CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

NOTE 1:-   GENERAL

 

a.       Company description:

                                                                                                                        

Albert Technologies Ltd. (formerly: Adgorithms Ltd.) ("the Company") was incorporated under the laws of Israel and commenced operations in September 2010. The Company's registered address is 20 Lincoln Street, Tel-Aviv, Israel.

The Company offers Artificial Intelligence-based software ("Albert") to brands and advertising agencies using a SaaS model. The Company develops and deploys algorithmic solutions to provide marketers with a self-driving solution for cross-channel campaign execution, testing, optimization, analysis, and insights.

 

The Company's shares are admitted for trading on AIM, commencing June 2015, under the symbol "ALB" (formerly "ADGO").

 

b.    In March 2014, the Company established a wholly-owned subsidiary in the United States, Albert Technologies Inc. (formerly: Adgorithms Inc.), which is engaged in the distribution of the Company's products and services in the United States, as well as provides the Company with advisory and management services.

In August 2016, the Company established a wholly-owned subsidiary in Israel, AA Digital Media (All Aspects) Ltd. which commenced operating in November 2016 and ceased its operations in December 2017. All Aspect was engaged in trading media in various strategies with an array of participants in the online advertising value chain ("In- direct activity" or "In-direct business").

In May 2017, the Company established a wholly-owned subsidiary in Brazil, Adgorithms Brasil Internet Ltda, which is engaged in the distribution of the Company's products and services in Brazil. (Albert Technologies Inc., AA Digital Media and Adgorithms Brasil Internet Ltda, collectively, "the Subsidiaries"). 

c.      The Company management and the Board of Directors believe that the Company's existing financial resources are adequate to satisfy its expected liquidity requirements through the end of 2018. In addition, the Company has adopted a contingency plan, which was approved by the Board, to be effected, in whole or in part, at its discretion, to preserve cash to allow the Company to continue its operations and meet its obligations, to the extent required for at least one year from the date of approval of the consolidated financial statements.

d.      On 5 December 2017, the Company publicly announced the decision of its Board of Directors to cease the In-direct business by the end of 2017. The In-direct activity is presented in the statement of operations and other comprehensive loss as "discontinued operations", including comparative data. For further information please refer to Note 9.

 

e.     The consolidated financial statements were approved for issuance by the Board of Directors on 9 March 2018.

 

 

 

NOTE 2:-   SIGNIFICANT ACCOUNTING POLICIES

 

The following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwise stated.

 

a.       Basis of presentation:

 

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS as adopted by the EU").

 

The consolidated financial statements have been prepared on a cost basis.

 

b.       Consolidated financial statements:

 

The consolidated financial statements comprise the financial statements of the Company and subsidiaries that are controlled by the Company. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

 

Potential voting rights are considered when assessing whether an entity has control. The consolidation of the financial statements commences on the date on which control is obtained and ends when such control ceases.

 

The financial statements of the Company and the Subsidiaries are prepared as of the same dates and periods. The consolidated financial statements are prepared using uniform accounting policies by the Company and the Subsidiaries. Significant intragroup balances and transactions and gains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.

 

c.    Significant accounting judgments, estimates and assumptions used in the preparation of the consolidated  financial statements:

 

The preparation of the consolidated financial statements requires the management of the Company to make estimates and assumptions that have an effect on the application of accounting policies and on the reported amounts of assets, liabilities, revenues and expenses. Changes in accounting estimates are reported in the period of the change in estimate.

 

In the process of applying the significant accounting policies, the Company has made the following judgments which have a significant effect on the amounts recognised in the consolidated financial statements:

 

Development costs

 

The Company evaluates project development costs for capitalisation in accordance with its accounting policy. Before such costs can be capitalised, the Company needs to demonstrate that "the intangible asset will generate probable future economic benefits", among other factors. The Company does not meet the threshold requirements for capitalisation of project development costs and therefore expenses all such costs.

