Matomy Media Group Ltd 2018 Results

31 March 2019

Matomy Media Group | 2018 Final Results Final results for the year ended 31 December 2018

Matomy Media Group Ltd. (the "Company" or "Matomy"), a global advertising technology company, announces its final results for the year ended 31 December 2018. 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, a market leading domain advertising and monetization platform.

Matomy's domain monetization activity recorded revenue of \$75.6 million and Adjusted EBITDA of \$14.2 million in 2018.

(\$ million)	Year ended 31 December
	2018	2017	Change
Revenue	75.6	105.4	(28.3)%
Adjusted gross profit*	21.4	30.3	(29.4)%
Adjusted gross margin*	28.3%	28.8%	(1.7)%
Adjusted EBITDA**	14.2	24.5	(42.0)%

Selected Domain Monetization Activity's Financial Data:

In 2017, Matomy's domain monetization activity's revenue and Adjusted EBITDA enjoyed a substantial increase following the closing of a competitor and the transfer of business. However, in 2018, in response to a key partner's more stringent compliance requirements, some of the new business was rejected. When comparing 2018 to 2016 figures instead of comparing 2018 to 2017 figures, Matomy's domain monetization activity shows a substantial increase in revenue (FY2016: \$63.3 million).

Matomy sold the mobile advertising platform Mobfox in November 2018, which is classified for accounting purposes as a "discontinued" activity and is excluded from 2017 and 2018 results below. All other activities that were sold or otherwise closed are referred as "exited" activities and are included in operations and the chart below.

Matomy Non-GAAP Unaudited Financial Highlights:

Overview of results	Year ended 31 December
(\$ million)	2018	2017	Change
Revenue - Domain Monetization Activity and Exited Activities	88.7	194.4	(54.4)%
Adjusted gross profit*	27.3	63.0	(56.7)%
Adjusted gross margin*	30.8%	32.4%	(4.9)%
Adjusted EBITDA **	7.0	18.8	(62.8)%

Selected Mobfox (Programmatic Mobile Advertising) Financial Data

Mobfox was sold in November 2018. Therefore Mobfox 2018 figures below do not represent a full year.

(\$ million)	Eleven months ended 30 November	Year ended 31 December
	2018	2017	Change
Revenue	34.8	50.6	(31.2)%
Adjusted gross profit*	10.3	14.0	(26.4)%
Adjusted gross margin*	29.6%	27.8%	6.5%
Adjusted EBITDA**	(4.1)	1.8	(327.7)%

*Adjusted gross profit/margin

Adjusted gross profit is a non-GAAP financial measure that Matomy defines as revenues less direct media costs, which are the direct costs associated with the purchase of digital media. These costs include: payments for digital media based on the revenues Matomy generates from its customers on a revenue-sharing basis; payments for digital media on a non-revenue-sharing basis (CPC or CPM); and serving fees for third-party platforms. Adjusted gross margin in a non-GAAP financial measure that Matomy defines as Adjusted gross profit divided by revenue.

Matomy believes that adjusted gross profit and adjusted gross margin are meaningful measures of operating performance because they are 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 (loss) from continuing operations before taxes on income, financial expenses (income), net, bond issuance costs, equity losses of affiliated companies, net, depreciation and amortization, share-based compensation expenses (cash and non-cash) and exceptional items (as described below). Adjusted EBITDA is a key measure Matomy uses to understand and evaluate its operating performance and trends.

Business and operating highlights

Liam Galin succeeded Sagi Niri as Matomy's President and Chief Executive Officer in January 2018 and announced his resignation in March 2019.
The Company remains focused on its domain monetization activity, in which it has a competitive edge, and exited all other activities.
According to the Company's focused strategy, and following the decrease in revenues of the other activities, the Company:
- o Closed the Optimatic video programmatic platform in June 2018
- o Sold myDSP media buying platform in July 2018
- o Sold Whitedelivery email marketing platform in August 2018
- o Sold Mobfox supply side mobile advertising platform in November 2018
In 2018, Matomy's domain monetization activity, now the Company's single activity, generated revenues of \$75.6 million, (FY2017: \$105.4 million) and Adjusted EBITDA of \$14.2 million (FY2017: \$24.5 million).
In February 2018, the Company raised 103 million NIS (approx. \$30 million as of the issuance date) in convertible bonds. The Company is in negotiations with bondholders in order to reach an agreement to amend certain terms of the bonds, as part of the Company's Proposed Plan, as noted in the Going Concern section below.
In March 2018, the Company increased its holding in Team Internet to 90%. The Company is in negotiations with Team Internet's minority shareholder as noted in the Liability to Non-controlling Interests section below.
The Company's platforms took all required steps to be compliant with the new regulation of General Data Protection Regulation (GDPR) that came into effect on May 25, 2018.
Matomy took aggressive measures to ascertain high quality, sustainable, and "clean" revenue. Non-compliant traffic sources were expunged from its platforms, affecting revenues in the short-term, while strengthening the Company's long-term position.
Following the sale of certain activities, as detailed above, Matomy reduced the corporate team and significantly decreased operational overhead.

Sami Totah, Chairman of the Board of Matomy, said:

"Matomy underwent a number of changes in 2018, including a shift in focus and management. Under the leadership of Liam Galin, the Company exited all activities that were sapping resources from the profitable domain monetization activity. The results published in this report validate these steps and today Matomy is well positioned to move forward as the leading innovative force in the domain monetization marketplace."

A copy of this announcement will be available on the Matomy website: http://investors.matomy.com/rns.aspx.

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 dual-listed on the London and Tel Aviv Stock Exchanges.

For more information:

Press / Investor Relations:

Noam Yellin [email protected] +972544246720

Website: http://investors.matomy.com LinkedIn: www.linkedin.com/company/matomy-media-group Twitter: @MatomyGroup Facebook: www.facebook.com/MatomyMediaGroup

CHAIRMAN'S STATEMENT

Introduction

2018 was a year of restructuring. Matomy focused on the core activity of domain monetization, and exited activities where we believed we no longer had a clear competitive advantage. This transformation has allowed us to streamline our corporate team - and is, we believe, a natural and encouraging mark of organizational maturity. Matomy is conducting discussions with bondholders, Rainmaker and shareholders regarding steps to enable the company to move forward.

Operating Performance

Now the results of Matomy's domain monetization activity, the sole activity of Matomy, are the clearest indicators of Matomy's operating performance moving forward.

In 2018, Matomy showed a decrease in both revenue and EBITDA as it closed all activities outside of domain monetization activity and took aggressive measures to ascertain high quality, sustainable, and "clean" revenue. Non-compliant traffic sources were expunged from its platforms, affecting revenues in the short-term, while strengthening the Company's long-term position. Compared to 2016, before the one-off spike of traffic following the closure of a competitor, Matomy's domain monetization activity's revenue of \$75.6 million in FY2018 showed growth of 19.4% (FY2016 \$63.3 million).

Outlook

Matomy's domain monetization activity is in a burgeoning industry with a great deal of opportunity. To keep pace with industry changes, we invest carefully in technology and R&D to ensure product excellence and are dedicated to providing features and services that keep advertisers and publishers exceeding their goals. We maintain a small and nimble, forwardthinking executive team and we take bold strides to succeed.

Sami Totah Chairman

OPERATIONAL REVIEW

Revenues by Media Channel

The following table sets out Matomy's revenues by business unit for the years ended 31 December 2018 and 2017, not including the discontinued Mobfox operations. Mobfox's performance in 2018 is detailed in the financial statements.

	Year ended 31 December
(\$ millions)	2018	2017	Change
Domain monetization	75.6	105.4	(28.3%)
Exited activities (Email, Video, etc)	13.1	89.0	(85.3%)
Total	88.7	194.4	(54.4%)

Domain monetization

Domain monetization revenues decreased by \$29.8 million, for the year ended 31 December 2018 compared to 2017, as the Company removed non-compliant traffic sources.

In 2018, Team Internet's proprietary ad delivery engines served semantically relevant ads to approximately 2 billion monthly visitors across about 145 million websites, generating more than 100 million paid clicks per month.

Team Internet's performance is mainly attributable to its leading technology across its various platforms. The technology yields enhanced performance in comparison to peers and has led to increased recruitment of new clients and higher market share.

Exited activities

At the time of closure or sale, the exited activities showed a consistently decreasing trend in both revenue and profitability and required resources which caused Matomy to deviate from its core growth activities. The activities exited in 2017 include legacy display, social and search and virtual currency media channels. The activities exited or sold in 2018 include email, video, and mobile advertising platforms. Exited or sold activities will not be included in the results for periods going forward.

FINANCIAL REVIEW

GAAP Financial Highlights Including Exited Activities:

This excludes the discontinued Mobfox operations:

Overview of results	Year ended 31 December
(\$ millions, except EPS)	2018	2017	Change
Revenue	88.7	194.4	(54.4%)
Gross profit	18.9	44.9	(57.9%)
Operating income / (loss)	(8.4)	(13.8)	39.1%
Pre-tax income / (loss)	(3.3)	(16.3)	79.8%
Net income / (loss) from continuing operations	(6.9)	(13.9)	50.4%
Net income / (loss) from continuing operations attributable to Matomy	(6.8)	(15.3)	55.6%
Earnings / (loss) per share from continuing operations	(0.07)	\$(0.34)	79.4%

Revenue

As Matomy exited non-core activities and removed revenue sources no longer compliant with key partners' requirements, revenues in 2018 decreased compared to 2017.

Cost of revenues including exited activities and excluding the discontinued Mobfox operations:

	Year ended 31 December
\$ millions, except as otherwise indicated	2018	2017
Media costs	61.4	131.4
Other cost of revenues	8.5	18.2
Cost of revenues	69.9	149.6
Gross margin (%)	21.3%	23.0%
Adjusted gross margin (non-GAAP) (%)	30.8%	32.4%

Cost of revenues for the Group decreased by \$79.7 million, or 53.3%, to \$69.9 million (78.7% of total revenues) for the year ended 31 December 2018 from \$149.6 million (76.9% of total revenues) last year.

Other cost of revenues, which includes allocated costs, server expenses and amortization of capitalized R&D and intangible assets, also decreased with the closure of non-core activities.

Gross margin remained largely consistent, dropping slightly by 1.7%.

			Non GAAP Operating expenses excluding exceptional items
--	--	--	---------------------------------------------------------

	Year ended 31 December
\$ millions	2018	2017
Research and development	2.3	7.2
Sales and marketing	7.7	22.7
General and administrative	6.1	10.1
Non GAAP Total operating expenses of continuing operations	16.1	40.0
Total operating expenses as a percentage of revenues (Non GAAP)	18.2%	20.6%

Operating expenses (Non-GAAP) decreased by \$23.9 million, or 59.8%, to \$16.1 million (FY2017: \$40.0 million). Operating expenses as a percentage of revenues were 18.2% (FY2017: 20.6%).

The decrease in operating expenses is mainly attributable to the sale of exited activities throughout the year, which lowered general, administrative, sales and marketing costs. This trend is expected to continue through the year 2019.

Financial expenses (income)

Net financial expenses, excluding bond issuance costs, decreased by \$9.2 million to \$6.7 million in income for the year ended 31 December 2018 (FY2017: \$2.5 million expense). The decrease is primarily due to financial income recorded due to change in the fair value of the convertible bond, off-set in part by an increase in interest expenses on credit facilities and foreign exchange rate fluctuations.

Taxes on income

Taxes on income shifted to \$3.7 million expense for the year ended 31 December 2018 (-113.3% of loss before taxes), compared to \$2.3 million benefit last year (14.1%).

The effective corporate tax rate of (113.3%) in 2018 was mainly affected by tax expenses with a tax rate of 33% on Team Internet profit without recording deferred tax on its loss from the exited activities, as there is no future expected profit in the relevant Company's subsidiaries.

The effective corporate tax rate of 14.1% in 2017 was mainly due to (1) reversal of deferred tax liability resulting from impairment of intangible assets and (2) income from changes in fair value of contingent payment obligation related to acquisitions which are non-deductable for tax purposes, off-set by (a) tax rate of 33% on Team Internet profit, and (b) record of full valuation allowances on current year and carry forward losses in the parent company and most of its subsidiaries.

Matomy is subject to corporate tax on its income, principally in Israel, the United States and Germany. Matomy may also be subject to corporate tax on its income in other jurisdictions in which Matomy has operations.

Amortization of intangible assets

Amortization expenses of continuing operations were \$3.3 million in 2018 and \$9.1 million in 2017 with total amortization expenses at \$4.6 million in 2018 compared to \$10.6 million in 2017. The decrease is a result of intangible assets being fully amortised or impaired in prior years and during 2018.

Net loss

Net loss from continuing operations was \$6.9 million in 2018 (2017: \$13.9 million), and total net loss was \$46.6 million (2017: \$14.4 million). The net loss attributable to Matomy Media Group's shareholders from continuing operations was \$6.8 million in 2018 (2017: \$15.3 million).

