Automax Motors Ltd. — Earnings Release 2019

Nov 28, 2019

Matomy Media Group | Third Quarter 2019 Financial Results

Matomy Media Group Ltd. (LSE: MTMY, TASE: MTMY.TA), today announced financial results for the third quarter ended 30 September, 2019.

OPERATING REVIEW -Results for the nine-month period ended 30 September 2019

Following the sale of its Mobile activity in November 2018 Matomy operates in one segment Domain monetization (Team Internet).

Matomy Media Group Consolidated Results for the nine-month period ended 30 September 2019 (non-GAAP):

(\$ million)	nine-month period ended 30 September 2019
	(unaudited)
Revenue	52.7
Adjusted gross profit*	14.3
Adjusted gross margin*	27.1%
Adjusted EBITDA**	4.7
Direct Adjusted EBITDA***	8.3

*Adjusted Gross Profit / Margin

Adjusted gross profit is a non-GAAP financial measure that Matomy defines as revenues less Direct Media Costs.

Matomy believes that adjusted gross profit is a meaningful measure of operating performance because it is frequently used for internal management purposes, indicates the performance of Matomy's solutions in balancing the goals of delivering results to its customers whilst meeting margin objectives, and facilitates a more complete understanding of factors and trends affecting Matomy's underlying revenues performance.

**Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that Matomy defines as net income before taxes on income, financial expenses (income), net, depreciation and amortisation, share-based compensation expenses (cash and non-cash). Adjusted EBITDA is a key measure Matomy uses to understand and evaluate its core operating performance and trends, to prepare and approve its annual budget and to develop short- and long-term operating plans.

***Direct Adjusted EBIDTA

Direct Adjusted EBITDA is a non-GAAP financial measure that Matomy defines as Adjusted EBITDA

directly attributable to a specific business less the applicable Corporate Allocations assigned to such activity.

Going Concern

The Company requires additional capital in order to fund its liabilities (such liabilities include, among others, liability to non-controlling interest and convertible bond liability). In order for the Company to act in a manner that is intended to address the interests of all stakeholders, the Company signed a binding agreement to sell all of its stake in Team Internet, as further detailed in Note 1b(i) to the interim financial statements as of 30 September 2019. If such transaction will be completed, the Company will have positive net assets (the Company's assets shall exceed its liabilities) and it shall have sufficient funds to pay all liabilities as they become due. If the transaction will not be completed, there is no assurance that the Company will be able to obtain such required additional capital, and in such circumstances there is substantial doubt regarding the Company's ability to continue as a going concern. For further details, refer to Note 1b to the Company's Interim Financial Statements as of 30 September 2019 and to the Auditors' Report.

Projected Consolidated Sources and Expected Uses of Funds Statement through September 2020

Pursuant to the requirements the Hybrid Disclosure Model which apply only to dual listed companies that issue bonds on TASE, this announcement includes a special statement of projected consolidated sources and expected uses of funds statement through September 2020 (the "Projected Statement"). The Projected Statement is not intended to create any continuous on-going disclosure obligation for the Company. See Appendix A. See also "Cautionary statement regarding forward-looking statements" below.

Cautionary statement regarding forward-looking statements

This announcement includes certain forward-looking statements, forecasts, estimates, projections, and opinions. These forward-looking statements may be identified by the fact that they do not relate only to historical or current facts or the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. Forward-looking statements include statements regarding the the negotiations with Rainmaker and the bondholders, the business strategy, objectives, financial condition, results of operations and market data of the Company and its subsidiaries (the "Group"), as well as any other statements that are not historical facts. These statements reflect the Company's current view concerning future events and are based on assumptions made by the Company (including, without limitation, assumptions concerning currency exchange rate fluctuations, requirements of additional capital, costs of sale or closure of various operations and changes to regulations) and information currently available to the Company.

Although the Company considers that these views and assumptions are reasonable, by their nature, forward-looking statements involve unknown risks, uncertainties, assumptions and other factors because they relate to events and depend on circumstances that will occur in the future whether or not outside the control of the Company. These factors, risks, uncertainties, and assumptions could cause actual outcomes and results to be materially different from those projected. Past performance cannot be relied upon as a guide to future performance and should not be taken as a representation that trends or activities underlying past performance will continue in the future. No representation is made or will be made that any forward-looking statements will be achieved or will prove to be correct. These factors, risks, assumptions, and uncertainties expressly qualify all subsequent oral and written forward-looking statements attributable to the Company or persons acting on its behalf.

The forward-looking statements speak only as of the date of this announcement. Each of the Company and its respective affiliates expressly disclaim any obligation or undertaking to update, review or revise any forward-looking statement and disclaims any obligation to update its view of any risks or uncertainties described herein, or to publicly announce the result of any revisions to the forwardlooking statements made in this announcement to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based or otherwise, except as required by law.

No statement in this announcement is intended or is to be construed, as a profit forecast or estimate or to be interpreted to mean that earnings per Company share or overall earnings for the current or future financial years will necessarily match or exceed the historical published earnings per Company share or overall earnings.

By order of the Board:

Sami Totah, Chairman of the Board and Chief Executive Officer Ilan Tamir, Chief Operating Officer

About Matomy Media Group Ltd.

Matomy Media Group Ltd. (LSE: MTMY, TASE: MTMY.TA) is a global advertising technology company. Founded in 2006 with headquarters in Tel Aviv and offices in Germany, Matomy is duallisted on the London and Tel Aviv Stock Exchanges.

For more information:

Press / Investor Relations:

Noam Yellin Noam@smartteam.co.il +972544246720

Website: http://investors.matomy.com

Matomy Media Group Ltd. - Sources and Expected Uses of Funds Statement (Solo, excluding Team Internet) - through Q3 2021						עד ט( - אינטרנ לא טים )סולו, ל פויים - מושים צ רות ושי דוח מקו מ - רופ בע" מדיה ג מטומי 2021 בר בספמט ליום 30
in thousands of USD													דולר באלפי
		Q4-2019 projected		Q1-2020 projected	Q2-2020 projected		Q3-2020 projected		Q4-2020 projected		Nine months 2021 projected
Opening balance	\$	4,143	\$	3,791	\$	2,777	\$	4,458	\$	4,183	\$	3,908	תיחה יתרת פ
Sources :													מקורות:
Cash flow from Operations:													: שוטפת ת מפעילו תזרים
Working Capital Mobfox activity	\$	(315)											מובפוקס חוזר הון
Tax Receivable - Matomy USA	\$	798			\$	164							יקאיים ס האמר ונות המ ס משלט החזר מ
Tax Receivable - Matomy KG	\$	3,128											יים ס הגרמנ ונות המ ס משלט החזר מ
Cash flow from Financing activity:
Payments from CNIC					\$	1,792					\$	2,384
	\$	3,611	\$	-	\$	1,956	\$	-	\$	-	\$	2,384
Expected Usage of Funds:													: צפויים ם שימושי
Cash used for Operations:	\$	(438)	\$	(438)	\$	(275)	\$	(275)	\$	(275)	\$	(275)	: שוטפת ת לפעילו תזרים
One-time Cost of Operations			\$	(288)									פעמית-חד ת תפעולי עלות
D&O Insurance - runoff			\$	(200)									runoff - ים דירקטור ביטוח
Legal cost of bond settlement / sale of TIAG	\$	(400)											ת משפטיו - אינטרנט טים ומכירת החוב הסדר עלות
Net taxes due in Germany and UK	\$	(84)	\$	(88)									ה ובאנגלי בגרמניה החלים ,נטו , מסים
Tax due on Matomy UK loan repayment
Bond interest due on December 31, 2019 plus interest due until anticipated date of													ריבית בתוספת 31/12/19 ם חלה ביו ריבית ה מוקדם הפדיון ה עד ליום הצפויה
the early redemption of the Bonds	\$	(979)
Less bond deposit	\$	938											מן צל הנא קדון שא בניכוי פ
Cash flow used for Financing activity:													: מימון ת לפעילו תזרים
Net Bond principal payment	\$	(3,000)									\$	-	אג"ח חזיקי ה הקרן למ טו, של החזר, נ
		\$ (3,963)		\$ (1,014)	\$	(275)	\$	(275)		\$ (275)	\$	(275)
Closing balance	\$	3,791	\$	2,777	\$	4,458	\$	4,183	\$	3,908	\$	6,017	גירה יתרת ס

