Filed by SciSparc Ltd. pursuant to
Rule 425 under the Securities Act of 1933, as amended

Subject Company: AutoMax Motors Ltd.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

For the month of May 2024

Commission file number: 001-38041

SCISPARC LTD.

(Translation of registrant’s name into English)

20 Raul Wallenberg Street, Tower A,

Tel Aviv 6971916 Israel

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒        Form 40-F ☐

Financial Information Regarding Merger with AutoMax Motors Ltd.

Reference is made to the Report of Foreign Private Issuer on Form 6-K submitted by SciSparc Ltd. (the “Company’) to the U.S. Securities Exchange Commission on April 11, 2024 (the “Prior 6-K”). In connection with signing the Agreement and Plan of Merger dated April 10, 2024 (the “Merger Agreement”) by and among the Company, AutoMax Motors Ltd., an Israeli limited company (“AutoMax”), and SciSparc Merger Sub Ltd., an Israeli limited company and wholly-owned subsidiary of the Company (“Merger Sub”), as disclosed in the Prior 6-K, the Company is filing the financial statements contained in the exhibits below.

Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement, which was included as Exhibit 99.1 to the Prior 6-K, including approval of the transaction by the Company’s shareholders and AutoMax’s shareholders, Merger Sub will be merged with and into AutoMax, with AutoMax surviving the Merger as a wholly-owned subsidiary of the Company (the “Merger”).

At the effective time of the Merger (the “Effective Time”, as further defined in the Merger Agreement) each outstanding share of AutoMax’s share capital will be converted into the right to receive ordinary shares of the Company (the “Ordinary Shares”).

The unaudited pro forma condensed combined financial information that has been included as Exhibit 99.2 to this Report of Foreign Private Issuer on Form 6-K does not necessarily reflect what the Company’s results of operations, financial position or cash flows would have been during the periods presented had the Merger been completed in prior periods and does not necessarily indicate what the Company’s results of operations, financial position, cash flows or costs and expenses will be in the future.

Additional Information and Where You Can Find It

In connection with the proposed transactions between the Company and AutoMax, the Company will file a registration statement and a proxy statement with the United States Securities and Exchange Commission (“SEC”). This communication is not a substitute for the registration statement, the proxy statement or any other documents that the Company may file with the SEC or send to its shareholders in connection with the proposed transactions. Before making any voting decision, investors and securityholders are urged to read the registration statement or the proxy statement, as applicable, and all other relevant documents filed or furnished or that will be filed with or furnished to the SEC in connection with the proposed transaction as they become available because they will contain important information about the proposed transaction and related matters.

You may obtain free copies of the proxy statement and all other documents filed or that will be filed with the SEC regarding the proposed transaction at the website maintained by the SEC at www.sec.gov. Once filed, the proxy statement will be available free of charge on the Company’s website at https://investor.scisparc.com/, by contacting the Company’s Investor Relations at IR@scisparc.com or by phone at +972-3-6167055.

Participants in Solicitation

The Company, AutoMax and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the holders of the Company’s Ordinary Shares in connection with the proposed transaction. Information about the Company’s directors and executive officers is set forth in the Company’s annual report on Form 20-F, for the year ended December 31, 2023, filed with the SEC on April 1, 2024. Other information regarding the interests of such individuals, as well as information regarding AutoMax’s directors and executive officers and other persons who may be deemed participants in the proposed transaction, will be set forth in the proxy statement, which will be filed with the SEC. You may obtain free copies of these documents as described in the preceding paragraph.

Non-Solicitation

This Report of Foreign Private Issuer on Form 6-K will not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor will there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

Incorporation by Reference

This Report of Foreign Private Issuer on Form 6-K is incorporated by reference into the Company’s registration statements on Form F-3 (File No. 333-275305, File No. 333-269839, File No. 333-266047, File No. 333-233417, File No. 333-248670 and File No. 333-255408) and on Form S-8 (File Nos. 333-225773 and 333-278437) filed with the SEC to be a part thereof from the date on which this report is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.

Exhibit Index

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Exhibit 99.1

Automax Motors Ltd.

Consolidated Financial Statements as for

December 31, 2023

Automax Motors Ltd.

Consolidated Financial Statements as for

December 31, 2023

Table of Contents:

Auditors’ Report

To the shareholders of

Automax Motors

We have audited the accompanying balance sheets of Automax Motors Ltd. (hereafter: “the Company”) as of December 31, 2023 and 2022, and the related statements of profit and loss, statements of changes in equity and statements of cash flow for the years then ended. These financial statements are the responsibility of the Company’s board of directors and management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the AICPA. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the board of directors and management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022 and the results of its operations, the changes in equity and cash flow for those years then ended, in conformity with International Financial Reporting Standards (IFRS) and the provisions of the Securities Regulations (Annual Financial Statements), 2010.

Without qualifying our above opinion, we refer to note 21(a) to the financial statements regarding the indictment that was filed against the company Global Automax Ltd. along with its officers, for suspicions of committing offenses as detailed in the note, and also to what is stated in note 1(d) regarding the company’s financial situation, the company’s losses and regarding the steps the company is taking in order to meet its obligations. The company estimates that its financial strength, together with its financial sources and taking the actions detailed in the note, will allow it to continue to finance its activities and meet its obligations in the foreseeable future.

Key matters in the audit

Key matters in the audit are matters that were communicated, or were required to be communicated, to the company’s board of directors and which, according to our professional judgment, were most significant in the audit of the consolidated financial statements for the current period. These matters include, among other things, any matter which: (1) relates, or may relate, to material sections or disclosures in the financial statements and (2) our judgment regarding it was particularly challenging, subjective or complex. These matters are answered as part of our audit and formation of our opinion on the consolidated financial statements as a whole. The communication of these matters below does not change our opinion on the consolidated financial statements as a whole and we do not use it to give a separate opinion on these matters or on the sections or disclosures to which they refer.

Vehicle inventory

As described in note 8 to the consolidated financial statements, as of December 31, 2023, the balance of the vehicle inventory amounts to approximately 183,647 thousand NIS and constitutes approximately 60% of the total assets in the company’s consolidated financial statements.

Also, as described in note 2(9), the company’s management measures the inventory according to the lower of cost or net realizable value. The inventory cost includes the expenses for purchasing the inventory and bringing it to its current location and condition. Net realizable value is the estimate of the sale price in the normal course of business minus the estimate of costs for completion and costs necessary to carry out the sale. Vehicle inventory cost is determined based on a specific cost.

Due to the materiality of the vehicle inventory balance in the consolidated financial statements and due to the fact that the audit of the inventory is an essential part of the audit work, we determined, according to our professional judgment, that the examination of the existence and evaluation of the inventory as of December 31, 2023 is a key matter in the audit.

The audit procedures carried out in response to the key matter in the audit

The audit procedures we performed, related to this key matter, included, among others, the following procedures: understanding the internal control environment regarding the vehicle inventory registration process; Attending the company’s inventory counts and sampling inventory details for the purpose of checking their existence; receiving direct counting approvals from external websites; checking vehicle inventory costs and their book value; Assessing the adequacy of the disclosure in the consolidated financial statements; Checking that inventory items are shown according to the lower of cost or net realizable value.

Examining the decline in value of the company’s assets

As a continuation of Notes 2(12) and 2(15), the company identified signs of asset impairment and performed an asset impairment assessment, in accordance with the requirements of International Accounting Standard IAS 36, through a comparison between the book value of the cash-generating unit and its recoverable amount. We identified the examination of the decline in value of the company’s assets, as of December 31, 2023, as a key matter in the audit. Determining the recoverable amount for the aforementioned cash-generating units involved a great deal of subjective judgment, since changes in the assumptions can have a material effect on the result of the examination of the decline in value of the cash-generating units.

The audit procedures carried out in response to the key matter in the audit

The audit procedures we performed, related to this key matter, included, among others, the following procedures: understanding of processes and the control environment, regarding the examination of impairment by the company; Examining the adequacy of the identification of the cash generating units; Examining the methodology used in determining the refundable amount; assessment of the skills, experience and independence of the valuer on behalf of the company’s management; Assessing the plausibility of the significant assumptions underlying the works to examine impairment; Performing a sensitivity analysis regarding the management’s significant assumptions used in the valuation; due diligence of the book value and value in use of the cash-generating units; Examination of the adequacy of the disclosures in the financial statements related to the examination of the decrease in value.

Sincerely,
Ben David Shalvi, Kop & Co.
Certified Public Accountants, (Isr.)
Jerusalem,
	Jerusalem, March 31, 2024

Automax Motors Ltd.

Consolidated statements of financial position

(in thousands ILS)

The accompanying notes constitute an integral part of the financial statements.

Automax Motors Ltd.

Consolidated statements of financial position

(in thousands ILS)

The accompanying notes constitute an integral part of the financial statements.

Automax Motors Ltd.
Consolidated statements of profit and loss
(in thousands ILS)

The accompanying notes constitute an integral part of the financial statements.

Automax Motors Ltd.

Consolidated statements of comprehensive income

(in thousands ILS)

The accompanying notes constitute an integral part of the financial statements.

Automax Motors Ltd.

Consolidated statements of changes in shareholders’ equity

(in thousands ILS)

The accompanying notes constitute an integral part of the financial statements.

Automax Motors Ltd.

Consolidated Statements of Cash Flows

(in thousands ILS)

The accompanying notes constitute an integral part of the financial statements.

Automax Motors Ltd.
Consolidated Statements of Cash Flows
(in thousands ILS)

Appendix A - Adjustments required for the presentation of net cash flows from operating activities

 

		For the year ended
		December 31,
		2023				2022
Incomes and expenses non-involving cash flows
Depreciation and amortization			10,392				8,182
Deferred tax expenses (income)			293				421
Other incomes			(104	)			(226	)
Share-based payment			2,549				9,976
The group’s share in the results of companies treated according to the book value method, net			600				585
IFRS 16 implementation effects			-				-	(*)
Financing expenses, net			2,939				2,662
Trade registration expenses			-				-
			16,669				21,600
Changes in assets and liabilities items
Increase in vehicles inventory			(6,551	)			(97,082	)
Decrease (increase) in accounts receivable and debit balances			9,806				(21,238	)
Increase in trade receivables			(8,733	)			(9,253	)
Increase (decrease) in suppliers and service providers			(8,949	)			6,403
Increase (decrease) in accounts payable and credit balances			21,743				1,368
Increase in long-term prepaid expenses			(191	)			-
Increase in employee’ benefits and employee related provisions			78				88
Increase (decrease) in current payable taxes			(3,355	)			1,332
			3,848				(118,382	)
			20,517				(96,782	)

The accompanying notes constitute an integral part of the financial statements.