Exceptional items

Matomy views the following items, which were recorded in profit and loss, either as expense or income, as exceptional items which are material to the financial statements and therefore has excluded them from non-GAAP measures:

· Impairments of intangible assets, goodwill and capitalized R&D amounting to \$7.9 million in 2018 and \$27.2 million in 2017.

· Earnout adjustments income of \$0.4 million in 2019 and \$8.5 million in 2017.
· Loss from sale of an activity of \$1.7 million in 2018 and gain of \$0.9 million in 2017.
· Restructuring costs relating to the exited and sold activities amounting to \$1.9 million in 2018 and \$0.9 million in 2017.

Liquidity and cash flows

The following table sets out selected cash flow information for the Group for the years ended 31 December 2018 and 2017.

	Year ended 31 December
\$ millions	2018	2017
Net cash provided by (used in) operating activities	(14.5)	17.5
Net cash provided by (used in) investing activities	0.2	2.2
Net cash provided by (used in) financing activities	(7.9)	(12.0)
Increase (decrease) in cash and cash equivalents	(22.2)	7.7
Cash and cash equivalents at beginning of period	29.4	21.7
Cash and cash equivalents at end of period	7.2	29.4

(A) Net cash provided by / used in operating activities

Matomy's net cash used in operating activities was \$14.5 million (FY2017: \$17.5 million inflow). In 2018, net cash used in operating activities consisted of a net loss of \$46.6 million increased by \$5.8 million relating to a net increase in working capital and offset by \$37.9 million relating to noncash expenses. Noncash expenses were primarily impairment of intangible assets, capitalized R&D and goodwill of \$38.6 million, depreciation and amortization of \$8.6 million and loss from disposal of property and equipment and loss from sale of activity of \$2.7 million, off-set in part by fair value revaluation of the bond of \$11.4 million and a decrease in deferred tax assets of \$0.7 million.

In comparison, for the year ended 31 December 2017, net cash provided by operating activities consisted of a net loss of \$14.4 million which was offset by \$7.4 million relating to a net decrease in working capital, and \$24.5 million relating to noncash expenses. Noncash expenses were primarily impairment of intangible assets, capitalized R&D and goodwill of \$27.1 million, depreciation and amortization of \$14.4 million and stock-based compensation expense of \$1.4 million, off-set in part by earnout adjustments income of \$10.0 million, a decrease in deferred tax assets of \$7.8 million and gain from sale of activity of \$0.9 million.

Net changes in working capital in 2018 were mainly driven by a decrease of \$22.7 million in trade receivables, which was offset by the effects of a decrease in trade payables (\$17.8 million), and a decrease of \$10.5 million in withholding tax receivable, employees and payroll accrual and accrued expenses and other liabilities. The decrease in both trade receivables and trade payables was mainly attributable to the sale and closure of the exited activity, and lower scale of activities in the mobile discontinued operation and the domain monetization activity.

(B) Net cash provided by / used in investing activities

Net cash provided by investing activities was \$0.2 million (FY2017: \$2.2 million inflow). In 2018, net cash provided by investing activities primarily included \$6.5 million from the sale of activity, off-set by \$2.3 million capitalized investment in R&D, \$1.1 million investment in domains and \$3.0 million restricted cash.

For the year ended 31 December 2017, net cash provided by investing activities primarily included \$5.6 million from the sale of activity, \$1.8 million from the sale of investment in the affiliated company, off-set in part by \$3.9 million of capitalized investment in R&D and \$1.0 million of investment in domains.

(C) Net cash used in / provided by financing activities

Net cash used in financing activities decreased was \$7.9 million (FY2017 \$12 million outflow). In 2018, net cash used in financing activities related primarily to \$29.9 million inflow due to the bond issuance, which was offset by \$23.5 million of total payments to non-controlling interests and earnout payments and \$14.3 million due to repayments of loans and credit lines.

In 2017, net cash used in financing activities related primarily to \$17.7 million of total payments to non-controlling interests and earnout payments, less \$5.2 million net increase in outstanding term loans and utilization of credit lines and \$0.5 million of proceeds from the exercise of stockbased compensation during the year.

As of 31 December 2018, Matomy had \$2.9 million in term loans. Of those, \$1.8 million are due within one year. As of that date Matomy also had a revolving credit line amounting to \$3.9 million.

NOTES TO FINANCIAL STATEMENTS

Goodwill

Goodwill represents the excess of the purchase price in a business combination over the fair value of the net tangible and intangible assets acquired.

Matomy's goodwill was created mainly through the 2013, 2014 and 2015 acquisitions. The Company performs an annual impairment test during the fourth quarter of each fiscal year, or more frequently if indicators of potential impairment exist, to determine whether the net book value of each reporting unit exceeds its estimated fair value. During the year ended 31 December 2018 the Company recorded in its continuing operations a goodwill impairment loss of \$5.0 million which is attributable to the domain monetization activity. During the year ended 31 December 2017, the Company recorded a goodwill impairment loss of \$9.0 related to the exited activities. In addition, the Company recorded in 2018 a goodwill impairment related to its discontinued operation in the amount of \$30.6 million. For further information See Note 2h to the financial statements.

Impairment of long-lived assets and intangible assets subject to amortization

During the years ended 31 December 2018 and 2017, following the changes in the Company's business focus, the Company performed an impairment review of all its long-lived assets and intangible assets which resulted in impairment charge of \$2.9 and \$18.1, respectively. For further information See Note 2g to the financial statements.

Liability to non-controlling interests

In accordance with the share purchase agreement dated December 2017 (the "2017 SPA") with the minority shareholders of Team Internet, Rainmaker Investments GmbH ("Rainmaker"), in which the Company, through its UK and German subsidiaries, currently holds 90% of the share capital, 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. The agreement with Rainmaker also provides that in the event that it can be demonstrated that the failure by the Company, through its UK and German subsidiaries, to make the payment is due to lack of funds despite any and all necessary efforts of the Company to obtain such funds (including by taking loans and selling assets), then the sole remedy available to Rainmaker is the exercise of the repurchase option. If the failure to pay is not as specified above, then Rainmaker is not limited in the legal remedies that it may pursue

The Company is conducting discussions with Rainmaker regarding the terms of the purchase by the Company of the shares held by Rainmaker in Team Internet. In preliminary discussions held between the parties, and as part of the Proposed Plan of the Company (as further described below), the understanding is that the payment to Rainmaker will be in the amount of \$13,500 and that Rainmaker will be allowed to retain a certain portion of the shares of Team Internet that were originally required to be sold by Rainmaker. As of the date of the approval for the issuance of these financial statements there is no new agreement regarding the terms for the purchase of the shares held by Rainmaker and no legal remedies have been waived or exercised.

Sale of exited activities

On 29 July 2018, the Company signed an agreement for the sale of "myDSP" activity for a consideration of \$850, which would be paid in two payments: \$600 upon closing and \$250 deferred to be received on 1 December 2018. The first payment in the amount of \$600 was received in September 2018. The second payment in the amount of \$250 has yet to be received.

On 13 August 2018, the Company signed an agreement for the sale of its Whitedelivery email marketing activity. The Company also signed an agreement with the buyer for data-licensing. The maximum total consideration from the agreements amounts to \$8,500, which includes performance-based payments subject to meeting pre-defined milestones. The Company does not expect to collect any material amount from this transaction due to the buyer's financial difficulties.

On 15 November 2018 the Company sold its mobile core-business ("Mobfox") for a total consideration of \$7,500, of which a payment of \$6,000 was received as of 31 December 2018 and the remaining \$1,500 was subject to fulfillment of certain payment requirements to publishers that were transferred with the framework of the sale. In January 2019 \$1,000 was received. As a result of the sale of the Mobfox business, the operating results from the Mobfox mobile-core segment and the related assets and liabilities have been presented as discontinued operations in the consolidated financial statements for all periods presented.

Loss per share

Matomy's loss per share for continuing activities in 2018 was \$0.07 (2017: \$0.34). The total loss per share was \$0.48 in 2018 (2017: \$0.35).

Treasury shares

As of 31 December 2018, Matomy had a total of 10,970,111 treasury shares, of which, 1,211,236 shares were held by Team Internet.

Financial obligations and covenants

Matomy's financial obligations and commitments as at 31 December 2018

\$ million	Due within 1 year	Due >1 year	Total
Bank loans	1.8	1.1	2.9
Operating lease obligations, net of sublease rental	0.5	0.8	1.3
Convertible bond	-	26.9*	26.9
Total	2.3	28.8	31.1

Details regarding these main obligations and financial covenants may be found in notes 1B, 8, 9 and 10 in the financial statements.

* In respect of the Company's convertible bonds, as described in Note 1B, noncompliance with certain covenants during two consecutive quarters constitutes an event of default, which under certain circumstances, as detailed in the bond, entitles the holders to claim immediate repayment of the Bonds. As of 31 December 2018, the Company was not in compliance for two consecutive quarters with certain covenants, therefore, the convertible bond in the amount of \$18,540, (principal of \$26,948 as of 31 December 2018) was classified to short term liabilities as of 31 December 2018. The Company is holding discussions with the trustee of the bonds and with the representatives and legal counsel of the bondholders in order to reach an agreement to amend certain terms of the Bonds. Further details are described in the Going Concern section below.

Financial reporting

This financial information has been prepared under US GAAP principles and in accordance with Matomy's accounting policies.

The Company changed its accounting policy regarding the offsetting of bank overdraft and cash balances in the same bank account. According to the new accounting policy, the Company presents overdraft and cash balance in the same account on gross basis compared to previous presentation which was presented net. Management believes presenting on gross basis the overdraft and cash balances in the same bank account is a more appropriate presentation. Prior year's amounts were reclassified to conform to current year's presentation.

Going concern

The Company requires additional capital in order to fund its liabilities (such liabilities include, among others, liability to non-controlling interest, bank loans and convertible bond liability). There is no assurance that the Company will be able to obtain such required additional capital. The Company believes that these conditions raise substantial doubt regarding the Company's ability to continue as a going concern. For further details, refer to Note 1b to the Company's financial statements and to the Auditors' Report.

In order for the Company to act in a manner that is intended to address the interests of all stakeholders, the Company proposed comprehensive plan that will enable it to raise funds, adjust the terms of the bonds to the Company's current and anticipated financial position and planned future activity, and fund the purchase of Rainmaker's shares in Team Internet from Rainmaker (the "Proposed Plan"). The main updated key features of the Proposed Plan are detailed below in Note 1B.

Projected Sources and Expected Uses of Funds Statement through December 2020

Pursuant to the requirements of the Hybrid Disclosure Model which apply only to dual listed companies that issue bonds on TASE, this announcement includes a special statement of projected sources and expected uses of funds statement through December 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.

Principal risks

The Directors assess and monitor the key risks of the business on an ongoing basis. The principal risks and uncertainties that could have a material effect on the Group's performance include, among other things, the following:

As a result of recent dispositions, reflecting Matomy's recently-adopted strategy, Matomy's operations are currently focused exclusively on the domain monetization business through its subsidiary Team Internet. Such a focus creates a significant dependence on a single Group entity, which scope of business is much narrower and less diverse than the business that the Group as a whole used to operate until recently.
If Matomy fails to comply with the terms or covenants of its debt obligations, our financial position may be adversely affected (and see Note 1b of the financial statements for details about Matomy's noncompliance with certain covenants under its publicly listed bonds and about its negotiations with the bondholders in that regard).
Matomy is currently negotiating with Team Internet's minority shareholder, Rainmaker and the holders of its publicly-traded bonds (for description of disputes and negotiations with Rainmaker and the bondholders, see Note 1b of the financial statements). There is no assurance that the negotiations with either Rainmaker and/or the bondholders will be successfully concluded, or as to the ability of the Company to execute the Proposed Plan, or as to the full implications of not reaching an agreement, or delay in reaching an agreement, with respect to any (or both) of these two main stakeholders.
Matomy is currently going through changes in its management team thereby adding further managerial challenges in this transitional period.
Matomy is dependent on relationships with certain third parties with significant market positions; Specifically, the Group's current mode of operation in the domain monetization business is significantly based on the relationship with significant costumer, the continuation of which cannot be guaranteed.
Certain internet and technology companies may intentionally or unintentionally adversely affect Matomy's operations, mainly, due to announced or unannounced changes and restrictions by such companies
The delivery of digital ads and the recording of the performance of digital ads are subject to complex regulations, legal requirements and industry standards
Matomy's revenue and operating results are highly dependent on the overall demand for advertising. Factors that affect the amount of advertising spending, such as economic downturns, particularly in the fourth quarter, can make it difficult to predict our revenue and could adversely affect our business
Seasonal fluctuations in digital advertising activity, which may historically have been less apparent due to our historical core activities and growth, could adversely affect our cash flows and operating results
Matomy operates in an intensely competitive market that includes companies that have greater financial, technical and marketing resources than we do
The digital advertising industry is highly competitive and fragmented and currently experiencing consolidation, resulting in increasing competition
Matomy relies on the continued compatibility of its technological platforms with thirdparty operating systems, software and content distribution channels
Matomy may be subject to third-party claims brought against it
Matomy has historically derived the majority of its revenues from customers that use its solutions for display marketing campaigns which are now rapidly declining
The digital advertising industry remains susceptible to fraud
Matomy is an Israeli-domiciled company and as such the rights and obligations of shareholders are governed by Israeli law and differ in some respects from English law
As a result of the announcement of Brexit, the British government has begun negotiating the terms of the U.K.'s future relationship with the E.U. Although it is unknown what those terms will be, it is possible that these changes may affect our operations and financial results.