 

d.       Functional currency and foreign currency:

 

1.       Functional currency and presentation currency:

 

The consolidated financial statements are presented in U.S. dollars, the Company's and its Subsidiaries functional currency, and are rounded to the nearest thousand, unless stated otherwise. The functional currency best reflects the economic environment in which the Company operates and conducts its transactions.

 

2.       Transactions in foreign currency:

 

Transactions denominated in foreign currency are recorded based on the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currency as of the reporting date are translated into the functional currency based on the exchange rate at each reporting date. Exchange rate differences are recorded in profit or loss.

 

Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currency are translated into the Company's functional currency using the exchange rate as of the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated into the functional currency based on the exchange rate as of the date that the fair value was determined.

 

e.       Cash and cash equivalents:

 

Cash includes cash balances available for immediate use. Cash equivalents include short-term highly liquid deposits in banks (with original maturities of three months or less) that are readily convertible into known amounts of cash and are part of the Company's cash management.

 

f.       Restricted cash:

 

Restricted cash is primarily invested in deposits used as security for office leases, credit line limit and letter of credit to service providers.

 

g.       Short-term bank deposit:

Bank deposits with maturities of more than three months but less than one year are included in short-term deposits.

 

h.       Allowance for doubtful accounts:

 

The allowance for doubtful accounts is determined in respect of specific debts whose collection, in the opinion of Company's management, is doubtful. Impaired debts are derecognised when they are assessed as uncollectible.

 

i.        Property and equipment, net:

 

Items of property and equipment are measured at cost, including direct acquisition costs, less accumulated depreciation, accumulated impairment losses, if any, and excluding day-to-day servicing expenses.

 

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful life of the property and equipment (generally 3-7 years).

 

j.        Impairment of non-financial assets:

 

The Company evaluates the need to record an impairment of the carrying amount of non-financial assets whenever events or changes in circumstances indicate that the carrying amount is not recoverable. If the carrying amount of non-financial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverable amount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pre-tax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognised in profit or loss.

 

An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount that would have been determined (less depreciation or amortisation) had no impairment loss been recognised for the asset in prior years and its recoverable amount. The reversal of the impairment loss is carried to profit or loss.

 

k.       Employee benefits:

 

1.       Post-employment benefits:

 

The Company has a defined benefit plan in respect of severance pay pursuant to the Severance Pay Law in Israel. According to the Law, employees are entitled to severance pay upon dismissal or retirement. The liability for termination of employment is measured using the projected unit credit method. The actuarial assumptions include expected salary increases and rates of employee turnover based on the estimated timing of payment. The amounts are presented based on discounted expected future cash flows using a discount rate determined by reference to market yields at the reporting date on high quality corporate bonds that are linked to the Consumer Price Index with a term that is consistent with the estimated term of the severance pay obligation.

 

In respect of its severance pay obligation to certain of its employees, the Company makes current deposits in pension funds and insurance companies ("the plan assets").

 

Plan assets are comprised from assets held by a long-term employee benefit funds or qualifying insurance policies. Plan assets are not available to the Company's own creditors and cannot be returned directly to the Company.

 

The liability for employee benefits shown in the consolidated statement of financial position reflects the present value of the defined benefit obligation less the fair value of the plan assets.

 

Remeasurements of the net liability in respect of the defined benefit plan are recognised in other comprehensive income in the period in which they occur.

 

On 1 January 2015 the Company agreed to adopt Section 14 to the Severance Pay Law under which the Company pays fixed contributions and will have no legal or constructive obligation to pay further contributions only for the period commencing from1 January 2015. Contributions in respect of severance pay are recognised as an expense when contributed simultaneously with receiving the employee's services and no additional provision is required in the financial statements.

 

2.       Short-term benefits:

 

Short-term employee benefits are benefits that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social security contributions and are recognised as expenses as the services are rendered. A liability in respect of a cash bonus or a profit-sharing plan is recognised when the Company has a legal or constructive obligation to make such payment as a result of past service rendered by an employee and a reliable estimate of the amount can be made.