Assumptions:

1

2

On 15 November 2019, the Company signed a binding agreement with Centralnic Group PLC, whose shares are traded on the AIM Market of the London Stock Exchange, the "Purchaser" or "CNIC") to sell all the shares in Team Internet. For further details refer to Note 1 in the Company's financial statement for the period ending on September 30, 2019. Part of the consideration is deferred. In addition to the consideration paid on closing by the Purchaser to the trustee of the convertible bonds (Series A) of the Company (the "Trustee"), the Company shall transfer to the Trustee a cash amount of approx. \$3,000K, for the completion of full and immediate repayment of the Company's outstanding convertible bonds (principal and interest).

The Company anticipates that subject to the completion of the Transaction, it will continue to decrease its professional services (accounting, audit and legal services) expenses. In addition, the Company will examine possible alternatives with regard to its listings on the High Growth Segment of the London Stock Exchange's Main Market and the Tel – Aviv Stock Exchange which will be implemented during the first half of 2020. The Company expects that as a result of all of the above, the Company's operational overhead will be decrease significantly.

Unreviewed Statement

The statement contains unreviewed financial measures that do not have a standardized meaning prescribed by GAAP.

Cautionary statement regarding forward-looking statements

This statement includes certain forward-looking statements, forecasts, estimates, projections and opinions. These forward-looking statements may be identified by the fact that they do not relate only to historical or current facts or the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. Forward-looking statements include statements regarding the business strategy, objectives, financial condition, results of operations and market data of the Company and its subsidiaries (the "Group"), as well as any other statements that are not historical facts. These statements reflect the Company's current view with respect to future events and are based on assumptions made the Company (including, without limitation, assumptions concerning currency exchange rate fluctuations, requirements of additional capital, costs of closure of various operations and changes to regulations) and information currently available to the Company.

Although the Company considers that these views and assumptions are reasonable, by their nature, forward-looking statements involve unknown risks, uncertainties, assumptions and other factors because they relate to events and depend on circumstances that will occur in the future whether or not outside the control of the Group. These factors, risks, uncertainties and assumptions could cause actual outcomes and results to be materially different from those projected. Past performance cannot be relied upon as a guide to future performance and should not be taken as a representation that trends or activities underlying past performance will continue in the future. No representation is made or will be made that any forward-looking statements will be achieved or will prove to be correct. These factors, risks, assumptions and uncertainties expressly qualify all subsequent oral and written forwardlooking statements attributable to the Company or persons acting on its behalf.

The forward-looking statements speak only as of the date of this announcement. Each of the Company and its respective affiliates expressly disclaim any obligation or undertaking to update, review or revise any forward-looking statement and disclaims any obligation to update its view of any risks or uncertainties described herein or to publicly announce the result of any revisions to the forward-looking statements made in this announcement to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based or otherwise, except as required by law.

No statement in this announcement is intended, or is to be construed, as a profit forecast or estimate or to be interpreted to mean that earnings per Company share or overall earnings for the current or future financial years will necessarily match or exceed the historical published earnings per Company share or overall earnings.

Matomy Media Group Ltd. - Gap analysis - comparison of Q3, 2019 actual cash flow compared to the Sources and Expected Uses of Funds Statement projection published on August 31, 2019						של רבעון 3 ין נתוני שוואה ב טבלת ה מ - רופ בע" מדיה ג מטומי ב31- פורסם פויים ש מושים צ רות ושי דוח מקו לעומת 2019 שנת ט 2019 באוגוס
	in thousands of USD								דולר באלפי
			Q3 -	2019		Q3 - 2019
			Projected		Actual
	Sources :								מקורות:
	Cash flow from Operations:							: שוטפת ת מפעילו	תזרים
	Working Capital Mobfox activity	Note 1 below	\$	(710)	\$	17	למטה 1 הערה	מובפוקס	חוזר הון
	Tax Receivable - Matomy USA	2 Note below	\$	- \$		66	למטה הערה 2	יקאיים ס האמר ונות המ ס משלט	החזר מ
Expected Usage of Funds:								: צפויים	ם שימושי
	Ongoing operations	3 Note below	\$	(438)	\$	(478)	למטה הערה 3	שוטפת פעולית	עלות ת
	One-time Cost of Operations	Note 3 below	\$	(191)	\$	(244)	למטה 3 הערה	פעמית-חד ת תפעולי	עלות
	D&O insurance	Note 4 below			\$	(250)	למטה 4 הערה	ים דירקטור	ביטוח
	Legal cost of bond settlement / sale of TIAG	Note 5 below	\$	(200)	\$	(419)	למטה 5 הערה	ת משפטיו - אינטרנט טים ומכירת החוב	הסדר עלות
Note									הסבר
1	The company paid suppliers less than expected in Q3, and will pay outstanding debts during Q4.						פתוחים שנשארו	חובות , ותשלם המצופה פחות מ לספקים שילמה החברה רבעון .4 במהלך	.1
2	Company collected an amount earlier than expected.							מהצפוי מוקדם זה סכום גבתה החברה	.2
3	This cost was slightly higher than planned.							מהצפוי במעט גבוהה היתה זו עלות	.3
The Company and the insurer of the existing policy encountered difficulties to reach an understanding about the extension of the existing policy according to its terms. The existing insurer agreed to extend the existing policy provided, inter alia, that the Company will pay a much higher premium 4 for a limited coverage (exclusion of coverage in case of insolvency). In light of the above, the Company's changed the structure of the insurance coverage and turned the existing policy into a run-off policy for a period of 7 years, on the same terms as the existing policy, and purchased an additional D&O insurance policy with a reduced coverage from a different insurer							טוח סת הבי דוש פולי מת סה הקיי ת הפולי ם יותר וי מצומצ פכה את חברה ה כיסוי ן רכשה שנים, וכ	נוגע לחי הבנות ב להגיע ל בקשיים נתקלו והמבטח החברה אריך א סכים לה הקיים ה המבטח תנאים. באותם הקיימת בגין כיס הה יותר מיה גבו שלם פר חברה ת כך, שה בכפוף ל אמור, ה לנוכח ה פירעון(. חדלות תו הליכי מתחול )המחריג של 7 לתקופה run ת off- לפוליס הקיימת הפוליסה ח אחר. ר ממבט מצם יות וסף מצו ביטוחי נ	.4
5	Higher costs than expected due to the sale of Team Internet transaction							אינטרנט טים מכירת בשל מהרגיל גבוהות עלויות	.5

MATOMY MEDIA GROUP LTD. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED FINANCIAL INFORMATION

AS OF 30 SEPTEMBER 2019

U.S. DOLLARS IN THOUSANDS

UNAUDITED

INDEX

	Page
Review Report of Independent Auditors	2
Consolidated Balance Sheets	3 - 4
Consolidated Information of Operations	5
Consolidated Information of Changes in Shareholders' Equity	6 - 7
Consolidated Information of Cash Flows	8 – 9
Notes to Interim Consolidated Financial Information	10 – 28

- - - - - - - - - - - - - - - - - - -

The Board of Directors Matomy Media Group Ltd.