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 Proposed Plan, 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 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 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 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.

Directors' responsibility

The Directors confirm that to the best of their knowledge the condensed set of final audited financial statements, which has been prepared in accordance with US GAAP principles, gives a true and fair view of the assets, liabilities, financial position and profit of the undertakings included in the consolidation as a whole as required by DTR 4.1.

Sami Totah Ilan Tamir Chairman COO

Reconciliation of GAAP measures to non-GAAP measures

The following table presents a reconciliation of Adjusted gross profit to gross profit and to revenues, the most directly comparable financial measures calculated in accordance with US GAAP, for the periods indicated:

	Year ended 31 December
\$ million	2018	2017
Revenues	88.7	194.4
Direct media costs	(61.4)	(131.4)
Adjusted gross profit	27.3	63.0
Adjusted gross margin (%)	30.8%	32.4%
Other cost of revenues	(8.4)	(18.1)
Gross profit	18.9	44.9

The following table presents a reconciliation of Adjusted EBITDA from continuing operations to net loss from continuing operations, the most directly comparable financial measure calculated in accordance with US GAAP, for the periods indicated:

	Year ended 31 December
\$ million	2018	2017
Net loss from continuing operations	(6.9)	(13.9)
Taxes on income (benefit)	3.7	(2.3)
Financial expenses (income) , net	(6.7)	2.5
Bond issuance costs	1.6	-
Gain on remeasurement to fair value and equity gains (equity losses) of affiliated companies, net	0.1	0.1
Depreciation and amortization	4.9	10.9
Share-based compensation (cash and non-cash) expenses	(0.8)	2.8
Exceptional items	11.1	18.7
Adjusted EBITDA	7.0	18.8

Appendix A

Matomy Media Group Ltd. - Sources and Expected Uses of Funds Statement (Solo, excluding Team Internet) - 2019/20

מטומי מדיה גרופ בע"מ - דוח מקורות ושימושים צפויים - )סולו, ללא טים אינטרנט( - שנת 2019/20

in thousands of USD						דולר באלפי
	Q1 - 2019	Q2-2019	Q3-2019	Q4-2019	2020
Opening balance	5,778 \$	7,347 \$	2,051 \$	3,909 \$	1,260 \$	יתרת פתיחה
:Sources						מקורות:
Cash flow from Operations:						: שוטפת מפעילות תזרים
Working Capital Mobfox activity	\$ 1,778	\$ (854)				מובפוקס חוזר הון
Tax - Receivable Media Matomy	1,544 \$					המס הישראליים החזר משלטונות
Tax Receivable USA Matomy -	96 \$	658 \$	920 \$			איים ות המס האמריק החזר מס משלטונ
Tax Receivable KG Matomy -	711 \$			3,237 \$	1,180 \$	ות המס הגרמניים החזר מס משלטונ
Dividend from Mobfox Austria		\$ 85				אוסטריה מובפוקס דיבידנד
Dividend from Team Internet		\$ 3,710	\$ 1,752	\$ 1,752	\$ 9,213	אינטרנט מטים דיבידנד
Withholding on tax Internet Team Dividend		607) \$	286) \$ (	286) \$ (	1,507) \$ (	ט ( בידנד טים אינטרנ ניכוי מס במקור די
Cash flow from Finance activity:						: מימון מפעילות תזרים
Issue Rights		10,000 \$				הנפקת זכויות
Bond Series A Expansion		\$ 2,000				האגח סדרת הרחבת
Cost Issuance		(1,000) \$				עלויות הנפקה
Cash flow from Investment activity:						: השקעה מפעילות תזרים
Sale of myDSP - last payment		\$ 250				myDSP מכירת
	\$ 4,129	\$ 14,242	\$ 2,385	\$ 4,702	\$ 8,886

Expected Usage of Funds:						: צפויים שימושים
Cash used for Operations:	\$ (438) \$	(438) \$	(438) \$	(438) \$	(1,100)	: שוטפת לפעילות תזרים
One time Cost of Operations	\$ (305) \$	(714)				פעמית-חד תפעולית עלות
Legal cost of bond settlement	\$ (171) \$	(329)				משפטיות - החוב הסדר עלות
Bond due interest		(1,057) \$		1,004) \$	(1,652) \$ (	לבעלי האגח ריבית חצי שנתית
loss Hedging	(755) \$					דור הפסד מפעילות גי

Cash flow used for Financing activity:						: מימון לפעילות תזרים
principal Bond payment		(3,500) \$		5,100) \$	(6,000) \$ (	החזר קרן לאג"ח
Long term loan - repayment to Leumi Bank	\$ (893)					לאומי בנק טווח ארוכת הלוואה פרעון
Rainmaker payments		\$ (13,500) \$	(90) \$	(810) \$	(360)	Rainmaker-ל תשלומים
	\$	(2,561) \$ (19,537) \$	(528) \$	(7,352) \$	(9,112)
Closing balance	7,347 \$	2,051 \$	3,909 \$	1,260 \$	1,034 \$	יתרת סגירה
Bank Leumi Deposit	\$ 1,000

Available Balance	\$ 6,347	\$ 2,051	\$ 3,909	\$ 1,260	\$ 1,034

Assumptions:

The statement assumes settlements between the Company, the bondholders, Rainmaker and any other relevant stakeholders, based on the updated key features for the Proposed plan published on January 9, 2019, and the clarifications that were published on January 23, 2019 ("Proposed plan"). On January 30, 2019 the majority of the bondholders voted in favour of an indicative non-binding approval of the Proposed Plan. The main key features of the Proposed Plan are as follows:

1.1 A fundraising with a commitment from key shareholder to invest \$10M in addition to a commitment to purchase bonds in the amount of up to \$2M as part of an expansion of the Series A Bonds.

1.2 Payment of \$13.5 to Rainmaker, based on preliminary understandings between the parties.

1.3 Updated payment schedule on the principal of the bonds of \$3.5M, \$5.1M, \$6M in Q2 2019 ,Eo2019, Eo2020 respectively

To date no agreement has been signed and there is no assurance with respect to the outcome of the actual foregoing discussions or with respect to the actual implementation of the proposed settlement

* If a settlement is is not concluded, the amounts due will vary as follows:

Payment to Rainmaker shall be due which based on the demand from Rainmaker is in an amount of approximately ~\$18M plus interest
Payment to the bondholders in an amount of approximately ~\$30M (with a potential claim for immediate repayment)

In addition, in such event Rainmaker may have the right to pursue other remedies, including the right to purchase some or all of the shares of Team Internet, as described in further detail in Note 1(b) in the Company's Consolidated Financial Reports for Q3, 2018).

The amounts of dividends that may be distributed by Team Internet to Matomy depend on the percentage holdings of Matomy in Team Internet and on the dividend policy at the relevant time.
In connection with Bank Leumi's approval of the sale of Mobfox Matomy provided \$3M secured cash deposit to Bank Leumi against its liabilities (long term debt, securities related to lease agreements and Forex hedging). This cash deposit is reduced proportionately as Matomy repays its liabilities
Timing of distribution of Team Internet's dividends may vary based on liquidity limitations

5.With respect to future dividend distributions by Team Internet, the Company adopted a conservative approach based on the actual results of Team Internet in 2018, and adjusted accordingly the dividend distributions from Team Internet during 2019 and 2020.

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 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 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 Q1, 2019 actual cash flow compared to the Sources and Expected Uses of Funds Statement projection published on January 3rd, 2019

in thousands of USD דולר באלפי

		Q1 - 2019	Q1 - 2019
		Projected	Actual
:Sources					מקורות:
Cash flow from Operations:					: שוטפת מפעילות תזרים
Working Capital Mobfox activity	Note 7 below	\$ 680	\$ 1,778	למטה 7 הערה	מובפוקס חוזר הון
Tax - Receivable Media Matomy	below 1 Note	- \$	1,544 \$	הערה 1 למטה	המס הישראליים החזר משלטונות
Receivable Tax USA Matomy -	below 2 Note	555 \$	96 \$	ערה 2 למטה	יים ה ות המס האמריקא החזר מס משלטונ
Dividend from Mobfox Austria	Note 8 below	\$ 85	\$ -	למטה 8 הערה	אוסטריה מובפוקס דיבידנד
Dividend from Team Internet	Note 3 below	\$ 4,600	\$ -	למטה 3 הערה	אינטרנט מטים דיבידנד
Withholding on tax Internet Team Dividend	below 3 Note	1,213) \$	- \$ (	ערה 3 למטה	ט ה בידנד טים אינטרנ ניכוי מס במקור די
Cash flow from Finance activity:					: מימון מפעילות תזרים
Issue Rights	below 3 Note	10,000 \$	- \$	הערה 3 למטה	הנפקת זכויות
Cost Issuance	below 3 Note	1,000) \$	- \$ (	הערה 3 למטה	עלויות הנפקה
Cash flow from Investment activity:					: השקעה מפעילות תזרים
Sale of myDSP - last payment	Note 8 below	\$ 250	\$ -	למטה 8 הערה	myDSP מכירת
Expected Usage of Funds:					: צפויים שימושים
Cash used for Operations:
One time Cost of Operations	Note 4 below	\$ (1,019) \$	(305)	למטה 4 הערה	פעמית-חד תפעולית עלות
Legal cost of bond settlement	Note 4 below	\$ (500) \$	(171)	למטה 4 הערה	משפטיות - החוב הסדר עלות
loss Hedging	below 5 Note	980) \$	(755) \$ (	הערה 5 למטה	דור הפסד מפעילות גי
Cash flow used for Financing activity:					: מימון לפעילות תזרים
principal Bond payment	below 3 Note	1,500) \$	- \$ (	הערה 3 למטה	החזר קרן לאג"ח
Long term loan - repayment to Leumi Bank	Note 6 below	\$ (185) \$	(893)	למטה 6 הערה	לאומי בנק טווח ארוכת הלוואה פרעון
Rainmaker payments	Note 3 below	\$ (13,500) \$	-	למטה 3 הערה	Rainmaker-ל תשלומים

1 1 Company collected an unexpected amount due to tax return from the Israeli tax authorities
2 2 Partial amount was collected during Q1 and the rest will be collected in Q2
3 3 The implementaion of the Proposed plan, as defined in assumption no. 1 in the Company's Sources and Expected Uses of Funds Statement, was deferred from Q1 to Q2
Partial amount was paid, the rest will be paid in Q2
5 5 The actual hedging loss turned out lower due to a favorable fluctuation in the Dollar/Shekel conversion rate
6 6 The company repaid all of the outstanding loan during Q1
7 7 The company collected from customers and paid suppliers with an excess in Q1, in addition to outstanding debts that will be paid in Q2

מטומי מדיה גרופ בע"מ - טבלת השוואה בין נתוני רבעון 1 של שנת 2019 לעומת דוח מקורות ושימושים צפויים שפורסם ב3- בינואר 2019

הסבר Note

החברה גבתה סכום לא-צפוי בשל החזר מס משלטונות המס הישראליים

החברה גבתה סכום חלקי מהחוב ברבעון ,1 השאר ייגבה ברבעון 2

יישום המתווה המוצע של ההסדר בין החברה, מחזיקי אגרות החוב שלה ו-Rainmaker, כפי שפורסם ביום 9 בינואר 2019 וההבהרות לו מיום 23 בינואר ,2019 נדחה לרבעון 2

4 4 חלק מהסכום שולם ברבעון ,1 השאר ישולם ברבעון 2

הפסד הגידור קטן מהצפוי בשל התחזקות בשער דולר לעומת השקל

החברה פרעה את כל החוב לבנק לאומי במהלך רבעון 1

החברה גבתה מלקוחות ושילמה לספקים מעל המצופה, ותשלם חובות שנשארו פתוחים במהלך רבעון 2

8 Payment was deferred to Q2 2 לרבעון נדחה התשלום 8

MATOMY MEDIA GROUP LTD. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF 31 DECEMBER 2018

IN US DOLLARS IN THOUSANDS

INDEX

	Page
Report of Independent Auditors	2-3
Consolidated Balance Sheets	4 - 5
Consolidated Statements of Operations	6
Consolidated Statements of Changes in Shareholders' Equity	7
Consolidated Statements of Cash Flows	8 – 9
Notes to Consolidated Financial Statements	10 – 47

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

The Board of Directors and shareholders of Matomy Media Group Ltd.