  

l.        Share-based payment transactions:

 

The cost of equity-settled transactions with employees and others is measured at the fair value of the equity instruments granted at grant date.

 

The cost of share-based payments is recognised in profit or loss, with a corresponding increase in equity, over the period in which the relevant employees become fully entitled to the award. The amount recognised in profit or loss, taking the vesting conditions into account, consisting of service and performance conditions other than market conditions, is adjusted to reflect the actual number of equity instruments that are expected to ultimately vest.

 

m.      Provisions:

 

A provision is recognised when there is a present obligation, legal or constructive, as a result of a past event and a reliable estimate can be made of the amount of the obligation and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.

 

n.       Revenues:

 

The Company derives its revenues from campaign management SaaS ("Software as a Service") platform and until the end 2017 the Company also derived part of its revenues from sales through bids for advertising spaces on advertising exchanges ("In-direct").

 

Revenue is recognised in profit or loss when the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the Company and the associated costs can be measured reliably. Revenue is measured at the fair value of the consideration received, net of discounts.

 

When the Company acts as an agent or as a broker without being exposed to the significant risks and rewards associated with the transaction, the amounts collected on behalf of the principal are not revenues, and revenues reflect the amount of the commission. When the Company acts as a principal and is exposed to the significant risks and rewards associated with the transaction, revenues reflect the gross inflows of the economic benefits.

 

In determining whether the Company is acting as the principal or an agent, the Company follows the accounting guidance for principal-agent considerations. While none of the factors identified in this guidance is individually considered presumptive or determinative, because the Company is the primary obligor in the arrangement and is responsible for (i) selecting and contracting with third party suppliers for the purchase of inventory, (ii) having general inventory risk over advertising spaces bought, (iii) establishing the selling price, and (iv) assuming credit risk in the transaction, with respect to In-direct revenues, the Company acts as the principal and therefore reported all revenues earned and costs incurred on a gross basis.

 

With respect to SaaS revenues, the Company evaluated that it acts as an agent, based on the accounting guidance for principal-agent considerations, and therefore reports those revenues on net basis.

 

Deferred revenues

 

Payments received from customers, which do not meet the criteria for revenue recognition, are recorded as deferred revenues.

 

o.       Research and development costs:

 

Research expenditures are recognised in profit or loss when incurred. Development costs are also recognised in profit or loss unless they can be capitalised as an intangible asset because the Company can demonstrate: the technical feasibility of completing the development of the intangible asset so that it will be available for use or sale; the Company's intention to complete the development of the intangible asset and use or sell it; the ability to use or sell the intangible asset; how the intangible asset will generate future economic benefits; the availability of adequate technical, financial and other resources to complete the intangible asset; and the ability to measure reliably the respective expenditure asset during its development period.

 

p.       Taxes on income:

 

Taxes on income in the consolidated statements of operations are comprised from current and deferred taxes. Taxes in respect of current or deferred taxes are carried to the consolidated statements of operations except to the extent that the taxes arise from items which are recognised directly in equity or in other comprehensive income.

The current tax liability is measured using the tax rates and tax laws that have been enacted or substantively enacted by the reporting date as well as adjustments required in connection with the tax liability in respect of previous years. 

Deferred tax balances are measured at the tax rates that are expected to apply when the asset is realised or the liability is settled, based on tax laws that have been enacted or substantively enacted by the reporting date.

 

 q.      Earnings (loss) per share:

 

Earnings (loss) per share are calculated by dividing the net income (loss) attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the period. Basic earnings (loss) per share only include shares that were actually outstanding during the period. Potential ordinary shares are included in the computation of diluted earnings (loss) per share only when their conversion has a dilutive effect on the earnings (loss) per share. Further, potential ordinary shares that are converted during the period are included in diluted earnings (loss) per share only until the conversion date and from that date in basic earnings (loss) per share.