Review Report of Independent Auditors

We have reviewed the consolidated financial information of Matomy Media Group Ltd. and its subsidiaries (collectively "the Company"), which comprise the consolidated balance sheet as of 30 September 2019, and the related consolidated information of operations, changes in shareholder's equity and cash flows for the nine-month periods ended 30 September 2019 and 2018.

Management's Responsibility for the Financial Information

Management is responsible for the preparation and fair presentation of the interim financial information in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control sufficient to provide a reasonable basis for the preparation and fair presentation of interim financial information in conformity with U.S. generally accepted accounting principles.

Auditor's Responsibility

Our responsibility is to conduct our review in accordance with auditing standards generally accepted in the United States applicable to reviews of interim financial information. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial information. Accordingly, we do not express such an opinion.

Conclusion

Based on our review, we are not aware of any material modifications that should be made to the consolidated financial information referred to above for it to be in conformity with U.S. generally accepted accounting principles.

Emphasis of Matter Regarding Going Concern

The accompanying interim financial information have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1a to the interim financial information, during the ninemonth period ended 30 September, 2019 the Company incurred a net loss of \$ 16,026 thousands, and its working capital deficiency amounted to \$ 32,156 thousands as of 30 September, 2019. These conditions, among others, raise substantial doubts about the Company's ability to continue as a going concern. Management's evaluation of the events and conditions and management's plans regarding these matters are described in Note 1b. The interim financial information do not include any adjustments that might result from the outcome of this uncertainty.

Tel Aviv, Israel KOST FORER GABBAY & KASIERER November 28, 2019 A Member of Ernst & Young Global

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

	30 September 2019	31 December 2018
	Unaudited	Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	\$ 9,938	\$ 7,167
Restricted cash		- 3,134
Trade receivables, net	5,730	5,947
Government authorities	5,364	9,009
Other receivables and prepaid expenses	1,215	3,474
Discontinued operation	120	4,634
Total current assets	22,367	33,365
LONG-TERM ASSETS:
Property and equipment, net	1,406	1,413
Operating lease right-of-use asset	1,836	-
Domains	11,881	11,904
Other intangible assets, net	624	1,451
Goodwill	26,295	42,279
Other assets	55	59
Total long-term assets	42,097	57,106
Total assets	\$ 64,464	\$ 90,471

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

	30 September 2019	31 December 2018
	Unaudited	Audited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Liability to non-controlling interest	\$ 20,643	\$ 19,375
Short-term bank credit and current maturities of bank loans	1,501	5,752
Trade payables	6,932	7,498
Employees and payroll accrual	891	1,813
Convertible bond at fair value (principal of ILS 101,000 thousand)	19,289	18,540
Accrued expenses and other liabilities	4,766	6,057
Discontinued operation	501	3,928
Total current liabilities	54,523	62,963
LONG-TERM LIABILITIES:
Deferred tax liabilities	472	2,727
Bank loans, net of current maturities	434	1,116
Operating lease liabilities	1,451	-
Other liabilities	185	318
Total long-term liabilities	2,542	4,161
EQUITY:
Matomy Media Group Ltd. shareholders' equity:
Ordinary shares	254	254
Additional paid-in capital	86,109	86,031
Accumulated other comprehensive loss	(3,174)	(3,174)
Accumulated deficit	(69,800)	(53,788)
Treasury shares	(6,231)	(6,231)
Total Matomy Media Group Ltd. shareholders' equity	7,158	23,092
Non-controlling interests	241	255
Total equity	7,399	23,347
Total liabilities and equity	\$ 64,464	\$ 90,471

CONSOLIDATED INFORMATION OF OPERATIONS

U.S. dollars in thousands except share and per share data

	Nine months ended 30 September 2019	Yeear ended December 31 2018
	Unaudited	Audited
Revenues	\$ 52,676	\$ 73,072	\$ 88,734
Cost of revenues	40,935	57,942	69,867
Gross profit	11,741	15,130	18,867
Operating expenses Research and development Selling and marketing General and administrative Impairment, net of change in fair value of contingent consideration Other expenses (Refer to Note 1c(i)) Restructuring costs Loss from sale of activity	524 2,727 4,960 15,984 1,000 - -	2,137 6,897 4,338 293 - 1,117 1,777	2,266 7,694 6,125 7,435 - 1,923 1,777
Total operating expenses	25,195	16,559	27,220
Operating loss from continuing operations	(13,454)	(1,429)	(8,353)
Convertible bond issuance costs Financial expenses (income), net	- 2,385	1,588 (1,276)	1,588 (6,691)
Loss from continuing operations before taxes on income Tax on income	(15,839) 187	(1,741) 3,139	(3,250) 3,683
Loss from continuing operations before gain from sale of affiliated companies Gain from sale of affiliated companies Loss from continuing operations	(16,026) - (16,026)	(4,880) - (4,880)	(6,933) 75 (6,858)
Loss from discontinued operations, net	-	(37,712)	(39,787)
Net loss	(16,026)	(42,592)	(46,645)
Net loss attributable to other non-controlling interests in subsidiary	14	47	53
Net loss attributable to Matomy Media Group Ltd. from continuing operations Net loss attributable to Matomy Media Group Ltd. from discontinued	(16,012)	\$ (4,833)	\$ (6,805)
operations	-	\$ (37,712)	\$ (39,787)
Net loss attributable to Matomy Media Group Ltd.	(16,012)	(42,545)	\$ (46,592)
Basic and diluted loss per ordinary share from continuing operations Basic and diluted loss per ordinary share from discontinued operations	(0.16) -	(0.05) (0.39)	\$ (0.07) (0.41)
Basic and diluted loss per ordinary share	(0.16)	\$ (0.44)	\$ (0.48)
Weighted average number of shares used in computing basic and diluted net loss per share	97,169,841	96,400,577	96,511,986

CONSOLIDATED INFORMATION OF CHANGES IN SHAREHOLDERS' EQUITY

US dollars in thousands, except share data

	Ordinary shares				Additional paid-in	Accumulated other comprehensive Accumulate				Treasury	Total Matomy Media Group Ltd. shareholders'	Non controlling			Total
	Number		Amount		capital		loss		deficit	Shares	equity		interests		equity
Balance as of 1 January 2019	98,372,339	\$	254	\$	86,031	\$	(3,174)	\$	(53,788)	\$ (6,231)	\$ 23,092	\$	255	\$	23,347
Stock-based compensation	-		-		78		-		-	-	78		-		78
Vesting of restricted share units	111,500		*)		*)		-		-	-	-		-		-
Net loss	-		-		-		-		(16,012)	-	(16,012)		(14)		(16,026)
Balance as of 30 September 2019 (unaudited)	98,483,839	\$	254	\$	86,109	\$	(3,174)		\$ (69,800)	\$ (6,231)	\$ 7,158	\$	241	\$	7,399