Re: Report of Independent Auditors

We have audited the accompanying consolidated financial statements of Matomy Media Group Ltd. ("the Company") and its subsidiaries, which comprise the consolidated balance sheets as of 31 December 2018 and 2017, and the related consolidated statements of operations, changes in shareholders` equity and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries at 31 December 2018 and 2017 and the consolidated results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

CONSOLIDATED BALANCE SHEETS

US dollars in thousands

		31 December
	2018			2017
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	\$	7,167	\$	29,407
Restricted cash		3,134		124
Trade receivables, net		5,947		22,402
Government authorities		9,009		3,781
Other receivables and prepaid expenses		3,474		2,364
Discontinued operation		4,634		11,988
Total current assets		33,365		70,066
LONG-TERM ASSETS:
Property and equipment, net		1,413		3,922
Domains		11,904		10,797
Other intangible assets, net		1,451		6,921
Goodwill		42,279		48,692
Discontinued operation		-		41,454
Other assets		59		176
Total long-term assets		57,106		111,962
Total assets	\$	90,471	\$	182,028

		31 December
	2018	2017
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Liability to non-controlling interest Short-term bank credit and current maturities of bank loans Trade payables Employees and payroll accrual Convertible bond (principal of ILS 101,000 thousands) Accrued expenses and other liabilities Discontinued operation	S 19,375 5,752 7,498 1,813 18,540 6,057 3,928	S 41,547 18,375 18,252 2,805 8.832 14,263
Total current liabilities	62,963	104,074
LONG-TERM LIABILITIES: Deferred tax liabilities Bank loans, net of current maturities Discontinued operation Other liabilities	2,727 1,116 318	3,411 3,001 67 1,585
Total long-term liabilities	4,161	8,064
EQUITY: Matomy Media Group Ltd. shareholders' equity: Ordinary shares Additional paid-in capital Accumulated other comprehensive loss Accumulated deficit Treasury shares	254 86,031 (3,174) (53,788) (6,231)	252 85,931 (3,174) (7,196) (6,231)
Total Matomy Media Group Ltd. shareholders' equity	23,092	69,582
Non-controlling interests	255	308
Total equity	23,347	69,890
Total liabilities and equity	સ્ત્રે 90,471	ਦਿੱਤੇ 182,028

CONSOLIDATED STATEMENTS OF OPERATIONS

US dollars in thousands except earnings per share data

	Year ended 31 December
		2018		2017
Revenues	\$	88,734	\$	194,442
Cost of revenues		69,867		149,569
Gross profit		18,867		44,873
Operating expenses
Research and development		2,266		7,154
Selling and marketing		7,694		22,679
General and administrative		6,125		10,114
Impairment, net of change in fair value of contingent consideration		7,435		18,668
Restructuring costs		1,923		924
Loss (gain) from sale of activity		1,777		(913)
Total operating expenses		27,220		58,626
Operating loss from continuing operations		(8,353)		(13,753)
Bond issuance costs		1,588		-
Financial expenses (income), net		(6,691)		2,536
Loss from continuing operations before taxes on income		(3,250)		(16,289)
Tax on income (benefit)		3,683		(2,303)
Loss from continuing operations before equity losses of affiliated companies Gain on remeasurement to fair value, gain from sale of affiliated companies and		(6,933)		(13,986)
equity gains of affiliated companies, net		75		135
Loss from continuing operations		(6,858)		(13,851)
Loss from discontinued operations, net		(39,787)		(583)
Net loss		(46,645)		(14,434)
Net income attributable to redeemable non-controlling interests in subsidiaries		-		(1,466)
Net loss (income) attributable to other non-controlling interests in subsidiary		53		(23)
Net loss attributable to Matomy Media Group Ltd. before accretion of redeemable non-controlling interest from continuing operations	\$	(6,805)	\$	(15,340)
Net loss attributable to Matomy Media Group Ltd. before accretion of
redeemable non-controlling interest from discontinued operations	\$	(39,787)	\$	(583)
Net loss attributable to Matomy Media Group Ltd. before accretion of redeemable non-controlling interest	\$	(46,592)	\$	(15,923)
Basic and diluted loss per ordinary share from continuing operations	\$	(0.07)	\$	(0.34)
Basic and diluted loss per ordinary share from discontinued operations	\$	(0.41)	\$	(0.01)
Basic and diluted loss per ordinary share	\$	(0.48)	\$	(0.35)

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

US dollars in thousands, except share data

	Ordinary shares			Additional paid-in	Accumulated other comprehensive		Retained		Treasury		Total Matomy Media Group Ltd. shareholders'		Non controlling		Total equity
	Number		Amount	capital		Loss	Earnings		shares		Equity		interests
Balance as of 1 January 2017	95,787,694	\$	247	\$ 101,066	\$	(3,174)	\$ 8,795		\$ (6,231)	\$	100,703	\$	-	\$	100,703
Cumulative-effect adjustment from adoption of ASU 2016-09	-		-	68		-	(68)		-		-		-		-
Change in parent's ownership interest in subsidiary Stock-based compensation	- -		- -	- 1,374		- -		- -	- -		- 1,374		285 -		285 1,374
Exercise of options and vesting of restricted share units Exercise of warrants	1,493,229 254,100		4 1	522 -		- -		- -	- -		526 1		- -		526 1
Accretion of redeemable non-controlling interest Net loss	- -		- -	(17,099) -		- -	(15,923)	-	- -		(17,099) (15,923)		- 23		(17,099) (15,900)
Balance as of 31 December 2017	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 Net loss	837,316 -		2 -	(2) -		- -	(46,592)	-	- -		- (46,592)		- (53)		- (46,645)
Balance as of 31 December 2018	98,372,339	\$	254	\$ 86,031	\$	(3,174)	\$ (53,788)		\$ (6,231)	\$	23,092	\$	255	\$	23,347

CONSOLIDATED STATEMENTS OF CASH FLOWS

US dollars in thousands

	Year ended
	31 December
Cash flows from operating activities:		2018		2017

Net loss	\$	(46,645)	\$	(14,434)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization		8,647		14,397
Stock-based compensation		102		1,374
Impairment of intangible assets, goodwill, domains and capitalized
research and development		38,580		27,144
Change in deferred tax, net		(664)		(7,802)
Change in accrued interest and effect of foreign exchange differences
on long term loans		(167)		516
Gain on remeasurement to fair value, gain from sale of affiliated
companies and equity losses of affiliated companies, net		(75)		(135)
Fair value revaluation of convertible bond		(11,390)		-
Decrease in trade receivables		22,679		21,981
Increase in other receivables and prepaid expenses		(186)		(1,469)
Decrease in other assets		57		58
Decrease in trade payables		(17,796)		(14,814)
Changes in fair value of contingent payment obligation related to
acquisitions recognized in earnings and liability to non-controlling
interest		260		(9,963)
Increase in withholding tax receivable		(3,399)		(71)
Accretion of contingent payment obligation related to acquisitions		-		359
Decrease in employees and payroll accruals		(2,294)		(846)
Increase (decrease) in accrued expenses and other liabilities		(4,818)		2,078
Loss (gain) from sale of activity		1,835		(913)
Loss from disposal of property and equipment		847		229
Other		(57)		(234)
Net cash provided by (used in) operating activities		(14,484)		17,455
Cash flows from investing activities:
Sale of activity		6,510		5,642
Purchase of property and equipment		(206)		(322)
Purchase of domains		(1,134)		(1,002)
Proceeds from sale of domains and property and equipment		76		160
Capitalization of research and development costs		(2,258)		(3,901)
Investments in subsidiaries net of cash acquired		-		(141)
Restricted cash		(3,010)		-
Change in long term deposit		66		-
Sale of investment in affiliated company		149		1,823
Net cash provided by investing activities	\$	193	\$	2,259

CONSOLIDATED STATEMENTS OF CASH FLOWS

US dollars in thousands

	Year ended
	31 December
		2018		2017
Cash flows from financing activities:
Short-term bank credit, net	\$	(4,322)	\$	12,135
Receipt of bank loans		-		2,000
Issuance of convertible bond		29,930		-
Repayment of bank loans		(10,019)		(8,937)
Additional payments related to previous acquisitions, net		(681)		(3,228)
Acquisition of redeemable and non-redeemable non-controlling interest		(20,146)		(10,994)
Dividend paid to redeemable non-controlling interest		(2,711)		(3,491)
Exercise of options and warrants		-		527
Net cash provided by (used in) financing activities		(7,949)		(11,988)
Effect of exchange rate differences on cash		-		10
Increase (decrease) in cash and cash equivalents		(22,240)		7,736
Cash and cash equivalents at beginning of year		29,407		21,671
Cash and cash equivalents at end of year	\$	7,167	\$	29,407
Supplemental disclosure of cash flow activities
Cash paid during the year for:
Income taxes, net	\$	8,210	\$	5,263
Interest paid, net	\$	2,623	\$	997
Non-cash investing activities:
Receivable in connection with acquisitions	\$	1,839	\$	75

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, domain owners.

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, 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.

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.

b. In 2018, the Company incurred a net loss of \$ 46,645 and had negative cash flows from its operating activities of \$ 14,484. In addition, the Company's working capital deficiency amounted to \$ 29,598 as of 31 December 2018.

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

NOTE 1:- GENERAL (Cont.)

Number of shares	Original Purchase price per share	Percentage of the total Team Internet's share capital
14,706	EUR 153.20	20%
36,765	EUR 535.84	50%
7,353	EUR 1,715.67	10%
7,353	EUR 2,481.33	10%

The shares purchased by the Company are detailed below:

In respect of the Company's convertible bond, as described in Note 9 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:

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 31 December 2018, the Company was not in compliance for two consecutive quarters with its Minimum Equity covenant and was not in compliance for one quarter with its Adjusted EBITDA and Net Debt to Adjusted EBITDA covenants. Therefore, under ASC 470, Debt, the convertible bond in the amount of \$18,540, (principal of \$26,948 as of 31 December 2018) was classified to short term liabilities as of 31 December 2018.

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.

Beginning in the fourth quarter of 2018, the Company has been holding discussions with the trustee of the outstanding Bonds (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.

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

NOTE 1:- GENERAL (Cont.)

The bondholders have, among other things, made a claim that they are entitled, at 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.

During January 2019, The Trustee issued a voting proxy, according to which the bondholders are requested to either vote in favor of an indicative non-binding approval of the Company's Proposed Plan (as further described below) or demand immediate repayment of the Bonds. On 29 January 2019, the majority of the bondholders voted in favor of the Proposed Plan of the Company and resolved not to require immediate repayment of the Bonds pursuant to that voting proxy. To date no agreement was reached.

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 ongoing 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.

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 April 30, 2019.

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

NOTE 1:- GENERAL (Cont.)

It should be noted that the Company engaged independent legal experts in order to advise about the appropriate measures and actions it should take in connection with the Letter of Support. In light of the indicative approval of the Proposed Plan (as described below) by the majority of the bondholders, the continued negotiations regarding Proposed Plan, and the extension of the Letters of Support as described above, the Company is of the opinion that it is not necessary, at this stage, to reach a conclusion regarding the above disputed interpretation of the Letters of Support.

In order for the Company to act in a manner that is intended to address the interests of all stakeholders, the Company proposed comprehensive plan that will enable it to raise funds, adjust the terms of the Bonds to the Company's current and anticipated financial position and planned future activity, and fund the purchase of Rainmaker's shares in Team Internet from Rainmaker (the "Proposed Plan"). The main key features of the Proposed Plan are as follows:

(i) A fund raising by the Company of not less than \$12,000, in which key shareholders holding in the aggregate approximately 55% of the voting share capital of the Company would commit to secure an amount of \$10,000 through a capital raising and an additional amount of up to \$2,000 through the issuance of additional Bonds, at a market price (the "Additional Amount"). The commitment for the Additional Amount will enter into effect only in the event that no additional amounts are raised beyond the commitment by the key shareholders of \$10,000. Therefore, any consideration received by the Company in excess of the original commitment by the key shareholders of \$10,000, will proportionately reduce the liability of the key shareholders for the Additional Amount accordingly (the specific terms of the fundraising have not been finalized);
(ii) Discussions with Rainmaker regarding the terms of the purchase of the shares held by it in Team Internet with the intention of modifying the existing terms (for further details see above);
(iii) Adjustment of the payment schedule of the principal amount and the financial covenants of the Bonds as follows:
- A waiver on the measurement of the covenants until the end of 2019.
- Adjusting the minimum shareholder equity covenant to \$5,000.
- Adjusting the minimum Adjusted EBITDA covenant to \$9,000.
- Adjusting the payment schedule of the principal amount of the Bonds, by advancing a partial repayment of a minimum amount of \$6,100 during 2019 (depending on the success of the fund-raising exceeding \$10,000), together with extending the overall payment period.
- Ability to make prepayment at par

The Company is proposing to the bondholders:

• Increased interest of 7% per annum

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

NOTE 1:-GENERAL (Cont.)

