 509
employees. Three employees were located in Asia Pacific, 243 employees were located in Europe, 24 employees were located in the United States and the rest
were located in Israel.
In October 2023 our board of directors approved, as part of a reorganization plan in several departments of the Company, the termination of certain
Company employees worldwide, with preferable terms.
None of our employees are represented by labor unions or covered by collective bargaining agreements. We believe that we maintain good relations with
all of our employees. However, in Israel, we are subject to certain Israeli labor laws, regulations and national labor court precedent rulings, as well as certain
provisions of collective bargaining agreements applicable to us by virtue of extension orders issued in accordance with relevant labor laws by the Israeli
Ministry of Economy and which apply such agreement provisions to our employees even though they are not part of a union that has signed a collective
bargaining agreement.
E. Share Ownership.
The following table lists as of March 15, 2024, the number of our shares beneficially owned by each of our directors, our executive officers and our
directors and executive officers as a group:
Executive Officers and Directors
Yoav Stern
Tomer Pinchas
Nick Geddes
Zivi Nedivi
Yoav Nissan-Cohen
Simon Anthony-Fried
Michael X. Garrett
Oded Gera
Roni Kleinfeld
J. Christopher Moran
All directors and executive officers as a group (10 persons)
*
Less than 1%.
Number of
Ordinary
Shares
Beneficially
Owned (1)
Percent of
Class (2)
32,355,893(3)
166,667(4)
350,000(5)
485,715(6)
13,333(7)
45,710(8)
—(9)
15,916(10)
8,378(11)
51,249(12)
33,492,861
12.9%
*
*
*
*
*
—
*
*
*
13.5%
(1) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.
Ordinary Shares relating to options currently exercisable or exercisable or RSUs vesting within 60 days of the date of this table are deemed outstanding for
computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except
as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment
power with respect to all shares shown as beneficially owned by them.
55
(2) The percentages shown are based on 221,368,434 Ordinary Shares issued and outstanding as of March 15, 2024, (which excludes shares purchased under
our repurchase plan), plus Ordinary Shares relating to options currently exercisable or exercisable within 60 days of the date of this table, which are
deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of
any other person.
(3) Mr. Stern holds 27,742,103 Series B warrants to purchase Ordinary Shares at an exercise price of $6.16 per share exercisable within 60 days. Stern YOI
Ltd. Partnership is a Nevada limited partnership. Mr. Stern is a managing member of Stern YOI Ltd. Partnership. In addition, Mr. Stern holds 4,613,790
Ordinary Shares.
(4) Mr. Pinchas holds 783,333 RSUs that do not vest within 60 days. In addition, Mr. Pinchas holds 166,667 Ordinary Shares.
(5) Mr. Geddes holds exercisable options to purchase 200,000 Ordinary Shares at an exercise price of $3.79 per share. In addition, Mr. Geddes holds options
to purchase 200,000 Ordinary Shares at an exercise price of $3.79 per share that are not exercisable within 60 days, and 850,000 RSUs that do not vest
within 60 days. In addition, Mr. Geddes holds 150,000 Ordinary Shares.
(6) Mr. Nedivi holds 1,314,285 unvested RSUs and an unvested option to purchase 1,000,000 Ordinary Shares at varied exercise prices that are not
exercisable within 60 days. In addition, Mr. Nedivi holds 485,715 Ordinary Shares.
(7) Mr. Nissan-Cohen holds 92,667 RSUs that do not vest within 60 days. In addition, Mr. Nissan-Cohen holds 13,333 Ordinary Shares.
(8) Mr. Anthony-Fried holds options to purchase 1,666 Ordinary Shares at an exercise price of $80.11 per share, and options to purchase 35,000 Ordinary
Shares at an exercise price of $0.70 per share that are exercisable within 60 days, and 9,044 Ordinary Shares. In addition, Mr. Anthony-Fried holds 51,136
RSUs that do not vest within 60 days.
(9) Mr. Garrett holds 30,000 RSUs that do not vest within 60 days.
(10) Mr. Gera holds 62,084 RSUs that do not vest within 60 days. In addition, Mr. Gera holds 15,916 Ordinary Shares.
(11) Mr. Kleinfeld holds 49,802 RSUs that do not vest within 60 days. In addition, Mr. Kleinfeld holds 8,378 Ordinary Shares.
(12) Mr. Moran holds options to purchase 35,000 Ordinary Shares at an exercise price of $0.70 per share, and options to purchase 11,916 Ordinary Shares at an
exercise price of $9.33 per share that are exercisable within 60 days. In addition, Mr. Moran holds options to purchase 1,084 Ordinary Shares at an
exercise price of $9.33 per share and 37,667 RSUs that do not vest within 60 days. In addition, Mr. Moran holds 4,333 Ordinary Shares.
2015 Stock Option Plan
We maintain one equity incentive plan – our Employee Stock Option Plan (2015), or the 2015 Plan. As of March 15, 2024, the number of Ordinary Shares
reserved for the exercise of options granted under the plan was 64,000,000. In addition, RSUs and options to purchase 16,647,551 Ordinary Shares were issued
and outstanding as of such date.
56
Our 2015 Plan was adopted by our board of directors in February 2015, and expires in February 2025. Our employees, directors, officer, consultants,
advisors, suppliers and any other person or entity whose services are considered valuable to us are eligible to participate in this plan. We are authorized to issue
equity-based compensation to our executive officers and/or directors and/or employees and/or subsidiaries in the amount that shall not exceed 20% of our
issued and outstanding share capital on a fully diluted basis, as will be at the time of the issuance. The foregoing limitation does not preclude from our board of
directors’ authority to change and/or determine the amount of equity-based compensation to be issued in accordance with the 2015 Plan.
Our 2015 Plan is administered by our board of directors, regarding the granting of options and the terms of option grants, including exercise price, method
of payment, vesting schedule, acceleration of vesting and the other matters necessary in the administration of these plan. Eligible Israeli employees, officers and
directors, would qualify for provisions of Section 102(b)(2) of the Israeli Income Tax Ordinance, or the Tax Ordinance. Pursuant to such Section 102(b)(2),
qualifying options and shares issued upon exercise of such options are held in trust and registered in the name of a trustee selected by the board of directors. In
order to be eligible under Section 102, the trustee may not release these options or shares to the holders thereof for two years from the date of the registration of
the options in the name of the trustee. Under Section 102, any tax payable by an employee from the grant or exercise of the options is deferred until the transfer
of the options or ordinary shares by the trustee to the employee or upon the sale of the options or ordinary shares, and gains may qualify to be taxed as capital
gains at a rate equal to 25%, subject to compliance with specified conditions. Our Israeli non-employee service providers and controlling shareholders may only
be granted options under Section 3(9) of the Tax Ordinance, which does not provide for similar tax benefits. The 2015 Plan also permits the grant to Israeli
grantees of options that do not qualify under Section 102(b)(2).
Upon termination of employment for any other reason, other than in the event of death, disability, all unvested options will expire and all vested options
will generally be exercisable for 3 months following termination, or such other period as determined by the plan administrator, subject to the terms of the 2015
Plan and the governing option agreement.
Upon termination of employment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months, or such other
period as determined by the plan administrator, subject to the terms of the 2015 Plan and the governing option agreement.
On March 13, 2019, our board of directors adopted an appendix to the 2015 Plan for U.S. residents. Under this appendix, the 2015 Plan provides for the
granting of options to U.S. residents in compliance with the U.S. Internal Revenue Code of 1986, as amended. On July 3, 2019, our shareholders approved the
adoption of the 2015 Plan together with the appendix for U.S. residents.
In September 2022, we re-priced the share options granted to a small group of certain directors and senior management, after receiving approval to do so
from the Israeli tax authorities. In accordance with the repricing, every two old share options will be converted into one RSU, without an exercise price. The
vesting period of the new RSUs will be 4 years. Additionally, in January, February, March, October, November and December, 2023, our board of directors
approved an acceleration of vesting of unvested options and RSUs in case of change of control, as well as in other special circumstances, to several employees
and executives.
F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation
Not applicable.
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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
As of March 15, 2024, we had several major shareholders and ADS holders. Nomis Bay Ltd., BPY Limited, EOM Management Ltd., Murchinson, James
Keyes, Jason Jagessar, Chaja Carlebach, and Marc J. Bistricer entered into a joint filing agreement in which they agreed to joint filing on behalf of each of their
statements on Schedule 13D with respect to our Ordinary Shares. These parties reported that they jointly own 15,550,000 Ordinary Shares and ADSs, which is
6.6% of our Ordinary Shares.
Additionally, Anson Funds Management LP, Anson Management GP LLC, Mr. Bruce R. Winson, Anson Advisors Inc., Mr. Amin Nathoo and Mr. Moez
Kassam entered into a joint filing agreement in which they agreed to joint filing on behalf of each of their statements on Schedule 13D with respect to our
ADSs. These parties reported that they jointly own 20,391,213 ADSs, or 8.7%, of our Ordinary Shares. Anson Funds Management LP is a Texas limited
partnership, Anson Management GP LLC, is the general partner of Anson Funds Management LP and a Texas limited liability company, Mr. Bruce R. Winson,
is the principal of Anson Funds Management LP and the managing member of Anson Management GP LLC. Anson Advisors Inc. is an Ontario, Canada
corporation, Mr. Amin Nathoo is a director and the Secretary and Chief Compliance Officer of Anson Advisors Inc., and Mr. Moez Kassam is also a director of
Anson Advisors Inc. and is the CEO and President of Anson Advisors Inc.
Finally, Mr. Stern is also a major shareholder (see “Item 6.E. Share Ownership”).
In January 2024, we entered into the Rights Plan, which replaced our prior rights agreement that expired by its terms, with the intention to protect the long-
term interests our ADS holders and enable them to realize the full potential value of their investment in the Company. The Rights Plan is designed to reduce the
likelihood that any entity, person or group would gain control of, or significant influence over our Company. Pursuant to the Rights Plan, we issued one special
purchase right for every one ADS outstanding at the close of business on February 5, 2024. Each right allows its holder to purchase from us one-half (0.5) of
one ADS, at a purchase price of $0.01 per ADS, once the rights become exercisable. The Rights would become exercisable (and such Person will be deemed to
be an Acquiring Person) if at any time after such announcement, (i) the Person increases its ownership percentage to an amount equal to or greater than the
greater of (1) 10% and (2) the sum of (I) the lowest number of Ordinary Shares beneficially owned by such Person as a percentage of the outstanding Ordinary
Shares as of any time from and after the time of the public announcement of the declaration of the Rights and (II) 0.001% or (ii) would have been an “Acquiring
Person” under that certain Rights Agreement by and between the Company and the Rights Agent dated as of January 27, 2023 prior to the expiration of the
rights issued under such agreement. The rights will expire on January 25, 2025. For more information about the Rights Plan, see exhibit 2.2 filed with this
annual report on Form 20-F.
Changes in Percentage Ownership by Major Shareholders
Over the course of 2023, there was an increase in: (i) joint beneficial ownership of Nomis Bay Ltd., BPY Limited, EOM Management Ltd., Murchinson,
James Keyes, Jason Jagessar, Chaja Carlebach, and Marc J. Bistricer from 5.2% to 6.6%, and (ii) Anson Funds Management LP, Anson Management GP LLC,
Mr. Bruce R. Winson, Anson Advisors Inc., Mr. Amin Nathoo and Mr. Moez Kassam from 5.1% to 8.7%. In addition, over the course of 2023, there was a
decrease in Mr. Stern’s beneficial ownership from 12.7% to 12.3%.
Over the course of 2022, there was an increase in: (i) joint beneficial ownership of Nomis Bay Ltd., BPY Limited, EOM Management Ltd., Murchinson,
James Keyes, Jason Jagessar, Chaja Carlebach, and Marc J. Bistricer from 0% to 5.2%, and (ii) Anson Funds Management LP, Anson Management GP LLC,
Mr. Bruce R. Winson, Anson Advisors Inc., Mr. Amin Nathoo and Mr. Moez Kassam (from 0% to 5.1%).
Over the course of 2021, Mr. Stern’s beneficial ownership increased from 12.1% to 12.7%.
We are not aware of any increases or decreases in the percentage ownership of other significant shareholders.
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Record Holders
Based upon a review of the information provided to us by The Bank of New York Mellon, the depositary of the ADSs, as of March 15, 2024, there were
120 holders of record of the ADSs on record with the Depository Trust Company.
These numbers are not representative of the number of beneficial holders of our shares nor is it representative of where such beneficial holders reside, since
many of these shares were held of record by brokers or other nominees.
The Company is not controlled by another corporation, by any foreign government or by any natural or legal persons except as set forth herein, and there
are no arrangements known to the Company which would result in a change in control of the Company at a subsequent date.
B. Related Party Transactions
Employment or Services Agreements
We have entered into written employment or services agreements with each of our executive officers. All of these agreements contain customary provisions
regarding noncompetition, confidentiality of information and assignment of inventions. However, the enforceability of the noncompetition provisions may be
limited under applicable law. In addition, we have entered into agreements with certain executive officers and all of our directors pursuant to which we have
agreed to indemnify each of them up to a certain amount and to the extent that these liabilities are not covered by directors’ and officers’ insurance.
Mr. Yoav Stern has been our Chief Executive Officer since January 20, 2020, and has been compensated in accordance with the terms of an agreement, or
the Amended and Restated Management Services Agreement, approved by our shareholders on July 7, 2020, by and between the Company and Mr. Yoav Stern,
through his fully owned entity, DoubleShore Inc. The term of Mr. Stern’s agreement was for a period of three years and was set to expire on December 31,
2022. On December 19 and 20, 2022, our compensation committee and board of directors, respectively, approved the renewal of Mr. Stern’s agreement as of
January 1, 2023 and until the next general meeting of shareholders. The renewed agreement was approved in accordance the Companies Law exemptions
regarding interested party transactions (regulation 1B4), according to which, the compensation committee and the board of directors may decide to renew the
engagement with its Chief Executive Officer or Director in terms which are not materially different from his/her previous terms or in terms which are not
favorable compared to the previous engagement, provided in any case that they adhere with our compensation policy. On September 7, 2023, a general meeting
of shareholders was held and Mr. Stern’s agreement expired and all payments due to Mr. Stern in connection therewith were made. Since September 7, 2023,
Mr. Stern has received no compensation for his ongoing services and there is no certainty when Mr. Stern shall have an approved compensatory arrangement
with the Company for his services, if at all. Per the approval of our compensation committee and board of directors, the Company pays for expenses incurred in
connection with Mr. Stern’s role as our Chief Executive Officer.
Options
Since our inception we have granted options to purchase our Ordinary Shares to our officers and directors. Such option agreements may contain (and
employment agreements of certain executive officers contain) acceleration provisions upon certain merger, acquisition, or change of control transactions. We
describe our option plans under “Share Ownership—2015 Stock Option Plan.” If the relationship between us and an executive officer or a director is
terminated, except for cause (as defined in the various option plan agreements), options that are vested will generally remain exercisable for 90 days after such
termination.
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C. Interests of Experts and Counsel
Not applicable.
ITEM 8. FINANCIAL INFORMATION.
A. Consolidated Statements and Other Financial Information.
See “Item 18. Financial Statements.”
Legal Proceedings
From time to time, we may become a party to various litigation matters incidental to the conduct of our business. Except as disclosed below, we are not
presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business, prospects, financial condition,
liquidity, results of operation, cash flows or capital levels.
DeepCube Litigation
On December 7, 2022, we were served with a motion requesting the discovery of documents in the Tel Aviv District Court (Economic Department) by an
ADS holder, Mr. Kfir Sapir asserting, among other things, that the purchase price in our acquisition of DeepCube did not accurately reflect the acquired
company’s value, that there were flaws in the approval process for the acquisition during the meeting of our board of directors, which allegedly resulted in a
breach of the directors’ fiduciary duties, and that we had undervalued DeepCube in our financial reports for 2021, suggesting that the acquired company had no
worth. Following our response, on October 19, 2023, upon a request from the Plaintiff, the court dismissed the matter without prejudice because the Plaintiff
intended to file a derivative action. On September 5, 2023, Mr. Sapir filed a motion to certify a derivative action according to section 198 to the Companies Law
against the Company and its directors with the Tel Aviv District Court, arguing the decision to acquire DeepCube for approximately $40 million in cash and $30
million ADSs, was unreasonable, based on his notion that DeepCube is only a “startup company” with allegedly no revenues and no products. A court hearing is
scheduled for July 3, 2024.
Murchinson Litigations in Israeli Courts
On February 12, 2023, Murchinson Ltd., BPY Limited, Nomis Bay Ltd., Boothbay Absolute Return Strategies, LP. and Boothbay Diversified Alpha Master
Fund, LP., collectively Murchinson or Murchinson and Affiliates submitted a statement of claim to the Lod District Court (Economic Department), or the Court,
in which they asserted that our shares registered under Form S-8, filed with the SEC on January 27, 2023, were allocated unlawfully and in bad faith, resulting
in the deprivation of shareholders’ rights. Murchinson also requested that the Court cancel the registration of the newly registered shares on the Company’s
Form S-8. Furthermore, Murchinson demanded that the Court order us to refrain from any allocation of shares from the newly registered shares, or, in the
alternative, to make any allocation subject to shareholder meeting approval or condition any future allocations from the newly registered shares on specific
criteria related to employee and official compensation. Pre-trial hearings were held on June 18, 2023 and on February 21, 2024.
Separately, on February 27, 2023, we filed a claim against Murchinson in the Court, challenging Murchinson’s right to convene a shareholders’ meeting,
contending that they are not shareholders (but rather ADS holders). Following a hearing on June 18, 2023, the matter was stayed until a verdict is reached in the
Second Murchinson Claim, as described below.
On March 26, 2023, Murchinson filed for temporary relief in Court, or the Second Murchinson Claim, in which it claimed that it had the right to convene a
special general meeting of shareholders on March 20, 2023, and that the decisions in that special general meeting would be valid and legally binding.
Specifically, the meeting Murchinson wanted to convene would amend the article of association and appoint two directors, or the Alleged Directors, and remove
from office Yoav Stern, Oded Gera, Igal Rotem and Dr. Yoav Nissan-Cohen. Following a hearing and submission of motions, on April 16, 2023, the Court
rejected Murchinson’s request for temporary relief and request that we refrain from doing any business outside the ordinary course of business. The Court,
however, granted the alternative relief of appointing the Alleged Directors as board observers. We filed, with the Supreme Court of Israel, a request for
interlocutory appeal, but was denied. The Second Murchinson Claim is currently pending before the Court.
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On August 31, 2023, Murchinson filed a complaint against the Company and Mr. Yoav Stern, arguing that we wrongfully counted proxy cards at our
September 7, 2023, annual general meeting, or the AGM, and that the required majority for the dismissal of directors at the AGM are a simple majority rather
than a special majority of 70%. In connection with this complaint, Murchinson requested temporary relief requesting that the Court instruct the Company (1) to
refrain from implementing the decisions reached at the AGM; or (2) to refrain from convening board of directors and committee meetings with members
comprising Ms. Hanna Caspi, Mr. Oded Gera and Dr. Yoav Cohen-Nissan; or (3) to refrain from doing any business outside the ordinary course of business,
including changes in our capital. A hearing took place on September 5, 2023, during which the Court denied the request for temporary relief. The Company
filed a counterstatement of claims to Murchinson’s complaint on January 18, 2024, and its statement of defense on January 21, 2024. A hearing was held on
February 21, 2024, in which the court scheduled further proceedings starting in September 2024.
On March 18, 2024, we filed a motion for temporary injunction in the Court against Murchinson, and Affiliates and Mr. Moshe Sarfati, a senior analyst at
Murchinson, or the Respondents, in which we claim that the Respondents had contacted officers at certain third-party companies with whom we have had
business discussions, and committed tortious interference. We asked the Court to issue an injunction against the Respondents:
I. To refrain from contacting third parties – including companies in the field of 3D printing and/or companies engaged in negotiations with the Company
– regarding the Company’s affairs, and to present them with misleading presentations casting doubt over the legality of the current board of directors
of the Company and implying that the current board of directors and management are not authorized to make decisions regarding the Company’s
transactions, or to threaten them that Respondents will act to thwart any negotiation, collaboration, or transaction with the Company under the
guidance of the Company’s current board of directors.
II. To avoid interfering with or undermining the Company’s business activities, including any attempts to thwart transactions advancing the Company’s
interests with third parties, including merger, acquisition, or stock exchange transactions. We also asked the Court to order the Respondents to provide
a written affidavit to be submitted by each of the Respondents, detailing all communications made to third parties engaged in business relations with
the Company, with the aim of interfering in the Company’s business affairs.
On March 21, 2024, we filed a complaint with the Court requesting a declaration that Respondents had breached their duties and requesting the
remedies specified above. A hearing is scheduled for March 26, 2024.
Murchinson Litigation in U.S. Courts
On March 27, 2023, we filed a complaint in the United States District Court for the Southern District of New York alleging claims against Murchinson and
Affiliates as well as Anson Funds, or Anson. The complaint alleges that defendants improperly engaged in coordinated efforts to acquire a large stake in the
Company and interfered with its business operations, in violation of U.S. securities laws, New York law, and pertinent contracts governing our ADSs. The
Complaint also alleges that defendants’ conduct was in violation of Section 13(d) of the Exchange Act and constituted breach of contract, tortious interference
with prospective business relationships, and unjust enrichment. After we filed the complaint, on May 2, 2023 and June 23, 2023, Murchinson and Anson filed
amended disclosures with the SEC. On July 10, 2023, the United States District Court dismissed our federal securities claims against Murchinson and Anson
and declined to exercise supplemental jurisdiction concerning our state law claims, dismissing them without prejudice. On August 9, 2023, we appealed the
District Court’s decision dismissing our claims arising under Section 13(d) of the Exchange That appeal remains pending.
On July 14, 2023, we filed a complaint against Murchinson and Affiliates and Anson in the Supreme Court of the State of New York. The complaint in this
action alleges that Murchinson and Affiliates breached multiple provisions of the contract that governs there holdings of our ADSs and were unjustly enriched
through their improper trading of our ADSs. On August 3, 2023, the Supreme Court of the State of New York issued a decision temporarily staying the
Company’s claims pending a post-trial ruling in the Second Murchinson Claim. We do not anticipate that any further action will take place in this matter until
the stay is lifted.
On May 1, 2023, Murchinson filed a complaint in the Southern District of New York alleging that the Company and its directors violated New York Civil
Rights Law §§ 70-a and 76-a when they initiated the above-referenced litigation in the Southern District of New York. On August 9, 2023, we filed a motion to
dismiss the complaint in its entirety, arguing, inter alia, that the Southern District of New York lacks jurisdiction to hear the claims and that Murchinson’s
complaint fails on the merits. The Company’s motion to dismiss remains pending.
Stratasys Litigation
On April 25, 2023, we filed a motion for the issuance of temporary relief against Stratasys and its board of directors, requesting that the Tel Aviv District
Court prevent Stratasys from sabotaging a special tender offer that we announced we intended to publish according to the mechanism prescribed in the
Companies Law for implementing an unlawful “poison pill.” On May 7, 2023, we filed a statement of claim, or the Poison Pill Claim, against Stratasys and its
board of directors. Following a hearing held in connection with the Poison Pill Claim, on July 18, 2023, the Tel Aviv District Court suggested, without making a
conclusive decision, that he believes that there is no per se prohibition against such a plan as long as it does not discriminate between shareholders. On August
8, 2023, the court stayed the proceedings in the Poison Pill Claim. On November 16, 2023, we asked the Tel Aviv District Court to resume the proceedings and
to set dates for final briefing. The matter is currently pending before the Tel Aviv District Court.
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Dividends
Except as detailed in Item 16E in relation to the repurchase of our Ordinary Shares, which is considered a dividend under the Companies Law, we have
never declared or paid any cash dividends on our Ordinary Shares and do not anticipate paying any cash dividends in the foreseeable future. Payment of cash
dividends, if any, in the future will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition,
operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.
Under the Companies Law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that
the distribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law,
the distribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for
distribution according to our then last reviewed or audited financial statements, provided that the end of the period to which the financial statements relate is not
more than six months prior to the date of distribution, generally referred to as the Earnings Criteria. In the event that we do not meet such earnings criteria, we
may seek the approval of the court in order to distribute a dividend. The court may approve our request if it is convinced that there is no reasonable concern that
the payment of a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due, generally referred to as the Solvency
Criteria.
However, under the New Exemptions, an Israeli company whose shares are listed outside of Israel, is permitted to perform distribution in a way of
repurchasing its own shares, even if the Earnings Criteria is not met, without the need for court’s approval. The exemption is subject to certain conditions,
including, among others: (i) The distribution meets the Solvency Criteria; and (ii) no rejection was filed by any of the company’s creditors to the court. If any
creditor objects to the distribution, the company will be required to obtain the court’s approval for the distribution.
Payment of dividends may be subject to Israeli withholding taxes. See “Item 10.E. Taxation”, for additional information.
B. Significant Changes
No significant change, other than as otherwise described in this annual report on Form 20-F, has occurred in our operations since the date of our
consolidated financial statements included in this annual report on Form 20-F.
ITEM 9. THE OFFER AND LISTING
A. Offer and Listing Details
Our ADSs, which represent our Ordinary Shares, are traded on the Nasdaq Capital Market under the symbol “NNDM.” Each ADS currently represents one
Ordinary Share. Our ADSs are subject to the Rights Plan.
B. Plan of Distribution
Not applicable.
C. Markets
Our ADSs are listed on the Nasdaq Capital Market.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
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ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
A copy of our amended and restated articles of association is attached as Exhibit 1.1 to this annual report on Form 20-F. The information called for by this
Item is set forth in Exhibit 2.2 to this annual report on Form 20-F and is incorporated by reference into this annual report on Form 20-F.
C. Material Contracts
The following is a summary of each material contract, other than material contracts entered into in the ordinary course of business, to which we are or have
been a party, for the two years immediately preceding the date of this annual report on Form 20-F:
● Share Purchase Agreement, dated January 4, 2022, by and among Nano Dimension Ltd. and the Selling Shareholders (related to the acquisition of
Essemtec), filed as Exhibit 10.1 to Report on Form 6-K (File No. 001-37600), filed on January 5, 2022. See Item 5.B “Liquidity and Capital Resources
- Financing Activities” for more information about this agreement.
● Share Purchase Agreement, dated January 4, 2022, by and among Nano Dimension Ltd. and the Selling Shareholders (related to the acquisition of
GIS), filed as Exhibit 10.1 to Report on Form 6-K (File No. 001-37600), filed on January 5, 2022. See Item 5.B “Liquidity and Capital Resources -
Financing Activities” for more information about this agreement.
● Equity Purchase Agreement, dated July 7, 2022, by and between Nano Dimension Ltd. and Lapmaster Wolters Limited, and, solely for purposes of
Sections 7.6 and 9.15, Lapmaster Group Holdings LLC., filed as Exhibit 10.1 to Report on Form 6-K (File No. 001-37600), filed on July 8, 2022. See
Item 5.B “Liquidity and Capital Resources - Financing Activities” for more information about this agreement.
● Deed of Variation of Share Purchase Agreement, dated July 11, 2022, by and among Nano Dimension Ltd., the Selling Shareholders Representative
(on behalf of the Selling Shareholders) and Nicholas Campbell Geddes, filed as Exhibit 10.1 to Report on Form 6-K (File No. 001-37600), filed on
July 14, 2022. See Item 5.B “Liquidity and Capital Resources - Financing Activities” for more information about this agreement.
● Rights Agreement, dated January 27, 2023, by and between Nano Dimension Ltd. and the Bank of New York Mellon, filed as Exhibit 4.1 to Report on
Form 6-K (File No. 001-37600), filed on January 27, 2023 (expired on January 29, 2024).
● Rights Agreement, dated January 25, 2024, by and between Nano Dimension Ltd. and the Bank of New York Mellon, filed as Exhibit 4.1 to Report on
Form 6-K (File No. 001-37600), filed on January 25, 2024. See exhibit 2.2 filed with this annual report on Form 20-F for more information about this
agreement.
D. Exchange Controls
There are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our Ordinary Shares or the
proceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,
legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.
The ownership or voting of our Ordinary Shares by non-residents of Israel, except with respect to citizens of countries that are in a state of war with Israel,
is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.
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E. Taxation.
Israeli Tax Considerations and Government Programs
The following is a description of the material Israeli income tax consequences of the ownership of our Ordinary Shares. The following also contains a
description of material relevant provisions of the current Israeli income tax structure applicable to companies in Israel, with reference to its effect on us. To the
extent that the discussion is based on new tax legislation which has not been subject to judicial or administrative interpretation, there can be no assurance that
the tax authorities will accept the views expressed in the discussion in question. The discussion is not intended, and should not be taken, as legal or professional
tax advice and is not exhaustive of all possible tax considerations.
The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of our Ordinary
Shares and ADSs. Shareholders should consult their own tax advisors concerning the tax consequences of their particular situation, as well as any tax
consequences that may arise under the laws of any state, local, foreign or other taxing jurisdiction.
General Corporate Tax Structure in Israel
Israeli companies are generally subject to corporate tax. As of January 2016, the corporate tax rate was 25%. As of January 1, 2017, the corporate tax rate
was reduced to 24% and as of January 1, 2018, the corporate tax rate was further reduced to 23%. However, the effective tax rate payable by a company that
derives income from a Preferred Enterprise (as discussed below) may be considerably less. Capital gains derived by an Israeli company are generally subject to
the prevailing corporate tax rate.
Law for the Encouragement of Industry (Taxes), 5729-1969
The Law for the Encouragement of Industry (Taxes), 5729-1969, generally referred to as the Industry Encouragement Law, provides several tax benefits for
“Industrial Companies.”
The Industry Encouragement Law defines an “Industrial Company” as an Israeli resident-company, of which 90% or more of its income in any tax year,
other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose
principal activity in a given tax year is industrial production.
The following corporate tax benefits, among others, are available to Industrial Companies:
● amortization of the cost of purchased a patent, rights to use a patent, and know-how, which are used for the development or advancement of the
company, over an eight-year period, commencing on the year in which such rights were first exercised;
● under limited conditions, an election to file consolidated tax returns with related Israeli companies; and
● expenses related to a public offering are deductible in equal amounts over three years.
Tax Benefits and Grants for Research and Development
Under the Research Law, programs which meet specified criteria and are approved by the IIA are eligible for grants of up to 85% of the project’s
expenditure, as determined by the research committee, in exchange for the payment of royalties from the revenues generated from the sale of products and
related services developed, in whole or in part pursuant to, or as a result of, a research and development program funded by the IIA. The royalties are generally
at a range of 3.0% to 3.5% of revenues until the entire IIA grant is repaid, together with an annual interest. Until October 25, 2023, the interest was calculated at
a rate based on 12-month London Interbank Offered Rate, or LIBOR, applicable to U.S. dollar deposits. However, on October 25, 2023, the IIA published a
directive concerning changes in royalties to address the expiration of the LIBOR. Under such directive, regarding IIA grants approved by the IIA prior to
January 1, 2024 but which are outstanding thereafter, as of January 1, 2024 the annual interest is calculated at a rate based on 12-month Secured Overnight
Financing Rate, or SOFR, or at an alternative rate published by the Bank of Israel plus 0.71513%; and, for grants approved on or following January 1, 2024 the
annual interest shall be the higher of (i) the 12 months SOFR interest rate, plus 1%, or (ii) a fixed annual interest rate of 4%.