 

If the number of ordinary or potential ordinary shares outstanding changes as a result of a bonus issue or share split during the reported periods or after the reporting period but before the financial statements are authorised for issue, the calculations of basic and diluted earnings per share are adjusted retrospectively for all periods presented.

 

r.       Disclosure of new standards in the period prior to their adoption:

 

IFRS 15, "Revenue from Contracts with Customers":

 

In May 2014, the IASB issued IFRS 15, "Revenue from Contracts with Customers": ("IFRS 15").

 

IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for the Construction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC-31, "Revenue - Barter Transactions Involving Advertising Services".

 

IFRS 15 introduces a five-step model that will apply to revenue earned from contracts with customers:

 

Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.

 

Step 2: Identify the separate performance obligations in the contract

 

Step 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, non-cash consideration and any consideration payable to the customer.

 

Step 4: Allocate the transaction price to the separate performance obligations on a relative stand-alone selling price basis using observable information, if it is available, or using estimates and assessments.

 

Step 5: Recognise revenue when the entity satisfies a performance obligation over time or at a point in time.

 

IFRS 15 is to be applied retrospectively for annual periods beginning on or after 1 January 2018. IFRS 15 allows an entity to choose to apply a modified retrospective approach, according to which IFRS 15 will only be applied in the current period presented to existing contracts at the date of initial application. No restatement of comparative periods is required.

 

The Company is still evaluating the possible impact of IFRS 15 but believes, based on an analysis performed to date, that its effect, if any, on its consolidated financial statements would be immaterial.

 

IFRS 9, "Financial Instruments" ("IFRS 9")

 

In July 2014, the IASB issued the final version of IFRS 9 that replaces IAS 39, "Financial Instruments: Recognition and Measurement". IFRS 9 addresses all three aspects of the accounting for financial instruments: classification and measurement, impairment and hedge accounting.

 

IFRS 9 is effective for annual periods beginning 1 January 2018. The Company believes that the adoption of IFRS 9 will not have a material impact on its consolidated financial statements.

 

IFRS 16, "Leases":

 

In January 2016, the IASB issued IFRS 16, "Leases" ("the new Standard"). According to the new Standard, a lease is a contract, or part of a contract, that conveys the right to use an asset for a period of time in exchange for consideration.

 

According to the new Standard:

 

Lessees are required to recognise an asset and a corresponding liability in the statement of financial position in respect of all leases (except in certain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".

 

Lessees are required to initially recognise a lease liability for the obligation to make lease payments and a corresponding right-of-use asset. Lessees will also recognise interest and depreciation expenses separately.

 

Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance or use (such as a percentage of revenues) are recognised as an expense by the lessees as incurred and recognised as income by the lessors as earned.

 

In the event of change in variable lease payments that are CPI-linked, lessees are required to remeasure the lease liability and the effect of the remeasurement is an adjustment to the carrying amount of the right-of-use asset.

 

The new Standard includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment for operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.

 

The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.

 

The new Standard is effective for annual periods beginning on or after 1 January 2019. Earlier application is permitted provided that IFRS 15, "Revenue from Contracts with Customers", is applied concurrently.

 

For leases existing at the date of transition, the new Standard permits lessees to use either a full retrospective approach or a modified retrospective approach, with certain transition relief whereby restatement of comparative data is not required.

 

The Company is evaluating the possible effects of the new Standard. The effect of this standard is expected to be immaterial.

 

 

 

NOTE 3:-   TRADE RECEIVABLES

 

Trade receivables are non-interest bearing and are in generally in terms of 30 to 90 days.

 

As of 31 December 2017 trade receivables are net of an allowance for doubtful accounts in the amount of $ 24 (2016 - $ 35).

