| COMMITMENTS AND CONTINGENT LIABILITIES |
| NOTE 9:- |
COMMITMENTS AND CONTINGENT LIABILITIES |
| |
a. |
Royalties commitments: |
| | 1. | The Company was engaged in research and development programs with NATI. The Company is committed to pay royalties to NATI at the rate of 3.0% of sales of products resulting from research and development partially financed by NATI. 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. |
During 2021, 2020 and 2019, the Company
paid royalties to NATI in the amount of $0, $10,067 and $2,091, respectively.
The total grants received by the Company
and Nano Size as of December 31, 2021 aggregated to $1,445,622. The Company’s total contingent liability (including interest) as
of December 31, 2021, with respect to royalty-bearing participation received, net of royalties paid, amounted to $1,988,119.
As of December 31, 2021 and 2020, 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 $1.1 million was repaid to NATI by Jet CU as a result of their technology and know-how sale to a foreign company
which was authorized by NATI and resulted in such payment in January 2018. The remaining liability back then (after additional payments)
was reduced to approximately $1.0 million and recorded in Jet CU and as of December 31, 2021 increased to approximately $1.3 million due
to accrued interest and change in the NIS vs. USD exchange rate, see Note 3 for additional information.
| | 2. | On December 15, 2011, the Company signed a research and development agreement with the Israeli ministry of energy. 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 ($180,063 based on the exchange rate of $1.00 / NIS 3.471 in effect as of December 31, 2013), out of which the Company received NIS 585,119 ($168,574 based on the exchange rate of $1.00 / NIS 3.471 in effect as of December 31, 2013) so far and do not expect to receive more, in exchange for the Company’s agreement to pay royalties of 5% plus interest as detailed in the agreement of any revenues generated from the intellectual property generated under the program. |
No grants were received during the three
(3) years ended December 31, 2021. During the years ended December 31, 2021, 2020 and 2019, the Company accrued royalties in the amount
of $814, $384 and $1,203, respectively.
As of December 31, 2020, the aggregate
contingent liability to the Israeli Ministry of National Infrastructures, Energy and Water Resources amounted to NIS 576,773 ($185,458
based on the exchange rate of $1.00 / NIS 3.11 in effect as of December 31, 2021).
| | 3. | 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 ($2,572,347 based on the exchange rate of $1.00 / NIS 3.11 in effect as of December 31, 2021). |
During the years ended December 31,
2021, 2020 and 2019, the Company accrued royalties in the amount of $7,708, $12,991 and $6,791, respectively.
| | 4. | 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 $180,000 which was paid during 2011 and will be offset against future royalty payments which will be payable by the Company from sales of products and services. The accrued royalties as of December 31, 2021 aggregated to $76,216 and recorded within the Accrued expenses and other current liabilities. |
| | 5. | 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 purchased from IKTS certain additives (the agreement is still active). 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 ($28 based on the exchange rate of $1.00 / €0.88 in effect as of December 31, 2021) per kilogram of the ingredients not manufactured by IKTS. In addition, as of December 31, 2021, the Company is obligated to pay IKTS a minimum annual royalty of €2,000 ($2,272 based on the exchange rate of $1.00 / €0.88 in effect as of December 31, 2021) deductible against royalties. |
During
the year ended December 31, 2021, 2020 and 2019, the Company recorded royalty expenses in the amount of $2,272, $2,453 and $2,247, respectively.
| | 1. | On March 11, 2018, a lawsuit captioned I.T.S Industrial Technologic Ltd. vs. (i) Digiflex Ltd., and (ii) Dan Vilenski., a former director of Digiflex, was filed in the Magistrate Court in Rishon Letzion in Israel. On March 11, 2019, the Company settled this claim for a total of NIS 400,000 ($106,724 based on the exchange rate of $1.00 / NIS 3.748 in effect as of December 31, 2018), paid in 12 monthly installments commencing April 2019. The remaining liability was recorded within the Trade payables as of December 31, 2019 and was fully paid by the Company during 2020. |
| | 2. | On May 16, 2019, a lawsuit captioned Yaskawa Europe Technology Ltd. vs. (i) Digiflex Ltd., and (ii) P.V. Nano Cell Ltd., was filed in the Magistrate Court in Kfar Saba in Israel. On January 19, 2020, the Company settled this claim for a total of NIS 179,006 ($57,558 based on the exchange rate of $1.00 / NIS 3.11 in effect as of December 31, 2021) including Value Added Tax (“VAT”) but failed to pay such settlement due to financial difficulties. As such, the liability is still recorded as a provision for legal claims within the accrued expenses and other current liabilities as of December 31, 2021. |
The
Company currently leases, through Nano Size, approximately 7,300 square feet of space in Migdal Ha’Emek, Israel for its principal
offices and manufacturing facilities at a monthly cost of approximately NIS 15,493 ($4,982 based on the exchange rate of $1.00 / NIS
3.11 in effect as of December 31, 2021). Those current lease agreements expire on June 30, 2022.
Additionally,
Digiflex leased 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 ($3,617 based on the exchange rate of $1.00 / NIS 3.456 in effect as of December 31, 2019).
This lease was mutually ended on March 15, 2020. Digiflex currently leases approximately 1,200 square feet of space in Migdal Ha’Emek,
Israel for its principal office and laboratory at a monthly cost of approximately NIS 5,000 ($1,608 based on the exchange rate of $1.00
/ NIS 3.11 in effect as of December 31, 2021). This lease agreement expires on March 14, 2023.
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