Automax Motors Ltd.
Consolidated Statements of Cash Flows
(in thousands ILS)

Appendix B - Consolidation Commencement

The accompanying notes constitute an integral part of the financial statements.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 1 - General

The company has been incorporated in 2006, and until December 2019, offered and provided, together with its subsidiaries, a variety of proprietary programmatic data-driven platforms that focused on two main activities of domain monetization and mobile digital advertising for advertisers, advertising agencies, application developers and domain owners, mainly in the U.S.and European countries. Its shares were traded on the London Stock Exchange (“LSE”) and at the Tel Aviv Stock Exchange Ltd. (“TASE”).

On June 23, 2020, the trading in the Company’s shares on the LSE and TASE exchanges was suspended. On November 25, 2020, trading resumed on TASE as part of the list for limited trading (retention list) and on January 12, 2021, the Company’s shares returned to trading as part of general trading on the main list on TASE.

On November 23, 2020, the Company’s shares were delisted from trading on the LSE.

During the period between the middle of 2017 and up to December 2019, the Company sold all of its activities in the field of digital advertising.

As of the date of the completion of the merger transaction (as defined in Note 1(c) hereunder), the Company is engaged, through Global Auto Max Ltd, a fully controlled subsidiary in the import to Israel and marketing of a variety of private and commercial vehicles models. In addition, the Company is engaged in direct import and marketing in Israel of buses manufactured by Temsa (through Dalhom Automax (as defined below), as well as in the purchase and sale of used vehicles (trade-in) (through Automax Trade-in (as defined below). Regarding the merger with Global Automax Ltd. see Note 1(c) hereunder.

On April 22, 2021, the company changed its name from Matomy Media Group Ltd. to Automax Motors Ltd.

Following are details of companies held by the Company as for the balance sheet date:

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 1 - General (continued)

Global Automax Ltd. was incorporated in Israel in 2014 as a private company in accordance with the provisions of the Companies Law, 2019-1999 (hereinafter: the Companies Law”).

The head offices of Global Automax are situated in Jerusalem. As of the day of its incorporation, Global Automax has been engaged in importing into Israel and marketing a variety of various vehicles intended for private use.

Global Automax is a licensed indirect importer, as defined in Paragraph 42 of the Services and Professions Licensing in the Automotive Industry Law, 5766-2016 (hereunder: “Automotive Services Licensing Law”). Said license covers 27 vehicle products in a variety of models.

As of the date of the financial statements, Global Automax conducts its operations through 12 car sale centers located in Jerusalem, Rishon Le-Zion, Petah Tikva, Afula, Be’er Sheva, Haifa, Ashkelon, Ra’anana, Akko, Netanya, Ashdod and Glilot, in addition to operating a series of storage facilities and PDI (pre-delivery inspection) service agencies for vehicles up for sale.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 1 - General (continued)

Since the outbreak of the Iron Swords War, the Company’s branches in Ashkelon and Petah Tikva have been closed, and the Company is examining the continuance of their operation. The Company assesses that the impact of not operating these branches is immaterial to the group.

Following are details of companies held by Global Automax as for the balance sheet date:

On November 9, 2020, the Company, Global Automax, and its (former) shareholders (controlling shareholders of the Company as for the date of the financial statements) and M.R.M. Merhavit Holdings and Management Ltd. (hereunder: “Transaction Initiator”) entered into a merger agreement by means of exchanging stock between the Company and the former shareholders of Global Automax (hereunder: the “Merger Agreement” or the “Merger Transaction” or the “Transaction”).

On March 24, 2021, the Merger Transaction has been finalized after the preconditions detailed within the Merger Agreement were met. As part of the transaction, the Company allocated ordinary shares to the shareholders of Global Automax (above and hereunder: (“Date of completion of the merger transaction”), which constituted immediately after their allocation 52.53% of the Company’s issued and paid-up share capital, as well as rights to the allocation of additional shares upon the fulfillment of milestones established in the Merger Agreement, which, if fully fulfilled, will increase the holdings of the former shareholders of Global Automax to 73% of the Company’s fully diluted issued and paid-up share capital.

In exchange, all shareholders of Global Automax at that time transferred their shares in Global Automax to the Company, so that after the completion of the transaction the Company owns 100% of Global Automax shares, fully diluted, as well as every right of any kind and type in Global Automax.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 1 - General (continued)

In addition, a number of Global Automax officers who serve as Company officers after the completion of the transaction were assigned with options to purchase 59,257,103 ordinary shares of the Company, according to an employee, officers and service providers’ option allocation plan upon the time of completion of the merger by the Company.

At the time of completion of the Merger Transaction, the directors of the Company who were in term at that time ceased to hold office (with the exception of the external directors and Mr. Amitay Weiss), as well as the other officers of the Company, and replaced by directors and various officers proposed by the former shareholders of Global Automax.

In addition, it was determined that according to the Merger Agreement, the amount of cash in the Company’s “petty cash” account as on the date of the Merger Transaction completion should be approx. 22 million ILS. Despite the aforementioned, according to the reconciliation, as carried out subject to the provisions of the Merger Agreement, the “petty cash” balance at the date of the reconciliation amounted to just 21.5 million ILS. The entire amount of the difference (approx. 500 thousand ILS) is subject to the indemnification provision stipulated in the Merger Agreement, according to which the amount of the difference will be paid by way of allocating the indemnity shares against capital raising to be carried out by the Company. In accordance with the provisions of the merger agreement, to the extent that it is not possible for any reason to make the indemnification in shares in the manner stated above, the controlling owners will be given indemnification in cash.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 1 - General (continued)

The Agreement also includes provisions regarding mutual compensation, instructions regarding the settlement of previous Company’ undertakings, preliminary terms and additional stipulations with respect to the completion of the Merger Transaction according to its terms as well as provisions regarding future issuance of securities subject to Company’ prospectus.

On March 28, 2023, in light of the Company’s compliance with milestones #2 and 3 stipulated in the merger agreement, the Company allocated to the controlling owners 168,105,258 additional ordinary shares of the Company, which constituted approx. 41% of the issued and paid-up capital of the Company after the allocation. As for the signature date of the financial statements, the controlling shareholders hold, jointly, about 55.65% of the Company’s issued and paid-up share capital.

The Company imports its inventory of vehicles from various suppliers situated in Europe and North America. Its revenues derive from the sale of vehicles in Israel in ILS. Therefore, the Company is exposed to depreciation in the exchange rate of the shekel against the foreign currencies of the countries from which the vehicles are imported. From the beginning of 2023, there has been a depreciation in the exchange rate of the shekel against various currencies, and more specifically the various currencies to which the Company is exposed. According to the Bank of Israel, this trend, which began to moderate as of November 2023 and as for the date of the publication of the report, is mainly due to the legislative changes regarding the judicial system in Israel, as detailed below. The erosion trend in the exchange rate of the shekel against foreign currencies that the Company is exposed to, has a negative effect on the Company’s profitability, especially in the short term, if it is not possible for the Company to adjust the selling prices of the vehicles it sells.

In light of the erosion trend in the exchange rate of the shekel against foreign currencies that the Company is exposed to from the beginning of 2023, the Company has made a change in the mix of vehicles it imports and in the purchase currencies (in accordance with the changes in the market). In addition, the Company implements a currency risk’ management policy which is designed to reduce said exposures.

From the second quarter of 2022 and until the second quarter of 2023, inter alia due to the appearance of a number of economic and geopolitical events that affected price levels worldwide, there was a sharp increase in inflation (during the 12-months period between March 2022 and March 2023, the consumer price index in Israel rose by 5%). In the second quarter of 2023, there was a certain moderation in the rate of increase in the consumer price index, which continued in the third quarter of 2023, and moved to a decrease in the fourth quarter of 2023 (mainly in light of the effect of the Iron Swords War). The increase in the consumer price index in Israel in 2023 amounted to 3%.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 1 - General (continued)

In response to the increase in prices and subsequently to the interest rate increases by the central banks in Europe and the USA, starting in April 2022, the Bank of Israel decided to raise the Bank of Israel’ interest rate, and it increased several times from a rate close to zero (which prevailed for about 7 years) to a rate of 4.75% per year, in the second quarter of 2023. In January 2024, the Bank of Israel decided to lower the annual rate by 0.25% to a level of 4.5%, which also prevails at the time of the publication of this report.

According to the Bank of Israel Research Department’s forecast published in January 2024, the inflation rate during 2024 is expected to be 2.4%, and the average Bank of Israel’ interest rate is expected to be 3.75%/4.00% in the fourth quarter of 2024.

The credit lines provided by banking corporations to the companies within the Group bear interest at the rate of the prime interest rate (which is the Bank of Israel’ interest plus 1.5%. At the time of the publication of the financial statements, the prime interest rate is 6%), plus a certain rate, as agreed during deliberations with the banking corporations upon actual takeout of the credit. Said rate is affected, inter alia, by the market interest rate, by the extent of credit and by the familiarity of the bank with the Company. Therefore, the increase in the Israeli interest rate has led to a rise in the Group’s financing costs (which are expected to continue increasing with the continued rise in interest), which might affect the financial results of the Group and its profitability. However, the Company does not expect that a higher interest rate environment will be a practical obstacle in taking credit from banks or other financing bodies. In addition, the Company does not anticipate that the continued increase in the market interest rate may harm the covenants established with the banking corporations, since most of the benchmarks that Group’ companies undertook with respect to the banking corporations are virtually unaffected by changes in interest rates.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 1 - General (continued)

However, the high interest rate environment and the effects of the Iron Swards War are expected to slow down the growth rate of the market in general, and of the Company in particular, as well as harm private consumption. According to the Central Bureau of Statistics, the Israeli growth rate in 2023 was 2%, which is a 0.1% decrease in GDP per capita in comparison to 2022. In a forecast published in January 2024 by the Research Department of the Bank of Israel, the Israeli growth rate in 2024 is expected to be 2% as well, and the rate of growth in private consumption is expected to increase from a negative rate of 0.7% in 2023, to 3% in 2024, and 6% in 2025. The increase in inflation and interest have a negative effect on the Company’s sales rate and, as a result, on its profitability.