Issuance of warrants to purchase up to 10% of the Company's share capital, after the proposed fundraising, for a period of 3 years at an exercise price equal to 150% of the share price of the fundraising. These warrants will replace the conversion mechanism of the Bonds.
Any additional sum to be received by the Company (excess fundraising, over performance in the business activity etc.) will be used to advance/increase the repayments of the Bonds.
The Company will grant a security interest in the tax refunds due to be received in 2019 and its shares in Team Internet for the benefit of the Bonds (subject to consent of a bank, which is currently holding a security).

As noted above, the majority of the bondholders voted in favor of the Proposed Plan. To date no agreement has been signed and there can be no assurance with respect to the outcome of such discussions between the Company and the various stakeholders, including the bondholders, or with respect to the actual implementations of the Proposed Plan.

It is noted that the adoption of any proposal and/or amendments to the existing agreements are subject to receipt of all required approvals, including the approval of key shareholders, the Company's Board of Directors, the bondholders, Rainmaker, the competent Israeli court and any other body or authority whose approval may be required. As of the date hereof, such required approvals have not yet been received and there is no certainty that they will be obtained.

These conditions raise, as described above, substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

c. Sale of activities:

On 29 July 2018, the Company signed an agreement for the sale of "myDSP" activity for a consideration of \$850, which would be paid in two payments: \$600 upon closing and \$250 is deferred and was supposed to be received on 1 December 2018. The first payment in the amount of \$600 was received in September 2018. The second payment in the amount of \$250 has yet to be received.

On 13 August 2018, the Company signed an agreement for the sale of its White delivery email marketing activity. In addition, the Company signed an agreement with the buyer for data-licensing. The maximum total consideration from the agreements amounts to \$8,500, which includes performance-based payments subject to meeting pre-defined milestones. The Company does not expect to collect any material amount from this transaction due to the buyer's financial difficulties.

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

NOTE 1:- GENERAL (Cont.)

On 15 November 2018 the Company sold its mobile core-business ("Mobfox") for a total consideration of \$7,500, of which a payment of \$6,000 was received as of 31 December 2018 and the remaining \$1,500 was subject to fulfilment of certain payment requirement to publishers that were transferred with the framework of the sale. In January 2019 \$ 1,000 was received. Accordingly, the results of operations of Mobfox have been classified as discontinued operations in the consolidated statements of operations in accordance with Accounting Standards Codification ("ASC") ASC 205-20 (Presentation of Financial Statements - Discontinued Operations). Additionally, the assets and associated liabilities have been classified as discontinued operations in the consolidated balance sheets.

On 29 June 2017, the Company entered into an agreement for the sale of its intangible assets and transfer of all employees related to part of its non-core business, for a total consideration of up to \$10,892, comprised of \$5,642 in cash and a contingent consideration up to \$5,250 based on future business performance.

The sale resulted in a gain of \$913, which is included in operating results for the year ended 31 December 2017.

Following the consummation of this transaction, the Company has exited from the legacy web display, social and search and virtual currency media channels, which are deemed noncore activities, and these media channels ceased to be part of the Company's activity.

The Company elected to recognize the future contingent proceeds when the contingency is resolved and therefore the contingent consideration amount was not accounted for as part of the gain/loss.

Loss (gain) from sale of activities:

	Year ended 31 December
	2018	2017
Cash consideration, net Deferred consideration - presented in receivables	\$ 6,463 1,839	\$ 5,642 -
Total consideration, net Property and equipment - R&D capitalization	8,302 (4,061)	5,642 -
Other intangible assets, net Goodwill Working capital and other	(202) (5,827) (47)	(69) (4,660) -
Loss (gain) from sale of activities	\$ 1,835	\$ (913)

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

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United Sates ("US GAAP"). The significant accounting policies are applied in the preparation of the consolidated financial statements on a consistent basis, as follows:

a. Principles of consolidation:

The consolidated financial statements include the accounts of Matomy Media Group Ltd and its subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation.

Changes in the parent's ownership interest in a subsidiary with no change of control are treated as equity transactions, with any difference between the amount of consideration paid and the change in the carrying amount of the non-controlling interest recognised in equity.

b. Use of estimates:

The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates, judgments and assumptions. The Company's management believes that the estimates, judgments and assumptions used 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 statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

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, liability to non-controlling interest, 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. Financial statements in US dollars:

The US dollar is the currency of the primary economic environment in which Matomy Media Group and its subsidiaries operate. A substantial portion of the revenues and expenses of the Company are generated in US dollars. In addition, financing activities including equity transactions and cash investments are made in US dollars, which is prepared in US dollars. Thus, the functional and reporting currency of the Company is the US dollar.

Accordingly, monetary accounts maintained in currencies other than the US dollar are remeasured into US dollars in accordance with ASC 830, "Foreign Currency Matters". All transaction gains and losses of the remeasured monetary balance sheet items using exchange rates in effect at the balance sheet date are reflected in the statements of income as financial income or expenses, as appropriate.

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

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

d. Cash and cash equivalents:

Cash equivalents are short-term highly liquid investments that are readily convertible into cash with original maturities of three months or less at acquisition.

e. Accounts receivable and allowance for doubtful accounts:

Accounts receivable are stated at realisable value, net of an allowance for doubtful accounts. The Company evaluates specific accounts where information indicates the Company's customers may have an inability to meet financial obligations. Allowance for doubtful accounts as of 31 December 2018 and 2017 were \$ 3,470 and \$ 1,648, respectively.

During the years ended 31 December 2018 and 2017 bad debt expenses were \$3,598 and \$ 1,958, respectively, and the write offs of balances included in allowances for doubtful accounts amounted to \$1,530 and \$ 1,884 in the years ended 31 December 2018 and 2017, respectively. During the years ended 31 December 2018 and 2017 recoveries amounted to \$246 and \$130, respectively, of amounts previously included allowance for doubtful accounts.

f. Property and equipment, net:

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, at the following annual rates:

	%

Computers and software	33
Office furniture and equipment	6 - 10
Electronic equipment	10 - 20
Capitalized research and development costs	33
Leasehold improvements	Over the shorter of related lease period
	or the life of the improvement

g. Impairment of long-lived assets and intangible assets subject to amortization:

Property and equipment and intangible assets subject to amortization are reviewed for impairment in accordance with ASC 360, "Accounting for the Impairment or Disposal of Long-Lived Assets", and ASC 350, "Intangibles - Goodwill and other" whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The recoverability of these assets is measured by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If property and equipment and intangible assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair market value.

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

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

In determining the fair values of long-lived assets for purpose of measuring impairment, the Company's assumptions include those that market participants will consider in valuations of similar assets.

h. 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.

The Company adopted in 2017, the Financial Accounting Standards Board ("FASB") authoritative guidance, which simplifies the subsequent measurement of goodwill. The standard eliminates Step 2 of the current goodwill impairment test, which requires companies to determine the implied fair value of goodwill when measuring the amount of impairment loss. Under the new standard, goodwill impairment is measured as the amount by which a reporting unit's carrying value exceeds its fair value, with the loss limited to the total amount of goodwill allocated to that reporting unit.

During 2018, following the recent changes in the Company's business focus and sale of its mobile activity, the Company recorded a goodwill impairment of \$30,648 related to its Mobile reporting unit. The Company did not record any goodwill impairment related to its Mobile reporting unit in 2017.

In addition, the Company determined that certain indicators of potential impairment existed during 2018, which triggered goodwill impairment analysis for its domain monetization unit. The Company determines the fair value of its domain monetization unit 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 additional impairment charges for its goodwill. As a result of the impairment test in 2018, the Company recorded goodwill impairment charges of \$5,014 using a weighted average cost of capital and a long-term growth rate of 15% and 2%, accordingly. The Company did not record any goodwill impairment related to its domain monetization reporting unit in 2017.

During 2017 the Company recorded goodwill impairment charges of \$9,005 related to its non-core reporting unit.

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

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

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.

Intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives. Customer relationships and trade name are amortized over their estimated useful lives in proportion to the economic benefits realized. This accounting policy results in accelerated amortization of such intangible assets as compared to the straight-line method. Technology and database are amortised over their useful lives on a straight-line basis. For impairment of intangible assets, refer to Note 2g.

i. Investments in affiliated companies:

In December 2017 the Company sold its investment in Adperio for a total consideration of \$1,972, comprised of \$1,823 in cash and \$149 which is held in escrow for additional year. The Company estimated that 50% of the escrow amount will be received, and therefore an amount of \$75 was included in other receivables and prepaid expenses in the balance sheet as of 31 December 2017. The sale resulted in a gain of \$7, which is included in operating results for the year ended 31 December 2017. During the year ended 31 December 2018, the Company received the entire \$149 amount, and as a result recorded a gain from sale of \$74.

j. Severance pay:

Effective September 2007, the Company's agreements with employees in Israel are generally in accordance with section 14 of the Severance Pay Law - 1963 which provide that the Company's contributions to severance pay fund shall cover its entire severance obligation with respect to period of employment subsequent to September 2007. Upon termination, the release of the contributed amounts from the fund to the employee shall relieve the Company from any further severance obligation and no additional payments shall be made by the Company to the employee. As a result, the related obligation and amounts deposited on behalf of such obligation are not stated on the balance sheet, as the Company is legally released from severance obligation to employees once the amounts have been deposited, and the Company has no further legal ownership on the amounts deposited.

Severance expenses during the years ended 31 December 2018 and 2017 were \$ 927 and \$ 1,063, respectively.

k. Revenue recognition:

The Company provided smart marketing services through customized programmatic solutions supported by internal media capabilities, big data analytics, and optimization technology. Matomy empowered advertising and media partners to meet their evolving growth-driven goals across several media channels, including mobile, domain monetization, email and video, for multiple industry verticals on a wide variety of devices and operating systems. Following the recent sale of activities (refer to Note 1c), the Company generates revenue only from its domain monetization technology.

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

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

On 1 January 2018, the Company adopted Accounting Standards Update No. 2014- 09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). In addition, the guidance in Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ("ASU 2016-08") was considered to the extent that it applies to the Company's revenue arrangements.

The Company elected to apply the modified retrospective method for transition to the new accounting standard. This applies the standard retrospectively without amending comparative figures, with the cumulative effect of initially applying the guidance recognized as an adjustment to retained earnings at the date of initial application. The Company's adoption of the new standard was evaluated on a qualitative basis and did not have any material effect on the financial statements for the year ended 31 December 2018.

The Company recognizes revenue once the performance obligations for all transactions are satisfied, and the corresponding revenue is recognized, at a distinct point in time; the Company has no arrangements with multiple performance obligations. The Company considers the following when determining if a contract exists (i) contract approval by all parties, (ii) identification of each party's rights regarding the goods or services to be transferred, (iii) specified payment terms, (iv) commercial substance of the contract, and (v) collectability of substantially all of the consideration is probable.

The Company evaluates whether it acts as the principal to determine whether revenue should be reported on a gross or net basis. The Company has determined that it acts as the principal. In making that evaluation, the Company considers indicators such as whether the Company is: (i) the primarily responsible for fulfilling the promise to provide the specified good or service, (ii) has inventory risk before the specified good or service has been transferred to a customer, or after transfer of control to the customer and (iii) has discretion in establishing the prices for the specified goods or service.

The Company records deferred revenues for unearned amounts received from customers for services that were not recognised as revenues. Deferred revenues amounted to \$ 808 and \$ 1,059 at 31 December 2018 and 2017, respectively, and are included within accrued expenses and other liabilities on the balance sheets.

l. Cost of revenues:

Cost of revenues consists primarily of direct media costs associated with the purchase of digital media, data centre costs, amortization of technology and internally developed software and allocation of attributable personnel and associated costs.

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

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

m. Comprehensive income:

The Company accounts for comprehensive income in accordance with ASC 220, "Comprehensive Income". Comprehensive income generally represents all changes in shareholders' equity during the period except those resulting from investments by, or distributions to, shareholders. The Company's items of other comprehensive income relate to foreign currency translation adjustments, which were immaterial for the years 2018 and 2017.

n. Research and development costs:

Research and development costs are charged to the statement of operations as incurred, except for certain costs relating to internally developed software, which are capitalized and amortized on a straight-line basis over their estimated useful life once the asset is ready for its intended use.

o. 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. During 2018 and 2017, the Company capitalized software development costs of \$ 2,258 and \$ 3,901, respectively. Amortization expense for the related capitalized internally developed software in 2018 and 2017 totaled \$ 3,345 and \$ 2,757, respectively, and is included in cost of revenues in the accompanying consolidated statements 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. As a result of changes in circumstances in the non-core activity, management decided to abandon certain projects and therefore recorded an impairment charge of \$790 and \$447 in 2018 and 2017, respectively.

Capitalized internally developed software of \$ 817 and \$ 6,755 are included in property and equipment in the consolidated balance sheets as of 31 December 2018 and 2017, respectively.