	Ordinary shares			Accumulated Additional other paid-in comprehensive Accumulate					Treasury	Total Matomy Media Group Ltd. shareholders'	Non controlling	Total
	Number		Amount		capital		Loss		deficit	Shares	equity	interests	equity
Balance as of 1 January 2018	97,535,023	\$	252	\$	85,931	\$	(3,174)	\$	(7,196)	\$ (6,231)	\$ 69,582	\$ 308	\$ 69,890
Stock-based compensation	-		-		47		-		-	-	47	-	47
Exercise of options and vesting of restricted share units	425,158		1		(1)		-		-	-	-	-	-
Net loss	-		-		-		-		(42,545)	-	(42,545)	(47)	(42,592)
Balance as of 30 September 2018 (unaudited)	97,960,181	\$	253	\$	85,977	\$	(3,174)	\$	(49,741)	\$ (6,231)	\$ 27,084	\$ 261	\$ 27,345

*) Represents an amount lower than \$ 1.

CONSOLIDATED INFORMATION OF CHANGES IN SHAREHOLDERS' EQUITY

US dollars in thousands, except share data

	Ordinary shares		Additional paid-in	Accumulated other comprehensive	Accumulate	Treasury	Total Matomy Media Group Ltd. shareholders'	Non controlling	Total
	Number	Amount	capital	Loss	deficit	shares	equity	interests	equity
Balance as of 1 January 2018	97,535,023	\$ 252	\$ 85,931	\$ (3,174)	\$ (7,196)	\$ (6,231)	\$ 69,582	\$ 308	\$ 69,890
Stock-based compensation Exercise of options and vesting of restricted share	-	-	102	-	-	-	102	-	102
units	837,316	2	(2)	-	-	-	-	-	-
Net loss	-	-	-	-	(46,592)	-	(46,592)	(53)	(46,645)
Balance as of 31 December 2018 (audited)	98,372,339	\$ 254	\$ 86,031	\$ (3,174)	\$ (53,788)	\$ (6,231)	\$ 23,092	\$ 255	\$ 23,347

CONSOLIDATED INFORMATION OF CASH FLOWS

US dollars in thousands

	Nine months ended 30 September	Year ended December 31
	2019	2018
		Unaudited		Audited
Cash flows from operating activities:
Net loss	\$ (16,026)	\$	(42,592)	\$ (46,645)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,354		7,451	8,647
Stock-based compensation	78		47	102
Impairment of intangible assets, goodwill, and capitalized
research and development	15,984		31,438	38,580
Change in deferred tax, net	(2,242)		(581)	(664)
Change in accrued interest and effect of foreign exchange
differences on long term loans and leases liability	(183)		(132)	(167)
Gain from sale of affiliated companies	-		-	(75)
Fair value revaluation - convertible bond	749		(4,979)	(11,390)
Decrease in trade receivables	4,732		19,049	22,679
Decrease (increase) in other receivables and prepaid
expenses	511		62	(186)
Decrease in other assets	6		57	57
Decrease in trade payables	(3,999)		(15,181)	(17,796)
Changes in fair value of payment obligation recognized in
earnings	1,268		260	260
Decrease (increase) in tax receivable	3,645		(3,383)	(3,399)
Decrease in employees and payroll accruals	(922)		(2,162)	(2,294)
Decrease in accrued expenses and other liabilities	(1,738)		(3,636)	(4,818)
Loss from sale of activity	-		1,777	1,835
Loss (gain) from disposal of property and equipment and
domains	(47)		160	847
Other	9		23	(57)
Net cash provided by (used in) operating activities	3,179		(12,322)	(14,484)
Cash flows from investing activities:
Sale of activity	1,839		600	6,510
Change in long-term deposit	-		-	66
Sale of investment in affiliated company	-		-	149
Purchase of property and equipment	(103)		(166)	(206)
Purchase of domains	-		(1,136)	(1,134)
Proceeds from sale of domains and property and equipment	-		-	76
Capitalization of research and development costs	(460)		(2,060)	(2,258)
Other	-		110	-
Net cash provided by (used in) investing activities	1,276		(2,652)	3,203

CONSOLIDATED INFORMATION OF CASH FLOWS

US dollars in thousands

	Nine months ended 30 September	Year ended December 31
	2019	2018
	Unaudited	Audited
Cash flows from financing activities:
Short-term bank credit, net	\$ (3,288)	\$ (94)	\$ (4,322)
Exercise of options	-	-	*)
Issuance of convertible bond	-	29,930	29,930
Repayment of bank loans	(1,530)	(9,632)	(10,019)
Additional payments related to previous acquisitions	-	(681)	(681)
Acquisition of non-controlling interest	-	(20,146)	(20,146)
Dividend paid to non-controlling interest	-	(2,711)	(2,711)
Net cash used in financing activities	(4,818)	(3,334)	(7,949)
Decrease in cash, cash equivalents and restricted cash	(363)	(18,308)	(19,230)
Cash, cash equivalents and restricted cash at beginning of period	10,301	29,407	29,531
Cash, cash equivalents and restricted cash at end of period	\$ 9,938	\$ 11,099	\$ 10,301
Non-cash investing activities:
Receivable in connection with acquisitions	\$ -	\$ 250	\$ 1,839

*) Represents an amount less than \$ 1.

US dollars in thousands (except share and per share data)

NOTE 1:- GENERAL

a. Matomy Media Group Ltd. ("Matomy") together with its subsidiaries (collectively - the "Company") offered and provided a portfolio of proprietary programmatic data-driven platforms focusing on two core activities of domain monetization and mobile digital advertising to advertisers, advertising agencies, Apps developers and domain owners.

Matomy was incorporated in 2006. The Company's markets are located primarily in the United States and Europe. The Company's shares are traded on the London Stock Exchange and also on the Tel Aviv Stock Exchange.

In the period spanning from mid-2017 through November 2018, the Company exited all of its data-driven advertising platforms with the exception of Team Internet AG ("Team Internet"), a market leading domain advertising and monetization platform, with two key activities: (i) a proprietary domain parking platform that enables customers to monetize their domain portfolios; and (ii) a proprietary self-serve platform that allows publishers and advertisers to buy and sell traffic on a smart programmatic real time bidding model. The Company, through its UK and German subsidiaries, currently holds 90% of the share capital of Team Internet. (Refer to Note 1c(i)).

In the nine-months period ended 30 September 2019, the Company incurred net loss of \$ 16,026. In addition, the Company's working capital deficiency amounted to \$ 32,156 as of 30 September 2019. The main factor contributing to the loss incurred in 2019 was goodwill impairment charges of \$ 15,984 related to its Domain Monetisation reporting activity (see Note 2e).

b. The Company requires additional capital in order to fund its liabilities. Such liabilities include, among others, liability to non-controlling interest (minority shareholder in Team Internet, Rainmaker Investments GmbH ("Rainmaker")) and convertible bond liability (Series A) (the "Bonds") (as further described in Note 1c below). There is no assurance that the Company will be able to obtain such require additional capital.