As described above, the rise in interest rates has a direct and indirect negative effect on the economy and the Company. Therefore, at the time when the monetary policy of raising interest rates moderates, it is expected to have a positive effect on the Company.

During the first quarter of 2023, the new government began promoting a plan to make fundamental changes to the judicial system in Israel, parts of which were approved by the Knesset in first reading of the bill. The proposed changes have aroused widespread controversy and criticism, which according to various publications by international credit rating companies (such as Moody’s), economic entities, senior economists in the market, heads of academic institutions and experts in the fields of law, economy, society and the humanities in Israel, may impact the robustness of the market and economy in Israel.

In April 2023, the international rating agency Moody’s lowered Israel’s rating forecast from “positive” to “stable”, and in May 2023, the International Monetary Fund lowered the growth rate forecast for the Israeli economy for 2023, while these bodies note that the crisis surrounding the changes in the judicial system constitute a cause of instability, and the lack of a broadly-agreed solution may cause an increase in the risk of Israel’s economy.

In July 2023, after the legislative proceedings were suspended for a certain period for negotiations between the coalition and the opposition, the Knesset approved in the second and third readings the Basic Law: The Judiciary (Amendment No. 3) (Reduction of the Reason for Reasonableness), without agreement with the opposition, in a manner that provoked public criticism and widespread protest. Following the aforementioned amendment, the credit rating agencies Moody’s and-S&P published outstanding reports in which they warned against the consequences of promoting changes in the judicial system without broad agreement on the Israeli economy. It should be clarified that petitions were submitted to the Supreme Court on its session as the High Court of Justice against the amendment to the Basic Law: the Judiciary, which were discussed in September 2023, for the first time before a full panel of 15 judges. On January 1, 2024, the Supreme Court, in its session as the High Court of Justice, rejected by a majority of votes the amendment to the Basic Law: the Judiciary (Reduction of the Reason for Reasonableness).

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 1 - General (continued)

At the beginning of August 2023, the Bank of Israel published a report regarding the financial stability for the first half of 2023, according to which the legislative changes regarding the judicial system in Israel caused a considerable increase in the economic uncertainty in the economy and the accelerated development of the negative sentiment in the markets. According to the aforementioned report, the uncertainty surrounding the legislative changes raised the risk premium of the economy and was accompanied by a devaluation of the exchange rates which contributed to an increase in inflation, a decrease in stock prices and increased volatility in the foreign exchange market and the financial markets. As of the date of the publication of this report, no further changes have yet been promoted in the judicial system in Israel, and it seems that in light of the outbreak of the Iron Swords War, there is no prospect of further changes being promoted in the foreseeable future.

Such changes may have a negative impact on the economic environment in which the Company operates, on the cost of funding sources, on the credit rating of the Israeli economy, and more. However, since these are changes most of which have not yet been enacted or entered into force, the extent of their impact on the Israeli economy and the automotive industry in general and the Company in particular, are unknown and cannot be assessed at this stage.

Starting at the beginning of 2023, the supply of vehicles in the intermediate category began to return to its normal level from before the corona crisis and the chip crisis in the automotive industry, and even the discount rates for the purchase of vehicles in the world began to rise during the second quarter of 2023. Therefore, the Company is gradually working to reduce the cost of vehicle inventory per vehicle it owns by increasing the supply of vehicles of the intermediate category and lower, that are marketed by the Company, with the aim of adjusting the Company’s vehicle inventory to the increased demand for vehicles of the intermediate category and lower, as a result of the economic and financial situation in the State of Israel.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 1 - General (continued)

The Company is looking at expanding and diversifying the sources of supply of vehicles imported by it, including brands manufactured in China that have gained demand in the Israeli car market. In the Company’s estimation, the realization of this move will have a positive effect on its revenues.

In the second half of 2023, global economic trends, including the increase in inflation and interest rates in the countries where the Company purchases its vehicle inventory, led to opportunities to purchase vehicle inventory in larger volumes and at better prices compared to previous periods. This trend increased during the period that elapsed between the date of this report and until the signature date of the financial statements.

The changes in the business environment (including the outbreak of the Iron Swords War as detailed in Note 1E hereunder) caused a decrease in the Company’s revenues during the reported period to a total of approx. ILS 418.9 million compared to approx. ILS 453.6 million in the corresponding period last year, to an erosion of the Company’s gross profit during the reporting period to a total of approx. ILS 37.8 million compared to a total of approx. ILS 60.7 million in the corresponding period last year, as well as losses (before tax) in the amount of approx. ILS 17 million during the reporting period compared to a profit (before tax) of 0.6 million ILS in the corresponding period. The adjusted loss (before tax) for 2023, deducted by options granted to employees, non-cash-flow rate differences with respect to the Optimatic transaction (as detailed in Note 16(b) hereunder) as well as the “Iron Swords” grants for the months of November and December 2023 (which were not recognized during the reporting period), constitutes approx. ILS 8.6 million, compared to a profit of about ILS 11.8 million (before tax) in the corresponding period last year.

The Company builds its cash flow for the following periods on the basis of a consolidated cash flow, which takes into account the individual cash flows of the companies held by it, so that all of the Company’s liabilities with respect to bondholders (series B) and the held companies towards banking corporations and various third parties will be used.

To this end, the Group takes the following steps:

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 1 - General (continued)

It should be clarified that the Company’s assumption in relation to the repayment of loans provided by it to invested companies that have been provided credit lines from banking corporations, is based on the fact that at the said repayment date, the invested companies will comply with the financial covenants and other terms stipulated by said banking corporations.

The Company raised funds from the public via bonds (series B), as detailed in Note 19 below. As part of the shelf prospectus and the deed of trust, the Company undertook to comply with a number of financial covenants, detailed in note 21c hereunder. The Company’s policy and operations are aimed at meeting the principal and interest payments to bondholders (series B) as well as the financial covenants at any point in time. The Company has various instruments for implementing this policy, as detailed hereunder:

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 1 - General (continued)

As of the date of the publication of this report, the Company is unable to assess the full future effects, to the extent that they may be of all of the factors mentioned above on the automotive industry in Israel in general and on the Company’s activities in particular. However, the Company estimates that its financial strength, together with its financial sources and taking the actions detailed above, will allow it to continue to finance its activities and meet its obligations in the foreseeable future.

E. Effects of the Iron Swords War:

On October 7, 2023, the terrorist organization Hamas launched a murderous attack on the State of Israel, which included firing rockets and the infiltration of thousands of terrorists into its territory. The attack claimed many victims, including Israeli and foreign citizens who were abducted to the territory of the Gaza Strip. Following the attack, the Israeli government declared an “Iron Swords” war, mobilized approximately 300,000 reservists and launched an attack on the Gaza Strip (hereinafter: “the war”). At the same time, a conflict is taking place in the northern territory of the country against the terrorist organization Hezbollah, and attacks have also been carried out from other arenas aimed at the State of Israel. The immediate impact of the outbreak of the war on Israel’s economy was evident, and was reflected, inter alia, in the devaluation of the shekel against foreign currencies, declines in stock exchange rates, the closing of many businesses due to the directives of the Home Front Command and the extensive mobilization of reserves, a trend that was moderated until the publication of the report, with the release of reserve forces, appreciation of the shekel against foreign currencies, increases in exchange rates and a return to a certain routine in the shadow of the war.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 1 - General (continued)

With the outbreak of the war, most of the Company’s branches were closed and there was no customers’ traffic. As of November 2023, the Company’s branches began to open in a partial format, in accordance with customer traffic and in accordance with the directives of the Home Front Command. As for the signature date of the financial statements, the Company’s branches in Ashkelon (operated by a joint venture with Global Automax and a third party) and in Petach Tikva (operated directly by Global Automax) are closed due to the lack of a protected space, and the lack of personnel. The Company is examining the continued operation of these branches. The Company assesses that the impact of not operating these branches is immaterial to the group. At the time of publication of the report, all other branches of the Company are operating as normal in accordance with the directives of the Home Front Command and a vibrant movement of customers is noticeable in them.

With the outbreak of the war, the Company worked to reduce its current expenses, as much as possible under the circumstances, including reducing advertising and marketing expenses, reducing other current expenses and reducing personnel related expenses. In addition, the Company also worked to reduce its fixed expenses, as much as possible under the circumstances, including partial or no payment of rent in some of its branches.

During the months of October and November 2023, the Group reduced about 10% of the workforce within the Group and about 30% of the Group’s employees were placed on layoff, while by the date of the publication of this report all Group’ employees who were placed on layoff returned to work. In addition, there are a small number of employees who were recruited into the reserves, and some of them returned to full-tim

During the fourth quarter of 2023, there was a significant decrease in the Group’s sales turnover compared to the corresponding period last year, attributed to the months of October and November 2023, in which most of the Company’s branches were closed and were not open to the public, while in December there was a significant increase in the amount of orders for vehicles compared to the corresponding period last year. The upward trend in vehicle orders from customers that began in December 2023 continued at the beginning of 2024 (not reviewed or audited), compared to the corresponding period last year.

With the outbreak of the war, the Houthis, an Islamic political and military organization in Yemen, declared war on Israel, and began to launch missiles at targets in Israel to support the terrorist organizations in the Gaza Strip and Hezbollah, to launch drones at Israel, and to attack vessels that supposedly have a connection to Israel. As a result of the vessel attacks, several shipping companies have announced the suspension of sailing through the Red Sea. The situation developed into an international crisis that has led to the establishment of an international coalition to guarantee freedom of navigation and to the announcement by the United States and its allies that Operation Prosperity Guardian has been launched against the Houthis in order to stop their attacks against vessels.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 1 - General (continued)

The Company imports its vehicle inventory mainly from Europe and North America, and therefore it is not expected to be directly affected by the disruptions resulting from the Houthi organization’s attacks on vessels in the Red Sea region which have caused changes in sailing routes. At the same time, the changes and disruptions in the sailing routes as mentioned above have caused significant delays in delivery dates and an increase in logistics and transportation prices within Europe and from Europe to Israel. The delays in delivery dates and the increase in logistics and transportation prices within Europe and from Europe to Israel have had a negative impact on the Company’s financial results.