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The terms of the Research Law also require that the manufacture of products developed with government grants be performed in Israel. The transfer of
manufacturing activity outside Israel may be subject to the prior approval of the IIA. Under the regulations of the Research Law, assuming we receive approval
from the IIA to manufacture our IIA funded products outside Israel, we may be required to pay increased royalties. The increase in royalties depends upon the
manufacturing volume that is performed outside of Israel as follows:
Manufacturing Volume Outside of Israel
Up to 50%
between 50% and 90%
90% and more
Royalties to
the IIA as a
Percentage of
Grant
120%
150%
300%
If the manufacturing is performed outside of Israel by us, the rate of royalties payable by us on revenues from the sale of products manufactured outside of
Israel will increase by 1% over the regular rates. If the manufacturing is performed outside of Israel by a third party, the rate of royalties payable by us on those
revenues will be equal to the ratio obtained by dividing the amount of the grants received from the IIA and our total investment in the project that was funded
by these grants. The transfer of no more than 10% of the manufacturing capacity in the aggregate outside of Israel is exempt under the Research Law from
obtaining the prior approval of the IIA. A company requesting funds from the IIA also has the option of declaring in its IIA grant application an intention to
perform part of its manufacturing outside Israel, thus avoiding the need to obtain additional approval. On January 6, 2011, the Research Law was amended to
clarify that the potential increased royalties specified in the table above will apply even in those cases where the IIA approval for transfer of manufacturing
outside of Israel is not required, namely when the volume of the transferred manufacturing capacity is less than 10% of total capacity or when the company
received an advance approval to manufacture abroad in the framework of its IIA grant application. For applications to manufacture abroad, submitted to the IIA
after October 25, 2023, the maximum increased liability is up to 150% of the IIA grants, plus interest accrued thereon, instead of 300%.
The know-how developed within the framework of the IIA plan may not be transferred to third parties outside Israel without the prior approval of a
governmental committee charted under the Research Law. The approval, however, is not required for the export of any products developed using grants
received from the IIA. The IIA approval to transfer know-how created, in whole or in part, in connection with an IIA-funded project to third party outside Israel
where the transferring company remains an operating Israeli entity is subject to payment of a redemption fee to the IIA calculated according to a formula
provided under the Research Law that is based, in general, on the ratio between the aggregate IIA grants to the company’s aggregate investments in the project
that was funded by these IIA grants, multiplied by the transaction consideration. The transfer of such know-how to a party outside Israel where the transferring
company ceases to exist as an Israeli entity is subject to a redemption fee formula that is based, in general, on the ratio between the aggregate IIA grants to the
total financial investments in the company, multiplied by the transaction consideration. According to the January 2011 amendment, the redemption fee in case
of transfer of know-how to a party outside Israel will be based on the ratio between the aggregate IIA grants received by the company and the company’s
aggregate R&D expenses, multiplied by the transaction consideration. According to regulations promulgated following the 2011 amendment, the maximum
amount payable to the IIA in case of transfer of know how outside Israel shall not exceed 6 times the value of the grants received plus interest, and in the event
that the receiver of the grants ceases to be an Israeli corporation such payment shall not exceed 6 times the value of the grants received plus interest, with a
possibility to reduce such payment to up to 3 times the value of the grants received plus interest if the R&D activity remains in Israel for a period of three years
after payment to the IIA and maintain at least 75% of the research and development employees the Company had for the six months before the know-how was
transferred, subject to additional conditions specified in the regulations.
Transfer of know-how within Israel is subject to an undertaking of the recipient Israeli entity to comply with the provisions of the Research Law and
related regulations, including the restrictions on the transfer of know-how and the obligation to pay royalties, as further described in the Research Law and
related regulations.
These restrictions may impair our ability to outsource manufacturing, engage in change of control transactions or otherwise transfer our know-how outside
Israel and may require us to obtain the approval or the IIA for certain actions and transactions and pay additional royalties to the IIA. In particular, any change
of control and any change of ownership of our Ordinary Shares that would make a non-Israeli citizen or resident an “interested party,” as defined in the
Research Law, requires a prior written notice to the IIA in addition to any payment that may be required of us for transfer of manufacturing or know-how
outside Israel. If we fail to comply with the Research Law, we may be subject to criminal charges or to mandatory repayment of grants received by us (together
with interest and penalties).
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Tax Benefits for Research and Development
Israeli tax law allows, under certain conditions, a tax deduction for expenditures, including capital expenditures, for the year in which they are incurred.
Expenditures are deemed related to scientific research and development projects, if:
● The expenditures are approved by the relevant Israeli government ministry, determined by the field of research;
● The research and development must be for the promotion of the company; and
● The research and development is carried out by or on behalf of the company seeking such tax deduction.
The amount of such deductible expenses is reduced by the sum of any funds received through government grants for the finance of such scientific research
and development projects. No deduction under these research and development deduction rules is allowed if such deduction is related to an expense invested in
an asset depreciable under the general depreciation rules of the income Tax Ordinance, 1961. Expenditures not so approved are deductible in equal amounts
over three years.
From time to time, we may apply the Office of the IIA for approval to allow a tax deduction for all research and development expenses during the year
incurred. There can be no assurance that such application will be accepted.
Law for the Encouragement of Capital Investments, 5719-1959
The Law for the Encouragement of Capital Investments, 5719-1959, generally referred to as the Investment Law, provides certain incentives for capital
investments in production facilities (or other eligible assets).
Tax Benefits
The Investment Law grants tax benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined in
the Investment Law) The definition of a Preferred Company includes a company incorporated in Israel that is not fully owned by a governmental entity, and that
has, among other things, Preferred Enterprise status and is controlled and managed from Israel. A Preferred Company is entitled to a reduced corporate tax rate
of 16% with respect to its income derived by its Preferred Enterprise, unless the Preferred Enterprise is located in a specified development zone, in which case
the rate will be 7.5% as of January 1, 2017.
Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at source at the rate of 20% or such lower rate as
may be provided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld.
Taxation of our Shareholders
Capital Gains Taxes Applicable to Non-Israeli Resident Shareholders. A non-Israeli resident who derives capital gains from the sale of shares in an Israeli
resident company should be exempt from Israeli tax so long as the shares were not held through a permanent establishment that the non-resident maintains in
Israel. However, non-Israeli corporations will not be entitled to the foregoing exemption if Israeli residents: (i) have a controlling interest of 25% or more in
such non-Israeli corporation or (ii) are the beneficiaries of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli corporation, whether
directly or indirectly.
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Additionally, a sale of securities by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For
example, under Convention Between the Government of the United States of America and the Government of the State of Israel with respect to Taxes on
Income, as amended, or the United States-Israel Tax Treaty, the sale, exchange or other disposition of shares by a shareholder who is a United States resident
(for purposes of the treaty) holding the shares as a capital asset and is entitled to claim the benefits afforded to such a resident by the U.S.-Israel Tax Treaty, or
Treaty U.S. Resident, is generally exempt from Israeli capital gains tax unless: (i) the capital gain arising from such sale, exchange or disposition is attributed to
real estate located in Israel; (ii) the capital gain arising from such sale, exchange or disposition is attributed to royalties; (iii) the capital gain arising from the
such sale, exchange or disposition is attributed to a permanent establishment in Israel, under certain terms; (iv) such Treaty U.S. Resident holds, directly or
indirectly, shares representing 10% or more of the voting capital during any part of the 12-month period preceding the disposition, subject to certain conditions;
or (v) such Treaty U.S. Resident is an individual and was present in Israel for 183 days or more during the relevant taxable year.
In some instances where our shareholders may be liable for Israeli tax on the sale of their Ordinary Shares, the payment of the consideration may be subject
to the withholding of Israeli tax at source. Shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid
withholding at source at the time of sale.
Taxation of Non-Israeli Shareholders on Receipt of Dividends. Non-Israeli residents are generally subject to Israeli income tax on the receipt of dividends
paid on our Ordinary Shares at the rate of 25%, which tax will be withheld at source, unless relief is provided in a treaty between Israel and the shareholder’s
country of residence. With respect to a person who is a “substantial shareholder” at the time of receiving the dividend or on any time during the preceding
twelve months, the applicable tax rate is 30%. A “substantial shareholder” is generally a person who alone or together with such person’s relative or another
person who collaborates with such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation.
“Means of control” generally include the right to vote, receive profits, nominate a director or an executive officer, receive assets upon liquidation, or order
someone who holds any of the aforesaid rights how to act, regardless of the source of such right. However, a distribution of dividends to non-Israeli residents is
subject to withholding tax at source at a rate of 20% if the dividend is distributed from income attributed to a Preferred Enterprise, unless a reduced tax rate is
provided under an applicable tax treaty. For example, under the United States-Israel Tax Treaty, the maximum rate of tax withheld at source in Israel on
dividends paid to a holder of our Ordinary Shares who is a Treaty U.S. Resident is 25%. However, generally, the maximum rate of withholding tax on
dividends, not generated by a Preferred Enterprise, that are paid to a United States corporation holding 10% or more of the outstanding voting capital
throughout the tax year in which the dividend is distributed as well as during the previous tax year, is 12.5%, provided that not more than 25% of the gross
income for such preceding year consists of certain types of dividends and interest. Notwithstanding the foregoing, dividends distributed from income attributed
to an Preferred Enterprise are not entitled to such reduction under the tax treaty but are subject to a withholding tax rate of 15% for a shareholder that is a U.S.
corporation, provided that the condition related to our gross income for the previous year (as set forth in the previous sentence) is met. If the dividend is
attributable partly to income derived from a Preferred Enterprise, and partly to other sources of income, the withholding rate will be a blended rate reflecting the
relative portions of the two types of income. We cannot assure you that we will designate the profits that we may distribute in a way that will reduce
shareholders’ tax liability.
U.S. Tax Considerations
U.S. Federal Income Tax Considerations
THE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT
BE CONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO
THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND
AMERICAN DEPOSITARY SHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND
POSSIBLE CHANGES IN THE TAX LAWS.
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Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a
“U.S. Holder” arising from the purchase, ownership and sale of the Ordinary Shares and ADSs. For this purpose, a “U.S. Holder” is a holder of Ordinary Shares
or ADSs that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States
or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federal income
tax purposes) or a partnership (other than a partnership that is not treated as a U.S. person under any applicable U.S. Treasury regulations) created or organized
under the laws of the United States or the District of Columbia or any political subdivision thereof; (3) an estate, the income of which is includable in gross
income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons (within the meaning of Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended, or the
Code) have authority to control all substantial decisions of the trust; or (5) a trust that has a valid election in effect to be treated as a U.S. person (within the
meaning of Section 7701(a)(30) of the Code) for U.S. federal income tax purposes.
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ADSs or Ordinary Shares, the tax treatment of an owner
of such entity will depend on the status of the owners, the activities of the entity or arrangement and certain determinations made at the owner level.
Accordingly, entities or arrangements treated as partnerships for U.S. federal income tax purposes and the partners in such partnerships should consult their tax
advisors regarding the U.S. federal income tax consequences applicable for them.
This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income tax
considerations that may be relevant to a decision to purchase our Ordinary Shares or ADSs. This summary generally considers only U.S. Holders that will own
our Ordinary Shares or ADSs as capital assets within the meaning of Section 1221 of the Code. Except to the limited extent discussed below, this summary does
not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’s status as a
U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,
administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to
change, possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S.
federal income tax treatment of an investment in our Ordinary Shares or ADSs by U.S. Holders and, therefore, can provide no assurances that the IRS will agree
with the conclusions set forth below.
This discussion does not address all of the aspects of U.S. federal income taxation that may be relevant to a particular U.S. holder based on such holder’s
particular circumstances and in particular does not discuss any estate, gift, generation-skipping, transfer, state, local, excise or foreign tax considerations. In
addition, this discussion does not address the U.S. federal income tax treatment of a U.S. Holder who is: (1) a bank, life insurance company, regulated
investment company, or other financial institution or “financial services entity:” (2) a broker or dealer in securities or foreign currency; (3) a person who
acquired our Ordinary Shares or ADSs in connection with employment or other performance of services; (4) a U.S. Holder that is subject to the U.S. alternative
minimum tax; (5) a U.S. Holder that holds our Ordinary Shares or ADSs as a hedge or as part of a hedging, straddle, conversion or constructive sale transaction
or other risk-reduction transaction for U.S. federal income tax purposes; (6) a tax-exempt entity; (7) real estate investment trusts or grantor trusts; (8) a U.S.
Holder that expatriates out of the United States or a former long-term resident of the United States; (9) a person having a functional currency other than the U.S.
dollars; or (10) S corporations, partnerships or other entities or arrangements treated as partnerships or other flow-through entities for U.S. federal income tax
purposes (and investors therein). This discussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at
any time, Ordinary Shares or ADSs representing 10% or more of our voting power. Additionally, the U.S. federal income tax treatment of partnerships (or other
pass-through entities) or persons who hold Ordinary Shares or ADSs through a partnership or other pass-through entity are not addressed.
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In general, for U.S. federal income tax purposes, U.S. Holders of our ADSs will be treated as owning the underlying Ordinary Shares represented by those
ADSs. Accordingly, exchanges of Ordinary Shares for ADSs, and ADSs for Ordinary Shares will not be subject to U.S. federal income tax.
Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding or
disposing of our Ordinary Shares or ADSs, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.
Taxation of Dividends Paid on Ordinary Shares or ADSs
We do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading “Passive
Foreign Investment Companies” below and the discussion of “qualified dividend income” below, a U.S. Holder will be required to include in gross income as
ordinary income the amount of any distribution paid on Ordinary Shares or ADSs (including the amount of any Israeli tax withheld on the date of the
distribution), to the extent that such distribution does not exceed our current and accumulated earnings and profits, as determined for U.S. federal income tax
purposes. The amount of a distribution which exceeds our earnings and profits will be treated first as a non-taxable return of capital, reducing the U.S. Holder’s
tax basis for the Ordinary Shares to the extent thereof, and then capital gain. We do not expect to maintain calculations of our earnings and profits under U.S.
federal income tax principles and, therefore, U.S. Holders should expect that the entire amount of any distribution generally will be reported as dividend
income.
In general, preferential tax rates for “qualified dividend income” and long-term capital gains are applicable for U.S. Holders that are individuals, estates or
trusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign
corporation” is a corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information
program. The IRS has stated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.
In addition, our dividends will be qualified dividend income if our Ordinary Shares or ADSs are readily tradable on the Nasdaq Capital Market or another
established securities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the
prior year, as a PFIC, as described below under “Passive Foreign Investment Companies.” A U.S. Holder will not be entitled to the preferential rate: (1) if the
U.S. Holder has not held our Ordinary Shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the ex-dividend
date, or (2) to the extent the U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S.
Holder has diminished its risk of loss on our Ordinary Shares or ADSs are not counted towards meeting the 61-day holding period. Finally, U.S. Holders who
elect to treat the dividend income as “investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.
The amount of a distribution with respect to our Ordinary Shares or ADSs will be measured by the amount of the fair market value of any property
distributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included
in the income of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the
U.S. Holder, regardless of whether the payment is in fact converted into U.S. dollars at that time. Any foreign currency gain or loss a U.S. Holder realizes on a
subsequent conversion of the NIS into U.S. dollars will be U.S. source ordinary exchange gain or loss.
69
Taxation of the Disposition of Ordinary Shares or ADSs
Except as provided under the PFIC rules described below under “Passive Foreign Investment Companies,” upon the sale, exchange or other disposition of
our Ordinary Shares or ADSs, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s tax basis for the
Ordinary Shares or ADSs in U.S. dollars and the amount realized on the disposition in U.S. dollar (or its U.S. dollar equivalent determined by reference to the
spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). A U.S. Holder’s initial tax basis in shares
generally will equal the cost of such shares. If any foreign tax is imposed on the sale, exchange or other disposition of our ADSs or Ordinary Shares, a U.S.
Holder’s amount realized will include the gross amount of the proceeds of the deposits before deduction of the tax. The gain or loss realized on the sale,
exchange or other disposition of Ordinary Shares or ADSs will be long-term capital gain or loss if the U.S. Holder has a holding period of more than one year at
the time of the disposition. Individuals who recognize long-term capital gains may be taxed on such gains at reduced rates of tax. The deduction of capital
losses is subject to various limitations.
Gain realized by a U.S. Holder on a sale, exchange or other disposition of Ordinary Shares or ADSs will generally be treated as U.S. source income for
U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of Ordinary Shares or ADSs is generally allocated to
U.S. source income. Because gain for the sale or other taxable disposition of our ADSs or Ordinary Shares will be treated as U.S. source income, and you may
use foreign tax credits against only the portion of United States federal income tax liability that is attributed to foreign source income in the same category, your
ability to utilize a foreign tax credit with respect to any foreign tax imposed on any such sale or other taxable disposition, if any, may be significantly limited.
An additional 3.8% net investment income tax (described below) may apply to gains recognized upon the sale, exchange or other taxable disposition of our
Ordinary Shares or ADS by certain U.S. Holders who meet certain income thresholds.
Passive Foreign Investment Companies
Special U.S. federal income tax laws apply to U.S. taxpayers who own shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federal
income tax purposes for any taxable year that either:
● 75% or more of our gross income (including our pro rata share of gross income for any company, in which we are considered to own 25% or more of
the shares by value), in a taxable year is passive; or
● At least 50% of our assets, averaged over the year and generally determined based upon fair market value (including our pro rata share of the assets of
any company in which we are considered to own 25% or more of the shares by value) are held for the production of, or produce, passive income.
For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions and
from notional principal contracts. Cash is generally treated as a passive asset, subject to certain exceptions that qualify as working capital.
The tests for determining PFIC status are applied annually, and it is difficult to make accurate projections of future income and assets which are relevant to
this determination. In addition, our PFIC status may depend in part on the market value of our Ordinary Shares or ADSs. Accordingly, there can be no assurance
that we currently are not or will not become a PFIC. Due to our substantial cash position, we believe that we may be treated as a PFIC for 2023, although we do
not intend to conduct an analysis to obtain assurance of this.
If we currently are or become a PFIC, each U.S. Holder who has not elected to mark the shares to market (as discussed below), would, upon receipt of
certain distributions by us and upon disposition of our Ordinary Shares or ADSs at a gain: (1) have such distribution or gain allocated ratably over the U.S.
Holder’s holding period for the Ordinary Shares or ADSs, as the case may be; (2) the amount allocated to the current taxable year and any period prior to the
first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; (3) the amount allocated to each of the other taxable years would
be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year; and (4) an interest charge for the deemed deferral benefit
would be imposed with respect to the resulting tax attributable to each such other taxable year. In addition, when shares of a PFIC are acquired by reason of
death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive a step-up to fair market value as of the date of the decedent’s death,
but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by the decedent. Indirect investments in a PFIC may also be subject
to these special U.S. federal income tax rules.
70
The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held the
Ordinary Shares or ADSs while we are a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has made such a
QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinary
income and such U.S. Holder’s pro rata share of our net capital gains as long-term capital gain, regardless of whether we make any distributions of such
earnings or gain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholder-by-
shareholder basis and generally may be revoked only with the consent of the IRS. We do not intend to furnish U.S. Holders annually with information needed in
order to complete IRS Form 8621 and to make and maintain a valid QEF election for any year in which we or any of our subsidiaries are a PFIC. Therefore, the
QEF election will not be available with respect to our Ordinary Shares or ADSs.
In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a mark-to-market election. A U.S. Holder of our
Ordinary Shares or ADSs which are regularly traded on a qualifying exchange, including the Nasdaq Capital Market, can elect to mark the Ordinary Shares or
ADSs to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fair
market value of the Ordinary Shares or ADSs and the U.S. Holder’s adjusted tax basis in the Ordinary Shares or ADSs. Losses are allowed only to the extent of
net mark-to-market gain previously included income by the U.S. Holder under the election for prior taxable years.
U.S. Holders who hold our Ordinary Shares or ADSs during a period when we are a PFIC will be subject to the foregoing rules, even if we cease to be a
PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFIC rules.
Tax on Net Investment Income
Subject to certain adjustments under the PFIC rules, U.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare
tax on their net investment income (including dividends on and gains from the sale or other disposition of our Ordinary Shares or ADSs), or in the case of
estates and trusts on their net investment income that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total
adjusted income exceeds applicable thresholds.
Tax Consequences for Non-U.S. Holders of Ordinary Shares or ADSs
Except as provided below, an individual, corporation, estate or trust that is not a U.S. Holder referred to below as a non-U.S. Holder, generally will not be
subject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our Ordinary Shares or ADSs.
A non-U.S. Holder may be subject to U.S. federal income tax on a dividend paid on our Ordinary Shares or ADSs or gain from the disposition of our
Ordinary Shares or ADSs if: (1) such item is effectively connected with the conduct by the non-U.S. Holder of a trade or business in the United States and, if
required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the case of a
disposition of our Ordinary Shares or ADSs, the individual non-U.S. Holder is present in the United States for 183 days or more in the taxable year of the
disposition and other specified conditions are met. Any dividend income or gain described in clause (1) above will be subject to U.S. federal income tax on a net
income tax basis in the same manner as a U.S. Holder and, with respect to corporate holders, a branch profits tax imposed at a rate of 30% (or such lower rate as
may be specified by an applicable income tax treaty) may also apply to its effectively connected earnings and profits (subject to adjustments). Any dividend
income or gain described in clause (2) above that is not effectively connected with the conduct by a Non-U.S. Holder of a trade or business within the U.S.
generally will be subject to 30% withholding tax (or such lower rate as may be specified by an applicable income tax treaty) net of certain U.S. source capital
losses.
71
In general, non-U.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our Ordinary Shares or ADSs if
payment is made through a paying agent, or office of a foreign broker outside the United States. However, if payment is made in the United States or by a U.S.
related person, non-U.S. Holders may be subject to backup withholding, unless the non-U.S. Holder provides an applicable IRS Form W-8 (or a substantially
similar form) certifying its foreign status, or otherwise establishes an exemption.
The amount of any backup withholding from a payment to a non-U.S. Holder will be allowed as a credit against such holder’s U.S. federal income tax
liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.
Information Reporting and Withholding
A U.S. Holder may be subject to backup withholding at a rate of 24% with respect to cash dividends and proceeds from a disposition of Ordinary Shares or
ADSs. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will not
apply with respect to payments made to designated exempt recipients, such as corporations and tax-exempt organizations. Backup withholding is not an
additional tax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely
furnished to the IRS.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements will
file reports with the SEC. The SEC maintains an Internet website that contains reports and other information regarding issuers that file electronically with the
SEC. Our filings with the SEC are also available to the public through the SEC’s website at www.sec.gov.
As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our
officers, directors and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the
Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as
frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120
days after the end of each fiscal year, or such applicable time as required by the SEC, an annual report on Form 20-F containing financial statements audited by
an independent registered public accounting firm, and may submit to the SEC, on a Form 6-K, unaudited quarterly financial information.
We maintain a corporate website http://www.nano-di.com. Information contained on, or that can be accessed through, our website and the other websites
referenced above do not constitute a part of this annual report on Form 20-F. We have included these website addresses in this annual report on Form 20-F
solely as inactive textual references.
72
I. Subsidiary Information.
Not applicable.
J. Annual Report to Security Holders.
Not Applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.
Quantitative and Qualitative Disclosure About Market Risk
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to
adverse changes in financial market prices and rates. Our current investment policy is to invest available cash in bank deposits, mainly with banks that have a
credit rating of at least A-minus, money market accounts and money market funds. Accordingly, a substantial majority of our cash and cash equivalents is held
in deposits that bear interest. Our market risk exposure is primarily a result of NIS/U.S. dollar exchange rates, which is discussed in the following paragraph.
Foreign Currency Exchange Risk
Our results of operations and cash flow are subject to fluctuations due to changes in NIS/U.S. dollar currency exchange rates. The vast majority of our
liquid assets is held in U.S. dollars, and a certain portion of our expenses is denominated in NIS. Changes of 5% and 10% in the U.S. Dollar/NIS exchange rate
would not have had a material effect in relation to the Company’s loss in 2023.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities.
Not applicable.
B. Warrants and rights.
Not applicable.
C. Other Securities.
Not applicable.
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D. American Depositary Shares
Fees and Expenses
Persons depositing or withdrawing shares or ADS holders must pay:
For:
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs).
Issuance of ADSs, including issuances resulting from a distribution of shares
or rights or other property. Cancellation of ADSs for the purpose of
withdrawal, including if the deposit agreement terminates.
$.05 (or less) per ADS.
Any cash distribution to ADS holders.
A fee equivalent to the fee that would be payable if securities distributed to
you had been shares and the shares had been deposited for issuance of ADSs.
Distribution of securities distributed to holders of deposited securities
(including rights) that are distributed by the depositary to ADS holders.
$.05 (or less) per ADS per calendar year.
Depositary services.
Registration or transfer fees.
Expenses of the depositary.
Transfer and registration of shares on our share register to or from the name of
the depositary or its agent when you deposit or withdraw shares.
Cable, telex and facsimile transmissions (when expressly provided in the
deposit agreement). Converting foreign currency to U.S. dollars.
Taxes and other governmental charges the depositary or the custodian has to
pay on any ADSs or shares underlying ADSs, such as stock transfer taxes,
stamp duty or withholding taxes.
As necessary.
Any charges incurred by the depositary or its agents for servicing the
deposited securities.
As necessary.
The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of
withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts
distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from
cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may collect any
of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated
to pay those fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.
From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance
of the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. In
performing its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency or other service providers that are owned by or
affiliated with the depositary and that may earn or share fees, spreads or commissions.
As an ADS holder, we will not treat you as one of our shareholders and you will not have shareholder rights. Israeli law governs shareholder rights. The
depositary is the registered holder of the shares underlying your ADSs. As a registered holder of ADSs, you will have ADS holder rights. A Deposit Agreement
among us, the depositary, ADS holders, and all other persons indirectly or beneficially holding ADSs sets out ADS holder rights as well as the rights and
obligations of the depositary. New York law governs the deposit agreement and the ADSs.
74
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
PART II
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
None.
ITEM 15. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2023, or the Evaluation Date.
Based on such evaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.
(b) Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-
15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial
Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based principally on the framework and criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission as of the end
of the period covered by this report.
Previously Identified Material Weaknesses in Internal Control Over Financial Reporting
We previously identified and disclosed in our Annual Report on Form 20-F for the year ended December 31, 2022, a material weakness in our internal
control over financial reporting relating to the design and maintenance of effective change management controls over certain information technology systems
that support the financial reporting processes of a subsidiary (Essemtec).
Remediation Efforts of Previously Disclosed Material Weaknesses:
During the year ended December 31, 2023, management has done the following to remediate the material weakness:
● formalized change management policies, processes, and procedures to ensure that all changes made to systems are tested and approved prior to
migration to production;
● removed permanent access for a third-party vendor responsible for maintaining the system and only granting temporary access as needed for change
activities; and
● increased resource allocation to the subsidiary IT team to allow for more attention on SOX control documentation.
● implemented a monitoring tool to capture changes made to the ERP system.
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As a result of these remediation activities and based on testing of the new and modified controls for operating effectiveness, management concluded that
the previously reported material weakness was remediated and that our internal control over financial reporting was effective as of December 31, 2023.
(c) Attestation Report of the Registered Public Accounting Firm
See report of Somekh Chaikin, a member firm of KPMG International, which is included on page F-3 of the consolidated financial statements included in
this annual report on Form 20-F.
(d) Changes in Internal Control over Financial Reporting
Other than steps taken in connection with the completion of the remediation process described above, there were no changes in our internal control over
financial reporting that occurred during the year ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
ITEM 16. [Reserved]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that each member of our audit committee is an audit committee financial expert, as defined under the rules under the
Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaq Stock Market rules.
ITEM 16B. CODE OF ETHICS
We have adopted a written code of ethics that applies to our officers and employees, including our principal executive officer, principal financial officer,
principal controller and persons performing similar functions as well as our directors. Our Code of Business Conduct and Ethics is posted on our website at
www.nano-di.com. Information contained on, or that can be accessed through, our website does not constitute a part of this annual report on Form 20-F and is
not incorporated by reference herein. If we make any amendment to the Code of Business Conduct and Ethics or grant any waivers, including any implicit
waiver, from a provision of the code, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations
of the SEC including the instructions to Item 16B of Form 20-F. We have not granted any waivers under our Code of Business Conduct and Ethics.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Somekh Chaikin, a member firm of KPMG International, located in Tel Aviv, Israel, PCAOB ID 1057, has served as our principal independent registered
public accounting firm for each of the two years ended December 31, 2022 and 2023.
76
The following table provides information regarding fees paid by us to Somekh Chaikin and/or other member firms of KPMG International for all services,
including audit services, for the years ended December 31, 2022 and 2023:
(in U.S dollars)
Audit fees (1)
Audit-related fees (2)
Tax fees (3)
All other fees
Total
Year Ended December 31,
2022
997,889
210,229
147,025
—
1,355,143
2023
875,909
68,722
116,859
—
1,061,490
(1) Includes professional services rendered in connection with the audit of our annual financial statements,
(2) Includes fees for other services, such as due diligence services in connection with acquisitions.
(3) Tax fees are the aggregate fees billed (in the year) for professional services rendered for tax compliance and tax advice other than in connection with the
audit.
Pre-Approval of Auditors’ Compensation
Our audit committee has a pre-approval policy for the engagement of our independent registered public accounting firm to perform certain audit and non-
audit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee
pre-approves annually a catalog of specific audit and non-audit services in the categories of audit services, audit-related services and tax services that may be
performed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general pre-
approval, it will require specific pre-approval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to
perform the prohibited non-audit functions defined in applicable SEC rules. All the fees set forth above were pre-approved by the Audit Committee.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
As of March 15, 2024, the following equity securities were purchased as part of our $100 million Repurchase Plan, described below, and by affiliated
purchasers:
Period
Repurchase Program
February 1-28, 2023
March 1-31, 2023
June 1-30,2023
July 1-31,2023
August 1-31,2023
September 1-30,2023
October 1-31,2023
Total
Total
Number of
Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs
Maximum
Number of
Shares (or
Approximate
Dollar Value)
that May Yet
be Purchased
Under the
Plans or
Programs
Total
Number
of Shares
Purchased
Average
Price
Paid per Share
3,795,690 $
2,453,187 $
1,807,311 $
13,942,389 $
3,127,742 $
3,787,648 $
3,102,387 $
32,016,354 $
2.88
2.97
2.68
3.19
3.08
2.68
2.73
2.89
3,795,690 $
2,453,187 $
1,807,311 $
13,942,389 $
3,127,742 $
3,787,648 $
3,102,387 $
32,016,354 $
89,049,685
81,768,245
76,928,895
32,425,758
22,782,297
12,634,517
4,160,138
4,160,138
77
In February 2023, we announced that we would put into action our previously announced $100 million Repurchase Plan allowing us to invest up to $100
million to repurchase our ADSs from time to time. in open market transactions, and/or in privately negotiated transactions or in any other legally permissible
ways, depending on market conditions, share price, trading volume and other factors. The $100 million Repurchase Plan was approved by the Israeli court in
August 2022 for a period of up to 12 months and was later extended for a period of two months. The $100 million Repurchase Plan expired on October 12,
2023, with $4,160,138 remaining, and thereafter no longer eligible for repurchases under such plan. All repurchases made in 2023 were made pursuant to the
$100 million Repurchase Plan.
In August 2023, our board of directors authorized the $200 million Repurchase Plan, allowing us to invest up to $200 million to repurchase ADSs from
time to time, in open market transactions, and/or in privately negotiated transactions or in any other legally permissible ways, depending on market conditions,
share price, trading volume and other factors. The Israeli court approved the $200 million Repurchase Plan in August 2023 and extended it for a twelve-month
period in October 2023. The $200 million Repurchase Plan went into effect on October 17, 2023. As of March 15, 2024, 17,110,217 shares have been
repurchased under the $200 million Repurchase Plan.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE
Under Nasdaq rules, we may elect to follow certain corporate governance practices permitted under the Companies Law in lieu of compliance with
corresponding corporate governance requirements otherwise imposed by the Nasdaq Stock Market rules for U.S. domestic issuers.