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

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

p. Accounting for stock-based compensation:

The Company accounts for stock-based compensation under ASC 718, "Compensation - Stock Compensation", which requires the measurement and recognition of compensation expense based on estimated grant date fair values for all share-based payment awards made to employees and directors. ASC 718 requires companies to estimate the fair value of equity-based awards on the date of grant, using an option-pricing model. The Company elected to account for forfeitures when they occur and adopted this change on a modified retrospective basis.

The Company recognizes compensation expenses for the value of its awards, which have graded vesting based on service conditions, using the accelerated attribution method, over the requisite service period of each of the awards.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016- 09"). The update simplifies several aspects of accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The ASU is effective for annual reporting periods beginning after 15 December 2016, including interim periods within those annual reporting periods, early adoption is permitted. The Company adopted the standard commencing 1 January 2017. The impact of the adoption was to reduce retained earnings and to increase additional paid-in capital by \$ 68 as of 1 January 2017.

1. The Company estimates the fair value of stock options granted to its employees and directors using the Black-Scholes-Merton option-pricing model. The Black-Scholes-Merton model requires a number of assumptions, of which the most significant are the expected stock price volatility and expected option term. The assumptions are estimated as follows:
2. Volatility the expected share price volatility was based on the historical equity volatility of the ordinary shares of comparable companies that are publicly traded and the Company's historical equity volatility.
3. Expected option term the expected term of the options represents the period of time that the options are expected to be outstanding and is based on the simplified method, which is the midpoint between the vesting date and the end of the contractual term of the option.
4. Risk-free interest - the risk-free interest rate assumption is based on the yield from zero-coupon US government Bonds appropriate for the expected term of the Company's employee stock options.
5. Dividend yield - the Company estimates its dividend yield based on historical pattern, however the Company currently intends to invest funds in business development and not to distribute dividends.

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

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The fair value of the Company's stock options granted to employees and directors for the years ended 31 December 2018 and 2017 was estimated using the following weighted average assumptions:

	Year ended 31 December
	2018	2017
Volatility	40%	47%
Expected option term (in years)	6.2	5.9
Risk-free interest rate	2.65%	1.97%
Dividend yield	0%	0%

1. The Company estimates the fair value of restricted share units ("RSUs") granted to employees according to the fair value of the Company's share at the grant date.
q. Income taxes:

The Company is subject to income taxes in Israel, Germany, the United States and numerous other jurisdictions. The Company accounts for income taxes in accordance with ASC 740, "Income Taxes". This topic prescribes the use of the liability method, whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to the amount that is more likely than not to be realised. In such determination, the Company considers future reversal of existing temporary differences, future taxable income, tax planning strategies and other available evidence in determining the need for a valuation allowance.

The Company implements a two-step approach to recognise and measure uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% (on a cumulative basis) likely to be realised upon ultimate settlement. The Company classifies interest incurred payable to tax authorities as interest expenses.

r. Concentrations of credit risks:

Financial instruments that could potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade receivables.

Cash and cash equivalents are managed in major banks, mainly in Israel, United Kingdom and Germany.

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

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company's trade receivables are derived from sales to customers located mainly in Europe and the United States. The Company performs ongoing credit evaluations of its customers and a specific allowance for doubtful accounts is provided.

s. Fair value of financial instruments:

The Company applies ASC 820, "Fair Value Measurements and Disclosures". Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date.

In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximises the use of observable inputs and minimises 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 the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the 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.
t. Basic and diluted earnings per share:

Basic earnings per share are computed based on the weighted average number of ordinary shares outstanding during each year. Diluted earnings per share are computed based on the weighted average number of ordinary shares outstanding during each year, plus dilutive potential ordinary shares outstanding during the year, in accordance with ASC 260, "Earnings per Share".

w. Treasury shares:

In accordance with ASC 505-30, the Company shares held by the Company and/or its subsidiaries are recognized at cost of purchase and presented as a deduction from equity. Any gain or loss arising from a purchase, sale, issue or cancellation of treasury shares is recognized directly in equity.

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

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

x. Domains:

During the year ended 31 December 2017, the Company changed its long-term strategy regarding the manner it relates to domains which were previously held for sale and accordingly reclassified the domains from current assets to non-current assets with indefinite useful lives. As of the date of reclassification, no impairment losses were recorded in accordance with ASC 350, "Intangibles - Goodwill and other".

Since the domains have no expiry date, management believes that these intangible assets have indefinite useful lives. Intangible assets with indefinite useful lives are not amortized and are tested for impairment annually or whenever there is an indication that the intangible asset may be impaired. For the years ended 31 December 2018 and 2017, no impairment losses were recorded.

y. Discontinued operations

For all periods presented, the operating results of our mobile advertising segment have been excluded from continuing operations and reported as income (loss) from discontinued operations, net of tax in the accompanying consolidated financial statements. In addition, the assets and liabilities related to our discontinued mobile advertising segment are reported as assets and liabilities of discontinued operations in the accompanying consolidated balance sheets. Cash flow information of our discontinued operations was not presented. For additional information on the discontinuation of our mobile advertising segment, refer to Note 17.

z. Change in accounting policies:

In 2018 the Company changed its accounting policy regarding the offsetting of bank overdraft and cash balances in the same bank account. According to the new accounting policy, the Company presents overdraft and cash balance in the same account on gross basis compared to previous presentation which was presented net. Management believes presenting on gross basis the overdraft and cash balances in the same bank account is a more appropriate presentation. Prior year's amounts were reclassified to conform to current year's presentation.

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

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The reclassification had no effect on previously reported net loss or shareholders' equity. The effect on 31 December 2017 is as follow:

	Year ended 31 December 2017
	Before After
Cash and cash equivalents	\$	28,827	\$	29,407
Short-term bank credit and current maturities of bank loans	\$	17,795	\$	18,375

aa. Recently issued accounting standards:

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02), which generally requires companies to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet.

The guidance is effective for the interim and annual periods beginning on or after December 15, 2018, and early adoption is permitted. For operating leases having initial or remaining non-cancelable lease terms in excess of one year, the lessee shall disclose both of the following: a. Future minimum rental payments required as of the date of the latest balance sheet presented, in the aggregate and for each of the five succeeding fiscal years. b. The total of minimum rentals to be received in the future under non-cancelable subleases as of the date of the latest balance sheet presented.

The Company is still evaluating the effect that this guidance will have on its consolidated financial statements and related disclosures.

NOTE 3:- PROPERTY AND EQUIPMENT, NET

	31 December
		2018		2017
Cost:
Computers and software	\$	571	\$	1,659
Office furniture and equipment		878		1,179
Electronic equipment		50		98
Capitalized research and development costs		2,252		10,465
Leasehold improvements		211		1,339
Total cost		3,962		14,740
Less: accumulated depreciation and amortization		(2,549)		(5,944)
Property and equipment, net	\$	1,413	\$	8,796

a. Composition:

b. Depreciation and amortization expense amounted to \$ 4,031 and \$ 3,784 for the years ended 31 December 2018 and 2017, respectively.

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

NOTE 3:- PROPERTY AND EQUIPMENT, NET (Cont.)

In connection with the restructuring plan, the Company recorded in 2018 and 2017 an impairment of \$ 905 and \$152, respectively, relating to disposal of certain office furniture and equipment which are included in restructuring charges in the statement of operations.

In 2018 and 2017, the Company recorded a loss on disposal of property and equipment in the amount of \$ 0 and \$ 77, respectively. In 2018 and 2017, the Company derecognised property and equipment in the amount of \$ 2,771 and \$ 2,602, respectively, which were fully depreciated.

NOTE 4:- OTHER INTANGIBLE ASSETS, NET

a.	Other intangible assets		comprise of the following:

	Technology		Customer relationships		Database		Trade name		Total
1 January, 2017	\$ 15,880	\$	13,498	\$	4,593	\$	2,606	\$	36,577
Acquisition Amortization Impairment Sale of activity	194 (4,741) (9,327) -		- (4,761) (5,013) (69)		- (587) (1,270) -		- (524) (2,082) -		194 (10,613) (17,692) (69)
31 December 2017	2,006		3,655		2,736		-		8,397
Amortization Impairment Sale of activity	(1,909) - -		(2,099) - (202)		(608) (2,128) -		- - -		(4,616) (2,128) (202)
31 December 2018	\$ 97	\$	1,354	\$	-	\$	-	\$	1,451

Related deferred tax liabilities of \$ 0 and \$ 6,148 have also been written off and are included in taxes on income, as tax benefit, for the years ended 31 December 2018 and 2017, respectively.

b. The estimated future amortization expense of other intangible assets as of 31 December 2018 is as follows:

2019 2020	\$ 1,031 420
	\$ 1,451

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

NOTE 5:- GOODWILL

Changes in goodwill for the years ended 31 December 2018 and 2017 are as follows:

	31 December
	2018		2017
Goodwill at beginning of year Acquisitions	\$ 83,768 -	\$	97,015 418
Sale of activity Impairment	(5,827) (35,662)		(4,660) (9,005)
	\$ 42,279	\$	83,768

NOTE 6:- FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table present assets and liabilities measured at fair value on a recurring basis as of 31 December 2018 and 2017:

	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

	31 December 2017 Fair value measurements using input type
		Level 1		Level 2		Level 3	Total
Assets:
Derivative asset	\$	-	\$	22	\$	-	\$ 22
Total financial asset	\$	-	\$	22	\$	-	\$ 22
Liabilities: Liability to non-controlling interest	\$	-	\$	-	\$	41,547	\$ 41,547
Contingent consideration in connection with acquisitions		-		-		1,716	1,716
Total financial liabilities	\$	-	\$	-		\$ 43,263	\$ 43,263

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

NOTE 6:- FAIR VALUE OF FINANCIAL INSTRUMENTS (Cont.)

The following table summarizes the changes in the Company's liabilities measured at fair value using significant unobservable inputs (Level 3), during the year ended 31 December 2018 and 31 December 2017:

	31 December
	2018		2017
Total fair balance at the beginning of the year	\$ 43,263	\$	17,358
Classification of liability to non-controlling interest from Redeemable to fair value financial instrument Classification of liability to non-controlling interest to	-		41,547
current liabilities (*)	(19,488)		-
Changes in fair value of liability to non-controlling interest	798		-
Accretion of contingent liability related to acquisitions	-		359
Changes in fair value of payment obligation related to
acquisitions recognized in earnings	(538)		(9,963)
Payment of contingent consideration during the period	(110)		(5,794)
Classification of contingent obligation into current
liabilities	(976)		-
Payment of liability non-controlling interests	(20,146)		-
Dividend to non-controlling interests	(2,711)		-
Other adjustments	(92)		(244)
Total fair value at the end of year	\$ -	\$	43,263

(*) As 31 December 2018 the total aggregate liability to non-controlling interest was set on an amount of EUR16,921 thousand (\$19,375 based on the exchange rate on 31 December 2018), of which EUR16,015 thousands is for the Third Sale Exit amount claimed by Rainmaker which was due on 30 November 2018. This amount accrues interest rate of 8% from 1 October 2018 till payment date. The accumulated interest rate as of 31 December 2018 is EUR319 thousands. The liability to non-controlling interest includes also an estimated liability of EUR587 which is due in 2019. The payment is yet to be made. For additional information refer to Note 1b.

NOTE 7:- LIABILITY TO NON-CONTROLLING INTEREST

a. The following table provides the movement in the redeemable non-controlling interests:

	31 December
	2017
Redeemable non-controlling interest at beginning of year	\$ 23,691
Decrease in redeemable non-controlling interests due to change in
ownership in subsidiaries *)	(565)
Revaluation of redeemable non-controlling interest in subsidiaries	17,099
Net income attributable to redeemable non-controlling interests	1,466
Dividend declaration/distributed to non-controlling interests	(144)
Classification of redeemable non-controlling interest into current
liabilities **)	(41,547)

	\$ -

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

NOTE 7:- LIABILITY TO NON-CONTROLLING INTEREST (Cont.)