It should be noted that with the outbreak of the war and with its continuation, a number of government decisions were made which may have a positive effect on the Group’s activities. This includes providing compensation for the decrease in transaction volumes of businesses, and some of the Group’s companies are included in the standards established for this matter (a request for such compensation has been submitted), compensation for the full damage caused to businesses in frontier settlements (which is relevant to the Company’s branches in Ashkelon, Ashdod and Be’er Sheva) (a request for such compensation has been submitted), receiving a state-guaranteed loan, and granting a three-month grace period for the first registration of vehicles that must be registered for traffic for the first time from 11 October 2023 until 31 December 2023, which will allow them to be sold as new for an additional period.

The Company frequently reviews its eligibility and takes action in order to receive the benefits in respect of the aforementioned government decisions. In addition, in January the Company received a state-guaranteed loan from a banking corporation in the amount of NIS 16 million (for additional details, see Note 32(1) above). Additionally, for the month of October 2023 the Group companies are entitled to receive compensation from the state in the amount of approximately NIS 2.07 million (which was recognized in the financial statements), and for the months of November-December 2023 the Group companies are entitled to receive additional compensation in the amount of approximately NIS 5.9 million, which was not recognized during the report period in light of its approval by the government after the report period (and which will be recognized in the financial statements for the first quarter of 2024).

In light of the outbreak of the war and its effects on the Company’s financial results which can be assessed at the time of this report’s publication, the Company took action to raise capital by way of a private offering in the amount of NIS 10 million which was completed on 31 December 2023 and strengthened the Company’s equity and liquidity. For additional details, see Note 21b(20) below. In addition, the Company continues to negotiate a merger with a company that was incorporated in Israel and whose securities are traded on NASDAQ (“The Receiving Company”), and on 16 January 2024 signed an agreement to receive a bridging loan in the amount of USD 1.4 million from the Receiving Company. For additional details, see Note 32(2) below. This transaction, as soon as it is completed, is expected to strengthen the Company’s liquidity and equity.

In January 2024, the Bank of Israel published a report on financial stability for the second half of 2024, according to which the murderous terrorist attack that occurred on 7 October and the “Iron Swords” war that began as a result are the materialization of an extreme scenario for geopolitical turbulence. The materialization of the risk did not result in damage to the financial stability of the economy. This occurred, among other things, against the background of the high standards of the stabilising regulation implemented until the outbreak of the war and thanks to the preventive measures taken by the Bank of Israel when everything started and the government’s assistance plans. According to the Bank of Israel, the effect of the war is reflected all the main risk exposure channels. However, in light of the policy measures that moderated the turmoil transmission, the level of risk increased only in the macroeconomic channel, as reflected in the increase in the country’s risk premium. According to the Bank of Israel, as the duration of the war, its scope and its negative consequences on the economy intensify, additional challenges are expected for the financial system.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 1 - General (continued)

On 9 February 2024, the international rating agency Moody’s announced the lowering of Israel’s credit rating to A2 (from a level of A1), and lowered the rating forecast from “stable” to “negative”. In the report, the rating agency estimated that the lateral consequences of the current conflict with Hamas, both when it still continues and after it ends, substantially increase the political risks in Israel, weaken its legislative and executive authorities, and significantly affect the budgetary stability of Israel in the foreseeable future.

As of the date of the publication of this report, in light of the war being a dynamic occurrence characterized by significant uncertainty, the Company is unable to assess the full future effects, if any, of the war and/or the expansion of its scope on the automotive industry in Israel in general and on the Company’s activities in particular. The Company estimates that its financial stability, along with its financial sources and taking the actions detailed above (including those covered in Note 1d above), will allow it to continue to finance its activities and meet its obligations in the foreseeable future.

f. Separate financial information:

The Company did not attach separate financial information to these financial statements due to the negligent value of such additional information. The Company fully owns Global Automax, and as of the date of the report on the financial position, most of the Group’s business activity is carried out in Global Automax, which is fully reflected in the Group’s consolidated report. As of the date of the report on the financial position, the Company has no business activity and therefore the publication of separate financial statements will not constitute additional material information for the reasonable investor.

g. Definitions:

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 2 - Principles of accounting policy

Unless stated otherwise, the principal accounting policies as detailed below have been consistently implemented by the Company during the preparation of the financial reports for all presented periods.

The consolidated financial statements of the Group have been prepared in accordance with the International Financial Reporting Standards (hereunder: “IFRS”) and their interpretations as published by the International Accounting Standards Board (IASB).

The financial statements have been prepared in accordance with Securities Regulations (Annual Financial Statements), 5770-2010 (hereunder: “Financial Statement Regulations”).

The operational turnover period of the Company is 12 months.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 2 - Principles of accounting policy (continued)

The Company elected to present profit or loss and other comprehensive income items using the “nature of business activity” method. The Group estimates that due to the organizational structure of the Group, the classification of expenses in such manner provides more reliable and relevant information.

The financial statements of the Company have been prepared on a cost basis, excluding financial instruments measured at fair value through profit or loss. The Company elected to present its statement of comprehensive income based on the nature of business activity method.

The consolidated financial statements of the Group include the financial reports of the Company and of entities controlled by the Company, whether directly or indirectly. An investor company controls an investee company when it is exposed or when it has rights to any variable returns deriving from its holding of the investee, and when it has the ability to use its power to affect those returns. In determining whether control exists, the Company considers potential voting rights that could be exercised or converted to shares in the held company.

Potential voting rights shall be considered de-facto rights in the event that the Group has practical ability to realize such rights. When de-facto potential voting rights exist, such as: convertible instruments, options and forwards of the investee held by the Company or other investing parties, whose realization shall increase the number of voting rights in the investee - the Group considers whether the existence of said potential voting rights, together with other existing voting rights, amount to control.

The results of the operations of any subsidiaries acquired or sold during the reported periods are included in the Company’s consolidated statements of profit and loss, as of the date that control was attained or the date it ceased to exists, as applicable.

Financial statements of subsidiaries that were not prepared in accordance with the accounting policies of the Group have been adjusted, prior to consolidation, in compliance with the accounting policy implemented by the Group.

For consolidation purposes, all inter-company transactions, balances, incomes and expenses are fully cancelled.

The Group implements the Acquisition method for all business combinations.

The acquisition date is the date when the purchaser attains control of the purchased. Control exists when the Group is exposed, or has rights to variable returns from its involvement in the purchased, and has the ability to influence these returns through its influence in the purchased. When examining control, actual rights held by the Group and by others are taken into account.

The Group recognizes goodwill as of the acquisition date according to the fair value of the consideration transferred, including amounts recognized with respect to any rights that do not confer control over the purchased, as well as the fair value as of the acquisition date of an equity interest in the purchased that was previously held by the Group, with deduction of the net amount attributed in the purchase of identifiable assets acquired and liabilities assumed.

On the purchase date, the purchaser recognizes a contingent liability it assumed as part of a business combination insofar as a liability arising from past events exists in the present, and its fair value could be reliably measured.

If the Group makes a bargain purchase (one that includes negative goodwill), it recognizes the resulting profit in the statement of profit and loss at the date of acquisition.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 2 - Principles of accounting policy (continued)

Furthermore, goodwill that is not updated due to utilization of losses carried forward for tax purposes that existed at the time of the business combination.

The consideration transferred includes the fair value of assets transferred to the previous owners of the purchased, liabilities incurred by the buyer vis-à-vis the previous owners of the purchased and capital rights issued by the Group. In a business combination achieved in stages, the difference between the fair value at the time of the acquisition of capital rights in the purchased that were previously held by the Group and their book value at that time, is recognized in the statement of profit and loss under other income or expenses. In addition, the transferred consideration includes the acquisition-date fair value of the contingent consideration. Subsequently to the acquisition date, the Group recognizes changes in the fair value of contingent consideration classified as a financial liability in the profit and loss statement, while contingent consideration classified as an equity instrument is not measured once again.

Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the day control is obtained until the day control is lost.

The accounting policy of subsidiaries has been changed, if necessary, in order to adjust it to the accounting policy adopted by the Group.

The share of non-controlling interest in the net assets (excluding goodwill) of combined subsidiaries is presented separately within the Group’s equity. Non-controlling interests include the balance of said interests on the date of business combination and the share of non-controlling interest in any changes in the combined company’s equity as of the date of business combination. Any losses of combined companies attributable to non-controlling interests, that exceed the non-controlling interest in the equity of the combined company, shall be assigned to non-controlling interests which do not confer control while disregarding their undertakings and the ability of said shareholders to make additional investments in the combined company.

For transactions with non-controlling shareholders with respect to acquiring additional shares in the combined company, following establishment of control, the excessive costs of acquisition, which exceed the book value of said non-controlling interests as of the date of acquisition, shall be recognized as part of equity attributable to the parent company.

The results of any transactions with non-controlling shareholders involving the sale of the Group’s investment in a combined company, while maintaining control, shall be recognized as part of equity attributable to the parent company.

Consolidated companies are entities in which the Group has a significant influence over the financial and operational policies, yet no control or joint control has been achieved. There is an assumption which can be refuted according to which holdings of 20% to 50% confer essential influence. In examining the existence of essential influence, potential voting rights that can be exercised or converted immediately into shares of the held company are taken into account.

Joint ventures are joint arrangements in which the Group has rights to the net assets of the arrangement.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 2 - Principles of accounting policy (continued)

Investment in consolidated companies and joint ventures are handled according to the equity method and are initially recognized at cost. The investment cost includes transaction costs. Transaction costs directly related to the expected acquisition of a consolidated company or a joint venture are recognized as an asset. The deferred expenses item with respect of an expected acquisition of a consolidated company or a joint transaction is recognized as an asset in the deferred expenses item of the statement of financial position. These costs are added to the investment cost at the time of acquisition. When a company first obtains essential influence or joint control in an investment treated as a financial asset measured at fair value through other comprehensive income until the date of obtaining the essential influence or joint control, other comprehensive income accumulated in respect of the investment will be credited to the retained earnings balance at that time. The consolidated financial statements include the Group's share of the income and expenses in the profit or loss and of other comprehensive income of held companies that are handled according to the equity method, after adjustments required to adapt the accounting policy to that of the Group, from the day on which the essential influence or joint control exists and until the day on which the essential influence or joint control ceases to exist.

Mutual balances within the Group and unrealized income and expenses, arising from inter-company transactions, were eliminated as part of the preparation of the consolidated financial statements. Unrealized profits arising from transactions with consolidated companies and joint transactions were eliminated against the investment, according to the Group's rights in these investments. Unrealized losses were eliminated similarly to the way in which unrealized gains were eliminated, as long as there were no indications of impairment.