In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the Nasdaq Stock Market rules, we have elected to follow
the provisions of the Companies Law, rather than the Nasdaq Stock Market rules, with respect to the following requirements:
● Distribution of periodic reports to shareholders; proxy solicitation. As opposed to the Nasdaq Stock Market rules, which require listed issuers to make
such reports available to shareholders in one of a number of specific manners, Israeli law does not require us to distribute periodic reports directly to
shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders. We currently make our audited
financial statements available to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private
issuer, we are generally exempt from the SEC’s proxy solicitation rules.
● Quorum. While the Nasdaq Stock Market rules require that the quorum for purposes of any meeting of the holders of a listed company’s common
voting stock, as specified in the company’s bylaws, be no less than 33 1/3% of the company’s outstanding common voting stock, under Israeli law, a
company is entitled to determine in its articles of association the number of shareholders and percentage of holdings required for a quorum at a
shareholders meeting. Our amended and restated articles of association provide that a quorum of two or more shareholders holding at least 25% of the
voting rights in person or by proxy is required for commencement of business at a general meeting. However, the quorum set forth in our amended and
restated articles of association with respect to an adjourned meeting consists of any number of shareholders present in person or by proxy.
● Compensation of officers. Israeli law and our amended and restated articles of association do not require that the independent members of our board of
directors (or a compensation committee composed solely of independent members of our board of directors) determine an executive officer’s
compensation, as is generally required under the Nasdaq Stock Market rules with respect to the chief executive officer and all other executive officers.
Instead, compensation of executive officers, who are office holders as defined under the Companies Law, is determined and approved by our
compensation committee and our board of directors, and in certain circumstances by our shareholders, either in consistency with our office holders
compensation policy or, in special circumstances in deviation therefrom, taking into account certain considerations stated in the Companies Law.
78
Shareholder approval is generally required for executive officers compensation in the event (i) approval by our board of directors and our compensation
committee is not consistent with our executive officers compensation policy, or (ii) compensation required to be approved is that of our chief executive officer
who is not a director or an executive officer who is also the controlling shareholder of our company (including an affiliate thereof). Such shareholder approval
shall require a special majority vote of the shares present and voting at a shareholders meeting, provided either (i) such majority includes a majority of the
shares held by non-controlling shareholders who do not otherwise have a personal interest in the compensation arrangement that are voted at the meeting,
excluding for such purpose any abstentions disinterested majority, or (ii) the total shares held by non-controlling and disinterested shareholders voted against
the arrangement does not exceed 2% of the voting rights in our company.
Additionally, approval of the compensation of an executive officer who is also a director requires a simple majority vote of the shares present and voting at
a shareholders meeting, if consistent with our executive officers’ compensation policy. Our compensation committee and board of directors may, in special
circumstances, approve the compensation of an office holder (other than a director, a chief executive officer or a controlling shareholder) or approve the
compensation policy despite shareholders’ objection, based on specified arguments and taking shareholders’ objection into account. Our compensation
committee may further exempt an engagement with a nominee for the position of chief executive officer, who meets the non-affiliation requirements set forth
for an external director, from requiring shareholder approval, if such engagement is consistent with our office holder compensation policy and our
compensation committee determines based on specified arguments that presentation of such engagement to shareholder approval is likely to prevent such
engagement. To the extent that any such transaction with a controlling shareholder is for a period exceeding three years, approval is required once every three
years.
A director or office holder may not be present when the board of directors of a company discusses or votes upon a transaction in which he or she has a
personal interest, except in case of ordinary transactions, unless the chairman of the board of directors determines that he or she should be present to present the
transaction that is subject to approval.
● Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies
Law, rather than seeking approval for corporation actions in accordance with Nasdaq Listing Rule 5635. In particular, under this Nasdaq Stock Market
rule, shareholder approval is generally required for: (i) an acquisition of shares/assets of another company that involves the issuance of 20% or more of
the acquirer’s shares or voting rights or if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration
to be received; (ii) the issuance of shares leading to a change of control; (iii) adoption/amendment of equity compensation arrangements (although
under the provisions of the Companies Law there is no requirement for shareholder approval for the adoption/amendment of the equity compensation
plan); and (iv) issuances of 20% or more of the shares or voting rights (including securities convertible into, or exercisable for, equity) of a listed
company via a private placement (and/or via sales by directors/officers/5% shareholders) if such equity is issued (or sold) below a specified minimum
price. By contrast, under the Companies Law, shareholder approval is required for, among other things: (i) transactions with directors concerning the
terms of their service or indemnification, exemption and insurance for their service (or for any other position that they may hold at a company), for
which approvals of the compensation committee, board of directors and shareholders are all required, (ii) extraordinary transactions with controlling
shareholders of publicly held companies, including private offerings to controlling shareholders, which require the special majority, and (iii) terms of
employment or other engagement of the controlling shareholder of us or such controlling shareholder’s relative, which require the special majority. In
addition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.
79
● Approval of Related Party Transactions. All related party transactions are approved in accordance with the requirements and procedures for approval
of interested party acts and transaction as set forth in the Companies Law, which requires the approval of the audit committee, or the compensation
committee, as the case may be, the board of directors and shareholders, as may be applicable, for specified transactions, rather than approval by the
audit committee or other independent body of our board of directors as required under the Nasdaq Stock Market rules.
● Annual Shareholders Meeting. As opposed to the Nasdaq Stock Market Rule 5620(a), which mandates that a listed company hold its annual
shareholders meeting within one year of the company’s fiscal year-end, we are required, under the Companies Law, to hold an annual shareholders
within 15 months of the last annual shareholders meeting, and in any case once every calendar year.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
ITEM 16J. INSIDER TRADING POLICIES
Not applicable.
ITEM 16K. CYBERSECURITY
We recognize the critical importance of maintaining the trust and confidence of our customers, clients, business partners and employees. The board of
directors is actively involved in oversight of our crisis management plan, or the Crisis Management Plan, and cybersecurity represents an important component
of our overall approach to risk management. Our cybersecurity policies, standards, processes and practices are fully integrated into our Crisis Management Plan
and are based on recognized frameworks established by the National Institute of Standards and Technology, the International Organization for Standardization
and other applicable industry standards. In general, we seek to address cybersecurity risks through a comprehensive, cross-functional approach that is focused
on preserving the confidentiality, security and availability of the information that we collect and store by identifying, preventing and mitigating cybersecurity
threats and effectively responding to cybersecurity incidents when they occur.
80
Risk Management and Strategy
As part of the critical elements of our overall risk management approach, our cybersecurity program is focused on the following key areas:
● Governance: As discussed in more detail under the heading “Governance,” the board of directors’ oversight of cybersecurity risk management is
supported by the Crisis Management Team, or CMT, which regularly interacts with it and with Mr. Yaniv Luzon, our Chief Information Security
Officer, or CISO, other members of management and relevant management committees.
● Collaborative Approach: We implemented a comprehensive, cross-functional approach to identifying, preventing and mitigating cybersecurity threats
and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that
decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner.
● Technical Safeguards: We deploy technical safeguards that are designed to protect our information systems from cybersecurity threats, including
firewalls, intrusion prevention and detection systems, anti-malware functionality and access controls, which are evaluated and improved through
vulnerability assessments and cybersecurity threat intelligence.
● Incident Response and Recovery Planning: We have established and maintain a comprehensive Crisis Management Plan that fully addresses our
response to a cybersecurity incident, and such plan is tested and evaluated on a regular basis.
● Third-Party Risk Management: We maintain a comprehensive, risk-based approach to identifying and overseeing cybersecurity risks presented by third
parties, including vendors, service providers and other external users of our systems, as well as the systems of third parties that could adversely impact
our business in the event of a cybersecurity incident affecting those third-party systems.
● Education and Awareness: We provide regular, mandatory training for personnel regarding cybersecurity threats as a means to equip our personnel with
effective tools to address cybersecurity threats, and to communicate our evolving information security policies, standards, processes and practices.
We engage in the periodic assessment and testing of our policies, standards, processes and practices that are designed to address cybersecurity threats and
incidents. These efforts include a wide range of activities, including audits, assessments, tabletop exercises, threat modeling, vulnerability testing, and other
exercises focused on evaluating the effectiveness of our cybersecurity measures and planning. We may engage third parties to perform assessments on our
cybersecurity measures, including information security maturity assessments, audits and independent reviews of our information security control environment
and operating effectiveness. The results of such assessments, audits and reviews are reported to the CMT and to Company’s management, and we adjust our
cybersecurity policies, standards, processes and practices as necessary based on the information provided by these assessments, audits and reviews. For further
information, see “Item 3.D. Risk Factors—General Risk Factors--Significant disruptions of our information technology systems or breaches of our data security
could adversely affect our business.”
81
Governance
The board of directors, in coordination with the CMT, oversees our risk management process, including the management of risks arising from cybersecurity
threats. Company’s management and the CMT each receive regular presentations and reports on cybersecurity risks, which address a wide range of topics
including recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends
and information security considerations arising with respect to our peers and third parties. The board of directors and CMT also receive prompt and timely
information regarding any cybersecurity incident that meets established reporting thresholds, as well as ongoing updates regarding any such incident until it has
been addressed. On an annual basis, Company’s management and the CMT discuss our approach to cybersecurity risk management with the members of the
Cybersecurity Council, which includes the Company’s CISO.
The CISO, in coordination with the CMT, which includes our CEO, CFO, COO, President, Human Resources, General Counsel, and Global IT Director,
works collaboratively across the Company to implement a program designed to protect our information systems from cybersecurity threats and to promptly
respond to any cybersecurity incidents in accordance with the Company’s incident response and recovery plans. To facilitate the success of our cybersecurity
Crisis Management Plan, multidisciplinary teams throughout the Company are deployed to address cybersecurity threats and to respond to cybersecurity
incidents. Through ongoing communications with these teams, the CISO and the CMT monitor the prevention, detection, mitigation and remediation of
cybersecurity threats and incidents in real time and report such threats and incidents to the board of directors when appropriate.
Mr. Luzon has been our CISO since November 2021. He has several years of experience in security management. Prior to joining our Company, from 2016
through 2021, he served as Information Security Manager for the Israeli Ministry of Religious Services. Mr. Luzon has an M.B.A. from the College of
Management and Academic Studies. He is a Technion Certified CISO, Information Security, of Technion – Israel Institute of Technology.
Cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected or are reasonably likely to affect our
Company, including our business strategy, results of operations or financial condition.
82
ITEM 17. FINANCIAL STATEMENTS
ITEM 18. FINANCIAL STATEMENTS
PART III
The consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20-F beginning on page F-1.
ITEM 19. EXHIBITS
The exhibits filed with or incorporated into this Annual Report are listed below.
Exhibit
1.1
Description
Amended and Restated Articles of Association of Nano Dimension Ltd., filed as exhibit 99.1 to Form 6-K filed on December 11, 2023, and
incorporated herein by reference.
2.1
2.2
4.1^
4.2
4.3
4.4
4.5
Amended and Restated Form of Depositary Agreement, dated as of April 15, 2019, among Nano Dimension Ltd., The Bank of New York
Mellon as Depositary, and owners and holders from time to time of ADSs issued thereunder, including the Form of American Depositary
Shares, filed as Exhibit 1 to the Form F-6 (File No. 333-252477) filed on January 27, 2021, and incorporated herein by reference.
Description of Securities, filed herewith.
Amended and Restated License Agreement, dated April 2, 2015, by and between the Company and Yissum Research Development Company of
The Hebrew University of Jerusalem, Ltd., filed as Exhibit 4.1 to Form 20-F/A filed on February 29, 2016, and incorporated herein by
reference.
Nano Dimension Ltd. Employee Stock Option Plan (2015), filed as Exhibit 99.1 to Form S-8 (File No. 333-269436) filed on January 27, 2023,
and incorporated herein by reference.
Nano Dimension Ltd. Amended and Restated Executive Officers Compensation Policy, filed as Exhibit 99.1 to Form 6-K filed on June 7, 2022,
and incorporated herein by reference.
Form of Warrant to purchase Ordinary Shares Represented by American Depositary Shares, dated January 30, 2019, filed as Exhibit 4.2 to Form
F-1 (File No. 001-228521) filed on January 30, 2019, and incorporated herein by reference.
Form of Warrant to purchase Ordinary Shares Represented by American Depositary Shares, dated September 4, 2019, filed as Exhibit 99.4 to
Report on Form 6-K (File No. 001-37600), filed on September 3, 2019, and incorporated herein by reference.
83
4.6
4.7
4.8
4.9
8.1
12.1
12.2
13.1
13.2
15.1
97.1
101
Form of Series A Warrant to purchase Ordinary Shares Represented by American Depositary Shares, dated August 5, 2020, between Nano
Dimension Ltd. and Stern YOI Ltd. Partnership, filed as Exhibit 4.5 to Form F-3 (File No. 333-252848), filed on February 8, 2021, and
incorporated herein by reference.
Form of Warrant to purchase Ordinary Shares Represented by American Depositary Shares, dated September 6, 2020, between Nano Dimension
Ltd. and YEDNE LLC, filed as Exhibit 4.7 to Form F-3 (File No. 333-252848), filed on February 8, 2021, and incorporated herein by reference.
Form of Indemnification Agreement, filed herewith.
Rights Agreement, dated January 25, 2024, by and between Nano Dimension Ltd. and the Bank of New York Mellon, filed as Exhibit 4.1 to
Report on Form 6-K (File No. 001-37600), filed on January 25, 2024, and incorporated herein by reference.
List of Subsidiaries, filed herewith.
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, filed herewith.
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, filed herewith.
Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.
Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.
Consent of Somekh Chaikin (Member firm of KPMG International), filed herewith.
Nano Dimension Ltd. Clawback Policy, dated November 27, 2023, filed herewith.
The following financial information from the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2023, formatted in
XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Financial Position; (ii) Consolidated Statements of Profit or
Loss; (iii) Consolidated Statements of Changes in Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial
Statements, tagged as blocks of text and in detail.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
^ Confidential treatment was granted with respect to certain portions of this exhibit pursuant to 17.C.F.R. §240.24b-2. Omitted portions were filed separately
with the SEC.
84
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on Form 20-F filed on its behalf.
SIGNATURES
Date: March 21, 2024
NANO DIMENSION LTD.
By:
/s/ Yoav Stern
Yoav Stern
Chief Executive Officer
85
Table of Contents
Report of Independent Registered Public Accounting Firm (Somekh Chaikin, Tel Aviv, Israel, Auditor Firm ID: 1057)
Consolidated Financial Statements as of December 31, 2023
Consolidated Statements of Financial Position
Consolidated Statements of Profit or Loss and Other Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
F-1
Page
F-2
F-4
F-5
F-6
F-9
F-10 - F-53
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Nano Dimension Ltd.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated statements of financial position of Nano Dimension Ltd. and its subsidiaries (the Company) as of
December 31, 2022 and 2023, the related consolidated statements of profit or loss and other comprehensive income, changes in equity, and cash flows for each
of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). We also have audited
the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as
of December 31, 2022 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in
conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023 based on criteria established in Internal Control
– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on
Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the
Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective
internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control
over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
F-2
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to
be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved
our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Somekh Chaikin
Member Firm of KPMG International
We have served as the Company’s auditor since 2015.
Tel-Aviv, Israel
March 21, 2024
F-3
Consolidated Statements of Financial Position as at
U.S. dollars in thousands (except share and per share data)
Assets
Cash and cash equivalents
Bank deposits
Restricted deposits
Trade receivables
Other receivables
Inventory
Total current assets
Restricted deposits
Investment in securities
Deferred tax
Other receivables
Property plant and equipment, net
Right-of-use assets
Intangible assets
Total non-current assets
Total assets
Liabilities
Trade payables
Financial derivatives and deferred consideration
Other payables
Current portion of other long-term liability
Total current liabilities
Liability in respect of government grants
Employee benefits
Liability in respect of warrants
Lease liability
Deferred tax liabilities
Loan from banks
Total non-current liabilities
Total liabilities
Equity
Non-controlling interests
Share capital
Share premium and capital reserves
Treasury shares
Foreign currency translation reserve
Remeasurement of net defined benefit liability (IAS 19)
Accumulated loss
Equity attributable to owners of the Company
Total equity
Total liabilities and equity
F-4
Nano Dimension Ltd
Note
2022
2023
December 31,
4.A
4.C
4.B
5.A
5.B
6
4.B
20.C
16.E
5.B
7
21
8
20.D
10
11
18
20.D
21
16.E
685,362
346,663
60
6,342
6,491
19,400
1,064,318
850
114,984
115
809
5,843
16,539
—
139,140
1,203,458
3,722
8,798
24,150
363
37,033
1,492
1,462
69
12,374
—
736
16,133
53,166
309,571
541,967
60
12,710
11,290
18,390
893,988
881
138,446
—
—
16,716
12,072
2,235
170,350
1,064,338
4,696
—
29,738
38
34,472
1,895
2,773
—
8,742
75
595
14,080
48,552
Note
2022
2023
December 31,
12
767
1,011
388,406
1,296,194
(1,509)
583
2,508
(536,657)
1,149,525
400,700
1,299,542
(97,896)
2,929
707
(591,207)
1,014,775
1,150,292
1,015,786
1,203,458
1,064,338
Consolidated Statements of Profit or Loss and Other Comprehensive Income
U.S. dollars in thousands (except share and per share data)
Revenues
Cost of revenues
Cost of revenues - write-down of inventories and amortization of assets recognized
in business combination and technology
Total cost of revenues
Gross profit
Research and development expenses, net
Sales and marketing expenses
General and administrative expenses
Other income, net
Impairment losses on intangible assets
Operating loss
Finance income
Finance expenses
Loss before taxes on income
Taxes benefit (expenses)
Loss for the year
Loss attributable to non-controlling interests
Loss attributable to owners
Loss per share
Basic loss per share
Diluted loss per share
Other comprehensive income items that after initial recognition
in comprehensive income were or will be transferred to profit or loss
Foreign currency translation differences for foreign operations
Other comprehensive income items that will not be transferred to profit or
loss
Remeasurement of net defined benefit liability (IAS 19), net of tax
Total other comprehensive income (loss) for the year
Total comprehensive loss for the year
Comprehensive loss attributable to non-controlling interests
Comprehensive loss attributable to owners of the Company
F-5
Nano Dimension Ltd
For the Year Ended
December 31,
2022
2021
10,493
5,730
43,633
24,943
3,641
9,371
1,122
41,686
22,713
19,644
—
140,290
(223,211)
17,909
428
(205,730)
4,906
(200,824)
(47)
(200,777)
4,639
29,582
14,051
75,763
38,833
30,457
—
40,523
(171,525)
22,965
79,471
(228,031)
(264)
(228,295)
(872)
(227,423)
2023
56,314
30,759
97
30,856
25,458
62,004
31,707
58,254
1,627
—
(124,880)
70,934
1,652
(55,598)
(62)
(55,660)
(1,110)
(54,550)
(0.81)
(0.83)
(0.88)
(0.88)
(0.22)
(0.22)
(46)
(844)
2,368
—
(46)
(200,870)
(69)
(200,801)
2,508
1,664
(226,631)
(892)
(225,739)
(1,801)
567
(55,093)
(1,088)
(54,005)
Note
13
14
8
15.A
15.B
15.C
15.D
8
15.E
15.E
16
17.A
17.B
18
Consolidated Statements of Changes in Equity
U.S. dollars in thousands (except share and per share data)
Nano Dimension Ltd
Share
premium
and capital
reserves
Share
capital
Remeasurement
of IAS 19
Treasury
shares
Foreign
currency
translation
reserve
Accumulated
loss
Total
Non-
controlling
interests
Total
equity
For the year
ended
December 31,
2023:
Balance as of
January 1,
2023
Investment of
non-
controlling
party in
subsidiary
Loss for the year
Other
comprehensive
income (loss)
for the year
Exercise of
warrants,
options and
vesting of
RSUs
Repurchase of
treasury
shares
Share-based
payment
acquired
Share-based
payments
Balance as of
December 31,
2023
388,406
1,296,194
2,508
(1,509)
583
(536,657)
1,149,525
767 1,150,292
—
—
—
—
—
—
—
—
—
—
—
(54,550)
—
(54,550)
1,332
(1,110)
1,332
(55,660)
—
—
(1,801)
—
2,346
—
545
22
567
12,294
(12,294)
—
—
—
—
—
—
—
—
—
—
(96,387)
—
—
(96,387)
—
(96,387)
—
(4,459)
—
20,101
—
—
—
—
—
—
—
(4,459)
—
(4,459)
—
20,101
—
20,101
400,700
1,299,542
707
(97,896)
2,929
(591,207)
1,014,775
1,011 1,015,786
F-6
Consolidated Statements of Changes in Equity
U.S. dollars in thousands (except share and per share data)
Nano Dimension Ltd
Share
premium
and capital
reserves
Share
capital
Remeasurement
of IAS 19
Treasury
shares
Presentation
/ Foreign
currency
translation
reserve
Accumulated
loss
Total
Non-
controlling
interests
Total
equity
For the year
ended
December 31,
2022:
Balance as of
January 1,
2022
Investment of
non-
controlling
party in
subsidiary
Loss for the year
Other
comprehensive
loss for the
year
Exercise of
warrants,
options and
vesting of
RSUs
Share-based
payment
acquired
Share-based
payments
Balance as of
December 31,
2022
386,665
1,266,027
—
(1,509)
1,407
(309,234)
1,343,356
875 1,344,231
—
—
—
—
—
—
—
—
—
—
—
(227,423)
—
(227,423)
784
784
(872) (228,295)
—
—
2,508
—
(824)
—
1,684
(20)
1,664
1,741
(1,741)
—
—
—
—
—
—
—
—
(1,005)
—
32,913
—
—
—
—
—
—
—
(1,005)
—
(1,005)
—
32,913
—
32,913
388,406
1,296,194
2,508
(1,509)
583
(536,657)
1,149,525
767 1,150,292
F-7
Consolidated Statements of Changes in Equity
U.S. dollars in thousands (except share and per share data)
Nano Dimension Ltd
Share
premium and
capital
reserves
Treasury
shares
Share capital
Presentation /
Foreign
currency
translation
reserve
Accumulated
loss
Total
Non-
controlling
interests
Total
equity
For the year
ended
December 31,
2021:
Balance as of
January 1,
2021
Investment of
non-
controlling
party in
subsidiary
Loss for the year
Other
comprehensive
loss for the
year
Issuance of
ordinary
shares, net (*)
Exercise of
warrants,
options and
vesting of
RSUs
Share issuance
as part of
business
combination
Share-based
payments
Balance as of
December 31,
2021
257,225
518,426
(1,509)
1,431
(108,457)
667,116
—
667,116
—
—
—
—
—
—
—
—
—
(200,777)
—
(200,777)
944
(47)
944
(200,824)
—
—
—
(24)
—
(24)
(22)
(46)
114,024
682,322
—
—
—
796,346
—
796,346
6,219
(3,176)
—
—
—
3,043
—
3,043
9,197
29,522
—
38,933
—
—
—
—
—
38,719
—
38,719
—
38,933
—
38,933
386,665
1,266,027
(1,509)
1,407
(309,234)
1,343,356
875 1,344,231
(*) See Note 12 for more information regarding issuance of ordinary shares.
F-8
Consolidated Statements of Cash Flows
U.S. dollars in thousands (except share and per share data)
Statements of Cash Flows
Cash flow from operating activities:
Net loss
Adjustments:
Depreciation and amortization
Impairment losses
Financing income net
Revaluation of financial liabilities accounted at fair value
Revaluation of financial assets accounted at fair value
Loss from disposal of property plant and equipment and right-of-use assets
Increase in deferred tax
Share-based payments
Other
Changes in assets and liabilities:
(Increase) decrease in inventory
Increase in other receivables
Increase in trade receivables
Increase in other payables
Increase (decrease) in employee benefits
Increase in trade payables
Net cash used in operating activities
Cash flow from investing activities:
Change in bank deposits
Interest received
Change in restricted bank deposits
Acquisition of property plant and equipment
Acquisition of intangible asset
Acquisition of subsidiaries, net of cash acquired
Payment of a liability for contingent consideration in a business combination
Acquisition of financial assets in fair value through profit and loss
Decrease in deposit in escrow
Other
Net cash used in investing activities
Cash flow from financing activities:
Proceeds from issuance of ordinary shares, warrants and convertible notes, net
Exercise of warrants and options
Lease payments
Repayment long-term bank debt
Proceeds from non-controlling interests
Amounts recognized in respect of government grants liability
Payments of share price protection recognized in business combination
Repurchase of treasury shares
Net cash from (used in) financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rate fluctuations on cash
Cash and cash equivalents at end of the year
Non-cash transactions:
Intangible asset acquired on credit
Property plant and equipment acquired on credit
Recognition of a right-of-use asset
Conversion of convertible notes and warrants to equity
F-9
Nano Dimension Ltd
For the Year Ended December 31,
2022
2021
2023
(200,824)
(228,295)
(55,660)
7,383
140,290
(6,873)
(10,608)
—
567
(5,013)
29,782
(70)
155,458
2,382
(429)
(449)
1,139
—
74
2,717
(42,649)
(416,019)
3,706
(32)
(9,761)
—
(74,574)
—
—
—
—
(496,680)
805,497
212
(1,494)
(814)
944
(96)
—
—
804,249
264,920
585,338
3,368
853,626
7,283
40,523
(1,769)
(4,516)
62,791
948
(581)
32,563
166
137,408
(4,603)
(1,978)
(1,992)
5,281
1,497
628
(1,167)
(92,054)
141,555
17,465
(327)
(9,388)
—
(31,057)
(10,708)
(177,775)
3,362
(800)
(67,673)
—
—
(4,151)
(406)
510
(221)
(1,005)
—
(5,273)
(165,000)
853,626
(3,264)
685,362
6,544
—
(46,281)
461
(23,462)
326
(11)
20,101
164
(42,158)
(340)
(5,775)
(5,603)
4,856
(1,478)
1,089
(7,251)
(105,069)
(189,060)
41,529
(27)
(9,098)
(1,524)
—
(9,255)
—
—
835
(166,600)
—
—
(4,823)
(536)
1,089
(298)
(4,459)
(96,387)
(105,414)
(377,083)
685,362
1,292
309,571
—
249
1,919
2,830
—
52
15,196
—
711
214
929
—
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Note 1 – General
A.
Reporting Entity
Nano Dimension Ltd
Nano Dimension Ltd. (the “Company”) is an Israeli resident company incorporated in Israel. The address of the Company’s registered office is 2 Ilan
Ramon St., Ness Ziona, Israel. Unless otherwise indicated, all references to the “Company,” refer to Nano Dimension Ltd. and its subsidiaries, Global
Inkjet Systems Ltd. (“GIS”), a United Kingdom corporation, Nano Dimension Technologies Ltd. (“Nano Tech”), an Israeli corporation, Essemtec AG
(“Essemtec”) and Nano Dimension Swiss GmbH (“Nano Swiss”), Swiss corporations, Formatec Holding B.V. (“Formatec Holding”), Admatec Europe
B.V. (“Admatec”), and Formatec Technical Ceramics B.V. (“Formatec”), Dutch corporations, Nano Dimension USA Inc. (“Nano USA”), a Delaware
corporation, Essemtec USA, LLC, a Delaware limited liability company, Nano Dimension GmbH (“Nano Germany”) and Essemtec Deutschland
GmbH, German corporations, Nano Dimension Australia Pty Ltd. (“Nano Australia”), an Australian corporation, Nano Dimension (HK) Limited, a
Hong Kong corporation, Essemtec France SAS, a French corporation, Nano Dimension NY Ltd., a New York corporation, and Nano Dimension
Trading (Shenzhen) Ltd., a Chinese corporation. The consolidated financial statements of the Company as of December 31, 2023, comprise the
Company and its subsidiaries in Israel, in the United States, in Switzerland, in Germany, in the United Kingdom, in the Netherlands, Australia and in
Hong Kong (together referred to as the “Group”). The Company engages in advance additive manufacturing (also known as “3D”) solutions. Since
March 2016, the Company’s American Depositary Shares (“ADSs”) have been trading on the Nasdaq Capital Market (“Nasdaq”).
Since August 25, 2014, the Company has devoted substantially all of its financial resources to develop its products and has financed its operations
primarily through the issuance of equity securities. The amount of the Company’s future net profits or losses will depend, in part, on the rate of its
future expenditures, its ability to generate significant revenues from the sale of its products, and its ability to obtain funding through the issuance of
securities, strategic collaborations or grants. In the fourth quarter of 2017 the Group began commercializing its products and its ability to generate
significant revenues and achieve profitability depends on its ability to successfully complete the development of, and to continue to commercialize, its
products, including consumables.
B.
Material events in the reporting period
(1) Change in interest curves and inflation expectations
Since 2021, inflation rates in Israel and the world have been rising – in 2021 and 2022, the Consumer Price Index in Israel increased, an increase that
continued also in 2023. Along with the worldwide rise in prices, central banks around the world decided to raise interest rates with the aim of curbing
rising prices. The changes in interest rates and the rise in inflation rates had a significant effect on items in the financial statements as described in the
following notes:
● Note 18 on employee benefits, with respect to remeasurement of actuarial liabilities.
● Note 20 on financial risks, with respect to linkage and currency risk.
(2) Iron Swords War in Israel
On October 7, 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military
targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and
in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers. Following the
attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to
their continued rocket and terror attacks (the “Iron Swords War”). Following this, there was a decrease in Israel’s economic and business activity. The
security situation has led, inter alia, to a disruption in the chain of supply and production, a decrease in the volume of national transportation, a
shortage in manpower as well as a decrease in the value of financial assets and a rise in the exchange rate of foreign currencies in relation to the NIS.
There was no material impact on the Company’s operations and revenues.
F-10
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Note 2 – Basis of Preparation
A.
Statement of compliance
Nano Dimension Ltd
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board.
The consolidated financial statements were authorized for issuance by the Company’s board of directors on March 20, 2024.
B.
Functional and presentation currency
These consolidated financial statements are presented in U.S. dollars (“USD”), which is the Company’s functional currency, and have been rounded to
the nearest thousand, except when otherwise indicated. The USD is the currency that represents the principal economic environment in which the
Company operates.
C.
Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis, except for the following assets and liabilities:
● Financial instruments, derivatives and other assets and liabilities measured at fair value through profit or loss;
● Deferred tax assets and liabilities; and
● Assets and liabilities for employee benefits.
For further information regarding the measurement of these assets and liabilities see Note 3 regarding material accounting policies.
D.
Operating Cycle
The operating cycle period of the Group is 12 months.
E.
Use of estimates
The preparation of financial statements in conformity with IFRS as issued by the International Accounting Standards Board requires management to
make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and
expenses. Actual results may differ from these estimates.
The preparation of accounting estimates used in the preparation of the Group’s financial statements requires management of the Company to make
assumptions regarding circumstances and events that involve considerable uncertainty. The Company’s management prepares the estimates on the
basis of past experiences, various facts, external circumstances, and reasonable assumptions according to the pertinent circumstances of each estimate.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the
estimates are revised and in any future periods affected.
F-11
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Nano Dimension Ltd
Information about assumptions made by the Group with respect to the future and other reasons for uncertainty with respect to estimates that have a
significant risk of resulting in a material adjustment to carrying amounts of assets and liabilities in the next financial year are included in the following
notes:
– Acquisitions of subsidiary
The Group measures the fair value of the consideration transferred (including contingent consideration) and fair value of the assets acquired and
liabilities assumed, in business combination transactions. For information on details on fair value measurement in acquisition of subsidiaries, see
Note 9 regarding business combinations.