*) In June 2017 the non-controlling interest of Matomy Social exercised their put option, and sold 10% of Matomy Social to the Company. As of 31 December 2018 and 2017, the Company holds 100% of Matomy Social.
**) In the end of 2017, as part of the 2017 SPA, Rainmaker exercised its put option to sell to the Company its remaining 20% during 2018 (see Note 1b). As a result, as of 31 December 2017, the Company recorded a liability for the expected consideration based on fair value according to its best estimates and classified the respective amount from redeemable to current liabilities.
b. The following table summarises the effect on the Company's shareholders:

	31	Year ended December
		2017
Net loss attributable to Matomy Media Group Ltd before accretion of redeemable non-controlling interest from continuing operations	\$	15,340
Accretion of redeemable non-controlling interest		17,099
Net loss attributable to Matomy Media Group Ltd. shareholders after accretion of redeemable non-controlling interest from continuing operations	\$	32,439

NOTE 8:- BANK LOANS AND CREDIT LINES

a. On 16 June 2014, the Company signed a loan agreement with an Israeli bank in an amount of \$21,600. The loan agreement requires repayment of 85% of the principal in 12 equal payments every three months commencing 16 September 2014, and 15% of the principal in 4 equal payments every three months commencing 16 September 2017. The loan bore interest of three months USD LIBOR plus 3.5% to be paid together with the relevant portion of the principal. The loan was repaid in full on 16 June 2018.
b. As of 31 December 2017, the Company had an unsecured line of credit with Israeli banks which was available to the Company based on meeting certain account receivable conditions, out of which, it utilized \$ 8,269. Interest rate of the credit line was USD LIBOR plus 3.25%. The credit line was repaid in full during 2018 and the Company has no credit line available as of 31 December 2018.
c. On 3 January 2017, the Company signed a term loan agreement with an Israeli bank in an amount of \$ 2,000. In accordance with the loan agreement, repayment of the principal and the interest shall be made in 12 equal quarterly payments, commencing 10 April 2017. The loan bears annual interest of three months USD LIBOR plus 4.6%. The remaining principal as of 31 December 2018 was \$ 893. On 5 February 2019, after balance sheet date, the loan was repaid in full and therefore the Company presented the entire loan amount in current liabilities.

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

NOTE 8:- BANK LOANS AND CREDIT LINES (Cont.)

The loan was secured by way of: (i) a fixed charge over the unpaid equity of the Company; and (ii) a floating charge over all the assets of the Company; and (iii) mutual guarantees between the Israeli companies.

d. On 20 August 2015, the Company's subsidiary Team Internet signed a term loan agreement with a German bank in an amount of EUR1,192 thousands (\$ 1,365 based on the exchange rate on 31 December 2018). In accordance with the loan agreement, repayment of the principal shall be made in 54 equal monthly payments, commencing 31 March 2016. The loan is indexed to the Euro and bears interest of 1.8% to be paid on a monthly basis, commencing 31 August 2015. The remaining principal as of 31 December 2018 was \$ 505 (EUR 441 thousand).
e. On 28 April 2016, Team Internet signed a loan agreement with a German bank in an amount of EUR 2,660 thousand (\$ 3,046 based on the exchange rate on 31 December 2018). In accordance with the loan agreement, repayment of the principal shall be made in 20 equal quarterly payments, commencing 30 September 2016. The loan is indexed to the Euro and bears interest of 1.1% to be paid on a quarterly basis, commencing 30 June 2016. The remaining principal as of 31 December 2018 was \$ 1,523 (EUR 1,330 thousand).
f. On 28 September 2016, the Company's subsidiary in the US ("Matomy US") signed a loan agreement with a bank in the US in an amount of \$ 4,000, and a secured line of credit in the amount of \$ 1,000. The line of credit bore a used credit line interest rate of LIBOR plus 3.25% and was repaid in full in November 2017. The term loan agreement required repayment of principal and interest every 3 months commencing 28 December 2016. The loan bore interest of three months USD LIBOR plus 3.65%. In December 2017 the Company signed an addendum to the loan agreement, and repaid loan principal of \$ 500. The remaining principal of \$ 1,834 was paid in full in February 2018.
g. On 10 January 2017, the Company's subsidiary in the US signed a secured line of credit in the amount of \$ 5,000, all was utilized with a bank in the US. The line of credit bore an interest rate of LIBOR plus 3.25%, and an interest of 0.35% on the unused credit line. The credit line was repaid in full in May 2018.
h. On 16 May 2018, Team Internet signed a secured line of credit in the amount of EUR 6,000 thousands (\$6,870 based on the exchange rate on 31 December 2018), with a German bank, out of which it utilized \$3,947 as of 31 December 2018. The line of credit bears an interest rate of 2%, and an interest of 0.5% on the unused credit line. Team internet is required to comply with certain covenants, as defined in the credit line agreement. As of 31 December 2018, Team Internet was in full compliance with the financial covenants.
i. As of 31 December 2018, the aggregate principal annual maturities according to the loan agreement are as follows:

2019 (current maturities) 2020	\$ 1,805 811
2021	305
Total	\$ 2,921

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

NOTE 9:- CONVERTIBLE BOND

In February 2018, the Company completed a public offering in Israel of convertible 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 semi-annual basis. Interest prepayment in the amount of ILS 2.8 million (approximately \$ 798) is included in other receivables and prepaid expenses on the balance sheet as of 31 December 2018. Transaction costs amounted to \$1,588 and were expensed as incurred. 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 1b for further information. As of 31 December 2018, the Company did not meet part of its bond covenants and as a result, the bond interest increased to 6% per annum. Refer to Note 1b for further information on the Bonds, including the potential consequences of noncompliance with the financial covenants in the Bonds.

The Company elected to apply the fair value option in accordance with ASC 825, "Financial Instruments", to the Bonds and therefore all unrealized gains and losses are recognized in earnings. As of 31 December 2018, the fair value of the Bonds, based on its quoted price at the TASE was \$18,540.

The changes of the Bonds in year ended 31 December 2018 were as follows:

Balance 1 January, 2018	\$ -
Convertible bond issuance, net Change in fair value	29,930 (11,390)
Balance as of 31 December, 2018	18,540

As of 31 December 2018, the aggregate annual payments of principal of the Bonds are as follows:

	Repayment amount
	\$
2020	13,474
2021	13,474
	26,948

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

NOTE 10:- COMMITMENTS AND CONTINGENT LIABILITIES

a. The Company rents its facilities under operating lease agreements with a term expiring in 2021. Future minimum lease commitments under non-cancellable operating leases for the year ended 31 December 2018 were as follows:

	Future minimum lease commitment
2019	\$ 466
2020	335
2021	335
2022	195

	\$ 1,331

Rent expenses, net of sublease rentals, for the years ended 31 December 2018 and 2017, were \$ 1,714 and \$ 2,105, respectively.

The Company has provided guarantees for rent expenses in the amount of \$ 1,072.

The Company leased its motor vehicles under cancellable operating lease agreements. In 2018 the Company cancelled its operating lease agreement.

Lease expenses for motor vehicles for the years ended 31 December 2018 and 2017 were \$ 23 and \$ 130, respectively.

In connection with the restructuring plan, the Company vacant most of its leased space, refer to Note 16 for further details.

b. From time to time, the Company is party to ordinary and routine litigation incidental to its business. As of 31 December 2018 the Company does do not expect the outcome of any such litigation to have a material effect on its consolidated financial position, results of operations, or cash flows.

NOTE 11:- EQUITY

a. The Company's equity is composed of shares of NIS 0.01 par value each, as follows:

	31 December 2018		31 December 2017
	Authorised	Issued	Outstanding	Authorised	Issued	Outstanding
	Number of shares
Ordinary
shares	430,500,000	108,131,214	98,372,339	430,500,000	107,293,898	97,535,023

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

NOTE 10:- EQUITY (Cont.)

The Ordinary Shares confer upon the holders thereof the right to receive notices and to attend general meetings of the Company, to be present thereat and to participate in and vote at such meetings, the right to participate in all distributions of dividends (whether of cash, assets or in any other lawful way) made by the Company and the right to participate with the other shareholders in the distribution of the surplus of assets of the Company which remains available for distribution on winding-up.

b. Options issued to employees and directors:

Under the global share plan as approved in 2012 options and Restricted Share Unit ("RSU") may be granted to employees, directors, officers and consultants of the Company. Each option granted under the Plans is fully exercisable up to 4 years and expires in between 7 to 10 years from the date of grant. As of 31 December 2018, there were 8,055,670 options available for future grants under the plan.

Any options, which are forfeited or not exercised before expiration, become available for future grants.

	Number of options	Weighted average exercise price	Weighted average remaining contractual term (in years)	Aggregate intrinsic value
Outstanding at 1 January 2018	4,732,659	\$1.50	6.09	\$3
Granted	195,000	\$0.85
Exercised	(5,000)	\$0.34
Forfeited	(3,448,816)	\$1.44
Outstanding at 31 December
2018	1,473,843	\$1.45	3.50	\$0
Exercisable at 31 December
2018	1,076,784	\$1.53	4.79	\$0

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

As of 31 December 2018, the total compensation cost related to options granted to employees and directors, not yet recognized amounted to \$ 183.

The aggregate intrinsic value of the outstanding stock options at 31 December 2018 and 2017, represents the intrinsic value of 0 and 5,000 outstanding options that are in-themoney as of such dates. The remaining 1,473,843 and 4,727,659 outstanding options are out-of-the-money as of 31 December 2018 and 2017, and their intrinsic value was considered as zero.

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

NOTE 10:- EQUITY (Cont.)

The aggregate intrinsic value of the exercisable stock options at 31 December 2018 represents the intrinsic value of 0 exercisable options that are in-the-money as of such dates. The remaining 1,076,784 exercisable options are out-of-the-money as of 31 December 2018, and their intrinsic value was considered as zero.

Total intrinsic value of options exercised during the years ended 31 December 2018 was \$ 3.

The weighted average grant date fair values of options granted for the years ended 31 December 2018 and 2017 were \$ 0.37 and \$ 0.55, respectively.

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

	Number of RSU's
Unvested at 1 January 2018	1,094,344
Granted	0
Vested	(832,316)
Forfeited	(223,528)
Unvested at 31 December 2018	38,500

The weighted average grant date fair value per share for the year ended 31 December 2018 and 2017 was \$ 0 and \$ 1.22, respectively.

As of 31 December 2018, the total compensation cost related to RSUs granted to employees, not yet recognized amounted to \$ 39.

d. Treasury shares

As of 31 December 2018, and 2017, treasury shares amounted to 10,970,111 shares of which 1,211,236 shares are held by Team Internet, and are considered outstanding.

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

NOTE 11:- LOSS PER SHARE

The following table sets forth the computation of basic and diluted loss per share:

	Year ended 31 December
		2018	2017
Basic and diluted net loss attributable to Matomy Media Group Ltd. from continuing operations (Note 7b)	\$	(6,805)	(32,439)
Weighted average number of shares used in computing basic and diluted net loss per share (in thousands)		96,512	95,474
Basic and diluted loss per ordinary shares from continuing operations (in dollars)	\$	(0.07)	(0.34)

Basic and diluted net loss attributable to Matomy Media Group Ltd. from discontinued operations	\$	(39,787)	(583)
Weighted average number of shares used in computing basic and diluted net loss per share (in thousands)		96,512	95,474
Basic and diluted loss per ordinary shares from discontinued operations (in dollars)	\$	(0.41)	(0.01)

The total weighted average number of shares related to the outstanding options excluded from the calculations of diluted earnings per share, since they would have an anti-dilutive effect, was 1,512,343 and 5,859,047 for years 2018 and 2017, respectively.

NOTE 12:- TAXES ON INCOME

a. Israeli taxation:
- 1. Corporate tax rates in Israel:

The Israeli corporate income tax rate was 23% in 2018 and 24% in 2017.

Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 ("the Law"):

As of 31 December 2018, the Company had ILS 22,630 thousand (\$ 6,038 with 31 December 2018 exchange rate) of tax-exempt income attributable to its Privileged Enterprise program resulting from 2012. The Company does not intend to distribute any amounts of its undistributed tax-exempt income as dividends as it intends to reinvest its tax-exempt income within the Company. Accordingly, no deferred income taxes have been provided on income attributable to the Company's Privileged Enterprise programs as the undistributed tax-exempt income is essentially permanent in duration. If such tax exempt income is distributed, it would be taxed at the reduced corporate tax rate applicable to such profits (25%) and an income tax liability of approximately \$ 1,509 would be incurred as of 31 December 2018.

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

NOTE 12:- TAXES ON INCOME (Cont.)

1. Carryforward operating tax losses of the Israeli parent and its Israelis subsidiaries amounted to \$ 36,800 as of 31 December 2018 and may be used indefinitely.
b. Income taxes on non-Israeli subsidiaries:

Non-Israeli subsidiaries are taxed according to the tax laws in their respective country of residence. The Company's main non-Israeli subsidiaries are located in Germany and in the United States, and are subject to tax rate in 2018 of 33% and 27%, respectively, and in 2017 of 33% and 35%, respectively

On December 22, 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 January 1, 2018.

Carryforward operating tax losses of its US subsidiaries amounted to \$ 6,300 as of 31 December 2018 which can be carried forward and offset against taxable income up to 20 years, expiring between fiscal 2036 and fiscal 2037.

c. Deferred tax assets and liabilities:

Deferred taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts recorded for tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:

	31 December
	2018		2017
Deferred tax assets:
Carry forward losses	\$ 10,297	\$	6,711
Research and development expenses	1,991		948
Allowance for doubtful debts	766		254
Intangible assets	891		1,141
Other	1,765		742
Gross deferred tax assets	15,710		9,796
Valuation allowance	(15,618)		(8,763)
Total deferred tax assets	92		1,033
Deferred tax liabilities:
Intangible assets	757		1,246
Gain on achieving control	2,022		2,022
Deductible goodwill	-		829
Other	40		347
Deferred tax liabilities	2,819		4,444

Deferred tax liabilities, net	\$ (2,727)	\$	(3,411)

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

NOTE 12:- TAXES ON INCOME (Cont.)