The financial statements of each of the companies within the Group are prepared in the currency of the primary economic environment in which they operate (hereunder: “functional currency”). For the purpose of consolidation of the financial statements, the results and the financial position of each of the companies within the Group are converted into NIS, which constitutes the functional currency of the Company. The consolidated financial statements of the Group are presented in NIS.

During the preparation of the financial statements of each of the companies within the Group, any transactions carried out in currencies which do not constitute the functional currency of said company (hereunder: “foreign currency”) are documented in accordance with the official exchange rates at the time they occur. At the end of each reporting period, monetary items denominated in foreign currency are translated in accordance with the official exchange rates at the time they occur.

Exchange rate differences are recognized in profit and loss during the period in which they occurred, except in the event that such exchange differences arise from receivable or payable monetary items originating in foreign operations whose settlement is not planned or expected to happen, which therefore constitute a part of net investment in foreign operations, in which case they are recognized under other comprehensive income as part of the adjustments deriving from translation of financial statements of foreign operations.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 2 - Principles of accounting policy (continued)

Cash and cash equivalents are considered highly liquid investments. This includes short-term deposits in banking corporations that are non-restricted by liens, with original maturities that do not exceed three months as of the date of investment, or that exceed three months and yet can be withdrawn immediately without fines, and constitute a part of the Group’s cash flow management.

Inventory is measured at the lower of cost and net realizable value. Inventory cost comprises all costs of purchase and any other costs incurred in bringing the inventory to its present location and condition. Net realizable value constitutes the estimated selling price that would be established in a regular transaction, deducted of any completion costs and costs required in order to finalize the sale. The Company reviews the state and the age of its inventory on a periodical basis, and recognizes corresponding slow inventory allowances. For details regarding considerations taken into account during the review of net realizable value of the new vehicle inventory, see Note 3b1 below.

Inventory cost is determined as follows:

Vehicle inventory –based on specific cost.

Accessories – based on average cost.

Accounting policies implemented since 1 January 2018 with respect to income recognition are as follows:

Income deriving from contracts with customers are recognized in profit or loss upon the transition of control over the asset or the service to the customer. The price of the transaction equals the expected consideration amount as per the contract terms, deducted of any amounts collected in favor of third parties (e.g. taxes).

Following are the specific income recognition criteria to be fulfilled prior to income recognition:

Income from sales of new vehicles

Income from sales of new vehicles and spare parts is recognized upon transfer of control over the new vehicle or the spare parts to the customer. Usually, control is transferred when the vehicle is delivered to the customer.

Income from sales of used vehicles

Income from sales of used vehicles is recognized upon transfer of control over sold used vehicles.

Credit transactions

The Company elected to use the relief provided by the standard, based on which it would not be required to separate the credit component in transactions with credit terms of less than 12 months and would recognize income in accordance with the consideration amounts as set within the contract, even in the event the customer pays before or after the date the product or service are delivered.

The taxes on income that are included in the statement of profit and loss include current taxes, taxes with respect to prior years and deferred taxes.

Tax expenses comprising current or deferred tax expenses are recognized in profit or loss, except in the event said taxes derive from items recognized in other comprehensive income or in equity. In such case, the tax amount is recognized in the corresponding item within equity as well.

Current taxes

The current tax liability is determined while using tax rates that have been enacted or substantively enacted by the reporting date, as well as any adjustments required with respect to tax liabilities from prior years.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 2 - Principles of accounting policy (continued)

Deferred taxes

Deferred taxes are calculated on temporary differences between the amounts as presented in the financial statements and amounts adjusted for tax purposes. Deferred tax balances are calculated using the expected tax rates that would apply upon the realization of the asset or the removal of the liability, based on tax laws that have been enacted or substantively enacted by the reporting date.

On every reporting date, deferred tax assets are reviewed according to their expected usage. Losses carried forward and deductible temporary differences for which deferred tax assets have not been recognized are reviewed at each reporting date and an appropriate deferred tax asset is recognized for them if it is expected that they will be utilized.

In calculating deferred tax amounts the Company does not take into consideration any taxes that would apply in the event of the realization of investments in held entities, as long as the sale of the held entities is not expected in the foreseeable future.

Initial implementation of IFRS 16 – Leases (hereunder: the “Standard”) – the Company elected to implement the provisions of the Standard using the modified retrospective manner (without restatement of comparative figures). The Company adopted the following accounting policy as of 1 January 2018 with respect to leases: 

The Company treats the contract as a lease when, in accordance with the terms of the contract, the right to control an identified asset is transferred for a period of time in exchange for consideration.

For transactions in which the Company serves as a lessee, it recognizes the leased property as a right of use asset as of the beginning of the lease term against a lease liability, excluding lease transactions with lease terms of less than 12 months and lease transactions where the underlying asset is of low value, in which case the Company recognizes lease related expenses in profit or loss using the straight line method over the lease term. As part of the measurement of the liability for a lease, the Company chose to apply the relief provided in the Standard and did not make a separation between lease components and non-lease components such as: management services, maintenance services and more that were included in the same transaction on the date the liability for the lease commenced. This includes all lease payments not yet paid, capitalized with the interest rate included in the lease when it can be easily determined, or with the Company’s additional interest rate. After this date, the Company measures the lease liability using the effective interest method. The right-of-use asset on the formation date is recognized at the amount of the lease liability plus lease payments paid on or before that date plus any transaction costs incurred. The right-of-use asset is measured by the cost model and depreciated over its useful life or over the lease term, whichever is shorter. Below are data regarding the number of years of depreciation of the relevant right-of-use assets according to groups of right-of-use assets:

When indicators of impairment exist, the Company reviews whether there is a need to recognize any right-of-use asset impairment subject to the provisions of IAS 36.

At the time the lease is created, the Company uses the index rate existing at that time for the purpose of calculating future lease payments. For transactions in which the Company constitutes the lessee, any changes in future lease payments originating in index variations are capitalized (without amending the capitalization rate used for lease liability calculations) to the balance of the right-of-use asset and are credited as an adjustment to the balance of the lease obligation. Only when there is a change in the cash flows resulting from a change in the index (that is, at the time when the coordination of the lease payments takes effect).

The lease period that cannot be canceled includes both periods covered by an option to extend the lease when it is reasonably certain that the option to extend will be exercised, and periods covered by an option to cancel the lease when it is reasonably certain that the option to cancel will not be exercised. In the event that there is a change in the expectation for exercising an extension option or for not exercising a cancellation option, the Company recalculates the remaining liability for the lease in accordance with the updated lease period, according to the updated discount rate on the day of the change in expectation, with the total change credited to the balance of the right-of-use asset until it is reset, and beyond that to profit or loss.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 2 - Principles of accounting policy (continued)

When the Company amends the terms of a lease, and said amendment does not reduce the scope of the lease and is not handled as a separate lease transaction, the Company re-measures the balance of its lease liability in accordance with the new lease terms, using the discount rate applicable on the modification date, and credits the change in the liability balance for the lease to the balance of the right to use asset. When an amendment is made to the terms of the lease that results in a reduction in the scope of the lease, the Company recognizes the profit or loss resulting from the partial or full write-off of the balance of the right-of-use asset and the liability for the lease. Subsequently, the Company re-calculates the balance of the lease liability in accordance with the new lease terms, using the discount rate applicable on the modification date, and credits the change in the liability balance for the lease to the balance of the right to use asset.

The cost of fixed assets includes expenses directly attributable to the purchase of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, as well as any additional cost that can be directly attributed to bringing the asset to the location and condition necessary for it to be able to operate in the manner intended by the management, an estimate of the costs of dismantling and removing the items and restoring the site where the item is located, as well as credit costs that have been used. The cost of purchased software, which is an integral part of the operation of the related equipment, is recognized as part of the cost of this equipment.

The spare parts, auxiliary equipment and backup equipment are classified as fixed assets when they meet the definition of fixed assets according to IAS-16, and otherwise they are classified as inventory. A fixed asset item purchased in exchange for another non-monetary item as part of a commercial transaction is recognized at fair value.

When significant fixed asset parts have different life spans, they are treated as separate items (significant components) of the fixed asset.

Changes in the obligation to dismantle and remove items and restore the site where they are located, except for changes resulting from the passage of time, are added to or subtracted from the cost of the property in the period in which they occur. The amount deducted from the cost of the asset shall not exceed its book value. The balance, if any, is immediately recognized in profit and loss.

Profit or loss arising from deducting a fixed asset item is determined by comparing the net proceeds from deducting the asset to its book value, and recognized net in the other income or other expenses items, as the case may be, in the profit and loss statement.

Depreciation is a systematic allocation of the depreciable amount of an asset over its useful life. A depreciable amount is the cost of the asset, or another amount that replaces the cost deducted of its residual value.

An asset is depreciated when it is available for use, that is, when it has reached the location and condition necessary for it to be able to operate in the manner intended by management.

Depreciation is recognized in the profit and loss statement using the straight-line method over the estimated useful life of each component of the fixed asset items, since this method reflects the predicted consumption pattern of the future economic benefits inherent in the asset in the best way. Assets leased under financing leases are depreciated over the shorter of the lease term and the useful life of the assets, unless it is reasonably expected that the Group will receive ownership of the asset at the end of the lease term. Owned lands are not depreciated.

The estimated useful life for the current period and the comparison period is as follows:

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 2 - Principles of accounting policy (continued)

Leasehold improvements are depreciated using the straight-line method over the lease period (including the Group’s lease term extension option which it is planning to exercise) or over the useful life of the improvement, whichever is shorter. The Company reviews the useful life period, the depreciation method and the residual value of each asset at least annually. Any adjustments are implemented as a change in an accounting estimate, in a prospective manner. Depreciation of assets is terminated as soon as possible between the date on which the asset is classified as held for sale and the date on which the asset is written off.

The estimates regarding the depreciation method, the useful life and the residual value are re-examined at least at the end of each reporting year and adjusted when necessary.

Intangible assets that are acquired separately are measured upon initial recognition at cost plus direct acquisition costs. Intangible assets purchased as part of business combinations are included based on fair value on the date of acquisition. Costs related to internally developed intangible assets, excluding capitalized development costs, are recognized in the profit or loss as incurred.

The intangible assets of the Group have a defined useful life. The assets are amortized over their economic useful life, while the need for impairment is reviewed whenever impairment indicators exist. The amortization period and method are reviewed at least annually.