–
Estimated impairment of non-financial assets
In 2021 and 2022, the Group examined whether there was an impairment of goodwill, intangibles and property, plant and equipment that were
allocated to cash generating units, in accordance with the accounting policy presented in Note 3 below. Recoverable amounts of cash-generating
units were determined on the basis of value-in-use calculations. These calculations require the use of estimates.
During those years, 2021 and 2022, there was a decline in the value of the Group’s cash-generating units to which goodwill is allocated. Given the
recoverable amount of the said cash-generating units, determined on the basis of the value in use of the units, the goodwill, intangibles and
property, plant and equipment relating to the Group of the said cash-generating units was reduced by approximately $40,523 and $140,290 in the
years 2022 and 2021, respectively.
For information on key assumptions used in calculation of the recoverable amount, see Note 8.D regarding intangible assets and Note 7 regarding
property, plant and equipment.
–
Fair value measurement of financial instruments
The Company accounts for financial liabilities relating to contingent liabilities arising from a business combination, warrants and related
derivatives at fair value through profit or loss. The fair values of these instruments are determined by using the Monte Carlo simulation method
and the Black-Scholes model and assumptions regarding unobservable inputs used in the valuation model including the probability of meeting
revenue targets, and weighted average cost of capital, all of which can lead to profit or loss from a change in the fair value of these instruments.
When determining the fair value of an asset or liability, the Group uses observable market data as much as possible. There are three levels of fair
value measurements in the fair value hierarchy that are based on the data used in the measurement, as follows:
● Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
● Level 2: inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly.
● Level 3: inputs that are not based on observable market data (unobservable inputs).
For information on details regarding fair value measurement at Level 2 and sensitivity analysis see Note 20.D regarding financial instruments.
F-12
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Nano Dimension Ltd
F.
Initial application of new standards, amendments to standards and interpretations
Amendment to IAS 1, Presentation of Financial Statements: “Disclosure of Accounting Policies” (“the Amendment”)
According to the Amendment, companies must provide disclosure of their material accounting policies rather than their material Accounting Policies.
Pursuant to the Amendment, accounting policy information is material if, when considered with other information disclosed in the financial statements,
it can be reasonably be expected to influence decisions that the users of the financial statements make on the basis of those financial statements.
The Amendment also clarifies that accounting policy information is expected to be material if, without it, the users of the financial statements would be
unable to understand other material information in the financial statements. The Amendment also clarifies that immaterial accounting policy
information need not be disclosed.
The Amendment is initially applied in the annual financial statements for 2023. As a result of applying the Amendment, the extent of the accounting
policy disclosure provided in the financial statements for 2023 was reduced and adjusted according to the Company’s specific circumstances.
Note 3 – Material Accounting Policies
The accounting policies of the Group set out below have been applied consistently for all periods presented in these consolidated financial statements, and have
been applied consistently by Group entities.
A.
Basis of consolidation
(1) Business combination
The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the definition of a
business and control is transferred to the Group. In determining whether a particular set of activities and assets is a business, the Group assesses
whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability
to produce outputs. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar
identifiable assets, then the Group may implement the concentration test, according to which the set of assets and activities acquired do not constitute a
business. Control exists when the Group is exposed, or has rights, to variable returns from its involvement with the acquiree and it has the ability to
affect those returns through its power over the acquiree. Substantive rights held by the Group and others are taken into account when assessing control.
The Group recognizes goodwill on an acquisition according to the fair value of the consideration transferred, less the net amount of the identifiable
assets acquired and the liabilities assumed. Any goodwill that arises is tested annually for impairment.
Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the
definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other
contingent consideration is classified as a financial liability and remeasured at fair value at each reporting date, and subsequent changes in the fair
value of the contingent consideration are recognized in profit or loss.
If share-based payment awards (“replacement awards”) are required to be exchanged for awards held by the acquiree’s employees (“acquiree’s
awards”), then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the
business combination. This determination is based on the market-based measure of the replacement awards compared with the market-based measure
of the acquiree’s awards and the extent to which the replacement awards relate to pre-combination service.
F-13
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
(2) Subsidiaries
Nano Dimension Ltd
Subsidiaries are entities controlled by the Group. The financial statements of the subsidiaries are included in the consolidated financial statements from
the date that control commences until the date that control is lost. The accounting policies of the subsidiaries are aligned with the policies adopted by
the Group.
(3) Non-controlling interest
Non-controlling interests comprise the equity of a subsidiary that cannot be attributed, directly or indirectly, to the parent company.
Profit or loss and any part of other comprehensive income are allocated to the owners of the Company and the non-controlling interests. Total profit or
loss and other comprehensive income is allocated to the owners of the Company and the non-controlling interests even if the result is a negative
balance of non-controlling interests.
B.
Foreign currency
(1) Foreign currency transactions
Transactions in currencies other than the USD are translated into the functional currency of the Group at exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at
that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of
the year, adjusted for effective interest and payments during the year, and the amortized cost in foreign currency translated at the exchange rate at the
end of the year.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the
transaction.
Foreign currency differences arising from translation are recognized in profit or loss.
(2) Index linked financial items
Financial assets and liabilities which according to their terms are linked to changes in the Israeli Consumer Price Index (the “Index”) are adjusted
according to the relevant Index on every reporting date in accordance with the terms of the agreement. Linkage differences deriving from said
adjustment are recorded to profit and loss.
(3) Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising upon acquisition, are translated to USD at
exchange rates at the reporting date. The income and expenses of foreign operations are translated to USD at exchange rates at the dates of the
transactions, mainly the average exchange rates during the period.
Foreign currency differences are recognized in other comprehensive income and are presented in equity in the foreign currency translation reserve
(hereinafter – “translation reserve”).
When a foreign operation is disposed of such that control is lost, the cumulative amount in the translation reserve related to that foreign operation is
reclassified to profit or loss as a part of the gain or loss on disposal.
F-14
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Nano Dimension Ltd
Generally, foreign currency differences from a monetary item receivable from or payable to a foreign operation, including foreign operations that are
subsidiaries, are recognized in profit or loss in the consolidated financial statements.
(4) Below are details regarding the Consumer Price Index of the New Israeli Shekel (“NIS”) and the exchange rate of Euro, Swiss Franc (“CHF”) and
British Pound (“GBP”):
December 31, 2023
December 31, 2022
December 31, 2021
Change in percentages:
Year ended December 31, 2023
Year ended December 31, 2022
Year ended December 31, 2021
C.
Revenue recognition
Consumer
Price Index
111.20
108.00
102.60
2.96
5.26
1.48
Euro
CHF
NIS
GBP
1.11
1.07
1.13
3.71
(5.62)
(7.38)
1.19
1.08
1.09
9.70
(0.54)
(3.54)
0.28
0.28
0.32
(2.98)
(11.62)
3.23
1.27
1.20
1.35
5.80
(10.80)
(0.74)
The Group recognizes revenue when the customer obtains control over the promised goods or services. On the contract’s inception date, the Group
assesses the goods or services promised in the contract with the customer and identifies as a performance obligation any promise to transfer to the
customer goods or services (or a bundle of goods or services) that are distinct.
The Group identifies goods or services promised to the customer as being distinct when the customer can benefit from the goods or services on their
own or in conjunction with other readily available resources and the Group’s promise to transfer the goods or services to the customer is separately
identifiable from other promises in the contract. The Group’s identified performance obligations include: printer, ink, maintenance (which is generally
provided for a period of up to one year), training and installation.
In some cases, the Group recognizes a warranty as a distinct service to the customer and is, therefore, a distinct performance obligation.
Revenue is allocated among performance obligations in a manner that reflects the consideration that the Group expects to be entitled to for the
promised goods based on the standalone selling prices (“SSP”) of the goods or services of each performance obligation.
The Group allocates the transaction price to the identified performance obligations based on the residual approach, while allocating the estimated
standalone selling prices for performance obligations relating to maintenance, training and installation services, and the residual is allocated to the
printer.
Revenues allocated to the printers, installation and training, and ink and other consumables are recognized when the control is passed in accordance
with the contract terms at a point in time.
Maintenance revenue is recognized ratably, on a straight-line basis, over the period of the services. Revenue from training and installation is
recognized at the time of performance.
Revenues from the provision of development services, which are contingent on the existence of milestones, are recognized solely on the existence of
the relevant milestone.
When the consideration for the contract is in a form other than cash, the Group measures the non-cash consideration at fair value. In trade-up contracts,
the Group delivers new printer and receives previous model printer and cash. The Group needs to evaluate the fair value of the printer received. In
doing so, the Group measures the difference between the SSP of the new printer and the cash received.
F-15
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
D.
Financial instruments
(1) Trade receivables
Nano Dimension Ltd
The Group initially recognizes trade receivables on the date that they are created. A trade receivables without a significant financing component is
initially measured at the transaction price and subsequently measured at amortized cost. Receivables originating from contract assets are initially
measured at the carrying amount of the contract assets on the date classification was changed from contract asset to receivables.
On each reporting date, the Group assesses whether the trade receivables carried at amortized cost are credit-impaired. The Group’s policy for
estimating the credit losses on trade receivables includes analysis of such items as aging, credit worthiness, payment history, and historical bad debt
experience.
Provisions for expected credit losses of financial assets measured at amortized cost are deducted from the gross carrying amount of the financial assets.
(2) Investment in securities
The Group measures investment in equity instruments in fair value through profit and loss.
(3) Derivative financial liabilities
Measurement of derivative financial instruments
Derivatives are recognized initially at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are
recognized in profit or loss, as financing income or expense. Inter alia, the Group implements the said accounting treatment to changes in the fair value
of warrants that contain a cashless exercise mechanism. For further information, see Note 20.
(4) Repurchase of share capital
When share capital recognized as equity is repurchased by the Group, the amount of the consideration paid, which includes directly attributable costs,
net of any tax effects, is recognized as a deduction from equity. Repurchased shares are classified as treasury shares. When treasury shares are sold or
reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus on the transaction is carried to share
premium, whereas a deficit on the transaction is deducted from retained earnings.
E.
Property plant and equipment
Property, plant and equipment are presented according to cost, including directly attributed acquisition costs, minus accumulated depreciation and
losses from accrued decrease in value.
The cost of printers used for internal purposes, which are classified as property, plant and equipment, includes the cost of materials and direct labor,
and any other costs directly attributable to bringing the assets to a working condition for their intended use.
Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of the fixed asset item, since this most
closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.
F-16
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
The estimated useful lives for the current and comparative periods are as follows:
Machinery, equipment and vehicles
Computers (mainly 33%)
Office furniture and equipment
Leasehold Improvements (mainly 25%)
Buildings
F.
Intangible assets
(1) Research and development
Nano Dimension Ltd
%
7 – 25
10 – 33
7 – 20
10 – 33
3.5
Development expenditure is capitalized only if development costs can be measured reliably, the product or process is technically and commercially
feasible, future economic benefits are probable, and the Group has the intention and sufficient resources to complete development and to use or sell the
asset.
The Group did not capitalize development expenses because the Group estimated that not all aforementioned conditions were met.
(2) Other intangible assets
Other intangible assets that are acquired by the Group are measured at cost less accumulated amortization and accumulated impairment losses.
(3) Amortization
Amortization is recognized in profit or loss on a straight-line basis, over the estimated useful lives of the intangible assets from the date they are
available for use, since these methods most closely reflect the expected pattern of consumption of the future economic benefits embodied in each asset.
G.
Impairment of non-financial assets
Determining cash-generating units
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates
cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). The
Group recognized six cash generating units.
Allocation of goodwill to cash-generating units or a group of cash-generating units
For the purposes of goodwill impairment testing, cash-generating units to which goodwill has been allocated are aggregated so that the level at which
impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes.
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 acquisitions
of its subsidiaries, at the Group’s level, since the goodwill cannot be allocated to individual cash-generating units.
F-17
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
The Group’s corporate assets
Nano Dimension Ltd
The Group recognizes technology assets, including technology assets recognized 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.
Recognition of impairment loss
An impairment loss is recognized if the carrying amount of an asset or a cash-generating unit exceeds its estimated recoverable amount. Impairment
losses are recognized in profit or loss. Impairment losses recognized in respect of a group of cash-generating units are allocated first to reduce the
carrying amount of any goodwill allocated to the units and then to reduce the carrying amounts of the other assets in the cash-generating units on a pro
rata basis.
H.
Provisions
A provision for claims is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably
and it is probable that an outflow of economic benefits will be required to settle the obligation. When the value of time is material, the provision is
measured at its present value.
A provision for warranties is recognized when the underlying products or services are sold. The provision is based on historical warranty data and a
weighting of all possible outcomes against their associated probabilities.
I.
Government grants
Grants received from the Israeli Innovation Authority (“IIA”) are recognized as a liability according to their fair value on the date of their receipt. The
amount of the liability is reexamined each period, and any changes in the present value of the cash flows discounted at the original interest rate of the
grant are recognized in profit or loss. Expenses related to revaluation of the liability in respect of government grants were recognized in the statements
of profit or loss and other comprehensive income as finance expenses.
J.
Leases
Upon initial recognition, the Group recognizes a liability at the present value of the balance of future lease payments, and concurrently recognizes a
right-of-use asset at the same amount of the lease liability.
Since the interest rate implicit in the Group’s leases is not readily determinable, the incremental borrowing rate of the lessee is used. Subsequent to
initial recognition, the right-of-use asset is accounted for using the cost model, and depreciated on a straight-line basis over the shorter of the lease
term or useful life of the asset, as follows:
Buildings
Vehicles
1-5 years
3 years
The lease term is the non-cancellable period of the lease plus periods covered by an extension or termination option if it is reasonably certain that the
lessee will or will not exercise the option, respectively.
The Group has elected to apply the practical expedient by which short-term leases of up to one year and/or leases in which the underlying asset has a
low value, are accounted for such that lease payments are recognized in profit or loss on a straight-line basis, over the lease term, without recognizing
an asset and/or liability in the statement of financial position.
F-18
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Nano Dimension Ltd
For lease contracts that contain non-lease components, such as services or maintenance, which are related to a lease component, the Group elected to
account for the contract as a single lease component without separating the components.
K.
Financing income and expenses
Financing income is comprised of interest income on deposits, revaluation of liability in respect of government grants, foreign currency gains and fair
value changes of financial liabilities and assets through profit and loss.
Financing expenses are comprised of bank fees, exchange rate differences, revaluation of liability in respect of government grants and fair value
changes of financial liabilities through profit and loss.
In the statements of cash flows, interest paid is presented as part of cash flows from financing activities and interest received is presented as part of
cash flows from investing activities.
Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basis as either financing income or financing
expenses depending on whether foreign currency movements are in a net gain or net loss position.
L.
Income tax expense
Income tax comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that they relate to a
business combination or recognized directly in equity or in other comprehensive income to the extent they relate to items recognized directly in equity
or in other comprehensive income.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes.
A deferred tax asset is recognized for unused tax losses, tax benefits and deductible temporary differences, to the extent that it is probable that future
taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefit will be realized.
Deferred tax assets that were not recognized are reevaluated at each reporting date and recognized if it has become probable that future taxable profits
will be available against which they can be utilized.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income
taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on
a net basis or their current tax assets and liabilities will be realized simultaneously.
For more information regarding the deferred tax assets and liabilities, see note 16.
M.
Employee benefits
Post-employment benefits
The Group’s liability for severance pay for its employees is mainly calculated pursuant to Israeli Severance Pay Law (1963) (the “Severance Pay
Law”). The Group’s liability is covered by monthly deposits with severance pay funds and insurance policies. For most of the Group’s employees, the
payments to pension funds and to insurance companies exempt the Group from any obligation towards its employees, in accordance with Section 14 of
the Severance Pay Law, which is accounted for as a defined contribution plan. Accumulated amounts in pension funds and in insurance companies are
not under the Group’s control or management and, accordingly, neither those amounts nor the corresponding accrual for severance pay are presented in
the consolidated statements of financial position.
Post-employment benefits for Essemtec employees are treated as defined benefit plans.
F-19
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
N.
Share-based payment transactions
Nano Dimension Ltd
The Group mainly uses grants of restricted share units (“RSUs”) in order to incentivize the performance of officers and other key employees, and to
members of the board of directors and observers who are not employees. The grant date fair value of share-based payment awards granted is
recognized as a salary expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the
awards. Share-based payment arrangements in which the subsidiary grants rights to parent company equity instruments to its employees are accounted
for by the Group as equity-settled share-based payment transactions.
The amount recognized as an expense in respect of share-based payment awards that are conditional upon meeting service and non-market
performance conditions, is adjusted to reflect the number of awards that are expected to vest.
Note 4.A – Cash and cash equivalents
Denominated in NIS
Denominated in USD
Denominated in GBP
Denominated in EURO
Denominated in CHF
Other
Note 4.B – Restricted deposits
December 31,
2022
2023
37,812
639,318
2,643
4,176
1,380
33
685,362
24,537
278,993
663
3,913
1,437
28
309,571
The Group has restricted deposits of $881 for the lease of its offices and labs and $60 for credit cards. The deposits are not linked and bear an annual interest
rate of 0.01%-5.1%. The Group expects to lease its offices and labs for a period of more than a year, thus the restricted deposit was classified as a non-current
asset. The restricted deposit for the credit cards was classified as a current asset.
Note 4.C – Bank deposits
The Group has unrestricted bank deposits of $541,967 (2022: $346,663), which are presented under current assets. The deposits bear an annual and fixed
interest rate of between 4.6%-7.17%.
The deposits period is between three months to one year.
F-20
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Note 5.A – Trade receivables
Trade receivables
Provision for impairment (*)
(*) All impairment losses derive from contracts with customers.
Note 5.B – Other receivables
Government authorities
Prepaid expenses
Others (*)
Presented under current assets
Presented under non-current assets
(*) Including $6,353 in receivables for reimbursement of damaged inventory (see note 6).
Note 6 – Inventory
Raw materials and work in progress
Finished goods
Nano Dimension Ltd
December 31,
2022
2023
6,770
(428)
6,342
13,370
(660)
12,710
December 31,
2022
2023
2,495
1,895
2,910
7,300
6,491
809
1,956
1,777
7,557
11,290
11,290
—
December 31,
2022
2023
14,924
4,476
19,400
12,134
6,256
18,390
During the reporting period, the Group’s warehouse located in the south of Israel suffered physical damage due to a direct missile hit related to the Iron Swords
War, as described in Note 1(B)(2). As a result, damaged inventory in the amount of $4,959 was written off. The damage was covered by government authorities,
part of which was received in November 2023, and the remainder in February 2024. The Group is in the process of claiming additional compensation from its
insurance policy, which compensates the profit margin of that inventory. The amount of $3,774, which represents the net excess of the receivables from the
government authorities over the cost of the inventory damaged, was recognized in other income.
F-21
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Note 7 – Property plant and equipment, net
Nano Dimension Ltd
Machinery,
equipment and
vehicles
Computers
Office
furniture and
equipment
Leasehold
improvements
Raw materials
for property
Buildings
Total
Cost
As of January 1, 2022
Acquisitions through
business combinations
Additions
Disposals
Effect of changes in
exchange rates
As of December 31,
2022
Additions
Disposals
Effect of changes in
exchange rates
As of December 31,
2023
Depreciation accrued
As of January 1, 2022
Additions
Impairment loss
Effect of changes in
exchange rates
As of December 31,
2022
Additions
Disposals
Effect of changes in
exchange rates
As of December 31,
2023
Carrying amount
As of December 31,
2022
As of December 31,
2023
8,490
1,870
795
2,579
439
6,064
20,237
391
3,125
(464)
65
2,075
(23)
120
677
—
43
3,543
—
267
(42)
(1)
(35)
11,809
7,179
(393)
3,945
984
(13)
1,591
241
(23)
6,130
3,509
(204)
454
111
44
16
19,049
5,027
1,853
9,451
8,490
99
3,343
1,870
496
1,552
(123)
27
11,809
921
(253)
3,945
169
(8)
795
74
696
26
1,591
70
(7)
935
838
4,326
31
6,130
581
(111)
(14)
81
43
11
12,463
4,187
1,697
6,611
—
6,586
—
840
—
—
156
2,840
—
—
(439)
—
—
—
—
—
—
439
—
(439)
—
—
—
—
—
—
—
—
—
20
—
(24)
6,060
110
—
619
9,440
(926)
165
29,535
12,023
(633)
611
1,236
6,781
42,161
18
205
—
12,547
1,712
9,478
(6)
(45)
217
231
—
39
23,692
1,972
(379)
160
487
25,445
5,843
5,843
6,294
16,716
During the year ended December 31, 2023, the Group acquired $726 (2022: $512) of property and equipment on credit.
A. Impairment loss
As part of the impairment testing of cash generating units, impairment losses of property, plant and equipment were recognized in 2022 and 2021 in the
amount of approximately $9,478 and $8,031. For further information regarding the impairment test, see Note 8.D.
F-22
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Note 8 – Intangible assets
A. Movement in carrying amount
Cost
As of January 1, 2022
Acquisitions through business combinations
Effect of changes in exchange rates
As of December 31, 2022
Acquisitions of intangible
As of December 31, 2023
Amortization and impairment losses
As of January 1, 2022
Amortization for the year
Effect of changes in exchange rates
Impairment loss
As of December 31, 2022
As of December 31, 2023
Carrying amount
As of December 31, 2022
As of December 31, 2023
B. Acquisitions
Nano Dimension Ltd
Goodwill
Technology
Development
Costs
Other
intangible
assets
Total
89,244
22,050
—
111,294
—
111,294
(89,244)
—
—
(22,050)
(111,294)
(111,294)
—
—
39,987
8,902
(453)
48,436
2,235
50,671
(39,987)
(1,654)
13
(39,987)
(48,436)
(48,436)
—
2,235
7,672
—
—
7,672
—
7,672
(7,672)
—
—
—
(7,672)
(7,672)
—
—
2,853
2,497
48
5,398
—
5,398
(2,853)
(348)
(10)
(2,187)
(5,398)
(5,398)
—
—
139,756
33,449
(405)
172,800
2,235
175,035
(139,756)
(2,002)
3
(31,045)
(172,800)
(172,800)
—
2,235
In August 2023, the Group acquired the technology and intellectual property of the U.K.-based company Additive Flow, which supplies solutions for 3D design
simulation and optimization, for 1,760 thousand GBP ($2,235). An amount of 1,200 thousand GBP ($1,524) was paid immediately, and the rest of the
consideration was transferred to the seller in February 2024. The Group intends to integrate Additive Flow’s technology as part of its research and development.
Therefore, the acquired intangible asset has not yet begun to be amortized.
C. Amortization
No amortization was recognized in 2023. In 2022, the current amortization of technology and of development costs and backlogs (included in “other intangibles
assets”) was allocated to the cost of revenues. The current amortization of trademarks (included in “other intangibles assets”) was recognized in selling and
distribution expenses. Amortization is recognized on a straight-line basis, except for backlogs which were amortized when inventory was sold.
D.
Impairment testing for cash-generating units containing goodwill
In 2022 and 2021, 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
tested the goodwill acquired from the acquisition of GIS and Formatec Holding (2021: 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 could not be allocated reasonably and consistently to cash-generating units and therefore were allocated to the Group
level.
F-23
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Nano Dimension Ltd
The estimated recoverable amount of the cash generating units was based on the higher between the fair value less costs of disposal and the value-in-use of the
Group. The value-in-use 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 impairment losses of
$40,523 and $140,290 were recognized in 2022 and 2021, respectively. The impairment losses were allocated to goodwill, intangible assets and property plant
and equipment.
The estimated fair value less cost of sale of some property, plant and equipment assets and right of use assets was higher than its carrying amount, and therefore
the impairment loss was not allocated to those assets.
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 interest,
tax, depreciation and amortization) margins. These assumptions are as follows:
(1) Discount rate
In 2022, the discount rate was estimated based on an industry average weighted average cost of capital, without debt leveraging, and was estimated to 21%
(2021: 20%). The discount rate was 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 were based on the Company’s budget, growth plans and available market information. Assumptions:
2022
Revenues annual growth rate is expected to gradually decrease from 35.8%
in 2023 to 21.5% in 2027.
2021
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
2022
EBITDA margin is expected to gradually increase from negative 153.8% in
2023, to negative 47.6% in 2027.
2021
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
In 2022, due to significant operating losses throughout the projection period, no tax expenses were recognized. In 2021, the effective tax rate during the
projection period was 16%.
F-24
Nano Dimension Ltd
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Note 9 – Subsidiaries
A. Details in respect of subsidiaries
Presented hereunder is a list of the main Group’s subsidiaries:
Name of company
Nano Dimension Technologies Ltd.
Nano Dimension USA Inc.
Nano Dimension (HK) Limited
Nano Dimension Australia Pty Ltd. (1)
Nano Dimension GmbH
J.A.M.E.S GmbH
Essemtec AG
Nano Dimension Swiss GmbH
Global Inkjet Systems Ltd. (2)
Formatec Holding B.V. (2)
Israel
USA
Asia-Pacific
Australia
Germany
Germany
Switzerland
Switzerland
UK
Netherlands
Principal location of the
company’s activity
2022
%
2023
%
100%
100%
100%
—%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
(1) In January 2023, the Company established an Australian-based subsidiary, Nano Australia. Nano Australia will perform sales and marketing activity and
engage in possible collaboration agreements.
(2) See note 9B.
B. Acquisition of subsidiaries
Business combinations during 2022
(1) Acquisition of GIS
On January 4, 2022, the Company acquired 100% of the shares and voting interests in GIS, a company incorporated under the laws of England &
Wales. GIS is a developer and supplier of high-performance control electronics, software, and ink delivery systems. Taking control of GIS will
enable the Group access to GIS’s technology and software, and will enable faster product development.
Consideration transferred
The following table summarizes the acquisition date fair value of each major class of consideration:
Cash
Deferred consideration
Earn-out cash consideration – Contingent consideration
Total consideration transferred
F-25
23,568
772
5,196
29,536
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
a) Deferred consideration
Nano Dimension Ltd
The Company will pay GIS’s selling shareholders the amount of GBP 1,000 thousand (as of January 4, 2022, approximately $1,349) on April
1, 2024. The deferred consideration for shareholders who represent approximately 39% of the selling shareholders is contingent on their
continued employment. Therefore, this amount is not part of the business combination, but of the employee benefits as described in note 18.
Regarding the amendment of the share purchase agreement in respect of deferred consideration, see below.
b) Earn-out cash consideration – Contingent Consideration
The Company will pay GIS’s selling shareholders earn-out payments, depending on certain targets, in an aggregate amount of up to GBP
7,000 thousand (“GIS earn-out consideration”) as follows:
(i) EBITDA based earn-out (maximum of up to GBP 1,000 thousand of the GIS earn-out consideration) – In the event that GIS generates,
during the fiscal year ending on March 31, 2022, EBITDA of at least GBP 396 thousand (as of January 4, 2022, approximately $535)
(“GIS EBITDA target”).
If the actual amount of EBITDA that was achieved by GIS during this period is equal to or lower than 50% of the GIS EBITDA target,
then GIS’s selling shareholders shall not be entitled to receive any portion of the EBITDA based earn-out consideration.
If the actual amount of EBITDA that was achieved by GIS during this period is lower than the GIS EBITDA target but higher than 50%
of the GIS EBITDA target, then GIS’s selling shareholders shall be entitled to a portion of the EBITDA-based earn-out consideration
based according to this formula:
EBITDA consideration * (1 – (GIS EBITDA target - Actual EBITDA)*2/GIS EBITDA target).
(ii) Gross profit based earn-out (maximum of up to GPB 3,000 thousand of the GIS earn-out consideration) – In the event that GIS generates,
during the fiscal year ending on March 31, 2023, gross profit of at least GBP 6,962 thousand (as of January 4, 2022, approximately
$9,364) (“GIS gross profit target”).
If the actual gross profit that was achieved by GIS during this period is equal to or lower than GBP 5,570 thousand (“GIS gross profit
threshold”), then GIS’s selling shareholders shall not be entitled to receive any portion of the gross profit-based earn-out consideration.
If the actual gross profit that was achieved by GIS during this period is lower than GIS gross profit target but higher than the GIS gross
profit threshold, then GIS’s selling shareholders shall be entitled to a portion of the GIS gross profit based earn-out consideration
according to this formula:
Profit consideration * (1 - (GIS gross profit target – actual gross profit)*5/GIS gross profit target).
(iii) Revenues based earn-out (maximum of up to GPB 3,000 thousand of the GIS earn-out consideration) – In the event that GIS generates,
during the fiscal year ending on March 31, 2023, revenues of at least GBP 9,537 thousand (as of January 4, 2022, approximately
$12,869) (“GIS revenues target”).
If the actual revenues that was achieved by GIS during this period is equal to or lower than GBP 8,584 thousand (“GIS revenues
threshold”), then GIS’s selling shareholders shall not be entitled to receive any portion of the revenues based earn-out consideration.
If the actual revenues that was achieved by GIS during this period is lower than GIS revenues target but higher than the GIS revenues
threshold, then GIS’s selling shareholders shall be entitled to a portion of the revenues-based earn-out consideration according to this
formula:
GIS revenues consideration * (1 - (GIS revenues target – actual revenues)*10/GIS revenues target).
The earn-out consideration for shareholders who represent approximately 39% of the selling shareholders, is contingent on their continued
employment. Therefore, this amount is not part of the business combination, but of the employee benefits as described in note 18.
In August 2022, the Company paid GBP 1,000 thousand ($1,163), after GIS surpassed the GIS EBITDA target.
Regarding the amendment of the GIS share purchase agreement in respect of contingent consideration, see below.
F-26
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Amendment to the deferred and Contingent Consideration
Nano Dimension Ltd
In July 2022, an amendment to the GIS share purchase agreement was signed, in which the terms of the deferred and contingent consideration
were updated, as follows:
1) The deferred consideration will amount to GBP 750 thousand and will be paid on March 31, 2023 (except for one selling shareholder, as
detailed below). There is no change in the condition that 39% of the selling shareholders are required to continued employment in order
to be entitled to this consideration.
2) The remaining contingent consideration that has not yet been paid in the amount of up to GBP 6,000 thousand, will be reduced to amount
of GBP 4,500 thousand and will be paid unconditionally on March 31, 2023 (except for one selling shareholder, as detailed below). There
is no change in the condition that 39% of the selling shareholders are required to continue employment in order to be entitled to this
consideration.
3) One selling shareholder (among the shareholders that are required to the continued employment) will receive his share of the updated
deferred consideration on the following dates on the condition he remains employed: approximately GBP 522 thousand on June 30, 2023;
approximately GBP 348 thousand on June 30, 2024; approximately GBP 435 thousand on June 30, 2025.
According to the amendment, the Company paid during 2023 an amount of $5,544 in order to settle the liabilities mentioned above.
c) Acquisition-related costs
The Group incurred acquisition-related costs of $1,094 of legal fees and due diligence costs. These costs have been included in general and
administrative expenses.
Identifiable assets acquired and liabilities assumed
The following table summarizes the recognized amounts of assets acquired and liabilities assumed at the date of acquisition.
Cash and cash equivalents
Inventories
Other current assets
Property and equipment, net
Technology
Customer relationships
Goodwill
Trade accounts payable
Other accounts payable and accrued expenses
Deferred tax
Total identifiable net assets acquired
F-27
5,409
3,396
1,199
139
5,924
548
14,580
(12)
(1,064)
(583)
29,536
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Measurement of fair value
Nano Dimension Ltd
Below is information regarding the way the Group determined the fair value of assets and liabilities recognized as part of the business
combination:
a)
Intangible assets
The fair value of the technology asset is determined using the multi-period excess earnings method, whereby the subject asset is valued by the
discounted net cash flows expected to be generated by the technology, after deducting a fair return on all other assets that are part of creating
the related cash flows. The fair value of customer relationship asset is based on the cost saving method, whereby the subject asset is valued by
the discounted estimated payments that are expected to be avoided as a result of the customer relationship being owned.
b)
Inventories
The fair value of inventories is determined based on estimated selling price in the ordinary course of business less estimated costs of
completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.
c) Deferred revenues
The fair value of deferred revenues is determined based on estimated costs to be incurred in order to fulfill the performance obligation that
exists.