In order for the Company to act in a manner that is intended to address the interests of all stakeholders, the Company, with the support of the bondholders and Rainmaker, concentrated its effort to sell Team Internet.

On 15 November 2019, the Company and Rainmaker signed a binding agreement with Centralnic Group PLC, whose shares are traded on the AIM Market of the London Stock Exchange, the "Purchaser" or "CNIC") to sell all the shares in Team Internet for the total consideration to be paid for 100% of Team Internet's shares €45,854,332 plus the Interest Amount, as determined in the agreement, and shall consist of the following (the "Purchase Price"):

(a) A cash payment of €39,554,332 (the "Cash Payment"), plus the Interest Amount that shall be paid on closing date.

In addition to the Cash Payment, the Purchaser shall retain an amount of €900,000 retention (the "Retention Amount"). The Retention Amount will be fully released after 15 months period, less deductions for settled claims or for outstanding claims (which are supported by documents as specified in the agreement).

US dollars in thousands (except share and per share data)

NOTE 1:- GENERAL (Cont.)

(b) €2,700,000 paid in Purchaser shares. The number of shares will be determined by dividing €2,700,000 by the Purchaser share price, as determined in the agreement.

(c) A deferred cash payment of €2,700,000 payable on the date that is 6 months following the closing.

As part of the Transaction, immediately prior to closing date, the Company will consummate the purchase of the remaining 10% stake of Rainmaker in Team Internet (as further detailed in Note 1c(i) below), by assigning to Rainmaker a portion of the consideration. Rainmaker shall be entitled to receive a total sum of €19,050,000: (i) a sum of € 16,508,190 out of the Cash Payment; (ii) €1,087,350 paid in Purchaser shares. The number of shares will be determined by dividing €1,087,350 by the Purchaser share price, as determined in the agreement; (iii) a sum of €1,087,350 out of the deferred cash payment; (iv) a sum of € 367,110 out of the Retention Amount. Upon consummation of such purchase of the remaining 10% stake of Rainmaker in Team Internet, no further claims between Rainmaker and the Company will exist and all alleged obligations of the Company towards Rainmaker will be settled.

The remaining amount of the Cash Payment (€23,046,142) and the Interest Amount, shall be paid to the trustee of the Bonds (the "Trustee"). In addition, the Company shall transfer to the Trustee a cash amount of approximately €2,400,000 (which shall be deposited in an escrow account prior to closing and as a condition thereto), for the completion of full and immediate repayment of the Company's outstanding convertible bonds (ILS101,000 thousands) (principal and interest).

The closing of the Transaction is subject to certain conditions precedent, such as approvals of the Company's shareholders, approval of the Bondholders and completion by the Purchaser of its proposed financing by means of a €40,000,000 bond issuance. If the Conditions Precedent are not satisfied by 31 December 2019 (which date may be extended in certain limited circumstances), then any party may terminate the agreement.

If the Purchaser's €40,000,000 bond issuance has not been completed prior the termination of the agreement because the conditions precedent, as detailed in the agreement, were not satisfied by 31 December 2019, the Purchaser shall pay a break-up fee of €900,000 to the Company and Rainmaker. If the Purchaser's €40,000,000 bond issuance was completed prior to such termination, but certain other conditions precedent were not satisfied, a breakup fee of €900,000 will be payable to the Purchaser by the Company and Rainmaker.

There is no certainty at this time that the transaction will be finalized.

US dollars in thousands (except share and per share data)

NOTE 1:- GENERAL (Cont.)

c. i. As detailed in Note 1b to the annual financial statements, in accordance with the share purchase agreement dated December 2017 (the "2017 SPA") with the minority shareholders of Team Internet, Rainmaker Investments GmbH ("Rainmaker"), the Company was required to buy the remaining 10% stake in Team Internet (the "Third Sale Exit") from Rainmaker on November 30, 2018. The Company failed to pay the amount due on 30 November 2018, which is claimed by Rainmaker to be equal to EUR 16,015 thousand. Failure by the Company to pay the consideration for the Third Sale Exit, triggers certain rights of Rainmaker, among other remedies, such as interest on late payment and a right to repurchase some or all of the Company's shares in Team Internet, at Rainmaker's discretion, at a price of 60% of the original purchase price paid by the Company on such shares. Such price, after giving effect to the foregoing discount and assuming all shares are purchased is approximately EUR 31,688 thousand.

In addition, under the 2017 SPA, it was agreed by the parties on a one-off bonus of \$1,000 to be paid to Rainmaker for the extension of the cooperation between Team Internet and its unrelated search engine provider beyond 31 July 2019. In March 2019, the Company expected payment for the search engine renewal bonus, and therefore a provision was recorded and the expense was recorded as other expense in the information of operation for the nine-month period ended 30 September 2019.

Subject to the completion of the Transaction described in b above, upon consummation of the purchase of the Third Sale Exit as part of the Transaction, no further claims between Rainmaker and the Company will exist and all alleged obligations of the Company towards Rainmaker will be settled.

ii. Beginning in the fourth quarter of 2018, the Company has been holding discussions with the Trustee and with the representatives and legal counsel of the bondholders in order to reach an agreement to adjust certain terms of the Bonds.

The bondholders have, among other things, made a claim that they are entitled, as of the fourth quarter of 2018, to call the Bonds for immediate repayment based on the "material adverse effect on the Company's business" clause, comparing the then current Company's business conditions and the Company's business conditions as of the bond's issuance date. The Company rejected this claim.

In addition, during 2019, the bondholders have convened numerous bondholders meetings that on their agenda was a resolution with regard to a contingent demand of an immediate repayment of the bonds, which was rejected by the bondholders.

Subject to the completion of the Transaction described in b above, the Company will fully repay its obligations to the bondholders.

iii. In respect of the Company's convertible bond, as described in Note 5 herein, noncompliance with certain covenants during two consecutive quarters constitutes a default event, which under certain circumstances, as detailed in the bond, entitles the holders to claim immediate repayment of the Bonds. The following includes summary of the bond financial covenants:

US dollars in thousands (except share and per share data)

NOTE 1:- GENERAL (Cont.)

Covenant
Minimum Equity (as defined therein) of \$40,000
Net Debt to Adjusted EBITDA Ratio (as defined therein) of not more than
2.5
Adjusted EBITDA (as defined therein) of at least \$10,000

As of 30 September 2019, the Company was not in compliance for two or more consecutive quarters with its Minimum Equity covenant and with the Adjusted EBITDA covenant. Therefore, under ASC 470, Debt, the convertible bond in the amount of \$ 19,289 (principal of \$ 29,006 as of 30 September 2019) was classified to short term liabilities as of 30 September 2019.

Noncompliance with certain covenants in the bonds triggers an increase of interest. As a result of the Company's Shareholders' Equity being lower than \$50,000, the interest rate on the outstanding balance of the principal of the Bonds was increased by 0.5% as of October 1, 2018. In addition, as a result of the Adjusted EBITDA being lower than \$10,000, the interest rate on the outstanding balance of the principal of the Bonds was increased by additional 0.5% as of 1 January 2019. Therefore, the updated annual interest rate for the period commencing on the 1 January 2019 and through 31 December 2019 will be 6.5%.

iv. On 28 December 2017, major shareholders of the Company holding in the aggregate approximately 30% of the Company's voting share capital, provided letters of support addressed to the Company stating that such shareholders agreed to provide sufficient financial support, if necessary, to the Company to ensure that the Company can continue its operations for at least twelve months from 27 December 2017. Under such letters, all eligible shareholders will have the right to participate under the same terms, which will be determined by the Board, subject to receipt of any applicable shareholder approvals (the "Letters of Support").