 

 

 

NOTE 4:-   PROPERTY AND EQUIPMENT, NET

 

 

 

 

NOTE 5:-   OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

 

 

NOTE 6:-   TAXES ON INCOME

 

a.       The Law for the Encouragement of Capital Investments, 1959:

 

Amendment to the Law for the Encouragement of Capital Investments, 1959 (Amendment 71):

 

On 5 August 2013, the "Knesset" (Israeli Parliament) issued the Law for Changing National Priorities (Legislative Amendments for Achieving Budget Targets for 2013 and 2014), 2013 which consists of Amendment 71 to the Law for the Encouragement of Capital Investments ("the Amendment"). According to the Amendment, the tax rate on preferred income from a preferred enterprise in 2014 and thereafter will be 16% (in development area A - 9%).

 

The Amendment also prescribes that any dividends distributed to individuals or foreign residents from the preferred enterprise's earnings as above will be subject to tax at a rate of 20%.

 

In October 2014, the Company received final approval from the Israeli Tax Authorities for a "Preferred Enterprise" status according to which the Company's revenues meet the definition of "Preferred Income" under the above law. According to the approval, starting 2013, the Company's income derived from the right to use software, not including certain services as detailed in the approval, is deemed "Preferred Income" under the Law for the Encouragement of Capital Investments, 1959. The approval is limited to the period between the tax years 2013 through 2017.

 

The tax benefits under "Preferred Enterprise" status are conditional upon the fulfillment of the conditions stipulated by the above law and the approval received from the tax authorities.

 

b.       Tax rates applicable:

 

Tax rates in Israel on income other than Preferred Income:

 

In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes a reduction of the corporate tax rate from 26.5% to 25%, effective from 1 January 2016.

 

In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from 1 January 2017 and to 23% effective from 1 January 2018.

 

As there were no deferred tax balances as of 1 January and 31 December 2017, the change in the tax rates had no effect in the financial statements.
 

Tax rates in the U.S:

 

A company incorporated in the U.S. - weighted average tax at the rate of about 40% (Federal tax, State tax and City tax of the city where the company operates).

 

On 22 December 2017, the U.S. enacted the Tax Cuts and Jobs Act (the "Act"), which among other provisions, reduced the U.S. corporate tax rate from 35% to 21%, effective 1 January 2018. At 31 December 2017, the Company is not expecting the Act to have a material effect on its consolidated financial statements as there are no deferred taxes.

         

                               Tax rate in Brasil:

 

Based on Brasilian laws, for Corporate Income Tax purposes, there are two methods: "Assumed Profit" or "Actual Profit". The Company has chosen the Assumed method for the year 2017. Under the Assumed Profit method, taxable income is computed by using 34% corporate tax on 32% of the gross revenue. Additional taxes in this method are PIS and COFINS, which rates are 0.65% and 3%, respectively calculated based on the gross revenue.

 

c.       Final tax assessments:

 

The Israeli parent company received final tax assessments until the year 2014. The Subsidiaries have yet to receive final tax assessments since their incorporation.

 

d.    Carryforward operating tax losses for tax purposes of the Israeli parent company amounted to approximately $18,315, as of 31 December 2017.

         

Carryforward operating tax losses for tax purposes of the Israeli subsidiary amounted to approximately $1,573, as of 31 December 2017.

 

Carryforward tax losses in Israel may be set against future taxable income. No deferred tax assets have been recorded in respect of these carryforward tax losses due to the uncertainty of their realisation.

 

e.       Taxes on income included in the consolidated statements of operations:

 

 

f.       Theoretical tax:

 

 

 

NOTE 7:-   COMMITMENTS AND CONTINGENCIES

 

Lease commitments:

 

The Company leases office facilities under operating leases, which expire in 2018. Future minimum commitments under non-cancelable operating lease agreements as of 31 December 2017 are as follows:

 

 

Rental expenses for the years ended 31 December 2017 and 2016 amounted to $ 488 and $ 403, respectively.

 

Legal contingencies:
 

From time to time, the Company is party to various legal proceedings incidental to its business. As of December 31 2017, the Company accrued an immaterial amount to cover probable losses from legal proceedings and threatened litigation.