Goodwill

Goodwill arising from an acquisition of a business is measured by the excess of the acquisition cost, plus the fair value of the rights that do not confer control, including the net fair value of the identified assets, liabilities and contingent liabilities of the consolidated company recognized at the time of acquisition. The method of measuring goodwill, in accordance with the alternatives listed above, is determined individually in each business combination.

Goodwill is recognized for the first time as an asset at cost, and is measured in subsequent periods at cost deducted of accumulated impairment losses.

For the purpose of examining impairment, goodwill is allocated to each of the Group’s cash-generating units that are expected to benefit from the synergy of the business combination. Cash-generating units to which goodwill has been allocated are reviewed annually or more frequently insofar as indicators attesting to a possible decrease in value of said unit exist. When the recoverable amount of a cash-generating unit is less than the book value of that unit, the impairment loss is allocated first to reduce the book value of any goodwill attributed to the cash-generating unit. After that, the remaining impairment loss, if any, is allocated to other assets of the cash-generating unit, in proportion to their book value. An impairment loss of goodwill is not eliminated in subsequent periods.

Upon disposal of a consolidated company, the amount of the related goodwill is included in determining the profit or loss from the disposal.

Website

The Company operates an official website and official Facebook and Instagram pages, where it publishes product updates and promotions. In addition, the Company also operates a LinkedIn page.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 2 - Principles of accounting policy (continued)

Licenses

The capitalized costs for the license are the costs of purchasing the license and costs that can be directly attributed and which are needed to obtain the license and include, among others, legal costs and consultants, travel costs abroad and salary costs that can be directly attributed to the license.

The capitalization of the costs for the license begins in the development phase and stops when the license is achieved, that is, when the property is in the necessary condition in order to be able to operate in the way management intended. Initial costs incurred during the research phase, meaning amounts used for obtaining knowledge and for searching for dealers and sub-agents, cannot be capitalized and shall therefore be recognized as incurred.

The useful life of a license shall not exceed the term of its contractual rights, yet the useful life might be shorter, according to the period the Company expects to use the license. In the event the contractual rights are provided for a renewable limited period, the useful life of the license shall include the renewal period only insofar as evidence exists supporting the Company’s intent of such renewal without incurring material costs. In the opinion of the Company, the requirements for including the renewal period as part of the useful life of the license have not been fulfilled.

Depreciation

Depreciation is a systematic allocation of the depreciable amount of an intangible asset over its useful life. A depreciable amount is the cost of the asset, deducted of its residual value.

The depreciation is recognized in profit and loss using the straight-line method, over the estimated useful life of the intangible assets as of the date when the assets are available for use, since these methods reflect the predicted consumption pattern of the future economic benefits inherent in each asset in the best way. Goodwill and intangible assets with an indefinite lifespan are not systematically depreciated, but are tested at least once a year for impairment.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 2 - Principles of accounting policy (continued)

Intangible assets that are formed in the Group are not systematically depreciated as long as they are not available for use, that is, they are not in the location and condition required for them to be able to operate in the way management intended. Therefore, these intangible assets, such as development costs, are tested for impairment at least once a year, until the time they become available for use.

The estimated useful life for the current period and the comparative periods is as follows:

The estimates regarding the useful life and the residual value are re-examined at least at the end of each reporting year and adjusted when necessary.

The Group reviews the estimated useful life of an intangible asset that is not amortized at least annually in order to determine whether the events and circumstances continue to support the determination that the intangible asset has an indefinite life.

The Company reviews the need for impairment of non-financial assets whenever indicators resulting from events or changes in circumstances show that the carrying amounts as stated in the financial reports may not be recoverable. In the event the carrying value of non-financial assets exceeds their recoverable amount, said value is reduced to the value of the recoverable amount. The recoverable amount of an asset is determined as the higher of fair value deducted by cost of disposal, and its value of use. In assessing the value of use, the expected cash flows are capitalized according to a pre-tax discount rate that reflects the specific risks for each asset. For assets which do not generate individual cash flows, the recoverable amount is determined for the cash-generating unit to which they can be attributed. Any impairment losses are recognized in profit and loss. An impairment loss of an asset, with the exception of goodwill, is canceled only when there have been changes in the estimates used to determine the asset’s recoverable amount from the date the impairment loss was last recognized. Such impairment reversal is limited to the lower of previously recognized impairment (deducted of depreciation or amortization) and the recoverable amount of the asset. As for assets measured at cost, said impairment reversal shall be recognized in profit or loss.

On 1 January 2018 the Company implemented the provisions of IFRS 9 – Financial Instruments (hereunder: the “Standard”) for the first time. The Company elected to implement the provisions of the Standard using the modified retrospective manner, without restatement of comparative figures.

The accounting policy implemented with respect to financial instruments as of 1 January 2018, is as follows:

Financial assets are initially measured at fair value, plus any transaction related costs directly attributable to the acquisition of the financial asset, excluding financial assets measured at fair value through profit or loss, for which transaction related costs are recognized in profit or loss.

The Company classifies and measures debt instruments in its financial statements based on the following criteria:

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 2 - Principles of accounting policy (continued)

The Company’s business model is holding the financial assets in order to collect contractual cash flows, and the contractual terms of the financial assets provide entitlement at specified times to cash flows that are only principal and interest payments for the principal amount that has not yet been repaid. After initial recognition, debt instruments in this Group are measured according to their terms at amortized cost using the effective interest method and deducting an allowance for impairment.

At the time of first recognition, a company can designate, without the possibility of changing this designation, a debt instrument as measured at fair value through profit or loss, if this designation eliminates or significantly reduces inconsistencies in measurement or recognition, for example in the case where the related financial liability is also measured at fair value through profit or loss.

The Company’s business model is holding the financial assets in order to collect contractual cash flows, and the contractual terms of the financial assets provide entitlement at specified times to cash flows that are only principal and interest payments for the principal amount that has not yet been repaid. Following initial recognition, all instruments within this Group are measured at fair value. Any gains or losses arising from fair value adjustments, except interest and exchange rate differences, are recognized through other comprehensive income.

A financial asset that is a debt instrument does not meet the criteria for measuring it at amortized cost or at fair value through other comprehensive income. After initial recognition, the financial asset is measured at fair value and gains or losses as a result of fair value adjustments are credited to profit or loss.

Investments in capital instruments that do not meet the aforementioned criteria and are therefore measured at fair value through profit or loss. Other financial instruments held for trading, such as derivatives, including embedded derivatives separated from their host contracts, are measured at fair value through profit or loss, unless designated to serve as effective hedging instruments. With respect to certain equity instruments not held for trading, upon initial recognition the Company may irrevocably elect to present as part of other comprehensive income any subsequent fair value changes which otherwise would have been measured at fair value through profit or loss. These changes will not be attributed to profit or loss in the future, not even when the investment is withdrawn.

Dividend incomes deriving from investments in equity instruments are recognized on the effective date for dividend eligibility, in the statement of profit and loss.

The Group examines, on each reporting date, the provision for loss for financial debt instruments that are not measured at fair value through profit or loss.

Financial liabilities measured at amortized cost

Upon initial recognition, the Company measures financial liabilities at fair value, deducted of any transaction related costs directly attributable to issuance of the financial liabilities.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 2 - Principles of accounting policy (continued)

Following the initial recognition, the Company measures all of its financial liabilities at amortized cost, while using the effective interest rate method, excluding:

Financial liabilities at fair value through profit or loss, such as derivatives;

Receipts for the issuance of warrants to purchase the shares of the Company and/or a consolidated company, which give the holder the right to purchase a fixed number of ordinary shares in exchange for a fixed amount of cash, are presented within the capital in the section “Share-based payment”. In this context, for an exercise amount that changes according to the exercise date, the exercise price can be determined for any possible exercise date on the issuance date, and therefore it is considered a fixed amount.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 2 - Principles of accounting policy (continued)

At times, the Company enters into engagements involving derivative financial instruments, such as foreign currency forwards, in order to mitigate risks arising from foreign currency exchange rates’ fluctuation.

The Group does not implement accounting hedging. Profits or losses deriving from changes in fair value of derivatives that are not held for hedging purposes, are immediately recognized in profit or loss.

Financial assets and financial liabilities are offset against each other. The net amount is presented as part of the statement of financial position, in the event the Company has a legally enforceable right to offset any amounts recognized, and insofar as the Company intends to clear the asset or the liability on a net basis, or realize the asset while clearing the liability, in parallel.

Fair value is the price that would have been received for the sale of an asset or the price that would have been paid to transfer a liability in a normal transaction between market participants at the time of measurement. Fair value measurement is based on the assumption that the transaction is made in the active market of the asset or the liability, or in absence of active markets, the most advantageous market. The fair value of the asset or the liability is measured by using the following assumptions: that it would be used by market participants for quoting the price of the asset or liability, and that market participants act with the purpose of achieving their economic interests. Fair value measurement for a non-financial asset takes into account the ability of a market participant to generate economic benefits by using the asset in its best use or by selling it to another market participant who will use the asset in its best use. The Group uses valuation techniques that are appropriate to the circumstances and for which there is sufficient obtainable data to measure fair value, while maximizing the use of relevant data. All assets and liabilities measured or presented at fair value are categorized into different fair value levels based on the lowest data level that is significant for the fair value measurement as a whole:

Level 1: Quoted prices (not adjusted) in active markets for identical assets and liabilities.

Level 2: Data other than quoted prices included in level 1 which can be directly or indirectly observed. Level 3: Data not based on observable market data (valuation techniques without the use of observable market data).

A provision is recognized when the Group has a current legal or implied obligation, as a result of an event that occurred in the past, that can be reliably measured, and when it is expected that a negative flow of economic benefits will be required to settle the obligation. Provisions are determined by capitalizing future cash flows using the pre-tax interest rate which reflects current market assessments with respect to the time-value of the cash and the specific risks of the liability without taking the Company’s credit risk into consideration. The book value of the provision is adjusted in each period in order to reflect the passage of time. The amount of the adjustment is recognized as financing expenses. The Group recognizes indemnification assets if and only if it is virtually certain that the indemnification amount would be received insofar as the liability is settled. The recognized amount with respect to the indemnification shall not exceed the value of the provision.

