NOTE 9:-

COMMITMENTS AND CONTINGENT LIABILITIES

 

a.

The Company was engaged in research and development programs with the National Technological Innovation Authority, or the “Authority” (formerly operating as Office of the Chief Scientist of the Ministry of Economy of the State of Israel, or the OCS). The Company is committed to pay royalties to the Authority at the rate of 3.5% of sales of products resulting from research and development partially financed by the Authority. The amount shall not exceed the grant amount received, linked to the dollar, including accrued interest at the LIBOR rate. The obligation to pay these royalties is contingent on actual sales of the products and in the absence of such sales, no payment is required.

 

No grants were received during the three (3) years ended December 31, 2017. During 2017, 2016 and 2015, the Company paid royalties to the Authority in the amount $305, $2,109 and $1,621, respectively. 

As of December 31, 2017, the Company and Nano Size received from the Authority grants in the amount of $1,009,506 (including interest). The Company’s total contingent liability (including interest) with respect to royalty-bearing participation received, net of royalties paid, amounted to $1,359,216 as of December 31, 2017.

 

Up to December 31, 2017 our new subsidiary, Digiflex, received grants for research and development efforts from the Authority in an aggregate amount of approximately $2.2 million, out of which an amount of approximately $0.5 million was repaid by Digiflex and Jet CU and approximately $1.0 million was repaid to the Authority by Jet CU due to a spinoff Jet CU conducted which was authorized by the Authority and resulted in such payment. The contingent remaining liability was reduced to approximately $0.7 million.

 

b.

In September 2009, the Company entered into a License Agreement with Ramot - Tel Aviv University (“Ramot”) for a joint research program. The program was approved by the Magneton committee of the Authority. The Magneton program supports cooperative research programs between industry and academia and encourages the transfer of technology from academic institutions to commercial firms. Under the terms of the Magneton program, the Company received from the Authority an aggregate amount of NIS 1,467,683 ($423,329 based on the exchange rate of $1.00 / NIS 3.467 in effect as of December 31, 2017), and no royalties are payable to the Authority with respect to this program. Pursuant to the terms of the License Agreement, the Company was required to fund the research and development of the technology subject to such agreement during the research period (two years starting September 2009) in a total amount of NIS 1,077,000 ($310,643 based on the exchange rate of $1.00 / NIS 3.467 in effect as of December 31, 2017). In addition, the Company issued to Ramot warrants to purchase 117,209 ordinary shares. The warrants are exercisable until the occurrence of an exit event, as defined in the agreement, at an exercise price of NIS 0.01 per share.

 

In return, the Company was required to pay to Tel Aviv University royalties of between 3.4% and 3.9% on all net sales of any product, component, device or material that is used in the preparation of coated substrates meeting certain specifications (“Licensed Film”) and services resulting from the license; and royalties of between 2.4% and 3.0% on all net sales of Licensed Film products and services, and a sublicense fee at a rate of 25% of all sublicense fees the Company receives with respect to the intellectual property developed under such agreement. The royalties and sublicense fees may be creditable against the annual license fee due to Ramot in such calendar year and the following calendar year, in the amount of $20,000 in the three years that follow the research period, $50,000 for the fourth, fifth and sixth years and $75,000 from the seventh year. License fees in the amount of $0, $0 and $20,000 were paid in 2017, 2016 and 2015, respectively. As of December 31, 2017, revenues related to the license agreement had not yet started.

 

On January 4, 2016, Ramot provided the Company with a notice of termination of the License Agreement due to failure to meet the development milestones. The termination of the agreement was effective on January 4, 2016. No fees were due with respect to 2016.

 

c.

On December 15, 2011, the Company signed a research and development agreement with the Israeli Ministry of National Infrastructures, Energy and Water Resources. Pursuant to the agreement, the ministry will fund up to 62.5% of the Company’s expenses related to the approved program up to a maximum amount of NIS 625,000 ($180,271 based on the exchange rate of $1.00 / NIS 3.467 in effect as of December 31, 2017), in exchange for the Company’s agreement to pay royalties of 5% of any revenues generated from the intellectual property generated under the program. The period of the program was 18 months starting January 1, 2012.

 

No grants were received during the three (3) years ended December 31, 2017. During the years ended December 31, 2017 and 2016, the Company accrued royalties in the amount of $148 and $281, respectively.

 

As of December 31, 2017, the aggregate contingent liability to the Israeli Ministry of National Infrastructures, Energy and Water Resources amounted to $178,559.

 

d.

In October 2010, the Company entered into a Convertible Bridge Financing Agreement with Israel Electric Corporation (“IEC”) and, as part of the agreement, the Company committed to pay IEC royalties equal to 2% of the total net sales of the Company’s products and service revenues from the product developed and manufactured through this agreement, up to a cap of NIS 8,000,000 ($2,307,470 based on the exchange rate of $1.00 / NIS 3.467 in effect as of December 31, 2017).

 

During the years ended December 31, 2017 and 2016, the Company accrued royalties in the amount of $1,558 and $3,577, respectively.

 

e.

In connection with previously made acquisition of Nano Size, the Company is obligated to pay 3% from future sales and 10% of sublicense fees derived from Nano Size’s intellectual property, until the aggregate consideration amounts to $1,400,000. The consideration included a minimum consideration of $60,000 which was paid during 2011, and will be off set against future royalty payments which will be payable by the Company from sales of products and services.

 

f.