 

On 6 September 2016, a statement of claim was filed with the Magistrate Court of Tel-Aviv, Israel (the "Court") against the Company, Albert's CEO and founder, Mr. Or Shani, and the Company's then CFO, Mr. Ron Stern (the "Defendants") by Mr. Tal Saar (the "Plaintiff"), a former service provider of the Company. The statement claims, among other things, that the Defendants are liable for certain fees due to such service provider and demanding to receive information with respect to payments made to Mr. Stern by the Company (the "Claim"). A statement of defense and a motion to dismiss the Claim were filed by the Defendants with the Court on 20 November 2016 and 30 December 2016, respectively. The plaintiff claims he is entitled to a payment of NIS 600 thousands (approximately $ 171, based on the exchange rate as of 31 December 2017). During 2017 the Defendants filed a response to the Plaintiff' statement and the Plaintiff filed an amended statement of claim. Pre-trial hearing scheduled for 16 April 2018.

 

No provision in respect of the Claim was recorded in the financial statements as of 31 December 2017, as the Company's current position is that all allegations are groundless and it is unlikely that any allegations brought against the Company, Mr. Shani and Mr. Stern will be accepted by the Court.

 

 

NOTE 8:-   EQUITY

 

a.       Composition of share capital:

 

 

b.       Share-based payments:

 

In October 2013, the Board of Directors of the Company adopted the Company's 2013 Share Option Plan ("Plan"). The Plan provides for the grant of options to purchase Ordinary shares of the Company to employees, officers, directors, consultants and advisors of the Company.

 

The share-based payments that the Company granted to its employees and non-employees are described below.

 

There have been no modifications to any of the options during 2016 and 2017, other than the modification mentioned below.

 

In June 2016 the CEO and founder, Mr. Or Shani, waived his rights with respect to all of his existing options over 2,012,999 Ordinary shares. As a result of the aforementioned waiver, an acceleration was recognised and accordingly, the Company recorded in its consolidated statement of operations an expense amounting to $146.

 

Options issued to employees:

Options granted under the Plan expire 10 years from the vesting commencing date. The options generally vest over three years (1/3 at each year).

In June 2016, the Company granted 3,072,981 options to its employees (the "June 2016 grant"). The June 2016 grant included 1,302,085 options that in addition to a service condition require the employees to meet certain non-market performance goals. Of these options, the performance goals for 246,795 options were achieved as of 31 December 2017, and the related compensation costs, subject to service vesting conditions, were recorded in the financial statements. For the remaining 1,055,290 performance-based options, not met as of 31 December 2017, and accordingly, no compensation costs in respect of these options are being recorded in the financial statements. On 9 March 2018 the Board of Directors approved the retroactive modification of the performance goals for 555,290 options (of the 1,055,290 options referred to above).In 2017, the Company granted 1,620,253 options to its employees subject to service vesting conditions.

 

The following table lists the number of share options, the weighted average exercise prices of share options and change in the number of outstanding options during the year:

 

 

The Company estimates the fair value of stock options granted to its employees and non-employees using the Black-Scholes-Merton option-pricing model ("B&S"). The B&S requires a number of assumptions, of which the most significant estimates are as follows:

 

·       Volatility - in 2016 and 2017 the Company's Ordinary shares had not been publicly traded for long enough to accurately evaluate volatility, and therefore the volatility assumption is based on the volatilities of other publicly-traded companies that management considered as comparable to the Company.

 

·       Expected option term - the expected term of the options represents the period of time that the options are expected to be outstanding.

 

·        Risk-free interest -the risk-free interest rate is based on the exercise price currency, based on the US daily treasury yield curve rate with an equivalent term to the expected life of the option.

 

The following table lists the inputs to the B&S model used for the fair value measurement of equity-settled share options for the above plan:

 

 

The options outstanding under the Company's Plans as of December 31, 2017 and 2016 have been separated into ranges of exercise price as follows:

 

 

The weighted average fair values of options granted for the years ended 31 December 2017 and 2016, were $ 0.283 and $ 0.132, respectively.