Legal Claims

A provision for claims is recognized when the Group has a legal obligation at present or an implied obligation as a result of a past event, when it’s more likely than not that the Group will require its financial resources to settle the obligation and when it can be reliably estimated. When the effect of the time value is material, the provision is measured according to its present value.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 2 - Principles of accounting policy (continued)

Share-based payments to employees and others who provide similar services that are settled in the Company’s capital instruments are measured at their fair value at the time of granting. The Company measures at the time of granting the fair value of the capital instruments granted by using the Black-Scholes model. When the capital instruments granted do not mature until those employees complete a specified period of service during which the employees may also be required to meet certain performance conditions, the Company recognizes the share-based payment arrangements in the financial statements over the vesting period against capital growth, under the section “Capital fund for share-based payment”. At the end of each reporting period, the Company estimates the number of capital instruments expected to mature. A change in estimate compared to previous periods is recognized in profit or loss over the remainder of the vesting period.

Profit per share is calculated by dividing net profit attributable to Company shareholders by the weighted number of actual ordinary shares that exist for the period.

Potential ordinary shares are included in the calculation of diluted profit per share in the event their effect dilutes the profit per share that arises from ongoing operations. Potential ordinary shares converted during the period shall be included as part of the diluted profit per share, only until the date they are converted. As of said date, potential ordinary shares shall be included in the basic profit per share. The Company’s share in profits of subsidiaries is calculated based on the Company’s portion in the profit-per-share of the subsidiaries, multiplied by the number of shares held by the Company.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 2 - Principles of accounting policy (continued)

In February 2021, the IASB published an amendment to International Accounting Standard 1:

Presentation of Financial Statements (hereunder: “the amendment”). In accordance with the amendment, companies will be required to provide disclosure of their material accounting policies instead of the current requirement to provide disclosure of their significant accounting policies. One of the main reasons for this amendment stems from the fact that the term “significant” does not have a definition in the IFRS while the term “material” has a definition in various standards and in particular in IAS 1.

The standard will be applied for annual periods beginning on 1 January 2023.

The above amendment had an impact on the Company’s accounting policy disclosures, but had no impact on the measurement, recognition or presentation of any items in the Company’s consolidated financial statements.

In February 2021, the IASB published an amendment to International Accounting Standard 8: Accounting Policies, Changes in Accounting Estimates and Errors (hereunder: “the amendment”). The purpose of the amendment is to introduce a new definition of the term “accounting estimates”.

Accounting estimates are defined as “financial amounts in the financial statements that are subject to measurement uncertainty.” The amendment clarifies what changes in accounting estimates are and how they differ from changes in accounting policy and error corrections.

The amendment was applied prospectively for annual periods beginning on 1 January 2023 and applies to changes in accounting policies and accounting estimates that occur at the beginning of that period or afterwards.

The above amendment did not have a material impact on the Company’s consolidated financial statements.

In May 2021, the IASB published an amendment to International Accounting Standard 12, Taxes on Income (hereunder: “IAS 12” or “the standard”) which reduces the applicability of the ‘first recognition exception’ in deferred taxes stated in Articles 15 and 24 of IAS 12 (hereinafter: “the amendment”).

As part of the guidelines for the recognition of deferred tax assets and liabilities, IAS 12 excludes the recognition of deferred tax assets and liabilities for certain temporary differences arising from the initial recognition of assets and liabilities in certain transactions. This exception is called the ‘first recognition exception’. The amendment narrows the applicability of the ‘first recognition exception’ and clarifies that it does not apply to the recognition of deferred tax assets and liabilities arising from a transaction that is not a business combination and for which equal temporary differences arise in debit and credit even if they meet the other conditions of the exception.

The standard will be applied for annual periods beginning on 1 January 2023 or later. Early application is possible. Regarding lease transactions - the amendment will be applied starting from the beginning of the earliest reporting period shown in the financial statements in which the amendment was first applied, attributing the cumulative effect of the application for the first time to the opening balance of the surpluses (or another component of capital, as applicable) for that date.

The above amendment did not have a material impact on the Company’s consolidated financial statements.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 3 - The main considerations, estimates and assumptions in preparing the financial statements

In preparing the financial statements in accordance with the IFRS, the Company’s management is required to use discretion in assessments, estimates and assumptions that affect the implementation of the accounting policy and the amounts of assets and liabilities, income and expenses. It is hereby clarified that the actual results may differ from said estimates.

During the formulation of accounting estimates used in the preparation of the Group’s financial statements, the Company’s management was required to make assumptions regarding circumstances and events involving significant uncertainty. In its discretion in formulating the estimates, the Company’s management bases the estimates on past experience, various facts, external factors and reasonable assumptions according to the circumstances appropriate to each estimate.

The estimates and assumptions based on which changes in recognized accounting estimates are regularly reviewed are recognized in the period in which the estimates were revised and in any affected future period.

Information regarding assumptions made by the Group regarding the future and other main factors of uncertainty in connection with estimates where there is a significant risk that their result will be a substantial adjustment to the book values of assets and liabilities during the next financial year is included in the following notes:

Discount rate of a liability for a lease

The Company cannot easily determine the interest rate inherent in leases, and therefore for the purpose of calculating the liabilities for a lease, it uses the additional interest rate of the Company. The additional interest rate determined by the Company constitutes the interest rate that the Company had to pay on a loan for a period similar to the lease period and with similar security, in order to obtain an asset of similar value to the right-of-use asset resulting from the lease, and all in a similar economic environment.

In preparing the financial statements, management is required to use estimates, evaluations and assumptions that affect the implementation of the accounting policies and the amounts reported for assets, liabilities, income and expenses. Actual results may differ from management’s estimates. The changes in the accounting estimates are credited in the period in which the change in the estimate is made. Below are the main assumptions made in the financial statements in connection with the uncertainty for the reporting date and critical estimates calculated by the Group, where a material change in the estimates and assumptions may change the value of assets and liabilities in the financial statements in the following reporting periods:

The Company regularly examines the realizable value of its inventory, and in particular the inventory of new vehicles. As part of the considerations used to determine the realization value of the new vehicle inventory, the Company estimates the expected sales prices of the inventory and the total additional costs that it is expected to incur in order to complete the sale, including agent commission payments and costs for preparing the vehicle for sale.

In assessing the chances of the results of the lawsuits filed against the Company and its held companies, the companies relied on the opinions of their legal advisors. These evaluations of the legal advisors are based on their best professional judgment, taking into account the stage of the proceedings as well as the legal experience gained in the various issues. Since the results of the legal claims will be determined by the courts, these results may differ from the estimates.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands of NIS)

Note 3 - The main considerations, estimates and assumptions in preparing the financial statements (continued)

The liability for post-employment benefit plans is determined using actuarial valuation techniques. Calculating the liability involves determining assumptions regarding discount rates, expected rates of return on assets, the wage increase rate and employee turnover rates, among other assumptions. The balance of the obligation may be significantly affected by changes in these estimates.

For the purpose of assessing whether it is reasonably certain that the Company will exercise an option to extend a lease period or to cancel a lease period, the Company takes into account all the relevant facts and circumstances that create an economic incentive for the Company to exercise or not exercise the option, such as: significant amounts invested for improvements to the leased property, the importance of the underlying asset and the uniqueness inherent in it for the purpose of the Company’s activity, the Company’s past experience in similar lease transactions and more.

After the start date, the Company re-evaluates whether it is reasonably certain that it will or will not exercise an option when a significant event or a significant change in circumstances occurs that has the potential to influence the Company’s decisions regarding the exercise of the option, such as: significant improvements made to the leased property that were not foreseen at the start date, entering into a lease of a sub-asset of the base asset for a period that exceeds the end of the previously determined lease period and more.

Note 4 - New standards and interpretations that have not yet been adopted

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands ILS)

Note 5 - Cash and cash equivalents

Note 6 – Customers

Customer debts do not bear interest.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands ILS)

Note 6 - Customers (continued)

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands ILS)

Note 7 - Receivables and debit balances

Note 8 - Vehicles inventory

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands ILS)

Note 9 - Investments in companies treated according to the balance sheet value method

Further to what was covered in Notes 1 (c) and 2 (u) regarding the merger and reverse acquisition: as stated, Metomy is the legal purchaser of Global Automax and both own subsidiaries as follows:

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands ILS)

Note 9 - Investments in Companies handle according to the Balance Sheet Value method (continued)

On April 25, 2021, Global Automax entered into a Founder’s Agreement with a third party that acts as an authorized distributor of vehicles imported by the Company, and operates the Company’s branch in Petah Tikva (hereunder: “the marketer” and “the Founders’ Agreement”, as applicable).

According to the Founder’s Agreement, the parties will work to establish a joint company (which was established under the name of Automax Hasharon), which will, among other things, operate marketing and sales centers for vehicles in the cities of Petah Tikva, Ra’anana, and other locations to be decided by the parties (below: “The joint company”). According to the Founder’s Agreement, the subsidiary company will own 1/3 of the joint company’s share capital, while the marketer will own the remaining 2/3. The parties undertook to provide the joint company with an initial amount as an owner’s loan for the purpose of financing its activities, divided between them according to the relative share of each party in the joint company’s share capital. Distribution of profits in the joint company will be made subject to any law, according to the relative share of each party in the joint company’s share capital. The joint company’s Board of Directors will appoint 3 members, where two will be appointed by the marketer and one by the subsidiary. The Founder’s Agreement also stipulates that certain decisions will require a 100% majority of the directors, including a change in the joint company’s incorporation documents, including a change in the rights attached to the joint company’s shares, providing loans and/or guarantees and/or other financing for the joint company’s activities that deviate from its normal course of business or Providing loans to stakeholders in the joint company, as well as approving transactions in which an office holder, director, shareholder and/or stakeholders in the company have a personal interest.

The Founders’ Agreement includes customary provisions that limit the possibility of share transferring in the joint company, including the right of first refusal (except in the circumstances stipulated in the Founders’ Agreement), the right to join the sale of shares (Tag Along) and forced sale (Bring Along). The joint company operates the company’s branches in Petah Tikva and Ra’anana.

On May 3, 2021, a vehicle marketing agreement was signed between the subsidiary and the joint company. The agreement is valid for a period of 5 years from the its signature date. In return for the marketing and distribution services, the marketer will receive a commission at certain determined rates from the price of each vehicle sold by the joint company (before VAT and minus license fees amount).