On March 11, 2013, the Company entered into a Joint Venture Agreement for the establishment of a joint venture in China. The closing conditions in the Joint Venture Agreement have not been met, and the parties resolved to dissolve the joint venture. The Company received from one of the parties to the Joint Venture Agreement, a payment demand for reimbursement of expenses. The Company disputes the claim but has offered to settle the claim, and therefore recorded a provision of $40,000 which represent management’s assessment for such settlement.

 

g.

In September 2012, the Company entered into a Know-How License Agreement with Fraunhofer Institute for Ceramic Technologies and Systems IKTS (“IKTS”), pursuant to which the Company purchases from IKTS certain additives. The Company has the right to receive the production file and knowhow to its chosen manufacturer, in consideration for payment to IKTS of royalties of €25 ($30 based on the exchange rate of $1.00 / € 0.83 in effect as of December 31, 2017) per kilogram of the ingredients not manufactured by IKTS. In addition, as of December 31, 2017, the Company is obligated to pay IKTS a minimum annual royalty amount deductible against royalties.

 

During the year ended December 31, 2017, 2016 and 2015, the Company recorded royalty expenses in the amount of $2,396, $2,202 and $2,177, respectively.

 

h.

In May 2014, the Company entered into an agreement with XaarJet Limited, or Xaar, a producer of printer heads. Once the first ink (Silver Nano-Particle Ink) is certified by Xaar, the Company will be required to pay Xaar a fee for all certified inks sold for use with Xaar print heads as follows: 2% of the certified ink price until the cumulative value of the fees received by Xaar exceeds £50,000 ($67,567 based on the exchange rate of $1.00 / £ 0.74 in effect as of December 31, 2017), and thereafter, 1% of the certified ink price. Once the cumulative value of the fees received by Xaar with respect to all products exceeds £1,000,000 ($1,351,351 based on the exchange rate of $1.00 / £ 0.74 in effect as of December 31, 2017), the Company and Xaar have agreed to review the percentage payable in the light of the prevailing business conditions. As of December 31, 2017, no such sales commenced.

 

i.

The first development consortium, DIMAP, was founded in October 2015 to develop novel ink materials and processes for 3D polyjet printing. The Company’s main partners in this project are Stratasys (Israel), Profactor (Austria), Borealis (Austria) and Phillips (Netherlands). The Company have been granted a budget from DIMAP of €259,600 (approximately $312,771 based on the exchange rate of $1.00 / 0.83 in effect as of December 31, 2017) to develop these ink materials and processes. The grants received up to December 31, 2017 aggregated to €220,656 (approximately $265,851 based on the exchange rate of $1.00 / 0.83 in effect as of December 31, 2017). This project is expected to be completed in late 2018.

 

j.

Our other development consortium, HIPERLAM, which started in November 2016, is aiming to develop novel ink materials and processes for LIFT printing technology. The Company’s main partners in this project are Orbotech (Israel), TNO (Netherlands) and Oxford Lasers Ltd. (U.K.). the Company have been granted a budget by HIPERLAM of €260,713 (approximately $ 329,452 based on the exchange rate of $1.00 / € 0.83 in effect as of December 31, 2017). The Company received the entire grant up to December 31, 2017. This project is expected to be completed in late 2019.

 

k.

A Eureka project has been approved for Digiflex – SINTERINK. The budget approved was NIS 2,019,291 ($582,432 based on the exchange rate of $1.00 / NIS 3.467 in effect as of December 31, 2017) - 40% grant, twelve (12) months. The goal of the project is to develop the Digiflex printer for conductive printing (laser and NIR), and optimized inks for laser sintering. The project is with other partners in the field of laser technologies, namely, Forth, Eulambia and Vector, all based in Greece. No grants received as of December 31, 2017 or the date of this report.

 

	l.	The Manunet project has been approved for the Company – DIGIMAN. The budget approved was NIS 1,052,217 ($303,495 based on the exchange rate of $1.00 / NIS 3.467 in effect as of December 31, 2017) - 60% grant, twelve 12 months. The goal of the project is to develop digitally printed sensors. The project is expected to be performed with certain partners (but we are waiting for approval by the German grant entity to start), namely, Chemnitz University (Germany), National Research Nuclear University (Russia) , MEPHI (Russia), IKTS (Germany), VIA (Germany) and CPC (Israel). No grants received as of December 31, 2017 or the date of this report.
	m.	From time to time, the Company is party to other various legal proceedings, claims and litigation that arise in the normal course of business. It is the opinion of management that the ultimate outcome of these matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

 

n.

The Company currently lease, through Nano Size, approximately 5,300 square feet of space in Migdal Ha’Emek, Israel for its principal offices and manufacturing facilities at a monthly cost of approximately NIS 10,030 ($2,893 based on the exchange rate of $1.00 / NIS 3.467 in effect as of December 31, 2017). The lease has been renewed and expires on June 30, 2019.   Additionally, Digiflex currently lease approximately 2,900 square feet of space at 6 Yad Haruzim, Kfar Saba, Israel for its principal office and laboratory at a monthly cost of approximately NIS 12,500 ($3,605 based on the exchange rate of $1.00 / NIS 3.467 in effect as of December 31, 2017). The lease agreement expires on January 31, 2021.

 

As of December 31, 2017, the future minimum aggregate office space commitment under non-cancelable agreements are as follows:

 

	As of ended December 31,		Office space
	2018		$	77,981
	2019			60,623
	2020			43,265
	2021			3,605
			$	185,474