With respect to such Letters of Support, the Company received two letters, the first letter from legal counsel to the minority shareholder in Team Internet, Rainmaker, claiming, among other things, that the Letters of Support impose a liability upon such major shareholders to inject funds into the Company in order to enable it to pay the consideration for the Third Sale Exit. The second letter from legal counsel to the major shareholders, who provided the Letters of Support, which include, inter alia, claims that the obligation under the Letters of Support is intended to cover funding relating to the Company's on-going operations, that is, salaries payments and other on-going expenses etc., but does not cover the consideration for the Third Sale Exit or discharge the Company's liabilities. The bondholders have also raised claims that based on their interpretation, the Letters of Support are intended to cover the payments due to them.

US dollars in thousands (except share and per share data)

NOTE 1:- GENERAL (Cont.)

On 20 December 2018, the Company received a letter from legal counsel to the shareholders who provided the Letters of Support, confirming that in support of the current discussions among the Company and various stakeholders, including the bondholders, the aforementioned shareholders agree not to claim that the Letters of Support expire with respect to the period up to 10 January 2019. This extension further states that the foregoing extension relates only to the extent of the circumstances under which the major shareholders would have been required to provide support pursuant to the terms of the original Letters of Support until 27 December 2018. The Company received several additional letters from legal counsel to the shareholders who provided the Letters of Support, further extending the Letters of Support as described above up to November 30, 2019.

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

a. Unaudited interim financial information

The accompanying unaudited interim consolidated financial information have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") for interim financial information. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial information. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results for the nine-month period ended 30 September 2019 are not necessarily indicative of the results that may be expected for the year ended 31 December 2019.

In the preparation of the interim consolidated financial information, except as described in Note 3, it applied the significant accounting policies, on a consistent basis to the annual financial statements of the Company as of 31 December 2018.

The unaudited interim consolidated financial information should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's financial statements ("the Annual Report") for the year ended 31 December 2018.

b. Use of estimates:

The preparation of the consolidated financial information in conformity with US GAAP requires management to make estimates, judgments and assumptions. The Company's management believes that the estimates, judgments and assumptions it uses are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial information, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

US dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

On an ongoing basis, the Company's management evaluates estimates, including those related to accounts receivable, fair values of financial instruments, fair values and useful lives of intangible assets and reporting units, fair values of stock-based awards, deferred taxes and income tax uncertainties and contingent liabilities. Such estimates are based on historical experience and on various other assumptions that it believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

c. Internally developed software:

The Company capitalizes certain internal software development costs, consisting of direct labor associated with creating the internally developed software. Software development projects generally include three stages: the preliminary project stage (all costs expensed as incurred), the application development stage (costs are capitalized) and the post implementation/operation stage (all costs expensed as incurred).

The costs capitalized in the application development stage primarily include the costs of designing the application, coding and testing of the system. Capitalized costs are amortized using the straight-line method over the estimated useful life of the software, generally 3 years, once it is ready for its intended use. The Company believes the straight-line recognition method best approximates the manner in which the expected benefit will be derived. Amortization expense for the related capitalized internally developed software in the nine month periods ended 30 September 2019 and 2018 totalled \$ 402 and \$ 2,959, respectively, and is included in cost of revenues in the accompanying consolidated information of operations. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

Capitalized internally developed software of \$ 876 and \$ 818 are included in property and equipment in the consolidated balance sheets as of 30 September 2019 and 31 December 2018, respectively.

d. Fair value of financial instruments

The carrying amounts of financial instruments carried at cost, including cash and cash equivalents, short-term deposits, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses and other liabilities approximate their fair value due to the short-term maturities of such instruments.

The Company follows the provisions of ASC 820 which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

US dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

In determining a fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing an asset or liability, based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect assumptions that market participants would use in pricing an asset or liability, based on the best information available under given circumstances.

The hierarchy is broken down into three levels, based on the observability of inputs and assumptions, as follows:

• Level 1 Observable inputs obtained from independent sources, such as quoted prices for identical assets and liabilities in active markets.
• Level 2 Other inputs that are directly or indirectly observable in the market place.
• Level 3 Unobservable inputs which are supported by little or no market activity.

The following table present liabilities measured at fair value on a recurring basis as of 30 September 2019 and 31 December 2018:

		30 September 2019 Fair value measurements using input type
		Level 1	Level 2		Level 3			Total
Liabilities: Bonds	\$	19,289	\$	-	\$	-		\$ 19,289
Total financial liabilities (unaudited)	\$	19,289	\$	-	\$	-		\$ 19,289
	31 December 2018
	Fair value measurements using input type
		Level 1		Level 2		Level 3		Total
Liabilities: Bonds Derivative	\$	18,540 -	\$	- 933	\$	- -	\$	18,540 933
Total financial liabilities	\$	18,540	\$	933	\$	-	\$	19,473

e. Goodwill and other intangible assets:

Goodwill reflects the excess of the purchase price of business acquired over the fair value of net identifiable assets acquired. Goodwill and indefinite intangible assets are not amortized but instead are tested for impairment, in accordance with ASC 350, at least annually at December 31 each year, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

US dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company determines the fair value of its Domain Monetisation and Mobile reporting units using the income approach which utilizes a discounted cash flow model, as it believes that this approach best approximates the reporting unit's fair value. Judgments and assumptions related to revenue, gross margin, operating income, future short-term and long-term growth rates, weighted average cost of capital, interest, cash flows, and market conditions are inherent in developing the discounted cash flow model. The Company considers historical rates and current market conditions when determining the discounted and growth rates to use in its analyses. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges for its goodwill.

Due to changes in compliance requirements, a handful of the Company's publishers have been deactivated, which resulted in negative impact on the Company's projected EBIDTA. As a result, the Company recorded during the nine month period ended 30 September 2019, goodwill impairment charges of \$15,984 related to its Domain Monetisation reporting unit, using a weighted average cost of capital and a long-term growth rate of 15% and 2%, accordingly. During the year ended 31 December 2018, the Company recorded goodwill impairment charges of \$30,648 related to its Mobile reporting unit, which is included in loss from discontinued operations, and \$5,014 related to its Domain Monetisation reporting unit.The majority of the inputs used in the discounted cash flow model to determine the fair value of the reporting units are unobservable and thus are considered to be Level 3 inputs.

f. Restricted Cash:

In the first quarter of 2019, the Company adopted FASB ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ("ASU 2016-18"), which enhances and clarifies the guidance on the classification and presentation of restricted cash in the statement of cash flows and requires additional disclosures about restricted cash balances.

NOTE 3:- LEASES

In February 2016, the Financial Accounting Standards Board (the "FASB") issued Topic 842, which requires the recognition of right-of-use ("ROU") assets and lease liabilities for operating leases on the consolidated balance sheet. The Company adopted Topic 842 and its related amendments as of January 1, 2019 using a modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application and not restating comparative periods. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to not reassess whether arrangements contain leases, not reassess lease classification and not reassess initial direct costs.