The aggregate cash flows derived for the Group as a result of the acquisition:
Cash and cash equivalents paid
Cash and cash equivalents of GIS
Goodwill
(23,568)
5,409
(18,159)
The goodwill is attributable mainly to the skills and technical talent of GIS’s work force, its technology and the synergies expected to be achieved
from integrating GIS into the Group’s existing 3D Technologies and business. None of the goodwill recognized is expected to be deductible for tax
purposes.
(2) Acquisition of Formatec Holding
On July 7, 2022, the Group acquired 100% of the shares and voting interests in Formatec Holding. Formatec Holding is the owner of two Dutch
companies: Admatec and Formatec. Admatec and Formatec operate in the field of 3D printing of non-electronic components from ceramic and
metallic materials. Admatec is a manufacturer and marketer of these types of 3D printers and provides various services in this field of printing.
Formatec develops and sells printers and materials and provides printing services to customers, both of models and of final products (which may
also be produced using traditional systems, and not necessarily using 3D printing). Taking control of Formatec Holding will provide the Group
access to Admatec’s and Formatec’s technology and customers, and benefit from its experienced scientists and engineers.
Consideration transferred
The total consideration for the purchased Formatec Holding shares was paid in cash in the amount of approximately $13,611.
The Group incurred acquisition-related costs of $888 of legal fees and due diligence costs. These costs have been included in general and
administrative expenses.
F-28
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Identifiable assets acquired and liabilities assumed
The following table summarizes the recognized amounts of assets acquired and liabilities assumed at the date of acquisition.
Cash and cash equivalents
Trade and other receivables
Inventory
Property and equipment, net
Right-of-use assets
Deferred tax asset
Customer relationships
Intangible assets
Goodwill
Trade and other payables
Lease liability
Deferred tax liabilities
Total identifiable net assets acquired
Measurement of fair value
Nano Dimension Ltd
712
691
827
480
627
857
1,690
3,237
7,470
(1,275)
(434)
(1,271)
13,611
The fair value of the intangible assets (Customer relationships, Technology and Backlog) is determined using the multi-period excess earnings
method, whereby the subject asset is valued by the discounted net cash flows expected to be generated by the intangible asset, after deducting a
fair return on all other assets that are part of creating the related cash flows.
The aggregate cash flows derived for the Group as a result of the acquisition:
Cash and cash equivalents paid
Cash and cash equivalents of Formatec Holding
Goodwill
(13,611)
712
(12,899)
The goodwill is attributable mainly to the skills and technical talent of Admatec’s and Formatec’s work force, their technology and the synergies
expected to be achieved from integrating Admatec and Formatec into the Group’s existing business. Admatec and Formatec fit the Group’s target
markets, and the combined offering will increase the number of applications that can be relevant for mass manufacturing. None of the goodwill
recognized is expected to be deductible for tax purposes.
F-29
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Note 10 – Other payables
Accrued expenses and other
Contract liabilities
Lease liability
Employees and related liabilities
Government authorities
Current maturities in respect of government grants
Note 11 – Liability in respect of government grants
Balance as of January 1
Payment of royalties
Revaluation of the liability
Balance as of December 31
Current maturities in respect of government grants
Non-current liability in respect of government grants
Nano Dimension Ltd
December 31,
2022
2023
4,899
3,330
4,846
8,917
1,664
494
24,150
7,208
3,857
4,473
11,252
2,686
262
29,738
2022
2023
1,988
(219)
217
1,986
494
1,492
1,986
(298)
469
2,157
262
1,895
Between the years 2014 to 2023, Nano Tech received several grants from the Israeli Innovation Authority (“IIA”), to finance development projects in an
aggregate amount of up to $8,745, while the IIA share of financing the aforesaid amount was in a range of 30% to 85% of expenditures. As of December 31,
2023, Nano Tech received grants in the aggregate amount of $3,843. In consideration, Nano Tech undertook to pay the IIA royalties at the rate of 3%-3.5% of
the future sales up to the amount of the grants received. The Group recognized a liability using a discount rate of 19%.
Note 12 – Equity
A. The Company’s share capital (in thousands of ordinary shares)
Issued and paid-up share capital as of December 31
Authorized share capital
F-30
Ordinary shares
2022
2023
258,564
500,000
235,597
500,000
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Share capital (in thousands of shares of NIS 5 par value per share)
Issued as of January 1
Repurchase of treasury shares
Exercise of warrants during the period (*)
Exercise of share options and RSUs during the period
Issued and paid-in share capital as of December 31
(*) See note 23(L).
B. Financing transactions
Nano Dimension Ltd
Ordinary shares
2022
2023
257,376
—
—
1,188
258,564
258,564
(32,016)
3,559
5,490
235,597
During 2021, the Company issued, pursuant to two public offerings in the United States, an aggregate of 74,100,000 ADSs. The total gross proceeds from
the offerings were approximately $832,980, before deducting underwriting discounts and commissions and other offering-related expenses. The total net
proceeds from the offerings, after deducting issuance expenses, were approximately $796,346. As a part of one of these offerings, the Company issued
1,137,500 non-tradable warrants to the underwriters. The warrants are accounted for as share-based payment expenses. See also Note 19.
C. Treasury shares
As of December 31, 2023, the Company held 32,026,894 ordinary shares, constituting approximately 12% of its issued and paid-in share capital. The rights
attached to the Company’s own shares that were acquired are suspended until their re-issuance.
In February 2023, the Company announced that it would put into action its previously authorized share repurchase plan allowing us to invest up to
$100,000 to repurchase the Company’s ADSs from time to time in open market transactions, and/or in privately negotiated transactions or in any other
legally permissible ways, depending on market conditions, share price, trading volume and other factors. The repurchase plan was approved by the Israeli
court in in August 2022 for a period of up to 12 months and later extended for an additional two months. The repurchase plan expired on October 12, 2023,
with $4,160,138 remaining, and thereafter no longer eligible for repurchases under such plan.
In August 2023, our board of directors authorized an additional 200 million repurchase plan (the “$200,000 Repurchase Plan”), allowing us to invest up to
$200,000 to repurchase ADSs from time to time, in open market transactions, and/or in privately negotiated transactions or in any other legally permissible
ways, depending on market conditions, share price, trading volume and other factors. The Israeli court approved the 200 million Repurchase Plan in
October 2023 and extended for a twelve-month period. The $200,000 Repurchase Plan went into effect on October 17, 2023. Such repurchases will be
made in accordance with applicable U.S. securities laws and regulations, under the Exchange Act, and other applicable law, and are subject to the approval
of the Israeli court, which was granted in October 2023. Under the $200,000 Repurchase Plan, we may repurchase all or a portion of the authorized
repurchase amount. The $200,000 Repurchase Plan does not obligate us to repurchase any specific number of the ordinary shares and may be suspended or
terminated at any time at management’s discretion.
D. Translation reserve from foreign operations
The movement in the foreign currency translation reserve is as follows:
Net change in foreign currency translation reserve for:
GIS
Admatec-Formatec
Essemtec and Nano Swiss
Other
F-31
For the year ended December 31,
2022
2023
Currency
Thousand USD
GBP
EURO
CHF
(1,221)
302
114
(19)
(824)
205
85
1,910
146
2,346
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
E. Rights Plan
Nano Dimension Ltd
In January 2024, the Company entered into a rights agreement, or the Rights Plan, with the intention to protect the long-term interests of the Company’s
ADS holders and enable them to realize the full potential value of their investment in the Company. The Rights Plan is designed to reduce the likelihood
that any entity, person or group would gain control of, or significant influence over our Company. Further to those goals, the rights under the Rights Plan
may cause substantial dilution to a person or group that acquires beneficial ownership of 10% or more of the Company’s ordinary shares then outstanding
or any existing holder of 10% or more of the beneficial ownership of the Company’s ordinary shares who shall acquire any additional ordinary shares.
Note 13 – Revenues
Consumables
Support services
Sales of systems
Research and development services
Total revenue
Revenues per geographical locations:
Americas
APAC
EMEA
Total revenue
Timing of revenue recognition:
Services transferred over time
Goods transferred at a point in time
Total revenue
For the year ended December 31
2022
2023
2021
1,631
1,117
7,250
495
10,493
5,487
3,217
34,929
—
43,633
7,795
4,590
43,929
—
56,314
For the year ended December 31
2022
2023
2021
2,513
743
7,237
10,493
14,309
4,361
24,963
43,633
22,340
2,947
31,027
56,314
For the year ended December 31
2022
2023
2021
1,074
9,419
10,493
3,217
40,416
43,633
4,590
51,724
56,314
The table below provides information regarding receivables and contract liabilities deriving from contracts with customers.
Trade receivables
Contract liabilities
For the year ended
December 31
2022
2023
6,342
3,330
12,710
3,857
The contract liabilities primarily relate to the advance consideration received from customers for contracts giving yearly maintenance for the printer. The
revenue is recognized in a straight line basis over the contracts’ period.
Contract costs
Management expects that commissions paid to agents for obtaining contracts are recoverable. The Group applies the expedient included in IFRS 15.94 and
recognizes incremental costs for obtaining the contract as an expense as incurred, where the amortization period of the asset it would have otherwise recognized
is one year or less.
Note 14 – Cost of revenues
Raw materials, materials and consumables
Payroll and related expenses
Other
Total
For the year ended December 31
2022
2023
2021
3,585
1,412
733
5,730
15,915
7,180
1,848
24,943
18,696
9,586
2,477
30,759
F-32
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Note 15 – Further detail of profit or loss
Nano Dimension Ltd
For the year ended December 31
2022
2023
2021
A. Research and development expenses, net
Payroll
Share-based payment expenses
Materials
Subcontractors
Patent registration
Depreciation
Rental fees and maintenance
Other
Less – government grants
B. Sales and marketing expenses
Payroll
Share-based payment expenses
Marketing and advertising
Rental fees and maintenance
Travel abroad
Depreciation
Other
C. General and administrative expenses
Payroll
Share-based payment expenses
Professional services
Office expenses
Travel abroad
Depreciation
Rental fees and maintenance
Other
D. Other income, net
Other income (*)
Other expenses (**)
E. Finance income
Revaluation of liability in respect of government grants
Exchange rate differences
Revaluation of liabilities (***)
Revaluation of financial assets at fair value through profit and loss (****)
Bank interest
Finance expenses
Exchange rate differences
Bank and other fees
Finance expense in respect of lease liability
Revaluation of financial assets at fair value through profit and loss (****)
Revaluation of financial liabilities (***)
Revaluation of liability in respect of government grants
14,604
14,238
2,764
2,864
441
5,697
559
637
41,804
(118)
41,686
8,283
8,569
4,053
365
749
318
376
22,713
2,880
6,974
6,993
1,065
461
210
97
964
19,644
—
—
—
25
3,444
10,608
—
3,832
17,909
—
70
237
—
—
121
428
35,638
17,424
6,881
10,344
506
3,038
642
1,290
75,763
—
75,763
20,057
8,616
5,057
392
2,567
1,502
642
38,833
9,321
4,940
9,701
2,704
743
563
286
2,199
30,457
—
—
—
—
—
4,516
—
18,449
22,965
16,135
148
180
62,791
—
217
79,471
33,462
7,722
6,584
6,717
689
3,859
1,081
1,890
62,004
—
62,004
19,075
2,490
4,685
319
2,555
1,369
1,214
31,707
14,032
8,448
29,122
1,613
674
926
515
2,924
58,254
3,774
(2,147)
1,627
—
1,568
—
23,462
45,904
70,934
—
245
477
—
461
469
1,652
See note 6.
See note 18(C) regarding termination liability due to reorganization.
(*)
(**)
(***) See note 20 regarding financing transactions that included issuance of financial instruments accounted at fair value through profit and loss.
(****)See note 20(C) regarding investment in securities measured at fair value through profit and loss.
F-33
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Note 16 – Income Tax
A. Corporate tax rate
Nano Dimension Ltd
The tax rate relevant to the Company in the years 2021 to 2023: 23%
On December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in the
Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. The first step was to a rate
of 24% as from January 2017 and the second step was to a rate of 23% as from January 2018.
B. Benefits under the Law for the Encouragement of Industry (Taxes)
a. The Company and some of its subsidiaries qualify as “Industrial Companies” as defined in the Law for the Encouragement of Industry
(Taxes) – 1969, and accordingly they are entitled to benefits, of which the most significant are, under limited conditions, the possibility of
submitting consolidated tax returns with related Israeli companies and amortization in three equal annual portions of issuance expenses when
registering shares for trading as from the date the shares of the company were registered.
b. The Company and certain subsidiaries are submitting a consolidated tax return to the tax authorities in accordance with the Law for the
Encouragement of Industry (Taxes) – 1969. As a result, the companies are, inter alia, entitled to offset their losses from the taxable income of
other companies, subject to compliance with certain conditions.
C. Description of the implications of the tax laws applicable to affiliated companies incorporated outside of Israel
The Group companies operating outside of Israel are subject to the tax laws applicable in the countries of residence and the activity of those
companies. The tax rate applicable to material companies outside of Israel are:
Companies incorporated in Switzerland (varies from canton to canton) - tax rate of 12.44% (the relevant canton).
Company incorporated in UK - tax rate of 19% until March 31, 2023 and 25% from April 1, 2023, onward.
Companies incorporated in Netherlands - tax rate of 25.8% for taxable income above Euro 200 thousand and tax rate of 19% for taxable income up to
Euro 200 thousand.
Company incorporated in U.S. - tax rate of 21%.
Companies incorporated in Germany - tax rate of 15.8%.
D. Composition of income tax expense (income)
Current tax expense
Deferred tax expenses (income)
Income tax expense (income)
E. Deferred tax assets and liabilities
Year ended December 31
2022
2023
2021
107
(5,013)
(4,906)
845
(581)
264
73
(11)
62
Deferred taxes are calculated according to the tax rate anticipated to be in effect on the date of reversal as stated above.
The movement in deferred tax assets and liabilities is attributable to the following items:
Balance of deferred tax asset (liability) as of January 1, 2022
Deferred tax asset (liability) acquired in business combinations
Changes recognized in profit or loss
Changes recognized in other comprehensive income
Balance of deferred tax asset (liability) as of December 31, 2022
Balance of deferred tax asset (liability) as of January 1, 2023
Changes recognized in profit or loss
Changes recognized in other comprehensive income
Balance of net deferred tax asset (liability) as of December 31, 2023
Intangible
assets and
inventories
Employee
benefits
Carryforward
tax losses
Total
(236)
(2,966)
3,073
96
(33)
516
—
5
(373)
148
491
1,968
(2,497)
38
—
771
(998)
581
(239)
115
Intangible
assets and
inventories
(33)
33
—
—
Employee
benefits
Other
148
(22)
(126)
—
Total
deferred tax
asset
(liability)
—
—
(75)
(75)
115
11
(201)
(75)
F-34
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
F. Theoretical tax
Nano Dimension Ltd
The main reconciliation between the theoretical tax on the pre-tax profit and the tax expense derives from temporary differences and tax losses for
which deferred taxes are not created.
G. Tax assessments
The Company has final tax assessments until and including the 2017 tax year.
Nano Tech has final tax assessments until and including the 2017 tax year.
H. Accumulated losses for tax purposes and other deductible temporary differences
As of December 31, 2023, the Group has a net operating loss for tax purposes of approximately $291,945, most of which originated in the Company.
The Group also has capital loss for tax purposes of approximately $681.
As of December 31, 2023, the Group has deductible temporary differences in the amount of approximately $5,170, mainly relating to share-based
payment expenses, revaluation of financial assets and liabilities, funding expenses and research and development expenses which are deductible over a
period of three years for tax purposes.
The Group has not recognized a tax asset for the aforesaid losses and deductible temporary differences, due to the uncertainty regarding the ability to
utilize those losses and deductible of temporary differences in the future.
I.
Income Tax Regulations (Rules on Bookkeeping by Foreign Invested Companies and Certain Partnerships and Determination of their Taxable Income),
1986.
As a “Foreign investment company” (as defined in the Israeli Law for the Encouragement of Capital Investments-1959), the Company’s management
has elected to apply Income Tax Regulations (Rules for Maintaining Accounting Records of Foreign Invested Companies and Certain Partnerships and
Determining Their Taxable Income) – 1986, from January 2018. Accordingly, its taxable income or loss is calculated in USD.
J. During 2022, the Company completed a merger of two of its subsidiaries, that are located in Israel. NanoFabrica and DeepCube were merged into
Nano Tech. The merger was approved by the Israeli tax authorities.
Note 17 – Loss per share
A.
Basic loss per share
The calculation of basic loss per share as of December 31, 2023 was based on the loss attributable to the owners of the company divided by a weighted average
number of ordinary shares outstanding, calculated as follows:
Weighted average number of ordinary shares (thousands of shares)
Loss attributable to the owners of the Company (thousands USD)
247,335
200,777
257,794
227,423
248,019
54,550
F-35
For the year ended December 31
2022
2023
2021
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Weighted average number of ordinary shares:
Nano Dimension Ltd
Balance as of January 1
Effect of share options exercised
Effect of warrants exercised
Effect of shares issued during the year
Repurchase of treasury shares
Weighted average number of ordinary shares used to calculate basic loss per share as of December 31
172,052
2,558
575
72,150
—
247,335
257,376
418
—
—
—
257,794
B.
Diluted loss per share
2021
Thousands of
shares of NIS
5.0 par value
Year ended December 31
2022
Thousands of
shares of NIS
5.0 par value
2023
Thousands of
shares of NIS
5.0 par value
258,564
687
2,307
1,893
(15,432)
248,019
The calculation of diluted loss per share as of December 31, 2023 was based on loss attributable to the owners of the company divided by a weighted average
number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares, calculated as follows:
Loss attributable to owners of the company (diluted)
Loss used to calculate basic loss per share
Changes in fair value of share price protection liability
Changes in fair value of warrants classified as liabilities
Loss attributable to ordinary shareholders
Weighted average number of ordinary shares (diluted)
Year ended December 31
2022
2023
2021
200,777
3,783
456
205,016
227,423
—
227
227,650
54,550
—
7
54,557
Weighted average number of ordinary shares used to calculate loss per share
Effect of share price protection on issue
Effect of warrants issued
Weighted average number of ordinary shares used to calculate diluted loss per share as of
December 31
2021
Thousands of
shares of NIS
5.0 par value
Year ended December 31
2022
Thousands of
shares of NIS
5.0 par value
247,335
702
95
257,794
—
96
2023
Thousands of
shares of NIS
5.0 par value
248,019
—
96
248,132
257,890
248,115
As of December 31, 2023, 53,651,683 options and warrants (in 2022: 63,478,648 and 2021: 55,817,296) were excluded from the diluted weighted average
number of ordinary shares calculation as their effect would have been anti-dilutive.
F-36
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Note 18 – Employee Benefits
Employee benefits include post-employment benefits, short-term benefits, termination benefits, and share-based payments.
With regards to share-based payments, see Note 19 on share-based payments.
With regards to benefits to key management employees, see Note 23 on related and interested parties.
A. Composition of employee benefits:
Nano Dimension Ltd
Presented under current liabilities – other payables:
Short-term employee benefits
Total
Presented under non-current liabilities – employee benefits:
Long-term employee benefits
Recognized liability for defined benefit plan, net
Total
December 31, December 31,
2022
2023
8,917
8,917
11,252
11,252
274
1,188
1,462
289
2,484
2,773
Following note 9(B)(1), the amounts detailed above include 39% of the deferred and contingent consideration arises from acquisition of GIS, for selling
shareholders that require continued employment in order to be entitled to this consideration, in the amount of $344 (2022 - $1,120) and $289 (2022 - $274)
in short-term and in long-term, respectively.
B. Post-employment benefit plans – defined benefit plan
Essemtec, a subsidiary of the Company, located in Switzerland, participates in a defined benefit plan. Employees in Switzerland are insured against the
risks of old age, death and disability. Essemtec is affiliated to the collective foundation Bâloise Collective BVG foundation. The supreme governing body
of the pension fund is the Foundation Council, which is made up of an equal number of representatives from the employees and the employer. The pension
fund rules, together with the legal provisions concerning occupational pension plans, constitute the formal regulatory framework of the pension plan.
Individual retirement savings accounts are maintained for each beneficiary, which savings contributions varying with age are credited to as well as any
interest which accrues. The rate of interest to be applied to the retirement savings accounts is set each year by the Foundation Council, having regard to the
financial situation of the pension fund. The amounts credited to the individual savings accounts are funded by savings contributions from both the employer
and employees. In addition, the employer pays risk contributions to fund death and disability benefits.
The standard retirement age is 64 for women and 65 for men. Employees are entitled to early retirement with a reduced old-age pension. The amount of the
old-age pension is the result of multiplying the individual retirement savings account at the time of retirement by a conversion rate set out in the pension-
fund rules. The retirement benefits can also be paid out in the form of a capital payment either in full or in part. The amount of disability pensions is
determined as a percentage of the insured salary and is independent of the number of years of service.
The Group’s defined benefit obligations and the related defined benefit costs are determined at each balance sheet date by a qualified actuary using the
Projected Unit Credit Method. The amount recognized in the consolidated balance sheet represents the present value of the defined benefit obligations
reduced by the fair value of plan assets. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the
form of refunds from the plans or reductions in future contributions to the plans.
F-37
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
1. Plan assets
Nano Dimension Ltd
As of December 31, 2023, plan assets were comprised of qualifying insurance policies of $17,109 (December 31, 2022: $12,913).
2. Movement in net defined benefit liabilities (assets) and in their components
Balance as of January 1
Included in profit or loss
Current service cost
Past service cost
Interest cost (income)
Administrative cost
Effect of movements in exchange rates
Included in other comprehensive income
Actuarial loss (gain) arising from financial
assumptions
Actuarial loss arising from other
assumptions
Return on plan assets excluding interest
income
Effect of movements in exchange rates
Other movements
Contributions paid by the employer
Contributions paid by the employees and
plan participants
Benefits paid
Changes from business combinations and
loss of control
Balance as of December 31
Defined benefit obligation
2022
2023
Fair value of plan assets
2023
2022
Net defined benefit
liability (asset)
2022
2023
15,816
14,101
(11,671)
(12,913)
4,145
1,188
487
—
61
21
—
459
(385)
341
24
1,404
(3,529)
1,284
721
—
(112)
—
—
260
—
—
(45)
—
—
—
—
(51)
14
—
—
(312)
—
(1,286)
—
—
361
(185)
487
—
16
21
—
459
(385)
29
24
118
(3,529)
1,284
721
(51)
(98)
—
361
75
—
—
(524)
(669)
(524)
(669)
1,950
(1,314)
—
14,101
3,207
(1,102)
—
19,593
(1,950)
1,314
(3,207)
1,102
—
(12,913)
—
(17,109)
—
—
—
1,188
—
—
—
2,484
3. The defined benefit liability is attributed to the plans’ participants as follows:
-
-
Active members: 95% (2022: 95%)
Pensioners: 5% (2022: 5%)
F-38
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
4. Actuarial assumptions and sensitivity analysis
Principal actuarial assumptions at the reporting date (expressed as weighted averages):
4. Actuarial assumptions and sensitivity analysis
Discount rate as of December 31
Future salary growth
Interest rate on the savings account
Price inflation
Social security increase
Future pension growth
Nano Dimension Ltd
2022
%
2023
%
2.35
1.25
1.75
1.25
1.25
0
1.9
1.9
1.9
1.9
1.9
0
Assumptions regarding future mortality are based on published statistics and mortality tables (BVG 2020 generational).
The calculation of the defined benefit obligation is sensitive to the mortality assumptions in accepted mortality tables. As a result, an increase of one
year in average life would cause an increase in the defined benefit obligation of $235 as of December 31, 2023.
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have
affected the defined benefit obligation by the amounts shown below:
Future salary growth
Discount rate
5. Effect of the plan on the Group’s future cash flows
December 31,
0.5 percentage
point increase
0.5 percentage
point decrease
2022
2023
2022
2023
50
(884)
79
(1,273)
(49)
1,001
(78)
1,431
The Group expects $715 in contributions to be paid to the funded defined benefit plan in 2024.
On December 31, 2023, the weighted-average duration of the defined benefit obligation was 13.9 years (2022: 13.6 years).
C. Termination liability
In October 2023 the Company’s board of directors approved, as part of a reorganization plan in several departments of the Company, an employment
termination of Company employees worldwide, with preferable terms.
In the reporting period, an expense related to payroll compensation due to this plan, in the amount of $2,147, was recognized in other expenses. The remaining
termination liability in the amount of $1,488 is presented under other payables.
F-39
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Note 19 – Share-based payment
Nano Dimension Ltd
A. During 2021, the Company granted to employees, officers and consultants 10,967,162 non-tradable share options and RSUs, which are exercisable into
10,967,162 ordinary shares. The share options vest over a period of three years. The share options will be exercisable during the earlier of a period of
four years from the vesting date, or 90 days from the end of employment date, in consideration for an exercise price ranging between $0 to $7.50 for
each share option. Some of the share options include a cashless exercise mechanism.
During 2021, the Company granted to underwriters in public offerings in the U.S. an aggregate of 1,137,500 warrants, which are exercisable into
1,137,500 ordinary shares. The exercise price is $11.875 for each warrant. The warrants are exercisable 6 months from the issuance date and expire 4
years after the issuance date.
During 2022, the Company granted to employees, officers and consultants 13,555,000 non-tradable share options and RSUs, which are exercisable into
13,555,000 ordinary shares. The share options and the RSUs vest over a period of three to four years. The share options will be exercisable during the
earlier of a period of four years from the vesting date, or 90 days from the end of employment date in consideration for an exercise price ranging
between $2.52 to $ 3.79 for each share option. Some of the share options include a cashless exercise mechanism.
During 2023, the Company granted to employees, officers and consultants 5,838,000 non-tradable share options and RSUs, which are exercisable into
5,838,000 ordinary shares. The share options and the RSUs vest over a period of two to four years. The share options will be exercisable during the
earlier of a period of four years from the vesting date, or 90 days from the end of employment date in consideration for an exercise price of $3.05 for
each share option. The share options include a cashless exercise mechanism. In addition, the Company changed the vesting terms of options to
purchase 1,000,000 ADSs granted to an officer of the Company.
B.
In May 2021, the Company issued non-tradable share options to purchase 131,000 ordinary shares to directors of the Company at an exercise price
ranging from $7.69 to $9.33 per share. The share options are vested over a period of 3 years from the grant date. The share options will be exercisable
during the earlier of a period of four years from the vesting date, or 90 days from the end of employment date.
In June 2022, the Company issued 210,000 RSUs to directors of the Company. The RSUs vest over a period of three years from the grant date.
In November 2022, the Company issued 75,000 RSUs to directors of the Company. The RSUs vest over a period of three years from the grant date.
In September 2022, the Company re-priced the share options granted to a small group of certain employees, directors and senior management, after
receiving approval to do so from the Israeli tax authorities. In accordance with the repricing, every two old share options were converted into one RSU,
without an exercise price. The vesting period of the new RSUs will be 4 years. As a result of this modification, there was an increase in the fair value
of the equity instruments granted, measured immediately before and after the modification. Hence, the Company measured the incremental fair value
granted, and recognized it over the period from the modification date until the date when the modified equity instruments vest.
In June 2023, the Company issued 200,000 RSUs to directors of the Company. The RSUs vest over a period of three years from the grant date.
In October 2023, the Company issued 70,000 RSUs to directors of the Company. The RSUs vest over a period of three years from the grant date.
F-40
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Nano Dimension Ltd
C. On April 22, 2021, the Group acquired 100% of the shares and voting interests in DeepCube. After the acquisition, one of DeepCube’s founders
continued to work at DeepCube, in the role of Chief Technology Officer. In accordance with the terms of the acquisition agreement, 892,465 ordinary
shares of the Company will be issued to this founder, with a share price protection mechanism. The granting of these shares is subject to conditions
related to the continued employment of the founder. Hence these shares were not taken into account as part of the consideration for the business
combination. The fair value of those shares, with the share price protection mechanism, was estimated at $7,756, and were recognized as post-
acquisition compensation cost.
During 2022 and 2023, the Company chose to settle the share price protection mechanism in cash, and therefore the cash paid in the amount of 2023:
$522 (2022: $489) was treated as repurchase of equity awards that was reduced from equity.
In addition, as part of the acquisition agreement, the Group exchanged equity-settled share-based payment awards held by employees of DeepCube
(the acquiree’s awards) for 299,455 RSUs of the Company (the replacement awards). The acquiree’s awards were granted during the years 2018 to
2021 and were generally subject to a 4-year vesting schedule. The replacement awards were granted on the acquisition date and are subject to a 3-year
vesting schedule.
D. On April 26, 2021, the Group acquired 100% of the shares and voting interests in NanoFabrica. In accordance with the terms of the acquisition
agreement, 1,178,008 ordinary shares of the Company will be issued to NanoFabrica’s founders, with a share price protection mechanism. The
granting of these shares is subject to conditions related to the continued employment of the founders. Hence these shares were not taken into account
as part of the consideration for the business combination. The fair value of those shares, with the share price protection mechanism, was estimated at
$10,941, and were recognized as post-acquisition compensation cost.
During 2022 and 2023, the Company chose to settle the share price protection mechanism in cash, and therefore the cash paid in the amount of 2023:
$3,937 (2022: $516) was treated as repurchase of equity awards that was reduced from equity.
In addition, as part of the acquisition agreement, the Group exchanged equity-settled share-based payment awards held by employees of NanoFabrica
(the acquiree’s awards) for 76,928 RSUs of the Company (the replacement awards). The acquiree’s awards were granted during the years 2017 to 2020
and were generally subject to a 4-year vesting schedule. The replacement awards were granted on the acquisition date and are subject to a 3-year
vesting schedule.
E. The fair value of share options is measured using the Black-Scholes-Merton formula, Binomial pricing model or Monte Carlo simulations.
Measurement inputs include the share price on the measurement date, the exercise price of the instrument, expected volatility (based on the weighted
average volatility of the Company’s shares, over the expected term of the options), expected term of the options (based on general option holder
behavior and expected share price), expected dividends, and the risk-free interest rate (based on government debentures).