 

The weighted average remaining contractual life of the outstanding options as of 31 December 2017 and 2016, were 8.41 and 8.77 years, respectively.

 

For the options exercised during 2017 and 2016, the weighted average market price of the Company's shares at the time of exercise was $0.38 and $0.25, respectively.

 

Options issued to non-employees:

 

The Company's outstanding options to non-employees as of 31 December 2017 and 2016 were as follows:

 

 

The following table lists the inputs to the B&S model used for the fair value measurement of equity-settled share options for the above plan:

 

 

The cost of share based payments from continuing operations recognised in profit or loss for services received from employees and consultants is shown in the following table:

 

 

NOTE 9:- DISCONTINUED OPERATIONS

On 5 December 2017, the Company publicly announced the decision of its Board of Directors to cease the In-direct business by the end of 2017. At 31 December 2017, In-direct business was classified as discontinued operations. The results of the In-direct business for the years 2017 and 2016 are presented below:

 

 

(*) See Note 14 for the weighted average number of Ordinary shares used in the computation

 

 

NOTE 10:- REPORTABLE SEGMENTS

 

a.      Based on the management reporting system, the Company operates in a single operating segment as provider of on-line marketing services.

 

b.       Revenues from continuing operations, based on the location of customers, are as follows:

 

 

c.       The Company's non-current assets are mostly located in Israel.

 

d.    In 2017, revenues from two customers individually represented 20% and 12% of the Company's revenues. Revenues from all other customers individually represented less than 10% of the Company's revenues.

 

In 2016, revenues from four customers individually represented percentages higher than 10% of the Company's revenues (between 11% to 15% for each customer).

 

 

 

NOTE 11:- FINANCIAL INSTRUMENTS

 

Financial risk management objectives and policies:

 

The Company is exposed to market risk and credit risk, as following:

 

a.       Market risk:

 

Market risk is the risk that the fair value of future cash flows or a financial instrument will fluctuate because of changes in market prices. Market risk is comprised from three types of risks: interest rate risk, currency risk and other price risk. As of 31 December 2017 and 2016, the Company considers the exposure to market risk to be immaterial.

 

b.       Credit risk:

 

Credit risk is the risk that counterparty will not meet its obligations as a customer or under a financial instrument leading to a loss to the Company. The Company is exposed to credit risk from its operating activity (primarily trade receivables) and from its financing activity, including deposits with banks and other financial institutions and foreign currency transactions.

 

1.       Trade receivables:

Customer credit risk is managed in the Company subject to the Company's policies, procedures and controls relating to customer credit risk management. Credit quality of a customer is assessed based on a credit analysis and rating and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored.

 

The Company's trade receivables are derived from sales to customers located in different countries, primarily in the United States. The Company performs ongoing credit evaluations for its customers and an impairment analysis is performed at each reporting date on an individual basis for the Company's customers. The maximum exposure to credit risk as of the reporting date is the carrying value of trade receivables (see Note 3).

 

The Company does not hold collateral as security for these receivables. The Company evaluates the concentration of risk with respect to trade receivables as low.

 

2.       Cash, cash equivalents and restricted deposits:

 

Credit risk from balances with banks and financial institutions is managed by the Company's management in accordance with the Company's policy. Cash, cash equivalents and restricted cash are deposited with major banks in Israel and in the US that are of high quality.

 

 

 

NOTE 12:- ADDITIONAL INFORMATION TO THE CONSOLIDATED STATEMENTS FROM CONTINUING OPERATIONS

 

 

 

 

NOTE 13:- COMPENSATION TO KEY MANAGEMENT PERSONNEL

 

 

 

NOTE 14:- NET LOSS PER SHARE

 

                   Details of the number of shares used in the computation of basic and diluted net loss per share:

 

 

In 2016 and 2017, all outstanding options have been excluded from the calculation of the diluted net loss per share because they are anti-dilutive (decrease net loss per share).

 

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