Under the new guidance, the Company determined if an arrangement contains a lease and the classification of that lease, if applicable, at inception or upon modification of a contract. The Company elected to not recognize a lease liability or ROU asset for short-term leases (leases with a term of twelve months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise). Lease liabilities represent its obligation to make lease payments under the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

US dollars in thousands (except share and per share data)

NOTE 3:- LEASES (Cont.)

Some leases include one or more options to renew. The exercise of lease renewal options is typically at the Company's sole discretion; therefore, the majority of renewals to extend the lease terms are not included in our right of use assets and lease liabilities as they are not reasonably certain of exercise. The Company regularly evaluates the renewal options, and, when it is reasonably certain of exercise, it will include the renewal period in its lease term. Lease modifications result in remeasurement of the lease liability.

The right-of-use asset and lease liability are initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate based on the information available at the date of adoption in determining the present value of the lease payments. The determination of its incremental borrowing rate requires judgment

The Company has operating leases for office space, that expire through 2025. Below is a summary of operating right-of-use assets and operating lease liabilities as of 30 September 2019 (Unaudited):

	\$
Operating right-of-use assets	1,836
Operating lease liabilities, current Operating lease liabilities long-term	315 1,451
Total operating lease liabilities (unaudited)	1,766

The short-term lease liabilities is included within accrued expenses and other short term liabilities in the consolidated balance sheet.

Minimum lease payments for our right of use assets over the remaining lease periods as of 30 September 2019, are as follows:

	30 September, 2019 (unaudited)
2019	\$ 79
2020	315
2021	315
2022	315
2023	315
Thereafter	465
Total undiscounted lease payments	1,804
Less: Interest	(38)
Present value of lease liabilities	\$ 1,766

US dollars in thousands (except share and per share data)

NOTE 3:- LEASES (Cont.)

The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of 30 September 2019:

Weighted average remaining lease term (years) 2.9 Weighted average discount rate 1.90%

Total rent expenses for the nine months ended 30 September 2019 and 2018 were \$ 244 and \$ 969, respectively.

NOTE 4:- BANK LOANS AND CREDIT LINE

In relation to the bank loans and credit lines, the Company is required to comply with certain covenants, as defined in the loan and bond agreements and its amendments. As of 30 September 2019, the Company was in full compliance with the financial covenants of its bank loan. In August and November 2019, the credit line was extended until February 2020.

NOTE 5:- CONVERTIBLE BOND

In February 2018, the Company completed a public offering in Israel of convertible (Series A) bonds (the "Bonds"). Through the issuance of the Bond, the Company raised a total gross consideration of ILS 103 million (approximately \$29,930 as of issuance date) issuing a total of 101,000 units of Bond, which bear a coupon of 5.5% per annum, payable semi-annually on June 30 and December 31 of each of the years 2018 to 2021 (inclusive). The interest is paid on a semiannual basis. Interest prepayment in the amount of ILS 1.6 million (\$ 469) is included in other receivables and prepaid expenses on the balance sheet as of 30 September 2019. The principal of the Bonds, denominated in ILS, is required to be repaid in two equal annual instalments commencing in December 2020. The Bonds are by their terms convertible into ordinary shares of the Company, at the discretion of the holders, up to ten (10) days prior to the final redemption date (i.e. December 21, 2021). The conversion price is subject to adjustment in the event that the Company effects a share split or reverse share split, rights offering or a distribution of bonus shares or a cash dividend. The Company may redeem the Bond upon delisting of the Bond from the TASE, subject to certain conditions. Refer to Note 1c(iii) for further information on the Bonds and the Bonds covenants, including the potential consequences of noncompliance with such financial covenants.

The Company elected to apply the fair value option in accordance with ASC 825, "Financial Instruments", to the convertible bond and therefore all unrealized gains and losses are recognized in earnings. As of 30 September 2019, the fair value of the convertible bond, based on its quoted price at the TASE was \$ 19,289.

US dollars in thousands (except share and per share data)

NOTE 5:- CONVERTIBLE BOND (Cont.)

The changes of the convertible bond in the nine months ended 30 September 2019 were as follows:

	\$
Balance 1 January 2019	\$	18,540
Change in fair value		749
Balance as of 30 September, 2019 (Unaudited)	\$	19,289

As of 30 September 2019, the aggregate principal annual payments of the bonds are as follows:

	Repayment amount
	\$
2020	\$ 14,503
2021	14,503
	\$ 29,006

NOTE 6:- EQUITY

a. Options issued to employees and directors:

A summary of the activity in options granted to employees and directors is as follows:

	Number of options	Weighted average exercise price	Weighted average remaining contractual term (in years)
Outstanding at January 1, 2019	1,473,843	\$ 1.45	3.50
Forfeited	(960,638)	\$ 1.44
Outstanding at 30 September 2019 (unaudited)	513,205	\$ 1.45	3.20
Exercisable at 30 September 2019 (Unaudited)	513,205	\$ 1.45	3.20

US dollars in thousands (except share and per share data)

NOTE 6:- EQUITY

b. Restricted Share Units ("RSU") issued to employees and directors:

	Number of RSU's
Unvested at 1 January 2019	38,500
Granted Vested	106,000 (111,500)
Forfeited	(33,000)
Unvested at 30 September 2019 (unaudited)	-

c. Treasury shares

As of 30 September 2019 and 31 December 2018, treasury shares amounted to 10,970,111 shares of which 1,211,236 shares are held by Team Internet, and are considered outstanding.

NOTE 7:- TAXES ON INCOME

a. (Loss) income before taxes on income is comprised as follows:

	Nine	months ended 30 September			Year ended December 31
	2019		2018		2018
		Unaudited
Domestic Foreign	\$ (8,990)	(6,849) \$	(3,215) 1,474	\$	(1,631) (1,619)
	\$ (15,839)	\$	(1,741)	\$	(3,250)

US dollars in thousands (except share and per share data)

NOTE 7:- TAXES ON INCOME (Cont.)

b. Taxes on income (tax benefit) are comprised as follows:

	Nine months ended 30 September				Year ended December 31
		2019 2018			2018
		Unaudited
Current:
Domestic	\$	-	\$	1	\$	(11)
Foreign		2,412		3,696		4,358
		2,412		3,697		4,347
Deferred:
Domestic	\$	-	\$	-	\$	2
Foreign		(2,225)		(558)		(666)
		(2,225)		(558)		(664)
	\$	187	\$	3,139	\$	3,683

NOTE 8:- REPORTABLE SEGMENTS

a. General

In 2018, the Company's chief operating decision maker ("CODM") started to review and make decisions about resources based on three reporting segments consisting of Team internet, Mobfox and the remaining non-core activities which reflect the companies updated business activity and its focus strategic. Accordingly, for management purposes, the Company was organized into operating segments based on the products and services and had operating segments as follows:

• Mobile Advertising ("Mobfox") Mobfox is a data-driven, supply-side platform (SSP) and exchange for mobile in-app advertising. Connected to developers and publishers, along with quality demand sources, Mobfox offers comprehensive support for all major mobile ad formats. Mobfox also offers media buying services on its myDSP demandside platform (DSP). Following the sale in November 2018 this operating segment ceased to exist. For the year ended 31 December 2018 and nine-month periods ended 30 September 2019 and 2018 this segment is reported as Discounted Operations in accordance with ASC 205-20.
• Domain Monetization Team Internet serves the domain monetisation market and includes two brands which work seamlessly together to provide a complete offering. Parking Crew is a domain parking platform which integrates with many third-party applications. Tonic, the second platform, is a traffic marketplace that allows users to monetize traffic and target audiences with a variety of ad types.