F-41
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
The following is the data used in determining the fair value of the options granted in 2022-2023:
Fair value in the grant date (thousands USD)
Range of share price (USD)
Range of exercise price (USD)
Range of expected share price volatility
Range of estimated life (years)
Range of weighted average of risk-free interest rate
Expected dividend yield
Fair value in the grant date (thousands USD)
Range of share price (USD)
Range of exercise price (USD)
Range of expected share price volatility
Range of estimated life (years)
Range of weighted average of risk-free interest rate
Expected dividend yield
Nano Dimension Ltd
19.A - Consultants
and Employees
2,049
2.46-2.86
1.00-3.05
103.20%-121.85%
4.5-8
4.33%-4.50%
—
19.B - Directors
and CEO
2022
21,708
1.38-6.52
0-9.33
93.62%-125.9%
4-7.07
0.29%-1.33%
—
2023
—
—
—
—
—
—
—
The following is the range of fair value of the RSUs granted during the years 2021-2023:
(in U.S dollars)
Range of fair value of the RSUs granted during the year
2021
4.62-10.94
2022
2.47-3.82
2023
2.39-2.86
F-42
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Nano Dimension Ltd
F. The number of share options and RSUs granted to employees and consultants, and included in Note 19.A are as follows:
Outstanding of January 1
Granted during the year
Exercised during the year
Forfeited or expired during the year
Share options exchange
Outstanding of December 31
Exercisable as of December 31
2022
Share options
and RSU’s
Replacement
awards
2023
Share options
and RSU’s
20,768,200
13,555,000
(1,084,331)
(3,204,932)
(2,500,870)
27,533,067
2,398,972
254,409
—
(116,362)
(40,907)
—
97,140
—
27,630,207
5,838,000
(6,922,002)
(3,983,731)
—
22,562,474
2,323,530
The number of RSUs, options and warrants granted to directors and the CEO included in Note 19.B are as follows:
Outstanding of January 1
Granted during the year
Exercised during the year
Forfeited or expired during the year
Outstanding of December 31
Exercisable as of December 31
G. The share-based payments expenses in 2023 were $20,101 (in 2022: $32,563, in 2021: $29,782).
Note 20 – Financial instruments
A. Risk management policy
2022
34,410,284
285,000
(20,418)
(142,435)
34,532,431
33,120,886
2023
34,532,431
270,000
(4,895,805)
(133,427)
29,773,199
28,327,309
The actions of the Group expose it to various financial risks, such as a credit risk, market risk (including a foreign currency risk and share price risk),
liquidity risk and cash flow risk for the interest rate. The comprehensive risk-management policy of the Group focuses on actions to limit the potential
negative impacts on financial performance of the Group to a minimum. The Group does not typically use derivative financial instruments in order to
hedge exposures. Risk management is performed by the Group’s Chief Executive Officer in accordance with the policy approved by the board of
directors.
The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews
the adequacy of the risk management framework in relation to the risks faced by the Group. The Group Audit Committee is assisted in its oversight
role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are
reported to the Audit Committee.
B. Credit risk
The Group does not have a significant concentration of credit risks.
The cash of the Group is deposited in Israeli, European and U.S. banking corporations. In the estimation of the Group’s management, the credit risk for
these financial instruments is low. The Company had bank accounts and deposits with Silicon Valley Bank, most of which were drawn and transferred
to other banks in March 2023. As of the reporting date, the remaining cash and deposits balance in Silicon Valley Bank is immaterial.
In the estimation of the Group’s management, it does not have any material expected credit losses.
F-43
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
C. Market risk
(1) Foreign currency risk
A currency risk is the risk of fluctuations in a financial instrument as a result of changes in the exchange rate of the foreign currency.
The following is the classification and linkage terms of the financial instruments of the Group:
Nano Dimension Ltd
December 31, 2023
Cash
Bank deposits
Restricted deposits
Trade receivables (net)
Other receivables
Investment in securities
Financial liabilities at amortized cost
Total net financial assets
December 31, 2022
Cash
Bank deposits
Restricted deposits
Trade receivables (net)
Other receivables
Investment in securities
Financial liabilities at amortized cost
NIS
USD
Other
Total
24,537
110,881
555
67
5,126
—
141,166
(9,415)
131,751
37,812
100,289
524
46
1,817
—
140,488
(11,545)
278,993
431,086
386
8,193
2,935
138,446
860,039
(10,019)
850,020
639,318
246,374
386
1,867
3,150
114,984
1,006,079
(9,851)
6,041
—
—
4,450
1,452
—
11,943
(11,161)
782
8,232
—
—
4,429
2,333
—
14,994
(16,340)
309,571
541,967
941
12,710
9,513
138,446
1,013,148
(30,595)
982,553
685,362
346,663
910
6,342
7,300
114,984
1,161,561
(37,736)
F-44
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Nano Dimension Ltd
The following is a sensitivity analysis of changes to profit (loss) and equity in the exchange rate of the NIS as of December 31:
Increase at a rate of 5%
Increase at a rate of 10%
Decrease at a rate of 5%
Decrease at a rate of 10%
(2) Share price risk
2022
2023
6,447
12,894
(6,447)
(12,894)
6,588
13,175
(6,588)
(13,175)
During 2022, the Group acquired shares of Stratasys Ltd. (“Stratasys”), a technology company traded on the Nasdaq Stock Exchange and engaged in
the 3D printing solutions area, for an amount of $177,775. As of December 31, 2023, the Company owns 9,695,115 of Stratasys’ ordinary shares, with
a value of approximately $138,446 (2022: $114,984) which constitute, as of December 31, 2023, approximately 14.02% (2022: 14.5%) of Stratasys’
ordinary shares. Therefore. a revaluation profit was recorded in amount of $23,462 (2022: loss of $62,791). A change of 1% in Stratasys’ share price
would have increased (decrease) profit or loss by the amount of $1,384 (2022: $1,150).
On July 24, 2022, Stratasys’ board of directors approved a poison pill mechanism, which will block the possibility of controlling or having a
significant influence on Stratasys without the approval of Stratasys’ board of directors. In accordance with the approved poison pill, when there will be
a shareholder who owns 15% of Stratasys, every other shareholder will be entitled to purchase a new share issued to such shareholder by Stratasys at a
price of $0.01 per share, and in this way will be able to dilute the shareholder who owns 15%, which is not entitled to this right, unless the purchase of
the shares that reached the 15% threshold was approved by the Stratasys’ board of directors. The poison pill was valid for one year, until July 24, 2023.
On December 21, 2023, Stratasys’ board of directors approved a new poison pill mechanism, which is substantially a duplication of the previous
poison pill, with some minor changes (the “Revised Poison Pill”). The Revised Poison Pill is valid for one year, until December 2024.
D. Fair value of financial instruments
The carrying amounts of certain financial assets and liabilities, including cash and cash equivalents, trade receivables, other receivables, trade payables
and other payables are the same or proximate to their fair value.
F-45
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Nano Dimension Ltd
The table below presents an analysis of financial instruments measured at fair value through profit or loss using a valuation methodology in accordance
with the fair value hierarchy levels (for a definition of the various hierarchy levels, see Note 2.E regarding the basis of preparation of the financial
statements).
December 31, 2023
Financial assets:
Traded shares
Total assets:
Financial liabilities:
Liability in respect of warrants
Total liabilities
Presented under current liabilities
December 31, 2022
Financial assets:
Traded shares
Total assets:
Financial liabilities:
Liability in respect of warrants
Contingent consideration in business combination
Total liabilities
Presented under current liabilities
Presented under non-current liabilities
(1) Details regarding fair value measurement at Level 2
(a) Warrants Issued in February 2019
Level 1
Level 2
Total
138,446
138,446
—
—
—
—
—
56
56
56
138,446
138,446
56
56
56
Level 1
Level 2
Total
114,984
114,984
—
—
114,984
114,984
—
—
—
—
—
69
4,982
5,051
4,982
69
69
4,982
5,051
4,982
69
In February 2019, the Company issued, as part of a public offering in the United States, 1,600,000 non-tradable warrants with an exercise
price of $8.625 per ADS and term of 5 years. In certain cases, the warrants may be exercised on a cashless basis. Therefore, the warrants are
accounted for as derivative instruments which are classified as a liability and measured at fair value through profit or loss.
Since the offering certain warrants were exercised. As of December 31, 2023, 1,316,010 warrants remained outstanding.
The fair value of the warrants was measured as of December 31, 2023 and December 31, 2022, at an amount of approximately $0 and $6,
respectively.
The fair value of the warrants was measured using the Black-Scholes model. The following inputs were used to determine the fair value:
Expected term of warrant (a) – 0.1 years (2022: 1.1 years).
Expected volatility (b) – 51.2% (2022: 48.5%).
Risk-free rate (c) – 5.3% (2022: 4.7%).
Expected dividend yield – 0%.
(a) Based on contractual terms.
(b) Based on the historical volatility of the Company’s ordinary shares and ADSs.
(c) Based on traded zero-coupon U.S. treasury bonds with maturity equal to expected terms.
F-46
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
(b) Warrants Issued in September 2019
Nano Dimension Ltd
In August 2019, the Company issued, as part of a securities purchase agreement of convertible promissory notes, non-tradable warrants to
purchase 62,668,850 ADSs. The warrants have a variable exercise price, equal to 125% of the conversion price of the convertible promissory
notes, and are exercisable upon the six-month anniversary of issuance and will expire five years from the date of issuance.
The warrants have been classified as financial liability that are measured at fair value through profit and loss as neither the exercise price nor
the number of shares to be issued is fixed.
On February 4, 2020, the Company agreed to amend the exercise price of the warrants to $1.914 per ADS, and the Company and the investors
agreed to terminate substantially all remaining warrants, besides warrants to purchase 95,620 ADSs.
The fair value of the warrants was measured as of December 31, 2023 and December 31, 2022, at an amount of approximately $56 and $63,
respectively.
The fair value of the warrants was measured using the Black-Scholes model. The following inputs were used to determine the fair value:
Expected term of warrant (a) – 0.68 years (2022: 1.68 years).
Expected volatility (b) – 47.57% (2022: 48.15%).
Risk-free rate (c) – 4.84% (2022: 4.48%).
Expected dividend yield –0%.
(a) Based on contractual terms.
(b) Based on the historical volatility of the Company’s ordinary shares and ADSs.
(c) Based on traded zero-coupon U.S. treasury bonds with maturity equal to expected terms.
(C) Contingent consideration in business combination
On November 2, 2021, the Group acquired 100% of the shares and voting interests in Essemtec. The consideration transferred included earn-
out cash consideration payments.
As of December 31, 2022, the fair value of the contingent consideration was determined by an external valuer. The fair value of the earn-out
cash payment, in the amount of $4,982 was measured by discounting the expected earn-out payment based on the actual gross profit results
recorded by Essemtec in the fiscal year ended December 31, 2022. Therefore, the measurement of the liability was based on level 2 data. The
following inputs were used to determine the fair value:
Essemtec’s underlying gross profit – approximately CHF 13,850.
Risk free rate – 0.96%.
During 2023, the Company paid an amount of $5,295 and settled this liability.
(2) Sensitivity analysis for share price
If the share price had increased or decreased by 10%, the fair value of the warrants issued in February 2019 would not have changed (remains
0).
F-47
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
E. Liquidity risk
The table below presents the repayment dates of the Group’s financial liabilities based on the contractual terms in undiscounted amounts:
Nano Dimension Ltd
December 31, 2023
Trade payables
Other payables
Financial derivatives and deferred consideration
Lease liabilities
Other long-term liability
Liability in respect of government grants
December 31, 2022
Trade payables
Other payables
Financial derivatives
Lease liabilities
Other long-term liability
Liability in respect of government grants
Note 21 – Leases
A. Information regarding material lease agreements
First year
More than
a year
Total
4,696
9,838
56
4,473
38
262
19,363
3,722
18,810
8,798
4,846
363
494
37,033
—
—
—
8,742
595
1,895
11,232
—
—
69
12,374
1,011
1,492
14,946
4,696
9,838
56
13,215
633
2,157
30,595
3,722
18,810
8,867
17,220
1,374
1,986
51,979
a. The Group leases vehicles for approximately three-year periods from several different leasing companies and from time to time changes the number of
leased vehicles according to its current needs. The leased vehicles are identified by means of license numbers and the vehicle’s registration, with the
leasing companies not being able to switch vehicles, other than in cases of deficiencies. The leased vehicles are used by the Group’s headquarters staff,
marketing and salespersons and other employees whose employment agreements include an obligation of the Group to put a vehicle at their disposal.
The Group accounted for the arrangement between it and the leasing companies as a lease arrangement in the scope of IFRS 16, “Leases” and for the
arrangement between it and its employees as an arrangement in the scope of IAS 19, “Employee Benefits”. The agreements with the leasing companies
do not contain extension and/or termination options that the Group is reasonably certain to exercise.
A lease liability and right-of-use asset in the amount of $316 have been recognized in the statement of financial position as of December 31, 2023, in
respect of leases of vehicles.
b. The Group leases offices in Ness-Ziona for a period of up to five years under a few different contracts for different floors used for offices, labs and
manufacturing facilities, in the same building. The contractual periods of the aforesaid lease agreements end in August 2024, November 2026 and July
2027. The Group also leases offices in Waltham, Massachusetts, U.S., for a contractual period of seven years, which ends in February 2029 and in
Munich, Germany for a contractual period of five years, which ends in December 2027.
F-48
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Nano Dimension Ltd
The lease payments in some of the Group’s leases in Israel and Germany are linked to the local consumer price indexes known on the lease’s date of
inception. The revaluation of the lease payments was recognized as a right-of-use asset. The asset was adjusted by the amount of $243 in 2023.
The Group has the option to extend some of its lease agreements. In measuring the lease liability and the right-of-use asset, the Group did not take into
account those options since under the current management those options are not reasonably certain to be exercised.
c.
In 2022, a lease liability and right-of-use asset of $627 were recognized as part of the business combination of Formatec Holding. For more
information, see Note 9.B(2). In December 2023, the Group extended the aforesaid lease until March 2029, recognizing additional $613 right-of-use
asset.
B. Right-of-use assets:
Balance as at January 1, 2022
Acquisition through business combinations
Depreciation
Disposals
Additions
Remeasurement
Effect of changes in exchange rates
Balance as at December 31, 2022
Depreciation
Disposals
Additions
Remeasurement
Effect of changes in exchange rates
Balance as at December 31, 2023
C. Lease liabilities
Maturity analysis of the Group’s lease liabilities:
Maturity analysis of the Group’s lease liabilities:
Less than one year
One to five years
Above 5 years
Total
Buildings
Vehicles
Total
4,192
627
3,349
95
14,419
459
(52)
16,201
4,316
293
613
(536)
44
11,713
299
—
221
58
319
—
(1)
338
256
46
316
—
7
359
4,491
627
3,570
153
14,738
459
(53)
16,539
4,572
339
929
(536)
51
12,072
December 31, December 31,
2022
2023
4,846
12,189
185
17,220
4,473
8,520
222
13,215
F-49
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
D. Amounts recognized in profit or loss
Interest expenses on lease liability
Expenses relating to leases
Nano Dimension Ltd
2021
2022
2023
237
1,592
1,829
180
3,723
3,903
477
4,911
5,388
During the years ended December 31, 2023 and 2022, the Company paid a total of $4,823 and $4,151, respectively, for lease payments.
Note 22 - Contingent liabilities
On February 12, 2023, Murchinson Ltd., BPY Limited, Nomis Bay Ltd., Boothbay Absolute Return Strategies, LP. and Boothbay Diversified Alpha Master
Fund, LP., (collectively “Murchinson” or “Murchinson and Affiliates”) submitted a statement of claim to the Lod District Court (Economic Department) (the
“Court”), in which they asserted that Company’s shares registered under Form S-8, filed with the SEC on January 27, 2023, were allocated unlawfully and in
bad faith, resulting in the deprivation of shareholders’ rights. Murchinson also requested that the Court cancel the registration of the newly registered shares on
the Company’s Form S-8. Furthermore, Murchinson demanded that the Court order the Company to refrain from any allocation of shares from the newly
registered shares, or, in the alternative, to make any allocation subject to shareholder meeting approval or condition any future allocations from the newly
registered shares on specific criteria related to employee and official compensation. Pre-trial hearings were held on June 18, 2023, and on February 21, 2024.
Separately, on February 27, 2023, the Company filed a claim against Murchinson in the Court, challenging Murchinson’s right to convene a shareholders’
meeting, contending that they are not shareholders (but rather ADS holders). Following a hearing on June 18, 2023, the matter was stayed until a verdict is
reached in the March 26, 2023 claim Murchinson and Affiliates filed with the Court, as described below.
On March 26, 2023, Murchinson filed for temporary relief in the Court, in which it claimed that it had the right to convene a special general meeting of
shareholders on March 20, 2023, and that the decisions in that special general meeting would be valid and legally binding. Specifically, the meeting Murchinson
wanted to convene would amend the article of association and appoint two directors (the “Alleged Directors”), and remove from office Yoav Stern, Oded Gera,
Igal Rotem and Dr. Yoav Nissan-Cohen. Following a hearing and submission of motions, on April 16, 2023, the Court rejected Murchinson’s request for
temporary relief and request that the Company to refrain from doing any business outside the ordinary course of business. The Court, however, granted the
alternative relief of appointing the Alleged Directors as board observers. The Company filed, with the Supreme Court of Israel, a request for interlocutory
appeal, but was denied. This claim is currently pending before the Court.
On August 31, 2023, Murchinson filed a complaint against the Company and Mr. Yoav Stern, arguing that the Company wrongfully counted proxy cards at
its September 7, 2023, annual general meeting (the “AGM”), and that the required majority for the dismissal of directors at the AGM are a simple majority
rather than a special majority of 70%. In connection with this complaint, Murchinson requested temporary relief requesting that the Court instructs the
Company (1) to refrain from implementing the decisions reached at the AGM; or (2) to refrain from convening board of directors and committee meetings with
members comprising Ms. Hanna Caspi, Mr. Oded Gera and Dr. Yoav Cohen-Nissan; or (3) to refrain from doing any business outside the ordinary course of
business, including changes in Company’s capital. A hearing took place on September 5, 2023, during which the Court denied the request for temporary reliefs.
The Company filed a counterstatement of claims to Murchinson’s complaint on January 18, 2024, and its statement of defense on January 21, 2024. A hearing
was held on February 21, 2024, in which the Court scheduled further proceedings starting in September 2024.
On March 27, 2023, the Company filed a complaint, in the United States District Court for the Southern District of New York alleging claims against
Murchinson and Affiliates as well as Anson Funds, or Anson. The complaint alleges that defendants improperly engaged in coordinated efforts to acquire a large
stake in the Company and interfered with its business operations, in violation of U.S. securities laws, New York law, and pertinent contracts governing
Company’s ADSs. The complaint also alleges that defendants’ conduct was in violation of Section 13(d) of the Exchange Act and constituted breach of contract,
tortious interference with prospective business relationships, and unjust enrichment. After the Company filed the complaint, on May 2, 2023 and June 23, 2023,
Murchinson and Anson filed amended disclosures with the SEC. On July 10, 2023, the United States District Court dismissed Company’s federal securities
claims against Murchinson and Anson and declined to exercise supplemental jurisdiction concerning Company’s state law claims, dismissing them without
prejudice. On August 9, 2023, the Company appealed the District Court’s decision dismissing Company’s claims arising under Section 13(d) of the Exchange.
That appeal remains pending.
On July 14, 2023, the Company filed a complaint against Murchinson and Affiliates and Anson in the Supreme Court of the State of New York. The
complaint in this action alleges that Murchinson and Affiliates breached multiple provisions of the contract that governs there holdings of our ADSs and were
unjustly enriched through their improper trading of our ADSs. On August 3, 2023, the Supreme Court of the State of New York issued a decision temporarily
staying the Company’s claims pending a post-trial ruling in the March 26, 2023 claim Murchinson and Affiliates filed with the Court. The Company does not
anticipate that any further action will take place in this matter until the stay is lifted.
On May 1, 2023, Murchinson filed a complaint in the Southern District of New York alleging that the Company and its directors violated New York Civil
Rights Law §§ 70-a and 76- a when they initiated the above-referenced litigation in the Southern District of New York. On August 9, 2023, The Company filed
a motion to dismiss the complaint in its entirety, arguing, inter alia, that the Southern District of New York lacks jurisdiction to hear the claims and that
Murchinson’s complaint fails on the merits. The Company’s motion to dismiss remains pending.
F-50
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Nano Dimension Ltd
On April 25, 2023, the Company filed a motion for the issuance of temporary relief against Stratasys and its board of directors, requesting that the Tel Aviv
District Court prevent Stratasys from sabotaging a special tender offer that the Company announced it intended to publish according to the mechanism
prescribed in the Companies Law for implementing an unlawful “poison pill.” On May 7, 2023, the Company filed a statement of claim (the “Poison Pill
Claim”), against Stratasys and its board of directors. Following a hearing held in connection with the Poison Pill Claim, on July 18, 2023, the Tel Aviv District
Court suggested, without making a conclusive decision, that he believes that there is no per se prohibition against such a plan as long as it does not discriminate
between shareholders. On August 8, 2023, the Tel Aviv District Court stayed the proceedings in the Poison Pill Claim. On November 16, 2023, the Company
asked the Tel Aviv District Court to resume the proceedings and to set dates for final briefing. The matter is currently pending before the Tel Aviv District Court.
On December 7, 2022, the Company was served with a motion requesting the discovery of documents in the Tel Aviv District Court (Economic
Department) by an ADS holder, Mr. Kfir Sapir asserting, among other things, that the purchase price in the Company’s acquisition of DeepCube did not
accurately reflect the acquired company’s value, that there were flaws in the approval process for the acquisition during the meeting of the Company’s board of
directors, which allegedly resulted in a breach of the directors’ fiduciary duties, and that the Company had undervalued DeepCube in its financial reports for
2021, suggesting that the acquired company had no worth. Following the Company’s response, on October 19, 2023, upon a request from the plaintiff, the court
dismissed the matter without prejudice because the plaintiff intended to file a derivative action. On September 5, 2023, Mr. Sapir filed a motion to certify a
derivative action according to section 198 to the Israeli Companies Law 5759-1999 against the Company and its directors with the Tel Aviv District Court,
arguing the decision to acquire DeepCube for approximately $40,000 in cash and $30,000 worth of ADSs, was unreasonable, based on his notion that
DeepCube is only a “startup company” with allegedly no revenues and no products. A court hearing is scheduled for July 3, 2024.
On March 18, 2024, the Company filed a motion for temporary injunction in the Court against Murchinson, and Affiliates and Mr. Moshe Sarfati, a senior
analyst at Murchinson (the “Respondents”), in which the Company claims that the Respondents had contacted officers at certain third-party companies with
whom Company have had business discussions, and committed tortious interference. The Company asked the Court to issue an injunction against the
Respondents:
I. To refrain from contacting third parties – including companies in the field of 3D printing and/or companies engaged in negotiations with the Company
– regarding the Company’s affairs, and to present them with misleading presentations casting doubt over the legality of the current board of directors
of the Company and implying that the current board of directors and management are not authorized to make decisions regarding the Company’s
transactions, or to threaten them that Respondents will act to thwart any negotiation, collaboration, or transaction with the Company under the
guidance of the Company’s current board of directors.
II. To avoid interfering with or undermining the Company’s business activities, including any attempts to thwart transactions advancing the Company’s
interests with third parties, including merger, acquisition, or stock exchange transactions. The Company also asked the Court to order the Respondents to
provide a written affidavit to be submitted by each of the Respondents, detailing all communications made to third parties engaged in business relations
with the Company, with the aim of interfering in the Company's business affairs.
On March 21, 2024, we filed a complaint with the Court requesting a declaration that Respondents had breached their duties and requesting the
remedies specified above. A hearing is scheduled for March 26, 2024.
Note 23 – Transactions and balances with related parties
A. Balances with related parties
Employee benefits liabilities
B. Shareholders and other related parties’ benefits
Salaries and related expenses- related parties employed by the Group (*)
Number of related parties
Compensation for directors not employed by the Group
Number of directors
(*) The figures include share-based payment expenses of $6,692 (2022: $7,333, 2021: $10,925)
December 31,
2022
2023
387
1,474
Year ended on December 31,
2022
2023
2021
13,629
7
3,951
8
10,185
8
374
7
11,818
8
408
8
C. On April 22, 2021, the Company acquired 100% of the shares and voting interests in DeepCube. The founders of DeepCube are Mr. Eli David and Mr. Yaron
Eitan (through his holding in Anaknu LLC (“Anaknu”), of which he is one of the shareholders). Mr. Eli David and Mr. Yaron Eitan were directors of DeepCube.
Mr. Eli David also continued to work at DeepCube after the acquisition, in the role of Chief Technology Officer.
F-51
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Nano Dimension Ltd
For the sale of their holdings in the company, the founders received the following consideration (Mr. Eli David and Anaknu in aggregate):
1. Cash payments - $19,420.
2. Payment in equity instruments to Anaknu 1,339 thousand ordinary shares with a fair value of $11,682. Those shares were entitled to a share price
protection mechanism for a period of 12 months. In April 2022 an amount of $3,661 was paid with regards to this price protection mechanism.
3. Post-acquisition compensation cost 892 thousand ordinary shares, with a share price protection mechanism for a period of 12 to 36 months, subject to
conditions related to the continued employment of Mr. Eli David. These shares were not taken into account as part of the consideration for the business
combination. The fair value of those shares, with the share price protection mechanism, was estimated at the transaction date at $7,756.
For the year ended December 31, 2023, $1,190 (2022: $3,286) of the share-based compensation was recognized as share-based payment expenses.
D. On May 25, 2021, following approval of the general meeting of the Company’s shareholders, the Company granted options to purchase 131,000 ADSs to
directors of the Company with exercise prices ranging from $7.69 to $9.33 per ADS.
E.
In May 2021, the Company granted options to purchase 3,000,000 ADSs to officers of the Company at an exercise price of $6.00 per ADS. In addition, the
Company granted options to purchase 1,000,000 ADSs to an officer of the Company, subject to certain change-of-control events, which have not occurred
during the reporting period.
F.
In January 2022, the Company granted options to purchase 400,000 ADSs to an officer of the Company at an exercise price of $3.79 per ADS.
G.
In June 2022, the Company granted 210,000 RSUs to directors of the Company.
H.
In August 2022, the Company granted 1,270,000 RSUs to officers of the Company.
I.
J.
In September 2022, the Company replaced options to purchase 3,241,737 ADSs granted before to certain officers and directors of the Company with
1,620,869 RSUs.
In November 2022, the Company granted 75,000 RSUs to directors of the Company. In addition, the Company granted 500,000 RSUs to an officer of the
Company.
K.
In January 2023, the Company granted 350,000 RSUs to officers of the Company.
L.
In April 2023, Mr. Yoav Stern exercised 4,816,282 warrants into 3,559,073 shares.
M. In June 2023, the Company granted 200,000 RSUs to directors of the Company. In addition, the Company granted 500,000 RSUs to an officer of the
Company.
N.
In October 2023 the Company granted 70,000 RSUs to directors of the Company and 850,000 RSUs to officers of the Company.
O.
In November 2023, the Company changed the vesting terms of options to purchase 1,000,000 ADSs granted to an officer of the Company.
For additional information regarding share-based payments transactions with officers and directors see note 19.
F-52
Notes to Consolidated Financial Statements
U.S. dollars in thousands (except share and per share data)
Note 24 – Events after the reporting date
Nano Dimension Ltd
A. After the reporting period, in January to March 15, 2024, the Company acquired 17,110,217 of the Company’s ADSs in a total amount of $46,150 and
recorded an increase in the reserve for treasury shares accordingly.
B.
In January 2024, the Company entered into the Rights Plan, with the intention to protect the long-term interests of the Company’s ADS holders and enable
them to realize the full potential value of their investment in the Company. The Rights Plan is designed to reduce the likelihood that any entity, person or
group would gain control of, or significant influence over the Company. Pursuant to the Rights Plan, the Company issued one special purchase right for
every one ADS outstanding at the close of business on February 5, 2024. Each right allows its holder to purchase from the Company one-half (0.5) of one
ADS, at a purchase price of $0.01 per ADS, once the rights become exercisable. The rights would become exercisable only if an entity, person or group
acquires beneficial ownership of 10% or more of the Company’s outstanding ordinary shares in a transaction not approved by our board of directors. The
rights will expire on January 25, 2025.
C. After the reporting period, in February and March 2024, the Group granted 510,000 RSUs to employees of the Company. The RSUs represent the right to
receive ordinary shares at a future time and vest over a period of three to four years.
F-53
Exhibit 2.2
Type and Class of Securities
Description of Rights of Each Class of Securities
Nano Dimension Ltd.’s (the “Company”) authorized share capital consists of 500,000,000 ordinary shares, NIS 5.00 par value per share (“Ordinary
Shares”).
Registration Number and Objectives of the Company
Our registration number with the Israeli Registrar of Companies is 52-0029109. The Company’s objectives are set forth in Section 3(b) of the
Company’s amended and restated articles of association and includes every lawful purpose, subject to the purposes of the Company specified in the Company’s
Memorandum of Association.
The Powers of the Directors
The Company’s Board of Directors shall direct the Company’s policy and shall supervise the performance of the Company’s chief executive officer
and his actions. The Company’s Board of Directors may exercise all powers that are not required under the Israeli Companies Law of 1999 (the “Companies
Law”) or under the Company’s amended and restated articles of association to be exercised or taken by the Company’s shareholders.
Preemptive Rights
The Company’s Ordinary Shares are not redeemable and are not subject to any preemptive right.
Limitations or Qualifications
Not applicable.
Other Rights
Not applicable.
Rights of the Shares
Under the Companies Law and our amended and restated articles of association, the Company’s Ordinary Shares shall confer upon the holders thereof:
● equal right to attend and to vote at all of the Company’s general meetings, whether regular or special, with each Ordinary Share entitling the
holder thereof, which attends the meeting and participates in the voting, either in person or by a proxy or by a written ballot or by any other
means, to one vote;
● equal right to participate in distribution of dividends, if any, whether payable in cash or in bonus shares, in distribution of assets or in any other
distribution, on a per share pro rata basis; and
● equal right to participate, upon the Company’s dissolution, in the distribution of the Company’s assets legally available for distribution, on a per
share pro rata basis.
All Ordinary Shares have identical voting and other rights in all respects.
Shareholder’s rights of inspection of the Company records
Pursuant to the Companies Law, shareholders have the right to inspect the Company’s documents that are specified below:
(1) minutes of the general meetings;
(2) the Company’s shareholders register and the register of substantial shareholders;
(3) a document in the Company’s possession, relating to an act or transaction with interested parties that requires approval by the general meeting;
(4) Articles of association and financial reports; and
(5) any document that the Company must submit under the Companies Law and under any statute to the Companies Registrar or to the Israeli
Securities Authority and that is available for public inspection at the Companies Registrar or the Israeli Securities Authority, as the case may be.
Transfer of shares
The Company’s fully paid Ordinary Shares are issued in registered form and may be freely transferred under the Company’s amended and restated
articles of association, unless the transfer is restricted or prohibited by another instrument, applicable law or the rules of a stock exchange on which the ordinary
shares are listed for trade. The ownership or voting of the Company’s Ordinary Shares by non-residents of Israel is not restricted in any way by the Company’s
amended and restated articles of association or the laws of the State of Israel, except for ownership by nationals of some countries that are, or have been, in a
state of war with Israel.
Election of Directors
The Company’s Ordinary Shares do not have cumulative voting rights for the election of directors. As a result, the holders of a majority of the voting
power represented at a shareholders meeting have the power to elect all of the Company’s directors, subject to the special approval requirements for external
directors, if applicable, to the extent the Company is then required to elect external directors.
Under the Company’s amended and restated articles of association, the Company’s Board of Directors must consist of not less than three but no more
than twelve directors, including, when the Company is required, two external directors who serve pursuant to the Companies Law. Pursuant to the Company’s
amended and restated articles of association, each of the Company’s directors (other than, when applicable, external directors, for whom special election
requirements apply under the Companies Law), will be appointed by a simple majority vote of holders of the Company’s voting shares, participating and voting
at an annual general meeting of the Company’s shareholders. In addition, the Company’s directors (other than the external directors, when applicable), which
may be elected only in annual meeting, are divided into three classes that are each elected at the third annual general meeting of the Company’s shareholders, in
a staggered fashion (such that one class is elected each annual general meeting), and serve on the Company’s Board of Directors unless they are removed by a
vote of 70% of the total voting power of the Company’s shareholders at a general meeting of the Company’s shareholders or upon the occurrence of certain
events, in accordance with the Companies Law and the Company’s amended and restated articles of association. In addition, the Company’s amended and
restated articles of association allow the Company’s Board of Directors to fill vacancies on the Board of Directors or to appoint new directors up to the
maximum number of directors permitted under the Company’s amended and restated articles of association. Such directors serve for a term of office equal to
the remaining period of the term of office of the directors(s) whose office(s) have been vacated or in the case of new directors, for a term of office according to
the class to which such director was assigned upon appointment. The Company is not currently required to have external directors serving on the Company’s
Board of Directors, based on an exemption that the Company has elected to be governed by under the Companies Law regulations.