The net change in the valuation allowance primarily reflects an increase in deferred tax assets on net operating losses and other temporary differences for which full valuation allowance is recorded.

d. Loss before taxes on income is comprised as follows:

		Year ended 31 December
	2018		2017
Domestic Foreign	\$	(1,631) (1,619)	\$	(15,983) (306)
	\$	(3,250)	\$	(16,289)

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

	Year ended
	31 December
	2018			2017
Current:
Domestic	\$	(11)	\$	71
Foreign		4,358		5,362
		4,347		5,433
Deferred:
Domestic		2		(145)
Foreign		(666)		(7,591)
		(664)		(7,737)
	\$	3,683	\$	(2,303)

f. A reconciliation of the beginning and ending amount of unrecognised tax benefits related to uncertain tax positions is as follows:

	31 December
	2018		2017
Beginning balance	\$	193	\$	169
Increase related to tax positions taken during prior years		-		24
Reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations		(10)		-
Ending balance	\$	183	\$	193

The entire amount of unrecognised tax benefits as of 31 December 2018, if recognised, would reduce the Company's annual effective tax rate.

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

NOTE 12:- TAXES ON INCOME (Cont.)

The Company does not expect uncertain tax positions to change significantly over the next 12 months, except in the case of settlements with tax authorities, the likelihood and timing of which is difficult to estimate.

During the years ended 31 December 2018 and 2017, the Company did not record any interest and exchange rate differences expenses related to prior years' uncertain tax positions, since the amount was immaterial.

The Company believes that it has adequately provided for any reasonably foreseeable outcome related to tax audits and settlement. The final tax outcome of its tax audits could be different from that which is reflected in the Company's income tax provisions and accruals. Such differences could have a material effect on the Company's income tax provision and net loss in the period in which such determination is made.

As of 31 December 2018, the Company and its subsidiaries in Israel besides one subsidiary in Israel received final, or considered final, tax assessments through 2013.

As of 31 December 2018, Team Internet and the Company subsidiaries in the US received final, or considered final, tax assessments through 2014.

g. Reconciliation between the theoretical tax expenses, assuming all income is taxed at the statutory rate in Israel and the actual income tax as reported in the statements of operations is as follows:

	Year ended 31 December
		2018		2017
Loss from continuing operations before taxes as reported in the statements of income	\$	(3,250)	\$	(16,289)
Statutory tax rate in Israel		23%		24%
Theoretical income tax benefit	\$	(747)	\$	(3,909)
Increase in taxes resulting from:
Deferred taxes on losses and other temporary
charges for which a valuation allowance was provided, net Tax adjustment in respect of different tax rate of		2,731		4,479
foreign subsidiaries		277		(381)
Non-deductible expense including impairment
charge, net		1,153		(1,446)
Effect of foreign exchange rate *)		342		(730)
Others		(73)		(315)
	\$	3,683	\$	(2,303)

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

NOTE 12:- TAXES ON INCOME (Cont.)

*) Results for tax purposes are measured under, Measurement of results for tax purposes under the Income Tax (Inflationary Adjustments) Law, 1985, in terms of earnings in NIS. As explained in Note 2c, the financial statements are measured in U.S. dollars. The difference between the annual changes in the NIS/dollar exchange rate causes a difference between taxable income and the income before taxes shown in the financial statements. In accordance with ASC 740-10-25-3(F), the Company has not provided deferred income taxes in respect of the difference between the functional currency and the tax bases of assets and liabilities.

NOTE 13:- REPORTABLE SEGMENTS

a. General

Following the implementation of the strategic plan in late 2017, the Company was focused on its two core activities Team internet and Mobfox. 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 (refer to Note 1c) this operating segment ceased to exist. For the year ended 31 December 2018 this segment is reported as Discounted Operations in accordance with ASC 205-20. (Refer to Note 17)
Domain Monetization Team Internet serves the domain monetization 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.
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 (refer to Note 1c) and the restructuring of the remaining non-core activities, this operating segment ceased to exist.

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

NOTE 13:- REPORTABLE SEGMENTS (Cont.)

Following the sale of certain activities (refer to Note 1c) and the restructuring of the remaining non-core activities, the Company operates only one segment the domain monetization.

b. Segments information:

	Year ended 31 December
		2018		2017
Revenues: Domain Monetization Other	\$	75,636 13,098	\$	105,358 89,084
Total revenues	\$	88,734	\$	194,442

	Year ended 31 December
	2018		2017
Operating income (loss):
Domain Monetization	\$ 14,181	\$	24,499
Other	(4,089)		1,495
Reconciling items (1)	(18,445)		(39,747)

Total loss from continuing operations	\$ (8,353)	\$	(13,753)

(1) Reconciling items are primarily related to impairment loss and depreciation and amortization costs for the years ended 31 December 2018 and 2017, 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 13:- REPORTABLE SEGMENTS (Cont.)

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

	Year ended 31 December
	2018	2017
Revenues Cost of revenues	\$ 75,636 58,089	\$ 105,358 79,934
Gross profit	17,547	25,424
Operating expenses Research and development Selling and marketing General and administrative Goodwill Impairment Total operating expenses	455 3,792 1,775 5,014 11,036	480 6,147 1,270 - 7,897
Operating income Financial expenses (income), net	6,511 (70)	17,527 1,286
Income before taxes on income Tax on income	6,581 3,658	16,241 5,071
Income before equity losses of affiliated companies Gain from achieving control and equity losses of affiliated companies, net	2,923 -	11,170 125
Net income Net loss (income) attributable to non-controlling interests in subsidiaries	2,923 53	11,295 (23)
Net income	\$ 2,976	\$ 11,272

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

NOTE 13:- REPORTABLE SEGMENTS (Cont.)

c. Geographical information:

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

Revenues from external customers:

	Year ended 31 December
	2018		2017
United States	\$ 55,665	\$	155,005
Europe	22,709		21,421
Asia	3,483		5,906
Other	6,877		12,110
	\$ 88,734	\$	194,442

Property and equipment, net:

	31 December
	2018		2017
Israel	\$	53	\$	816
United states		-		1,815
Germany		1,360		1,291
	\$	1,413	\$	3,922

d. In the year ended 31 December 2018 and 2017, one customer contributed 72% and 49% of the Company's revenues, respectively, while no other customer contributed more than 10%.

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

NOTE 14:- FINANCIAL EXPENSES, NET

	Year ended 31 December
		2018		2017
Financial income:
Interest income	\$	45	\$	16
Change in fair value of convertible bond		11,390		-
Hedging transactions		-		324
		11,435		340
Financial expenses:
Bank fees		(387)		(628)
Interest expense		(2,042)		(1,078)
Foreign currency remeasurement, net		(718)		(787)
Hedging transactions		(899)		-
Increase in liability to non-controlling interest		(684)		-
Accretion of contingent payment obligation related to
acquisitions		-		(359)
Other		(14)		(24)
		(4,744)		(2,872)
	\$	6,691	\$	(2,536)

NOTE 15:- 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.

Revenues from related parties amounted to \$ 8 and \$ 56 for the years ended 31 December 2018 and 2017, respectively. Cost of revenues to related parties amounted to \$ 5,009 and \$ 3,736 for the years ended 31 December 2018 and 2017 respectively.

Trade receivables from related parties amounted to \$ 0 for the years ended 31 December 2018 and 2017. Trade payables to related parties amounted to \$ 255 and \$ 678 for the years ended 31 December 2018 and 2017, respectively.

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

NOTE 16:- RESTRUCTURING COSTS

Following the sale of certain activities (refer to Note 1c) and the restructuring of the remaining non-core activities, the Company is now focusing on its Germany based Domain Monetization activity, streamlining its management and corporate overheads to fit its new structure and direction. In March 2019, the CEO has resigned from his position as President and CEO of the Company. The Chairman of the board of directors, will assume an interim CEO role, subject to the approval of the General Shareholders' Meeting of the Company.

Pursuant to the restructuring plan, the Company has incurred cumulative charges of \$ 2,865 as follows:

Payroll and related expenses	\$ 401
Lease facilities and related expenses	926
Property and equipment impairment	847
Servers and related	212
Other expenses	479

	\$ 2,865

Restructuring costs in the amount of \$942 are related to the discontinued operation. As of 31 December 2018 the Company restructuring liability amounted to \$ 464 and is included within Accrued expenses in the balance sheet.

NOTE 17:- 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 statements 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 17:- DISCONTINUED OPERATIONS (Cont.)

The following table summarizes the results of discontinued operations for the years ended 31 December 2018 and 2017:

	Year ended 31 December
		2018		2017
Revenues Cost of revenues	\$	34,774 31,422	\$	50,614 41,806
Gross profit		3,352		8,808
Operating expenses Research and development Selling and marketing General and administrative Impairment, net of change in fair value of contingent consideration Restructuring costs Loss (gain) from sale of activity		4,774 3,076 3,344 30,607 942 58		3,826 3,125 3,769 (1,487) - -
Total operating expenses		42,801		9,233
Operating loss Tax on income		(39,449) 338		(425) 158
Loss from discontinued operations		(39,787)		(583)

The following table summarizes the assets and liabilities of discontinued operations as of 31 December 2018 and 2017:

31 December
2018		2017


			10,951
	-		1,037
	4,634		11,988

			4,874
			1,476
			35,076
			41,454
	-		28
	-		41,454
\$	4,634	\$	53,442
	\$	4,634 - - - -	\$

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

NOTE 17:- DISCONTINUED OPERATIONS (Cont.)

	31 December
	2018		2017
LIABILITIES
CURRENT LIABILITIES: Trade payables Employees and payroll accrual Accrued expenses and other liabilities	\$	3,928 - -	\$	10,982 1,302 1,979
Total current liabilities of discontinued operation		3,928		14,263
LONG-TERM LIABILITIES: Other liabilities		-		67
Total long-term liabilities of discontinued operation		-		67
Total liabilities of discontinued operation	\$	3,928	\$	14,330

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

F:\W2000\w2000\12191\M\18\E\$12-MATOMY-WITH NOTES.docx

AI assistant

Automax Motors Ltd. — Earnings Release 2018

6665_rns_2019-03-31_a663900f-66e0-4669-8eb3-78427a700f50.pdf

Matomy Media Group Ltd 2018 Results

Matomy Media Group | 2018 Final Results Final results for the year ended 31 December 2018

Selected Domain Monetization Activity's Financial Data:

Matomy Non-GAAP Unaudited Financial Highlights:

Selected Mobfox (Programmatic Mobile Advertising) Financial Data

*Adjusted gross profit/margin

**Adjusted EBITDA

Business and operating highlights

Sami Totah, Chairman of the Board of Matomy, said:

About Matomy Media Group Ltd.

For more information:

Press / Investor Relations:

CHAIRMAN'S STATEMENT

Introduction

Operating Performance

Outlook

OPERATIONAL REVIEW

Revenues by Media Channel

Domain monetization

Exited activities

FINANCIAL REVIEW

GAAP Financial Highlights Including Exited Activities:

Revenue

Cost of revenues including exited activities and excluding the discontinued Mobfox operations:

Financial expenses (income)

Taxes on income

Amortization of intangible assets

Net loss

Exceptional items

Liquidity and cash flows

(A) Net cash provided by / used in operating activities

(B) Net cash provided by / used in investing activities

(C) Net cash used in / provided by financing activities

NOTES TO FINANCIAL STATEMENTS

Goodwill

Impairment of long-lived assets and intangible assets subject to amortization

Liability to non-controlling interests

Sale of exited activities

Loss per share

Treasury shares

Financial obligations and covenants

Financial reporting

Going concern

Projected Sources and Expected Uses of Funds Statement through December 2020

Principal risks

Cautionary statement regarding forward-looking statements

Directors' responsibility

Reconciliation of GAAP measures to non-GAAP measures

Appendix A

Assumptions:

Unreviewed Statement

Cautionary statement regarding forward-looking statements

MATOMY MEDIA GROUP LTD. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF 31 DECEMBER 2018

IN US DOLLARS IN THOUSANDS

INDEX

Re: Report of Independent Auditors

Management's Responsibility for the Financial Statements

Auditor's responsibility

Opinion

CONSOLIDATED BALANCE SHEETS

US dollars in thousands

CONSOLIDATED STATEMENTS OF OPERATIONS

US dollars in thousands except earnings per share data

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

US dollars in thousands, except share data

CONSOLIDATED STATEMENTS OF CASH FLOWS

US dollars in thousands

CONSOLIDATED STATEMENTS OF CASH FLOWS

US dollars in thousands

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

NOTE 1:- GENERAL

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

NOTE 1:- GENERAL (Cont.)

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

NOTE 1:- GENERAL (Cont.)

Automax Motors Ltd. Earnings Release 2018