On June 23, 2022, an agreement was signed between Global Automax, and the marketer Automax Hasharon (joing company of the subsidiary and the marketer) entered into a Founders Agreement according to which Global Automax purchased from the third party shares held by it which constitute 1/3 of the issued share capital of Automax Hasharon, as well as granted Automax Hasharon with an owner’s loan in accordance with the agreement established between the parties. After grnating the aforementioned owner’s loan, Automax Hasharon paid off the owner’s loan in the same amount granted by the third party. Simultaneously with the signing of the aforementioned agreement, an amendment to the Founder’s Agreement was signed according to which Global Automax will be entitled to appoint two directors to the Hasharon Automax board of directors, and the third party will be entitled to appoint one director. With the completion of the aforementioned agreement, Global Automax owns 2/3 of the issued share capital of Automax Hasharon, and the third party owns 1/3, and two directors on behalf of Global Automax, and one director on behalf of the third party, serve on the board of Automax Hasharon.

In October 2022, in accordance with the agreement between Global Automax and the Marketer, Global Automax commenced operating the Petah Tikva branch directly, while the joint company continues to operate the Ra’anana branch.

No consideration was transferred for the shares.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands ILS)

Note 9 - Investments in Companies handle according to the Balance Sheet Value method (continued)

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands ILS)

Note 9 - Investments in Companies handle according to the Balance Sheet Value method (continued)

B. Details regarding affiliated companies held by the company:

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands ILS)

Note 9 - Investments in Companies handle according to the Balance Sheet Value method (continued)

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands ILS)

Note 9 - Investments in Companies handle according to the Balance Sheet Value method (continued)

In addition, see Note 21b(p) below.

On May 27, 2021, Global Automax signed an agreement with Hi Biz Ltd., the operator of the Hiteczone consumer club, to establish a joint company to engage in automotive activity including marketing and sales of vehicles, and become, among other things a web based platform for Hiteczone consumer club and joing the national marketing and sales natwork of the new company (hereinafter: Hi Biz, the Agreement” and the “Joint Venture” as the case may be).

On July 18, 2023, Global Automax transferred all of its rights in the joint venture to High Biz. The transfer of the shares was done without any consideration.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands ILS)

Note 10 - Assets and liabilities for Lease Agreements

As of January 1, 2018, the company applies standard IFRS 16 as detailed in Note 2 p. This note refers to leases where the Group is the lessee.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands ILS)

Note 10 - Assets and liabilities for Lease Agreements (Continued)

Global Automax has a Lease Agreement with a third party for the lease of an asset in Jerusalem. The Lease Agreement is valid until March 31, 2025, after exercising its extnsion option. Also, Global Automax is granted with additional options to extend it until March 31, 2027. Global Automax is entitled to notify the lessor every year at the appointed time of shortening and/or termination of the Lease Agreement with a written notice of 6 months in advance.

The current monthly lease fees amount to 110 thousands ILS, plus VAT and linkage differences. On April 1, 2020, and every two years thereafter, lease fees shall increase by 3%, in comparison to the monthly fees paid on the previous month.

In order to guarantee Global Automax undertakings subject to the Lease Agreement, the lessor was provided with various collaterals, as detailed: (a) personal guarantees by Daniel Levi, Yinon Amit, Emanuel Paz Puzailov and Eyal Baruch (hereunder: the “Guarantors”); (b) a promissory note by Global Automax at the amount of 500 thousands ILS, personally guaranteed by the Guarantors; and (c) a deposit of 1-month lease fees provided by Global Automax and held by the lessor as collateral for Global Automax undertakings.

In accordance with the approval of the General Assembly of the company’s shareholders, the subsidiary intends to replace the personal guarantees given by the guarantors as mentioned above, with other acceptable guarantees to be given by Global Automax in the amount of up to 5 months lease fees. As for the reporting date, said guarantees have not yet been replaced.

This property houses the subsidiary’s building in Jerusalem, which includes an exhibition center, a parking lot for vehicles imported by the subsidiary, the company’s management offices, as well as a facility and system for preparing vehicles for sale (PDI).

The inherent interest rate of this lease is estimated at 4.3%.

Global Automax has a Lease Agreement with a third party according to which it leases a 2,000 square meters plot of land on which a 566 square meters building is built in Rishon Lezion. The Lease Agreement is until May 2031. Global Automax may shorten the lease term by a written notice that would be provided to the lessor 6 months in advance. Also, the lessor may shorten the lease period with a written notice of five months in advance, if it wishes to build on the property, provided that it presents the subsidiary with a signed and valid building permit from the Rishon LeZion Planning and Construction Committee.

The monthly lease fees vary between 82 to 100 thousands ILS, plus VAT and linkage differences from May 2015 (predefined annual increases).

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands ILS)

Note 10 - Assets and liabilities for Lease Agreements (Continued)

In order to guarantee its undertakings subject to the Lease Agreement, the Company provided the lessor with various collaterals, including a bank guarantee on behalf of the Company, promissory notes by the Company, and Company guarantee.

Global Automax branch is located in this property including a presentation center comprised of a showroom for sale of vehicles imported by Global Automax.

The inherent interest rate of this lease is estimated at 3.7%.

The subsidiary has a Lease Agreement with a third party according to which it leases a plot of land with an area of 1,776 square meters in Jerusalem. The Lease Agreement is until July 2024 (after the subsidiary exercised options granted to it to extend the lease period). The subsidiary may shorten the lease period provided that it notifies the lessor of this with a written notice 60 days in advance. The lessor has the right to cancel the agreement with a written notice of 6 months in advance, in cases of development and/or planning and/or sale of the leased property.

The current rent is ILS 42 thousand, plus VAT and linkage differences.

On March 24, 2024, the general meeting of the company’s shareholders approved the extension of the Lease Agreement for a period of up to 5 additional years, with monthly lease not exceeding NIS 44,100, plus VAT and linkage differences.

Approximately 47% of the leased property rights are held by an affiliated party of one of the Company’s Directors, who is also a controlling shareholder of the Company.

In order to guarantee its undertakings subject to the Lease Agreement, the Company provided the lessor with a sum for a total of 3-months lease fees (120 thousands ILS) plus VAT, as payment for the last three months of the lease term, and an additional CPI-linked promissory note by the subsidiary for the amount of 100 thousands ILS.

This property contains the logistic warehouse of the Company, where it stores its imported vehicles after they are released by the Customs Authorities and prior to their transportation to the Company’s PDI center.

The inherent interest rate of this lease is estimated at 3.7%.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands ILS)

Note 10 - Assets and liabilities for Lease Agreements (Continued)

Global Automax has a Lease Agreement with a third party according to which it leases a plot of land with an area of 510 square meters on which a building with an area of approximatively 363 square meters is built in Haifa. The Lease Agreement is until May 2026, after it was extended for an additional period.

The monthly lease fees total 42.5 thousand ILS, plus VAT and linkage differences, lease fees for the additional periodd total 44 thousand ILS.

Against possession hand over, a deposit equal to three months’ rent plus VAT was paid to the lessor. Global Automax branch is located in this property including a presentation center comprised of a showroom for sale of vehicles imported by Global Automax.

The inherent interest rate of this lease is estimated at 2%.

Automax Hasharon has a Lease Agreement with a third party according to which it leases a 1,550 square meter lot on which a building of approximately 1,550 square meters is built in Raanana. The Lease Agreement is for the period from May 1, 2021 to April 30, 2026, when Automax Hasharon is granted options to extend it until April 30, 2031. Automax Hasharon is entitled to notify the lessor every year at the appointed time of the shortening and/or termination of the Lease Agreement with a written notice of 3 months in advance.

The monthly lease fees total 55,000 ILS, plus VAT and linkage differences.

Global Automax branch is located in this property including a presentation center comprised of a showroom for sale of vehicles imported by Global Automax.

The inherent interest rate of this lease is estimated at 9%.

Automax Hasharon has a Lease Agreement with a third party according to which it leases a 4,095 square meter lot on which a building of approximately 4,095 square meters is built in Petach Tikva. The Lease Agreement is until December 2024, when she is granted options to extend it until December 2028.

The monthly lease fees total 27,500 ILS, plus VAT and linkage differences.

Global Automax branch is located in this property including a presentation center comprised of a showroom for sale of vehicles imported by Global Automax.

The inherent interest rate of this lease is estimated at 17%.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands ILS)

Note 10 - Assets and liabilities for Lease Agreements (Continued)

Automax Trade in does not have a Lease Agreement with a third party according to which it leases a 1,100 square meter lot on which a building of approximately 1,100 square meters is built in Glilot. The Lease Agreement is for a period until August 2025 (after exercising an option for its extension). The monthly lease fees total 37,500 ILS, plus VAT and linkage differences.

Global Automax branch is located in this property including a presentation center for sale of new and used vehicles.

The inherent interest rate of this lease is estimated at 1.7% and during the option period at 7.2%.

Global Automax has a Lease Agreement with a third party according to which it rents a plot of land with an area of 545 square meters on which a building with an area of approximatively 545 square meters is built in Afula. The Lease Agreement is for the period from December 1, 2021 to December 1, 2024, when Global Automax is granted options to extend it until December 1, 2030. Global Automax is entitled to notify the lessor every year at the appointed time of shortening and/or termination of the Lease Agreement with a written notice of 3 months in advance.

The monthly lease fees were set at the amount of 27,250 ILS, plus VAT and linkage differences. Global Automax branch is located in this property including a presentation center comprised of a showroom for sale of vehicles imported by Global Automax.

The inherent interest rate of this lease is estimated at 2.9%.

The subsidiary had a Lease Agreement with a third party according to which it rents an 80 square meter office in Ashdod. The Lease Agreement was for the period from April 3, 2023 until it ended on Arril 2, 2023.

The monthly lease fees totaled 3,900 ILS, plus VAT and linkage differences.

This property houses the sales office for institutional customers and the subsidiary’s vehicle fleets, and once the lease period ended, its activity was transferred to other Company branches.

The inherent interest rate of this lease is estimated at 2%.

During 2023, Global Automax signed operational Lease Agreements for 19 vehicles for a 3-year period. The aforementioned vehicles are presented on the basis of cost plus one-time setup costs transaction minus accrued depreciation. The vehicles are amortized based on individual calculations for each vehicle over the lease period.

The inherent interest rate of this lease is estimated between 4.53% and 6.9%.

Automax Motors Ltd.

Notes to the consolidated financial statements

(in thousands ILS)

Note 11 - Fixed Assets, net