NOTE 1: GENERAL

Mer Telemanagement Solutions Ltd. (the "Company" or "MTS") was incorporated on December 27, 1995. MTS and its subsidiaries (the "Group") is a worldwide provider of telecom expense management (“TEM”), billing solutions and online video advertising solutions and services.

The Company's wholly-owned subsidiaries in the United States and Hong Kong, MTS IntegraTRAK Inc. and MTS Asia Ltd., act as marketing and customer service organizations in those countries.

The Company's shares are listed for trade on the NASDAQ Capital Market under the symbol "MTSL".

In April 2015, the Company acquired 100% of the outstanding shares of Vexigo, a privately-held Israeli-based software company supporting video advertising over the internet and mobile devices.

During 2018, Vexigo sold its operation to an unaffiliated third party. The consideration for the sale was $250 receivable in three (3) installments, out of which, approximately $38 are still outstanding as of December 31, 2018.

During 2018, the Company entered into a Securities Purchase Agreement ("SPA") with Alpha Capital Anstalt, an institutional investor, for the investment of $1,353 in a newly-created class of convertible preferred shares, and $188 in ordinary shares of the Company. In October 2018 the Company shareholders approved the SPA.

The Alpha Capital SPA includes a greenshoe option for a future investment by Alpha Capital Anstalt of up to $1.5 million in the newly created preferred shares at the same price per preferred share paid in the initial investment during a period of 12 months following the closing date of the Alpha Capital SPA (see Note 10 for subsequent developments).

Discontinued operations:

In March 2009, the Company discontinued the operations of TABS Brazil Ltda. its wholly owned subsidiary in Brazil.

In June 2018, the Company discontinued the operations of Vexigo ltd. its wholly owned subsidiary in Israel.

The results of the discontinued operations including prior periods' comparable results, assets and liabilities which have been retroactively included in discontinued operations as separate line items in the statements of income and balance sheets are presented below.

The summarized results of operations for Vexigo and TABS Brazil Ltd for the years ended December 31, 2016, 2017 and 2018, are as follows:

	Year ended December 31,
		*)2018			2017		2016

Revenue	$	794		$	1,853	$	6,501
Cost of revenues		1,034			1,453		4,205
Gross profit (loss)		(240	)		400		2,296

Operating expenses		310			1,896		7,124
Operating loss		550			1,496		4,828
Financial income (expense), net		16			130		(19	)
Gain on disposal of the discontinued operations		250			-		-
Loss before taxes on income		284			1,366		4,847
Taxes benefit		-			-		570
Total net Loss on discontinued operations	$	284		$	1,366	$	4,277

*) Represent the results of the discontinued operations until their disposal.

The major classes of assets and liabilities that were classified as discontinued operations were:

	December 31,
	2018		2017

Cash and cash equivalents	$	146	$	163
Restricted cash		-		10
Trade receivables		1		827
Other accounts receivable and prepaid expenses		-		260
Property and equipment, net		4		41
Total assets of discontinued operations		151		1,301

Trade payables		265		980
Accrued expenses and other liabilities		305		400
Total liabilities of discontinued operations	$	570	$	1,380

The Company has historically suffered recurring losses from its operating activities.

The Company incurred losses for the year ended December 31, 2018, amounting to $ 1,170 and has accumulated deficit of $ 27,412.

In addition, the Company incurred negative cash flows from operations of $1,598 for the year ended December 31, 2018 and has a working capital deficiency of $376 as of that date.

Those factors raise substantial doubt about the Company's ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due.

The Company intends to finance operating costs over the next twelve months with existing cash on hand and by reducing operating spend. During 2018, the Company implemented a substantive cost reduction mainly by employee’s layoff and is expected to reduce its lease expenses during the first quarter of 2019. However, the Company will still need to seek additional sources of financing if it requires more funds than anticipated during the next twelve months or in later periods. The Company expects to explore various financing alternatives to raise additional funds to support its operations in the foreseeable future. There can be no assurance that additional financing will be available on satisfactory terms, or at all. If the Company is unable to secure needed financing, management may be forced to take additional actions.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business. The consolidated financial statements for the year ended December 31, 2018, do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty to the Company's ability to continue as a going concern.