2
Annual and Special Meetings
Under the Israeli law and our articles of association, the Company is required to hold an annual general meeting of the Company’s shareholders once
every calendar year, at such time and place which shall be determined by the Company’s Board of Directors, which must be no later than 15 months after the
date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special general meetings. The
Company’s Board of Directors may call special general meetings whenever it sees fit and upon the written request of: (a) any two of the Company’s directors or
of one quarter of the members of the Board of Directors in office at such time; and/or (b) one or more shareholders holding, in the aggregate, 5% of the
Company’s issued and outstanding share capital and at least one percent of the voting rights in the Company or a shareholder, one or more, who owns at least
5% of the voting rights in the Company (the “Non Exempted Holding”). However, under a new exemption applicable as of March 12, 2024, the board of
directors of an Israeli company whose shares are listed outside of Israel, shall convene a special meeting at the request of one or more shareholders holding at
least ten percent (10%) of the issued and outstanding share capital instead of five (5%) in the past, and at least one percent (1%) of the voting rights in the
company, or one or more shareholders holding at least ten percent (10%) of the voting rights in the company, provided that if the applicable law as applicable to
companies incorporated in the country which the Company is listed for trade, establishes a right to demand convening of such a meeting for those holding a
percentage of holdings lower than ten percent (10%), then the Non Exempted Holding shall apply.
Resolutions regarding the following matters must be passed at a general meeting of the Company’s shareholders:
● amendments to the Company’s amended and restated articles of association;
● the exercise of the Company’s Board of Director’s powers if the Company’s Board of Directors is unable to exercise its powers;
● appointment or termination of the Company’s auditors;
● appointment of directors;
● approval of acts and transactions requiring general meeting approval pursuant to the provisions of the Companies Law and any other applicable
law;
● increases or reductions of the Company’s authorized share capital; and
● a merger (as such term is defined in the Companies Law).
Notices
The Companies Law and our articles of association require that a notice of any annual or special shareholders meeting be provided at least 14 or 21
days prior to the meeting, as the case may be, and if the agenda of the meeting includes the appointment or removal of directors, the approval of transactions
with office holders or interested or related parties, approval of the chairman of the board or his relative to serve as the general manager or to exercise his powers
and approval of the general manager or his relative to serve as the chairman of the board or to exercise his powers,, notice must be provided at least 35 days
prior to the meeting.
Quorum
Under our amended and restated articles of association, the quorum required for the Company’s general meetings consists of at least two shareholders
present in person or by proxy, who hold or represent between them at least 25% of the total outstanding voting rights (instead of 33 1/3% of the issued share
capital required under the Nasdaq Listing Rules). If within half an hour of the time appointed for the general meeting a quorum is not present, the general
meeting shall stand adjourned either to (1) the same day of the following week, at the same hour and in the same place, (2) to such other date, time and place as
prescribed in the notice to the shareholders and in such adjourned meeting, or (3) to such day and at such time and place as the Chairperson of the General
Meeting shall determine (which may be earlier or later than the date pursuant to clause (1) above). If no quorum is present within half an hour of the time
arranged, any number of shareholders participating in the meeting, shall constitute a quorum.
If a general meeting was summoned following the request of a shareholder, then a quorum required in an adjourned general meeting, shall consist of at
least one or more shareholders, which holds and represents at least 5% of the company’s issued and outstanding share capital and at least 1% of the company
voting rights, or one or more shareholder, which holds at least 5% of the Company’s voting rights.
Adoption of Resolutions
The Company’s amended and restated articles of association provide that all resolutions in the Company’s shareholders’ meetings require a simple
majority of the vote of the shareholders attending the general meeting, unless otherwise required under the Companies Law or the Company’s amended and
restated articles of association. A shareholder of the Company may vote in a general meeting in person, by proxy or by a written ballot. The Company’s
amended and restated articles of association do not provide the Company’s shareholders with any cumulative voting rights.
3
Changing Rights Attached to Shares
Unless otherwise provided by the terms of the shares and subject to any applicable law, in order to change the rights attached to any class of shares,
such change must be adopted by the general meeting of the affected class or by a written consent of all the shareholders of the affected class.
The enlargement of an existing class of shares or the issuance of additional shares thereof shall not be deemed to modify the rights attached to the
previously issued shares of such class or of any other class, unless otherwise provided by the terms of the shares.
Limitations on the Rights to Own Ordinary Shares
There are no limitations on the right to own the Company’s securities.
Provisions Restricting Change in Control of the Company
There are no specific provisions of the Company’s amended and restated articles of association that would have an effect of delaying, deferring or
preventing a change in control of the Company or that would operate only with respect to a merger, acquisition or corporate restructuring involving the
Company (or the Company’s subsidiaries). However, as described below, certain provisions of the Companies Law may have such effect.
The Companies Law includes provisions that allow a merger transaction and requires that each company that is a party to the merger have the
transaction approved by its Board of Directors and, unless certain requirements described under the Companies Law are met, a vote of the majority of its shares
and, in the case of the target company, also a majority vote of each class of its shares.. For purposes of the shareholder vote of each party, unless a court rules
otherwise, the merger will not be deemed approved if shares representing a majority of the voting power present at the shareholders meeting and which are not
held by the other party to the merger (or by any person who holds 25% or more of the voting power or the right to appoint 25% or more of the directors of the
other party) vote against the merger. If, however, the merger involves a merger with a company’s own controlling shareholder or if the controlling shareholder
has a personal interest in the merger, then the merger will be subject to the same Special Majority approval that governs all extraordinary transactions with
controlling shareholders instead. Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes
that there exists a reasonable concern that as a result of the merger the surviving company will be unable to satisfy the obligations of any of the parties to the
merger, and may further give instructions to secure the rights of creditors. If the transaction would have been approved by the shareholders of a merging
company but did not receive the separate approval of each class or the exclusion of the votes of certain shareholders as provided above, a court may still
approve the merger upon the petition of holders of at least 25% of the voting rights of a company. For such petition to be granted, the court must find that the
merger is fair and reasonable, taking into account the value of the parties to the merger and the consideration offered to the shareholders. In addition, a merger
may not be completed unless at least (1) 50 days have passed from the time that the requisite proposals for approval of the merger were filed with the Israeli
Registrar of Companies by each merging company and (2) 30 days have passed since the merger was approved by the shareholders of each merging company.
4
The Companies Law also provides that, subject to certain exceptions, an acquisition of shares in a public company must be made by means of a
“special” tender offer if as a result of the acquisition (1) the purchaser would become a 25% or greater shareholder of the company, unless there is already
another 25% or greater shareholder of the company or (2) the purchaser would become a 45% or greater shareholder of the company, unless there is already a
45% or greater shareholder of the company. These requirements do not apply if, in general, the acquisition (1) was made in a private placement that received a
shareholders’ approval as a private placement intended to make the offeree a 25% or greater shareholder of the company, unless there is already another 25% or
greater shareholder of the company or a 45% or greater shareholder of the company, unless there is already a 45% or greater shareholder of the company, (2)
was from a 25% or greater shareholder of the company which resulted in the acquirer becoming a 25% or greater shareholder of the company, or (3) was from a
45% or greater shareholder of the company which resulted in the acquirer becoming a 45% or greater shareholder of the company. A “special” tender offer must
be extended to all shareholders, and may be consummated only if (1) at least 5% of the company’s outstanding shares will be acquired by the offeror and (2) the
number of shares tendered in the offer exceeds the number of shares whose holders objected to the offer.
If, as a result of an acquisition of shares, the acquirer will hold more than 90% of a company’s outstanding shares, the acquisition must be made by
means of a tender offer for all of the outstanding shares. In general, if less than 5% of the outstanding shares are not tendered in the tender offer and more than
half of the offerees who have no personal interest in the offer tendered their shares, all the shares that the acquirer offered to purchase will be transferred to it.
Shareholders may request from the court appraisal rights in connection with a full tender offer for a period of six months following the consummation of the
tender offer, but the acquirer is entitled to stipulate that tendering shareholders will forfeit such appraisal rights.
The Companies Law provides that any resolution to change the articles of association so that a certain provision may only be changed by a special
majority of the shareholders (as shall be defined in such resolution) shall require the same special majority of the shareholders.
Lastly, Israeli tax law treats some acquisitions, such as stock-for-stock exchanges between an Israeli company and a foreign company, less favorably
than U.S. tax laws. For example, Israeli tax law may, under certain circumstances, subject a shareholder who exchanges his Ordinary Shares for shares in
another corporation to taxation prior to the sale of the shares received in such stock-for-stock swap.
The Rights Agreement
On January 23, 2024, our Board of Directors adopted a rights plan, or the Rights Plan, which replaced our prior rights agreement that expired by its
terms, to protect the interests of its shareholders. The Rights Plan, if triggered, will significantly dilute the ownership of any Acquiring Person (as defined
below). Our Board of Directors has authorized, pursuant to the Rights Plan, the issuance, on February 6, 2024, of one special purchase right, or the Right, for
every ADS, each ADS representing one Ordinary Share, outstanding at the close of business on February 5, 2024. The Rights will initially trade with, and will
be inseparable from, the corresponding ADSs. The Rights are evidenced only by the balances indicated in the ADS register maintained by The Bank of New
York Mellon, or the Depositary, with respect to uncertificated ADSs or, in the case of certificated ADSs, the certificates that evidence those ADSs. New Rights
will accompany any new ADSs that are issued from February 6, 2024 until the earliest of the Distribution Record Date (as defined below), the Redemption Date
(as defined below) and the Final Expiration Date (as defined in the Rights Agreement).
The Rights were issued pursuant to a Rights Agreement, dated as of January 25, 2024, or the Rights Agreement, between us and The Bank of New
York Mellon, in its capacity as rights agent, or the Rights Agent. Each Right will allow its holder to purchase from the Company one-half of one (0.5) ADS, at a
purchase price of $0.01 per ADS, once the Rights become exercisable. Prior to exercise, the Right does not give its holder any dividend, voting, or liquidation
rights or other rights as an ADS holders of the Company.
5
The Rights will not be exercisable until we, after consultation with the Rights Agent, determine the distribution date for the Rights which shall be as
soon as practicable after the earlier of: (a) the close of business on the tenth (10th) day after the public announcement or public disclosure that a person or group
has become an Acquiring Person by obtaining beneficial ownership of 10% or more of the Company’s outstanding Ordinary Shares (subject to the parameters
and exceptions described below and in the Rights Agreement), except if such person or group has become an Acquiring Person pursuant to an offer approved by
the majority of the Board of Directors; or (b) the close of business on the tenth (10th) day (or a date determined by the Board of Directors before any person or
group becomes an Acquiring Person) after a person or group consummates a tender or exchange offer (except if such person or group has become an Acquiring
Person pursuant to an offer approved by the majority of the Board of Directors) which, if consummated, would result in that person or group becoming an
Acquiring Person. The earlier of such dates, upon which the Rights become exercisable, is referred to as the Distribution Record Date.
If a person’s beneficial ownership of the then-outstanding Ordinary Shares as of the time of the public announcement of the declaration of the Rights is
at or above 10% (including through entry into certain derivative positions), that person or group’s then-existing ownership percentage would be grandfathered
and would not trigger the exercisability of the Rights, as that person will not be deemed to be an Acquiring Person. However, the Rights would become
exercisable (and such Person will be deemed to be an Acquiring Person) if at any time after such announcement, (i) the person increases its ownership
percentage to an amount equal to or greater than the greater of (1) 10% and (2) the sum of (I) the lowest number of Ordinary Shares beneficially owned by such
person as a percentage of the outstanding Ordinary Shares as of any time from and after the time of the public announcement of the declaration of the Rights
and (II) 0.001% or (ii) would have been an Acquiring Person under that certain Rights Agreement by and between the Company and the Rights Agent dated as
of January 27, 2023 prior to the expiration of the rights issued under such agreement.
Until the Distribution Record Date, the balances in the register maintained by the Depositary with respect to uncertificated ADSs or, in the case of
certificated ADSs, the certificates evidencing those ADSs will also evidence the Rights, and any transfer of ADSs will also constitute a transfer of Rights. After
the Distribution Record Date, the Rights will separate from the ADSs and be evidenced solely by entries in the register maintained by the Rights Agent, or, in
the case of certificated Rights, by Right certificates. Any Rights held by an Acquiring Person or any Associate or Affiliate thereof are void and may not be
exercised.
If a person or group becomes an Acquiring Person, then beginning on the Distribution Record Date, all holders of Rights except the Acquiring Person
or any Associate or Affiliate thereof may, for a purchase price of $0.01 per one ADS, purchase one-half of one (0.5) ADS.
If the Company is later acquired in a merger or similar transaction after the Distribution Record Date, each holder of a Right except the Acquiring
Person or any Associate or Affiliate thereof may, for a purchase price of $0.01 per ADS, purchase, in lieu of ADSs representing Ordinary Shares, one (1) times
the number of securities of the acquiring corporation, that each ADS holder of the Company is entitled to for each Ordinary Shares.
An “Acquiring Person” is any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 10% or
more of the Ordinary Shares of the Company then outstanding, but shall not include the Company, any Subsidiary of the Company, any shares issued and/or
issuable pursuant to a Permitted Offer or under a benefit or share ownership plan of the Company or any Subsidiary of the Company, or any entity holding
Ordinary Shares for or pursuant to the terms of any such plan. Notwithstanding the foregoing, no Person shall become an “Acquiring Person” as the sole result
of an acquisition of Ordinary Shares by the Company which, by reducing the number of Ordinary Shares of the Company outstanding, increases the
proportionate number of Ordinary Shares of the Company beneficially owned by such Person to 10% or more of the Ordinary Shares of the Company then
outstanding; provided, however, that, if a Person shall become the Beneficial Owner of 10% or more of the Ordinary Shares of the Company then outstanding
by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional Ordinary
Shares of the Company, then such Person shall be deemed to be an Acquiring Person. Notwithstanding the foregoing, if the Board determines in good faith that
a Person who would otherwise be an Acquiring Person has become such inadvertently, and such Person divests as promptly as practicable a sufficient number of
Ordinary Shares, so that such Person would no longer be an Acquiring Person, as defined pursuant to the foregoing provisions of this paragraph, then such
Person shall not be deemed to be an Acquiring Person for any purposes of the Rights Agreement.
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The Board of Directors may, at its option, at any time prior to such time that any Person becomes an Acquiring Person, for no consideration, redeem all
but not less than all the then outstanding Rights (the effective date of redemption, or the Redemption Date. The redemption of the Rights by the Board of
Directors may be made effective at such time, on such basis and with such conditions as the Board of Directors, in its sole discretion, may establish.
Immediately upon the effectiveness of the action of the Board of Directors ordering the redemption of the Rights, and without any further action and without
any notice, the right to exercise the Rights will terminate and the Company may terminate the Rights Agreement.
The Board of Directors may, at its option, at any time after any person becomes an Acquiring person, determine, and instruct the Rights Agent, to
exchange all or part of the then outstanding and exercisable Rights (except for Rights that have become void) for ADSs at an exchange ratio of one-half of one
(0.5) ADS per Right, appropriately adjusted to reflect any adjustment in the number of Rights (the “Exchange Ratio”). However, the Board of Directors will not
be empowered to effect such exchange at any time after any person (other than the Company, any Subsidiary of the Company, any employee benefit or stock
ownership plan of the Company or any such Subsidiary, or any entity holding Ordinary Shares for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such person, becomes the Beneficial Owner of 50% or more of the Ordinary Shares then outstanding.
Immediately upon the action of the Board of Directors ordering the foregoing exchange, the right to exercise the Rights that are to be exchanged will
terminate and the only right thereafter of a holder of such Rights shall be to receive that number of ADSs equal to the number of such Rights held by such
holder multiplied by the Exchange Ratio. In the event that there shall not be sufficient Ordinary Shares issued but not outstanding or authorized but unissued to
permit any exchange of Rights, the Company will take all such action as may be necessary to authorize additional Ordinary Shares for issuance upon exchange
of the Rights.
Our Board of Directors may adjust the purchase price of the ADSs, the number of ADSs issuable and the number of outstanding Rights to prevent
dilution that may occur from a share dividend, a share split, or a reclassification of the Ordinary Shares or ADSs. No adjustments to the exercise price of less
than 1% will be made.
The terms of the Rights Agreement may be amended by our Board of Directors without the consent of the holders of the Rights. After a person or
group becomes an Acquiring Person, our Board of Directors may not amend the Rights Agreement in a way that adversely affects holders of the Rights. The
Rights will expire on January 25, 2025.
Borrowing Powers
Pursuant to the Companies Law and the Company’s amended and restated articles of association, the Company’s Board of Directors may exercise all
powers and take all actions that are not required under law or under the Company’s amended and restated articles of association to be exercised or taken by the
Company’s shareholders, including the power to borrow money for company purposes.
7
Differences between law of different jurisdictions
Not applicable.
Changes in the Company’s Capital
The general meeting may, by a simple majority vote of the shareholders attending the general meeting:
● increase the Company’s registered share capital by the creation of new shares from the existing class or a new class, as determined by the general
meeting;
● cancel any registered share capital which has not been taken or agreed to be taken by any person;
● consolidate and divide all or any of the Company’s share capital into shares of larger nominal value than the Company’s existing shares;
● subdivide the Company’s existing shares or any of them, the Company’s share capital or any of it, into shares of smaller nominal value than is
fixed;
● reduce the Company’s share capital and any fund reserved for capital redemption in any manner, and with and subject to any incident authorized,
and consent required, by the Companies Law; and
● reduce shares from the Company’s share capital.
Debt Securities
The Company does not have any debt securities that are registered under Section 12 of the Securities Exchange Act of 1934, as amended.
Warrants and Rights
The Company does not have any warrants or rights that are registered under Section 12 of the Securities Exchange Act of 1934, as amended.
Other Securities
The Company does not have any other securities that are registered under Section 12 of the Securities Exchange Act of 1934, as amended.
Name of the Depositary
The Bank of New York Mellon, as depositary, will register and deliver (ADSs. Each ADS will represent one share (or a right to receive one share)
deposited with the Bank of New York Mellon. Each ADS will also represent any other securities, cash or other property which may be held by the depositary.
The deposited shares together with any other securities, cash or other property held by the depository are referred to as the deposited securities. The depositary’s
office at which the ADSs will be administered and its principal executive office are located at 240 Greenwich Street New York, NY 10286.
American Depositary Shares
A holder of the Company’s ADSs (the “Holder”) may hold ADSs either (A) directly (i) by having American Depositary Receipt, also referred to as an
ADR, which is a certificate evidencing a specific number of ADSs, registered in the Holder’s name, or (ii) by having uncertificated ADSs registered in the
Holder’s name, or (B) indirectly by holding a security entitlement in ADSs through the ADS Holder’s broker or other financial institution that is a direct or
indirect participant in The Depository Trust Company, or DTC. If the Holder hold ADSs directly, the Holder is a registered ADS holder, also referred to as an
ADS holder. This description assumes the Holder is an ADS holder. If the Holder holds the ADSs indirectly, the Holder must rely on the procedures of the
Holder’s broker or other financial institution to assert the rights of ADS holders described in this section. The Holder should consult with his broker or financial
institution to find out what those procedures are.
Registered holders of uncertificated ADSs will receive statements from the depositary confirming their holdings.
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As an ADS holder, the Company will not treat the Holder as one of the Company’s shareholders and the Holder will not have shareholder rights. Israeli
law governs shareholder rights. The depositary will be the holder of the shares underlying the Holder’s ADSs. As a registered holder of ADSs, the Holder will
have ADS holder rights. A deposit agreement among us, the depositary, ADS holders and all other persons indirectly or beneficially holding ADSs sets out ADS
holder rights as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the ADSs.
The following is a summary of the material provisions of the deposit agreement. For more complete information, the Holder should read the entire
deposit agreement and the form of ADR.
Dividends and Other Distributions
How will the Holder receive dividends and other distributions on the shares?
The depositary has agreed to pay or distribute to ADS holders the cash dividends or other distributions it or the custodian receives on shares or other
deposited securities, upon payment or deduction of its fees and expenses. The Holder will receive these distributions in proportion to the number of shares the
Holder’s ADSs represent.
Cash.
The depositary will convert any cash dividend or other cash distribution the Company pays on the shares into U.S. dollars, if it can do so on a
reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible or if any government approval is needed and cannot be obtained,
the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. It will hold the foreign
currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any
interest.
Before making a distribution, any withholding taxes, or other governmental charges that must be paid will be deducted. The depository will distribute
only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary
cannot convert the foreign currency, the Holder may lose some or all of the value of the distribution.
Shares.
The depositary may distribute additional ADSs representing any shares the Company distributes as a dividend or free distribution. The depositary will
only distribute whole ADSs. It will sell shares which would require it to deliver a fraction of an ADS (or ADSs representing those shares) and distribute the net
proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs, the outstanding ADSs will also represent the new shares.
The depositary may sell a portion of the distributed shares (or ADSs representing those shares) sufficient to pay its fees and expenses in connection with that
distribution.
Rights to purchase additional shares.
If the Company offers holders of the Company’s securities any rights to subscribe for additional shares or any other rights, the depositary may (i)
exercise those rights on behalf of ADS holders, (ii) distribute those rights to ADS holders or (iii) sell those rights and distribute the net proceeds to ADS holders,
in each case after deduction or upon payment of its fees and expenses. To the extent the depositary does not do any of those things, it will allow the rights to
lapse. In that case, the Holder will receive no value for them.
The depositary will exercise or distribute rights only if the Company ask it to and provide satisfactory assurances to the depositary that it is legal to do
so. If the depositary will exercise rights, it will purchase the securities to which the rights relate and distribute those securities or, in the case of shares, new
ADSs representing the new shares, to subscribing ADS holders, but only if ADS holders have paid the exercise price to the depositary.
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U.S. securities laws may restrict the ability of the depositary to distribute rights or ADSs or other securities issued on exercise of rights to all or certain
ADS holders, and the securities distributed may be able subject to restrictions on transfer.
Other Distributions.
The depositary will send to ADS holders anything else the Company distributes on deposited securities by any means it thinks is legal, fair and
practical. If it cannot make the distribution in that way, the depositary has a choice. It may decide to sell what the Company distributed and distributes the net
proceeds, in the same way as it does with cash. Or, it may decide to hold what the Company distributed, in which case ADSs will also represent the newly
distributed property. However, the depositary is not required to distribute any securities (other than ADSs) to ADS holders unless it receives satisfactory
evidence from the Company that it is legal to make that distribution. The depositary may sell a portion of the distributed securities or property sufficient to pay
its fees and expenses in connection with that distribution. U.S. securities laws may restrict the ability of the depositary to distribute securities to all or certain
ADS holders, and the securities distributed may be subject to restrictions on transfer.
The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. The Company has
no obligation to register ADSs, shares, rights or other securities under the Securities Act. The Company also has no obligation to take any other action to permit
the distribution of ADSs, shares, rights or anything else to ADS holders. This means that the Holder may not receive the distributions the Company makes on
the Company’s shares or any value for them if it is illegal or impractical for the Company to make them available to the Holder.
Deposit, Withdrawal and Cancellation
How are ADSs issued?
The depositary will deliver ADSs if the Holder or the Holder’s broker deposits shares or evidence of rights to receive shares with the custodian. Upon
payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate
number of ADSs in the names the Holder requests and will deliver the ADSs to or upon the order of the person or persons that made the deposit.
How can ADS holders withdraw the deposited securities?
The Holder may surrender his ADSs for the purpose of withdrawal at the depositary’s office. Upon payment of its fees and expenses and of any taxes
or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the shares and any other deposited securities underlying the ADSs to
the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at the Holder’s request, risk and expense, the depositary will deliver the
deposited securities at its office, if feasible. However, the depository is not required to accept surrender of ADSs to the extent it would require delivery of a
fraction of a deposited share of other security. The depositary may charge the Holder a fee and its expenses for instructing the custodian regarding delivery of
deposited securities.
How do ADS holders interchange between certificated ADSs and uncertificated ADSs?
The Holder may surrender his ADR to the depositary for the purpose of exchanging the Holder’s ADR for uncertificated ADSs. The depositary will
cancel that ADR and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated ADSs. Upon receipt by
the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the
depositary will execute and deliver to the ADS holder an ADR evidencing those ADSs.
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Voting Rights
How do the Holder vote?
ADS holders may instruct the depositary how to vote the number of deposited shares their ADSs represent. If the Company request, the depositary to
solicit the Holder’s voting instructions (and the Company is not required to do so), the depositary will notify ADS holders of a shareholders’ meeting and send
or make voting materials to them if the Company asks it to. Those materials will describe the matters to be voted on and explain how ADS holders may instruct
the depositary how to vote. For instructions to be valid, they must reach the depositary by a date set by the depositary.
The depositary will try, as far as practical, subject to the laws of the State of Israel and of the Company’s articles of association or similar documents,
to vote or to have its agents vote the shares or other deposited securities as instructed by ADS holders. If the Company does not request the depositary to solicit
the Holder’s voting instructions, the Holder can still send voting instructions, and, in that case, the depositary may try to vote as the Holder instruct, but it is not
required to do so.
Except by instructing the depositary as described above, the Holder won’t be able to exercise voting rights unless the Holder surrender the Holder’s
ADSs and withdraw the shares. However, the Holder may not know about the meeting enough in advance to withdraw the shares. In any event, the depositary
will not exercise any discretion in voting deposited securities and it will only vote or attempt to vote as instructed.
The Company cannot assure the Holder that the Holder will receive the voting materials in time to ensure that the Holder can instruct the depositary to
vote the Holder’s shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying
out voting instructions. This means that the Holder may not be able to exercise the Holder’s right to vote and there may be nothing the Holder can do if the
Holder’s shares are not voted as the Holder requested.
In order to give the Holder a reasonable opportunity to instruct the Depositary as to the exercise of voting rights relating to Deposited Securities, if the
Company requests the Depositary to act, the Company agrees to give the Depositary notice of any such meeting and details concerning the matters to be voted
upon at least 30 days in advance of the meeting date.
Listing
The Company’s ADSs are listed on the Nasdaq Capital Market under the symbol “NNDM.”
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Form of
Indemnification Agreement
Exhibit 4.8
This Indemnification Agreement (this “Agreement”) is made as of ___________, 2016, by and between Nano Dimension Ltd., a company organized and
existing under the laws of Israel (the “Company”) and ____________ I.D. No / Passport No ____________ (“Indemnitee”).
WHEREAS, the Company desires to attract and retain qualified directors and officers and to provide them with protection against liability and expenses
incurred while acting in that capacity; and
WHEREAS, Indemnitee is director or officer of the Company; and
WHEREAS, in order to induce Indemnitee to serve as a director or officer of the Company, the Company agrees to indemnify Indemnitee upon certain
occurrences, all under the terms of this Agreement.
Now, therefore, the parties agree as follows:
1.
Indemnity. The Company hereby agrees, subject to the limitations set forth in this Agreement and to applicable law:
To indemnify Indemnitee to the greatest extent possible under applicable law against any liability or expense in respect of any acts or omissions of Indemnitee
in his capacity as a director or officer of the Company, as follows:
(i)
(ii)
(iii)
(iv)
a financial obligation imposed on Indemnitee in favor of another person by a court judgment, including a compromise judgment or an arbitrator’s
award approved by court;
reasonable litigation expenses, including attorneys’ fees, expended by Indemnitee or charged to him by a court, in a proceeding instituted against
him by the Company or on its behalf or by another person, or in a criminal charge from which he was acquitted or in any criminal proceeding of a
crime which does not require proof of mens rea (criminal intent) in which the Indemnitee is convicted, or due to an investigation or a proceeding
conducted against him by an authority authorized to conduct an investigation or a proceeding, pursuant to which no indictment was filed against
him and no monetary liability was imposed on him as an alternative to a criminal proceeding, or due to an investigation or a proceeding conducted
against him by an authority authorized to conduct an investigation or a proceeding, pursuant to which no indictment was filed against him but a
monetary liability was imposed on him as an alternative to a criminal proceeding, for a crime which does not require a finding of mens rea
(criminal intent) (collectively referred to hereinafter as a “Claim”);
a payment which Indemnitee is obligated to make to an injured party as set forth in Section 52(54)(a)(1)(a) of the Israeli Securities Law, 1968, as
amended (the “Securities Law”), if applicable, and expenses that Indemnitee incurs in connection with a proceeding under Chapters H’3, H’4 or
I’1 of the Securities Law, if applicable, including reasonable legal expenses, which term includes attorney fees; and
any other obligation or expense in respect of which it is permitted or will be permitted under the Companies Law, 5759-1999, to indemnify an
officer or director, subject to and in accordance with all applicable law.
The above indemnification will also apply to any action taken by the Indemnitee in his capacity as a director and/or officer of any other company controlled,
directly or indirectly, by the Company (a “Subsidiary”) or in his capacity as a director, officer or observer at board of directors’ meetings, of a company not
controlled by the Company but where his appointment as a director, officer or observer results from the Company’s holdings in such company (“Affiliate”).
2. General Limitations on Indemnity. If, when and to the extent that a final judicial determination is made, as to which all rights of appeal therefrom have
been exhausted or lapsed, the Indemnitee would not be permitted to be so indemnified as provided under this Agreement, the Company shall be entitled to
be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid. Indemnitee’s obligation to reimburse
the Company for any advance expenses or other sums paid hereunder shall be unsecured and no interest shall be charged thereon.
3. Limitations on Indemnity.
3.1. The Company undertakes to indemnify Indemnitee, with respect to Section 1(i) above, and in accordance with the terms of this Agreement up to a
total amount that will not exceed the lower amount of one of (a) 25% of the company’s equity, according to the recent financial statements of the
company as of the time of the indemnification payment. (b) US$1,000,000 (One Million United States Dollars)]. Under the circumstances of
indemnification of Indemnitee as set forth in this Agreement.
3.2. Indemnitee shall not be entitled to indemnification under Section 1, for financial obligations imposed arising from any of the following: (i) a
breach of the duty of fiduciary by Indemnitee, except, to the extent permitted by law, for a breach of the duty of fiduciary by the Indemnitee to the
Company, a Subsidiary or an Affiliate while acting in good faith and having reasonable cause to assume that such act would not prejudice the interests
of the Company, Subsidiary or Affiliate, as applicable; or (ii) a violation of the Indemnitee’s duty of care towards the Company, which was committed
intentionally or recklessly, except if it was done in negligence only; or (iii) an act committed with the intention to realize a personal unlawful profit; or
(iv) a fine or monetary penalty imposed on Indemnitee (excluding a fine or monetary penalty imposed pursuant to the conviction of a crime which
requires proof of mens rea (criminal intent)); or (v) a counterclaim made by the Company or in its name in connection with a claim against the
Company filed by Indemnitee, other than (a) by way of defense or by way of third party notice in connection with claim brought against the
Indemnitee, or (b) in specific cases in which the Company’s Board of Directors has approved the initiation or bringing of such suit by Indemnitee,
which approval shall not be unreasonably withheld.
3.3. The indemnification amount actually paid shall be limited to those amounts not covered by the Company’s directors and officers insurance policy
(the “D&O Policy”), such that Indemnitee will not be entitled to payment from the Company for amounts which Indemnitee has actually obtained
under the D&O Policy.