US dollars in thousands (except share and per share data)

NOTE 8:- REPORTABLE SEGMENTS (Cont.)

Non-core Activities – Matomy's non-core activities include email marketing under the Whitedelivery brand and video advertising services under the Video from Matomy and Optimatic Media Inc. ("Optimatic") brands. Following the sale of certain activities and the restructuring of the remaining non-core activities, this operating segment ceased to exist.

Following the sale of certain activities and the restructuring of the remaining non-core activities during 2018, the Company operates only one segment the domain monetization.

b. Segments information:

	Nine months ended 30 September			Year ended December 31
	2019 2018		2018
	Unaudited
Revenues: Domain Monetisation Other	\$ 52,676 -	\$	59,500 13,572	\$	75,636 13,098
Total revenues	\$ 52,676	\$	73,072	\$	88,734

b. Segments information:

		Nine months ended 30 September	Year ended December 31
		2019		2018	2018
	Unaudited
Operating loss:
Domain Monetisation	\$	7,274	\$	11,420	\$	14,181
Other		-		(3,685)		(4,089)
Reconciling items (1)		(20,728)		(9,164)		(18,445)
Total loss from continuing operations	\$	(13,454)	\$	(1,429)	\$	(8,353)

(1) Reconciling items are primarily related to impairment loss and depreciation and amortization costs for the nine months ended 30 September, 2019 and 2018 and for the year ended 31 December 2018, as well as corporate administrative costs and other miscellaneous items that are not allocated to individual segments.

US dollars in thousands (except share and per share data)

NOTE 8:- REPORTABLE SEGMENTS (Cont.)

The following includes the information of operations of the domain monetization:

		Nine months ended 30 September	Year ended December 31
		2019		2018	2018
	Unaudited
Revenues	\$	52,676	\$	59,500	\$	75,636
Cost of revenues		40,935		45,817		58,089
Gross profit		11,741		13,683		17,547
Operating expenses
Research and development		524		326		455
Selling and marketing		2,680		2,996		3,792
General and administrative		1,433		1,206		1,775
Goodwill Impairment		15,984		-		5,014
Total operating expenses		20,621		4,528		11,036
Operating income (loss)		(8,880)		9,155		6,511
Financial expenses (income), net		108		(79)		(70)
Income (loss) before taxes on income		(8,988)		9,234		6,581
Tax on income		2,349		2,985		3,658
Net income (loss) Net loss attributable to non-controlling interests		(11,337)		6,249		2,923
in subsidiaries		14		47		53
Net income (loss)	\$	(11,323)	\$	6,296		\$ 2,976

c. Geographical information:

Revenues by geography are classified based on the location where the consumer completed the action that generated the relevant revenues.

1. Revenues from external customers:

	Nine months ended 30 September				Year ended December 31
	2019 2018		2018
	Unaudited
United States	\$ 28,706	\$	47,527	\$	55,665
Europe	16,871		18,046		22,709
Asia	2,389		2,711		3,483
Other	4,710		4,788		6,877
	\$ 52,676	\$	73,072	\$	88,734

US dollars in thousands (except share and per share data)

NOTE 8:- REPORTABLE SEGMENTS (Cont.)

1. Property and equipment, net:

	30 September 2019	31 December 2018
	Unaudited
Israel	\$ -	\$	53
Germany	1,406		1,360
	\$ 1,406	\$	1,413

d. In the nine months periods ended 30 September 2019 and 2018 and in the year ended 31 December 2018, one customer contributed 83%, 70% and 72% of the Company's revenues, while no other customer contributed more than 10%.

NOTE 9:- DISCONTINUED OPERATIONS

As a result of the sale of the Mobfox business, the operating results from the Mobfox mobilecore segment and the related assets and liabilities have been presented as discontinued operations in the consolidated financial information for all periods presented. The results of operations from discontinued operations presented below include certain allocations that management believes fairly reflect the utilization of services provided to the former Mobfox segment. The allocations do not include amounts related to general corporate administrative expenses or interest expense. Therefore, the results of operations from the Mobfox segment do not necessarily reflect what the results of operations would have been had the former Mobfox segment operated as a stand-alone segment.

US dollars in thousands (except share and per share data)

NOTE 9:- DISCONTINUED OPERATIONS (Cont.)

The following table summarizes the results of discontinued operations for the nine months ended 30 September 2019 and 2018 and for the year ended 31 December 2018:

	Nine	months ended 30 September				Year ended December 31
	2019	2018				2018
	Unaudited
Revenues	\$	-	\$	27,957	\$	34,774
Cost of revenues		-		25,488		31,422
Gross profit		-		2,469		3,352
Operating expenses
Research and development		-		3,690		4,774
Selling and marketing		-		2,652		3,076
General and administrative		-		2,893		3,344
Impairment, net of change in fair value of
contingent consideration		-		30,607		30,607
Restructuring costs		-		202		942
Loss from sale of activity		-		-		58
Total operating expenses		-		40,044		42,801
Operating loss		-		(37,575)		(39,449)
Tax on income		-		137		338
Loss from discontinued operations	\$	-	\$	(37,712)	\$	(39,787)

The following table summarizes the assets and liabilities of discontinued operations as of 30 September 2019 and 31 December 2018:

	30 September 2019	31 December 2018
ASSETS	Unaudited
CURRENT ASSETS: Trade receivables, net	\$ 120	\$ 4,634
Total current assets of discontinued operation	120	4,634
Total assets	\$ 120	\$ 4,634

US dollars in thousands (except share and per share data)

NOTE 9:- DISCONTINUED OPERATIONS (Cont.)

	30 September 2019			31 December 2018
LIABILITIES		Unaudited
CURRENT LIABILITIES: Trade payables	\$	501	\$	3,928
Total current liabilities of discontinued operation		501		3,928
Total liabilities	\$	501	\$	3,928

NOTE 10:- FINANCIAL EXPENSES, NET

	Nine months ended 30 September				Year ended December 31
		2019	2018		2018
		Unaudited
Financial income:
Interest income	\$	124	\$	66	\$	45
Change in fair value of convertible Bonds		-		4,980		11,390
Hedging transactions		174	-			-
		298		5,046		11,435
Financial expenses:
Bank fees		(136)		(316)		(387)
Interest expense		(1,438)		(1,584)		(2,042)
Foreign currency remesurement.net		(92)		(538)		(718)
Hedging transactions		-		(526)		(899)
Change in fair value of convertible Bonds		(749)		-		-
Change in fair value of liability to non controlling interest		(268)		(797)		(684)
Other		-		(9)		(14)
		(2,683)		(3,770)		(4,744)
	\$	(2,385)	\$	1,276	\$	6,691

US dollars in thousands (except share and per share data)

NOTE 11:- RELATED PARTIES

The Company has activity with related parties as part of its ordinary business. The majority of the related parties' transactions include domain monetization activity with the non-controlling interest of Team Internet.

Cost of revenues to related parties amounted to \$ 2,251, \$ 4,200 and \$ 5,009 for the nine months ended 30 September 2019 and 2018 and for the year ended 31 December 2018, respectively.

Trade payables to related parties amounted to \$ 239 and \$ 255 for 30 September 2019 and for 31 December 2018, respectively.

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