3.4. Subject to the provisions of this Section 3, the indemnification hereunder will, in each case, cover all sums of money that the Indemnitee will be
obligated to pay, in those circumstances for which indemnification is permitted under the law.
3.5. The Company will be entitled to reimbursement of amounts collected from a third party in connection with liabilities indemnified hereunder. Such
reimbursement shall not exceed the amount the Company has paid to the Indemnitee.
4. Limitation of Categories of Claims. The indemnification pursuant to Section 1(i) above, shall only relate to liabilities arising in connection with acts or
omissions of Indemnitee in respect of the following events and circumstances which are deemed by the Company’s Board of Directors to be foreseeable at
the date hereof:
4.1. The offering of securities by the Company and/or by a shareholder thereof to the public and/or to private investors or the offer by the Company to
purchase securities from the public and/or from private investors or other holders pursuant to a prospectus, agreements, notices, reports, tenders and/or
other proceedings;
2
4.2. Occurrences in connection with investments in or by the Company and/or Subsidiary and/or Affiliate in other corporations whether before and/or
after the investment is made, entering into the transaction, the execution, development and monitoring thereof, including actions taken by the
Indemnitee in the name of the Company and/or Subsidiary and/or Affiliate as a director, officer, employee and/or board observer of the corporation
which is the subject of the transaction and the like;
4.3. The sale, purchase and holding of negotiable securities or other investments for or in the name of the Company and/or Subsidiary and/or Affiliate;
4.4. Actions in connection with the merger of the Company and/or any Subsidiary and/or any Affiliate with or into another entity;
4.5. Actions in connection with the sale of the operations, assets and/or business, or part thereof, of the Company and/or Subsidiary and/or Affiliate;
4.6. Without derogating from the generality of the above, actions in connection with the purchase or sale of companies, legal entities or assets,
licensing or acquisition of rights in products, assets or technologies of other persons or legal entities, and the sale, licensing or grant of license in the
same to other persons or legal entities, and the division or consolidation thereof;
4.7. Actions taken in connection with labor relations and/or employment matters (including employment-related benefits) in the Company and/or
Subsidiary and/or Affiliate and trade relations of the Company and/or Subsidiary and/or Affiliate, including with employees, independent contractors,
customers, suppliers and various service providers;
4.8. Actions in connection with the developing, testing and manufacturing of products (including a third party’s products, solutions and technologies)
by the Company and/or Subsidiary and/or Affiliate or in connection with the distribution, sale, license or use of such products, solutions or
technologies, and management of projects whether of the Company and/or Subsidiary and/or affiliate and/or any third party;
4.9. Actions relating to the promotion, offering and/or support of the products, solutions and technologies in the fields of operation of the Company,
any of its Subsidiaries or Affiliates as shall exist from time to time.
4.10. Actions taken in connection with the intellectual property of the Company and/or Subsidiary and/or Affiliate and its protection, including the
registration or assertion of rights to intellectual property and the defense of claims related to intellectual property or any claim or demand made for
actual or alleged infringement, misappropriation, or misuse of any third party’s intellectual property rights by the Company, its Subsidiaries or
Affiliates, including without limitation confidential information, patents, copyrights, design rights, service marks, trade secrets, copyrights, and
misappropriation of ideas by the Company, its Subsidiaries or Affiliates;
4.11. Actions taken pursuant to or in accordance with the policies and procedures of the Company and/or Subsidiary and/or Affiliate, that have been
decided upon, whether such policies and procedures are published or not, and actions relating to the operations and management of the Company
and/or of any Subsidiaries and/or Affiliates.
4.12. Occurrences resulting from the Company’s and/or Subsidiary’s and/or Affiliate’s status as a public company, and/or from the fact that the
Company’s securities were offered to the public and/or are traded on a stock exchange, whether in the U.S. or elsewhere;
4.13. Any claim or demand made by any lenders or other creditors or for monies borrowed by, or other indebtedness of, the Company and\or
Subsidiary and/or any Affiliate.
3
4.14. Any claim or demand made by any third party suffering any personal injury or damage to business or personal property through any act or
omission attributed to the Company or its Subsidiaries or its Affiliates, or their respective employees, agents or other persons acting or allegedly acting
on their behalf.
4.15. Any claim or demand made by suppliers, contractors or other third parties transacting any form of business with the Company in the ordinary
course of their respective businesses, relating to the negotiations or performance of such transactions, representations or inducements provided in
connection thereto or otherwise.
4.16. Any claim or demand made in connection with any transaction not in the ordinary course of business of either the Company or the party making
such claim (including any transaction with directors or officers of the Company or any controlling shareholder of the Company).
4.17. Any claim or demand made directly or indirectly in connection with complete or partial failure, by the Company and\or Subsidiary and/or
Affiliate, or their respective directors, officers and employees, to pay, report, keep applicable records or otherwise, any federal, state, municipal or
foreign taxes or other mandatory payments of any nature whatsoever, including, without limitation, income, sales, use, transfer, excise, value added,
registration, severance, stamp, occupation, customs, duties, real property, personal property, capital stock, social security, unemployment, disability,
payroll or employee withholding or other withholding, including any interest, penalty or addition thereto, whether disputed or not.
4.18. Any actions or decisions relating to insurance matters and/or risk management of the Company.
4.19. The filing of a report and/or announcement required by the Companies Law and/or any securities law which is applicable or may be applicable to
the Company from time to time, including the U.S. Securities Laws, including the regulations pertaining to these laws, the Israeli Securities Law -
1968, and/or according to rules and/or regulations adopted by the NASDAQ or any other stock exchange and/or securities market and/or any law of
any other country pertaining to these issues and/or the failure to file such a report and/or announcement, and/or actions relating to tender offers of the
Company, including actions relating to delivery of opinions in relation thereto.
4.20. Any decision regarding a distribution, as defined in the Companies Law, including a distribution pursuant to a court order, and/or repurchase of
shares or returns of capital or loans of the Company.
4.21. Any actions in connection with the change in the Company’s structure and/or a reorganization of the Company, including any arrangement
between the Company and its shareholders and/or creditors according to the Companies Law, and/or any decision relating to these issues including, but
not limited to, a change in the Company’s capital, the establishment of subsidiaries and/or their liquidation or sale, and/or all allotments or
distributions.
4.22. Approval of corporate actions, including the approval of acts of the Company’s management, its guidance and its supervision.
4.23. Any claim or demand made in connection with any expression of opinion or saying made in good faith during the course of performance of
duties and in connection with the performance of duties, including during meetings of the board of directors or committees of the Company;
4.24. Any administrative, regulatory or judicial actions, orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations,
proceedings or notices of noncompliance or violation by any governmental entity (in Israel or abroad), including the Office of the Chief Scientist or the
Investment Center of the Israeli Ministry of Industry and Commerce, the Israeli Antitrust Authority or the Israel Securities Authority, or other person
alleging the failure to comply with any statute, law, ordinance, rule, regulation, order or decree of any governmental entity applicable to the Company
and/or Subsidiary, or any of their respective businesses or operations.
4
4.25. Any claim or demand made by purchasers, holders, lessors or other users of products of the Company, for damages, losses or personal injuries
related to such products.
4.26. Any claim or demand made in connection with any preparation or formulation of work plans, including pricing, marketing, distribution,
instructions to employees, customers and suppliers, and collaboration with competitors.
4.27. Any acts in regard of invasion of privacy, participation and/or non-participation at Board meetings and/or voting and/or abstention from voting at
Board meetings, approval of corporate actions, claims of failure to exercise business judgment.
4.28. Claims of failure to exercise business judgment and a reasonable level of proficiency, expertise and care in regard of the Company’s business.
4.29. Violations of laws requiring the Company to obtain regulatory and governmental licenses, permits and authorizations in any jurisdiction.
4.30. Decisions and/or actions relating to environmental compliance, including pollution, contamination and hazardous materials.
4.31. Granting of liens on Company assets and granting guarantees on behalf of the Company.
4.32. Claims in connection with publishing or providing any information, including any filings with governmental authorities in the U.S., Israel and
elsewhere, on behalf of the Company, in the circumstances required under applicable laws.
4.33. Claims in connection with the preparation, approval or providing of any annual or quarterly financial statements, profit and loss statements,
balance sheets and similar financial information or forecasts.
4.34. Any of the forgoing actions or decisions relating or otherwise applicable to any Subsidiary or Affiliate of the Company.
4.35. Any claim or demand, not covered by any of the categories of events described above, which, pursuant to any applicable law, a director or officer
of the Company may be held liable to any government or agency thereof, or any person or entity, in connection with actions taken by such director or
officer in such capacity.
5. Expenses; Indemnification Procedure. The Company shall advance Indemnitee all expenses incurred by Indemnitee in connection with a Claim on the date
on which such amounts are first payable (“Time of Indebtedness”), and with respect to items mentioned in Section 1(ii) above, even prior to a court
decision, but has no duty to advance payments in less than twenty (20) days (but in any event not later than thirty (30) days) following delivery of a written
request therefor by Indemnitee to the Company. Advances given to cover legal expenses in criminal proceedings will be repaid by Indemnitee to the
Company, if such proceedings are concluded in such manner that would not have entitled the Indemnitee to indemnification under Section 1 above.
Additionally, the Company shall make available to Indemnitee any securities and/or guarantees which Indemnitee will be required to provide in the
framework of any action or proceeding and/or according to any interim decision, including arbitration proceedings, and including with respect to the
exchange of any attachments imposed on Indemnitee’s assets.
5
6. Notification and Defense of Claim. If any Claim is brought against Indemnitee in respect of which indemnity may be sought under this Agreement:
6.1. The Indemnitee shall promptly notify the Company of any legal proceedings initiated and of all possible or threatened legal proceedings without
delay following first becoming aware thereof, and the Indemnitee shall deliver to the Company, or to such person as it shall advise, without delay all
documents received in connection with these proceedings. Similarly, the Indemnitee must advise the Company on an ongoing and current basis
concerning all events which the Indemnitee suspects may give rise to the initiation of legal proceedings against the Indemnitee. Notice to the Company
shall be directed to the Chief Executive Officer with a copy to the General Counsel and the Chief Financial Officer of the Company as per Section 19
hereof, or if the Indemnitee is then the Chief Executive Officer of the Company, such notice shall be directed to the Chairman of the Board and the
other addressees.
6.2. The Company will be entitled to participate therein at its own expense or to assume the defense thereof and to employ counsel reasonably
satisfactory to Indemnitee. Indemnitee shall have the right to employ its own counsel in connection with any such Claim and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the expense of Indemnitee unless: (i) the Company shall not have assumed the
defense of the Claim, or (ii) the named parties to any such action (including any impleaded parties) include both Indemnitee and the Company, and
Indemnitee shall have reasonably concluded that joint representation is inappropriate under applicable standards of professional conduct due to a
conflict of interest between Indemnitee and the Company, in either of which events reasonable fees and expenses of such counsel to Indemnitee shall
be borne by the Company. However, in no event will the Company be obligated to pay the fees or expenses of more than one firm of attorneys
representing Indemnitee in connection with any one Claim or separate but substantially similar or related Claims in the same jurisdiction arising out of
the same general allegations or circumstances. For the avoidance of doubt, in the case of criminal proceedings the Company and/or the attorneys as
aforesaid will not have the right to plead guilty in Indemnitee’s name or to agree to a plea-bargain in his name without his prior written consent.
Furthermore, in a civil proceeding (whether before a court or as a part of a compromise arrangement), the Company and/or its attorneys will not have
the right to admit to any occurrences that are not indemnifiable pursuant to this Agreement and/or pursuant to law, without Indemnitee’s prior written
consent. However, the aforesaid will not prevent the Company and/or its attorneys as aforesaid, with the approval of the Company, to come to a
financial arrangement with a plaintiff in a civil proceeding without Indemnitee’s consent so long as such arrangement will not be an admittance of an
occurrence not fully indemnifiable pursuant to this Agreement and/or pursuant to law and further provided that any such settlement or arrangement
does not impose on Indemnitee any liability or limitation.
6.3. The Company shall not be liable to indemnify Indemnitee for any amounts paid in settlement of any Claim effected without the Company’s written
consent. Indemnitee shall give the Company such information and cooperation as may be required.
6.4. The Indemnitee will fully cooperate with the Company and/or any attorney as aforesaid in every reasonable way as may be required within the
context of their conduct of such legal proceedings, including but not limited to the execution of power(s) of attorney and other documents, provided
that the Company shall cover all costs incidental thereto such that the Indemnitee will not be required to pay the same or to finance the same himself.
7. Subrogation. In the event of payment under this Agreement from Company to Indemnitee, the Company shall be subrogated to the extent of such payment
to all of the rights of recovery of Indemnitee, who shall execute all documents reasonably required and shall do everything that may be reasonably
necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.
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8. Primacy of Indemnification. The Company hereby acknowledges that Indemnitee has or may have certain rights to indemnification, advancement of
expenses and/or insurance provided by the Indemnitee or by the party or parties who appointed the Indemnitee and certain of such party’s affiliates
(collectively, the “Appointing Party”). The Company hereby agrees, with respect to Indemnitee’s right to indemnification pursuant hereto: (i) that the
Company is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary and any obligation of the Appointing Party or its (or the
Indemnitee’s) insurer to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary), (ii)
that, subject to the provisions hereof, the Company shall be required to advance the full amount of expenses incurred by Indemnitee and indemnifiable
hereunder and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted
and as required by the Company’s Articles Association (or any agreement between the Company and Indemnitee) all subject to the provisions hereof,
without regard to any rights Indemnitee may have against the Appointing Party or its (or the Indemnitee’s) insurer, and, (iii) that the Company irrevocably
waives, relinquishes and releases the Appointing Party or its (or the Indemnitee’s) insurer from any and all claims against the Appointing Party or its (or the
Indemnitee’s) insurer for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement
or payment by the Appointing Party or its (or the Indemnitee’s) insurer on behalf of an Indemnitee with respect to any claim for which Indemnitee has
sought indemnification from the Company shall affect the foregoing and the Appointing Party or its (or the Indemnitee’s) insurer shall have a right of
contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company. The
Company and the Indemnitee agree that the Appointing Party or its (or the Indemnitee’s) insurer are express third party beneficiaries of the terms hereof.
9. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the
expenses actually or reasonably incurred by Indemnitee in connection with a Claim or Claims, but not, however, for the total amount thereof, the Company
shall nevertheless indemnify Indemnitee for the portion of such expenses to which Indemnitee is entitled.
10. Other Indemnification. Except to the extent provided in Section 8 above, the Company will not indemnify Indemnitee for any liability with respect to
which Indemnitee has received payment by virtue of an insurance policy or other indemnification agreement, other than for amounts, which are in excess of
the amount paid to Indemnitee pursuant to such policy or agreement and other than a deductible payable by the Indemnitee under an insurance policy or
indemnification agreement.
11. Collection from a Third Party. The Company will be entitled to any amount collected from a third party in connection with a Claim or Claims actually
indemnified hereunder by the Company.
12. Non-Exclusivity. The rights of the Indemnitee hereunder shall not be deemed exclusive of any other rights he may have under the Company’s Articles of
Association or applicable law or otherwise, and to the extent that during the indemnification period hereunder the rights of the then existing directors and
officers are more favorable to such directors or officers than the rights currently provided thereunder or under this Agreement to Indemnitee, Indemnitee
shall be entitled to the full benefits of such more favorable rights.
13. Exemption. The Company hereby exempts Indemnitee, to the fullest extent permitted by law, from any liability, or any part of liability, for damages caused
as a result of a breach of his duty of care to the Company, provided that in no event shall he be exempt with respect to any actions listed in Section 3.2
above.
14. Post Factum Indemnification. It is hereby clarified that nothing in here shall limit the Company’s right to indemnify the Indemnitee post factum, for any
and all amounts or events, without limitation.
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15. Severability. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof
shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other
provisions hereof. If such invalid or unenforceable undertaking may be modified or amended so as to be valid and enforceable as a matter of law, such
undertaking will be deemed to have been modified or amended, and any competent court or arbitrator are hereby authorized to modify or amend such
undertaking, so as to be valid and enforceable to the maximum extent permitted by law.
16. Termination of Services. For the avoidance of doubt, the Company will indemnify Indemnitee even if at the relevant Time of Indebtedness Indemnitee is no
longer a director or officer of the Company or of a Subsidiary or a director, officer and/or board observer of an Affiliate, as applicable, provided, that the
obligations are in respect of actions taken by the Indemnitee while serving as a director, officer and/or board observer, as aforesaid, and in such capacity.
17. Attorneys’ Fees. In the event of any litigation or other action or proceeding to enforce or interpret this Agreement, the prevailing party as determined by the
court shall be entitled to an award of its reasonable attorneys’ fees and other costs, in addition to such relief as may be awarded by a court or other tribunal.
18. Further Assurances. The parties will do, execute and deliver, or will cause to be done, executed and delivered, all such further acts, documents and things as
may be reasonably required for the purpose of giving effect to this Agreement and the transactions contemplated hereby. Notwithstanding anything to the
contrary, if for the validation of any of the undertakings in this Agreement any act, resolution, approval or other procedure is required, the Company
undertakes to cause them to be done or adopted in a manner which will enable the Company to fulfill all its undertakings as aforesaid.
19. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered
by hand or by fax or other means of electronic communication and receipted for by the party addressee, on the date of such receipt, or (ii) if mailed by
certified or registered mail with postage prepaid, on the third business day after the date postmarked.
20. Entire Agreement; Amendments. This Agreement constitutes the entire agreement between the parties with respect to its subject matter, and supersedes and
cancels all prior agreements, proposals, representations and communications between the parties regarding the subject matter hereof. No amendment,
modification, termination or cancellation of this Agreement shall be effective unless it is in writing and signed by the parties hereto.
21. Binding Effect; No Assignment. This Agreement shall be binding upon Indemnitee and the Company, their successors and assignees, and shall inure to the
benefit of Indemnitee, his heirs, personal representatives and assignees and to the benefit of the Company, its successors and assignees. Indemnitee shall
not assign or otherwise transfer his rights under this Agreement and any attempt to assign or transfer such rights shall be deemed null and void.
22. Governing Law; Jurisdiction. This Agreement shall be interpreted and enforced in accordance with the laws of the State of Israel, without regard to their
rules of conflict of laws, and any dispute arising from or in connection with this Agreement is hereby submitted to the sole and exclusive jurisdiction of the
competent courts in Tel Aviv, Israel.
23. Construction. The undertakings of the parties pursuant to this Agreement shall be widely construed and in a manner designated to give them effect, to the
fullest extent permissible under law. In the event of any contradiction between the provisions of this Agreement and any provision of law that is not
dispositive or which cannot be amended, the provision of law shall prevail but the same shall not impair or derogate from the validity of the other
provisions hereunder.
24. Counterpart Signatures. This Agreement may be executed in counterparts, both of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that two
parties need not sign the same counterpart. In the event that any signature is delivered by facsimile or PDF transmission, such signature shall create a valid
and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile
or PDF signature page were an original thereof.
8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
Nano Dimension Ltd.
Name: _________________
_________________
Title:
_________________
Company Name Jurisdiction of Incorporation
Essemtec AG
Jurisdiction of Incorporation
Switzerland
LIST OF SUBSIDIARIES
Exhibit 8.1
Formatec Holding B.V.
Global Inkjet Systems Ltd.
Jetted Additively Manufactured Electronics Sources GmbH
Nano Dimension Australia Pty Ltd.
Nano Dimension GmbH
Nano Dimension (HK) Limited
Nano Dimension Swiss GmbH
Nano Dimension Technologies Ltd.
Nano Dimension USA Inc.
Admatec Europe B.V.
Formatec Technical Ceramics B.V.
Essemtec USA, LLC
Essemtec Deutschland GmbH
Essemtec France SAS
Nano Dimension NY Ltd.
Nano Dimension Trading (Shenzhen) Ltd.
Netherlands
United Kingdom
Germany
Australia
Germany
Hong Kong
Switzerland
Israel
Delaware
Netherlands
Netherlands
Delaware
Germany
France
New York
China
CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a) or 15d-14(a)
Exhibit 12.1
I, Yoav Stern, certify that:
1.
I have reviewed this annual report on Form 20–F of Nano Dimension Ltd.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
Company and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual
report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the Company’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over
financial reporting.
Date: March 21, 2024
/s/ Yoav Stern
Yoav Stern
Chief Executive Officer
CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a) or 15d-14(a)
Exhibit 12.2
I, Tomer Pinchas, certify that:
1.
I have reviewed this annual report on Form 20–F of Nano Dimension Ltd.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
Company and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual
report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the Company’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over
financial reporting.
Date: March 21, 2024
/s/ Tomer Pinchas
Tomer Pinchas
Chief Financial & Operating Officer
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350
Exhibit 13.1
In connection with the filing of the Annual Report on Form 20-F for the period ended December 31, 2023 (the “Report”) by Nano Dimension Ltd. (the
“Company”), the undersigned, as the Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, to my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 21, 2024
/s/ Yoav Stern
Yoav Stern
Chief Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350
Exhibit 13.2
In connection with the filing of the Annual Report on Form 20-F for the period ended December 31, 2023 (the “Report”) by Nano Dimension Ltd. (the
“Company”), the undersigned, as Chief Financial and Operating Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, to my
knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 21, 2024
/s/ Tomer Pinchas
Tomer Pinchas
Chief Financial Officer & Chief Operating Officer
Consent of Independent Registered Public Accounting Firm
Exhibit 15.1
We consent to the incorporation by reference in the registration statements on Form F-3 (Nos. 333-255960, 333-233905 and 333-252848) and Form S-8 (Nos.
333-214520 and 333-248419 and 333-269436) of our reports dated March 20, 2024, with respect to the consolidated financial statements of Nano Dimension
Ltd. and the effectiveness of internal control over financial reporting.
/s/ Somekh Chaikin
Somekh Chaikin
Member Firm of KPMG International
Tel Aviv, Israel
March 21, 2024
NANO DIMENSION LTD. (the “Company”)
CLAWBACK POLICY
Effective as of November 27, 2023
Exhibit 97.1
Background
The Board of Directors of the Company (the “Board”) believes that it is in the best interests of the Company and its shareholders to create and maintain a
culture that emphasizes integrity and accountability and that reinforces the Company’s pay-for-performance compensation philosophy. The Compensation
Committee of the Board (the “Compensation Committee”) and the Board have therefore adopted this policy, which provides for the recoupment (or clawback)
of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under
the federal securities laws of the United States (the “Policy”). This Policy is designed to comply with Section 10D of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), Rule 10D-1 promulgated under the Exchange Act (“Rule 10D-1”) and the listing standards of the Nasdaq Stock Market
(“Nasdaq”) under Nasdaq Listing Rule 5608. In addition, this Policy is designed to comply with the requirements under the Israeli Companies Law 5759-1999
(the “Companies Law”) with respect to clawback provisions to be included in the Company’s Compensation Policy, as may be amended from time to time.
Administration
This Policy shall be administered by the Compensation Committee. Any determinations made by the Compensation Committee shall be final and binding on all
affected individuals. Subject to any limitation under applicable law, the Compensation Committee may authorize and empower any officer or employee of the
Company to take any and all actions necessary or appropriate to carry out the purpose and intent of this Policy (the “Authorized Officers”) (other than with
respect to any recovery under this Policy involving such officer or employee).
Covered Executives
This Policy applies to the Company’s current and former executive officers, as determined by the Board in accordance with Section 10D of the Exchange Act
and the listing standards of the Nasdaq (“Covered Executives”).
Recoupment; Accounting Restatement
In the event the Company is required to prepare an accounting restatement of its financial statements due to the Company’s material noncompliance with any
financial reporting requirement under the securities laws, the Compensation Committee will require prompt reimbursement or forfeiture of any excess Incentive
Compensation (as defined below) received by any Covered Executive during the three completed fiscal years immediately preceding the date on which the
Company is required to prepare an accounting restatement. For the sake of clarity, recoupment is required in the event of any restatement that either: (a) corrects
an error in previously issued financial statements that is material to the previously issued financial statements; or (b) corrects an error not material to previously
issued financial statements, but that would result in a material misstatement if (i) the error was left uncorrected in the then current period; or (ii) the error
correction was recognized in the then current period. The Company’s obligation to recover erroneously awarded compensation is not dependent on if or when
the restated financial statements are filed. For purposes of determining the relevant recovery period, the date that the Company is required to prepare an
accounting restatement as described above is the earlier to occur of: (A) the date the Board, a committee of the Board, the Authorized Officers, or officers of the
Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to
prepare an accounting restatement as described above; or (B) the date a court, regulator, or other legally authorized body directs the Company to prepare an
accounting restatement as described above. In accordance with Nasdaq Rule 5608(e), this Policy is applicable to Incentive Compensation (as described below)
received on or after October 2, 2023.
Incentive Compensation
For purposes of this Policy, “Incentive Compensation” means any of the following, provided that such compensation is granted, earned or vested based wholly
or in part on the attainment of a financial reporting measure affected by the restated financial statements:
● Annual bonuses and other short- and long-term cash incentives.
● Share options.
● Share appreciation rights.
● Restricted shares.
● Restricted share units.
● Performance shares.
● Performance units.
Financial reporting measures are measures that are determined and presented in accordance with the accounting principles used in preparing the Company’s
financial statements, and any measures that are derived wholly or in part from such measures. Share price and total shareholder return are also financial
reporting measures. A financial reporting measure need not be presented within the financial statements or included in a filing with the Securities and Exchange
Commission. The Company’s financial reporting measures may include, but are not limited to, the following:
● Company stock price.
● Total shareholder return.
● Revenues.
● Net income.
● Earnings before interest, taxes, depreciation and amortization (EBITDA).
● Funds from operations.
● Liquidity measures such as working capital, operating cash flow or Free Cash Flow.
● Return measures such as return on invested capital or return on assets.
● Earnings measures such as earnings per share.
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This Policy applies to all Incentive Compensation received by a Covered Executive:
● After beginning service as an executive officer;
● Who served as an executive officer at any time during the performance period for that Incentive Compensation;
● While the Company has a class of securities listed on a national securities exchange or a national securities association; and
● During the three completed fiscal years immediately preceding the date that the Company is required to prepare an accounting restatement as described
in this Policy. In addition to these last three completed fiscal years, this Policy applies to any transition period (that results from a change in the
Company’s fiscal year) within or immediately following those three completed fiscal years. However, a transition period between the last day of the
Company’s previous fiscal year end and the first day of its new fiscal year that comprises a period of nine to 12 months would be deemed a completed
fiscal year.
Incentive Compensation is deemed received in the Company’s fiscal period during which the financial reporting measure specified in the Incentive
Compensation award is attained, even if the payment or grant of the Incentive Compensation occurs after the end of that period.
Excess Incentive Compensation: Amount Subject to Recovery
The amount to be recovered will be the excess of the Incentive Compensation paid to the Covered Executive based on the erroneous data over the Incentive
Compensation that would have been paid to the Covered Executive had it been based on the restated results, as determined by the Compensation Committee,
and without regard to any taxes paid by or withheld from the Covered Executive. If the Compensation Committee cannot determine the amount of excess
Incentive Compensation received by the Covered Executive directly from the information in the accounting restatement, then it will make its determination
based on a reasonable estimate of the effect of the accounting restatement. For Incentive Compensation based on share price or total shareholder return, where
the amount of erroneously awarded compensation is not subject to mathematical recalculation directly from the information in an accounting restatement, the
amount will be based on a reasonable estimate of the effect of the accounting restatement on the share price or total shareholder return upon which the Incentive
Compensation was received. In such case, the Company shall maintain documentation of the determination of that reasonable estimate and provide such
documentation to Nasdaq.
Method of Recoupment
The Compensation Committee will determine, in its sole discretion, the method for recouping Incentive Compensation hereunder which may include, without
limitation:
● Requiring reimbursement of cash Incentive Compensation previously paid;
● Seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer, or other disposition of any equity-based awards;
● Offsetting the recouped amount from any compensation otherwise owed by the Company to the Covered Executive in accordance with applicable law;
● Cancelling outstanding vested or unvested equity awards; and/or
● Taking any other remedial and recovery action permitted by law, as determined by the Compensation Committee.
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No Indemnification
The Company shall not indemnify any Covered Executives against the loss of any Incentive Compensation recovered under this Policy or from any
consequence arising therefrom.
Interpretation
The Compensation Committee is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate or advisable for the
administration of this Policy. It is intended that this Policy be interpreted in a manner that is consistent with the requirements of Section 10D of the Exchange
Act, Rule 10D-1 and any applicable rules or standards adopted by the Securities and Exchange Commission or Nasdaq and the Companies Law.
Effective Date
This Policy shall be effective as of the date it is adopted by the Board (the “Effective Date”) and, in accordance with Nasdaq Rule 5608(e), shall apply to
Incentive Compensation that is received by Covered Executives on or after October 2, 2023.
Amendment; Termination
The Board may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary to reflect regulations adopted by the
Securities and Exchange Commission under Section 10D of the Exchange Act and to comply with any rules or standards adopted by Nasdaq. The Board may
terminate this Policy at any time.
Other Recoupment Rights
The Board intends that this Policy will be applied to the fullest extent of applicable law. The Board and/or Compensation Committee may require that any
employment agreement, equity award agreement, or similar agreement entered into or amended on or after the Effective Date shall, as a condition to the grant
of any benefit thereunder, require a Covered Executive to agree to abide by the terms of this Policy. Any right of recoupment under this Policy is in addition to,
and not in lieu of: (a) any other remedies or rights of recoupment that may be available to the Company pursuant to the terms of any similar policy in any
employment agreement, equity award agreement or similar agreement and any other legal remedies available to the Company, including termination of
employment or institution of legal proceedings; and (b) any statutory recoupment requirement, including Section 304 of the Sarbanes-Oxley Act of 2022. For
the avoidance of doubt, any amounts paid to the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2022 shall be considered (and may be credited)
in determining any amounts recovered under this Policy.
Impracticability
The Compensation Committee shall recover any excess Incentive Compensation in accordance with this Policy unless such recovery would be impracticable, as
determined in accordance with Rule 10D-1(b)(1)(iv) under the Exchange Act and the listing standards of Nasdaq. In order for the Company to determine that
recovery would be impracticable, the Company’s Compensation Committee must conclude the following:
a) The direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recovered after making a reasonable attempt to
recover such Incentive Compensation. Note that the attempt(s) to recover must be documented by the Company and such documentation provided to
Nasdaq;
b) Recovery would violate home country law where that law was adopted prior to November 28, 2022. Note that the Company must obtain a legal
opinion of home country counsel that such recovery would result in a violation of local law and provide such opinion to Nasdaq; or
c) Recovery would likely cause an otherwise tax-qualified retirement plan under which benefits are broadly available to Company employees to fail to
meet the requirements for qualified pension, profit-sharing and stock bonus plans under Section 401(a)(13) of the U.S. Internal Revenue Code or the
minimum vesting standards under Section 411(a) of the U.S. Internal Revenue Code.
Successors
This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors, administrators or other legal
representatives.
Exhibit Filing
A copy of this Policy shall be filed as an exhibit to the Company’s annual report on Form 20-F.
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ATTESTATION AND ACKNOWLEDGEMENT OF CLAWBACK POLICY FOR NANO
DIMENSION LTD. (the “Company”)
By my signature below, I acknowledge and agree that:
● I have received and read the attached Clawback Policy (this “Policy”) of the Company.
● I hereby agree to abide by all of the terms of the Policy both during and after my employment with the Company, including, without limitation, by
promptly repaying or returning any incorrectly awarded Incentive Compensation to the Company as determined in accordance with the Policy.
● I hereby waive any claim against the Company, its Authorized Officers and the Board in connection with the implementation of the Policy.
Signature:
Printed Name:
Date:
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