NOTE 3:-

ACQUISITION OF ACS

On December 31, 2015 (the "Closing Date"), the Company entered into a share purchase agreement, according to which the Company acquired 100% of the outstanding shares of ACS. Following the transaction, ACS became a wholly-owned subsidiary of the Company.

As part of the share purchase agreement, the Company agreed to pay an earn-out amount based on the sales of the Company’s products related to ACS technology (the “ACS Products”). The earn-out amount is calculated based on: (a) 20% of the net revenues from ACS Products (the "ACS Revenues") after the first $2,000 of ACS Revenues up to an earn-out payment of $2,000, plus (b) an additional amount of 10% of ACS Revenues after the first $20,000 of ACS Revenues (the "ACS Earn-Out").

The acquisition was accounted for using the purchase method. The $4,109 purchase price for the acquisition was composed of the following amounts: (i) a $2,000 payment in cash payable on the Closing Date, and (ii) $2,109, which represented the fair value of the ACS Earn-Out.

In addition, the Company agreed to pay $500 after 12 months and an additional $500 after 24 months following the Closing Date upon meeting cumulative conditions (including service conditions) for each of these two periods (the "Deferred Payments"). The Deferred Payments were recorded as payroll expenses during the periods for which the deferred payments remain contingent. The Company recorded $750 and $198 expenses related to the Deferred Payments during the years ended December 31, 2016 and 2017 respectively. In February 2017 and in March 2018, the Company paid $448 and $500, respectively in relation to the deferred payments. In addition, in March 2018, the Company paid $151 in relation to the ACS Earn-Out.

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date:

Current assets	$	305
Property and equipment		20
Technology		1,917
Customer relationships		312

Total identifiable assets acquired		2,554

Current liabilities		(361)
Deferred tax liability		(557)

Total identifiable liabilities assumed		(918)

Net identifiable assets acquired		1,636
Goodwill		2,473

Net assets acquired	$	4,109

The Company allocated the acquired assets and liabilities assumed based on a purchase price allocation.

The fair values of the acquired technology and customer relationships were valued using the income approach. This method utilized a forecast of expected cash inflows, cash outflows and contributory charges for economic returns on tangible and intangible assets employed.

The excess of the purchase price over the preliminary assessment of the net tangible and intangible assets acquired resulted in goodwill of $2,473. The goodwill is primarily attributable to expected synergies resulting from the acquisition. The acquired technology and customer relationships are being amortized on a straight-line basis over a period of 7 and 5-7 years, respectively.

The fair value of the Earn-Out was estimated by utilizing the income approach, taking into account the potential cash payments discounted to arrive at a present value amount, based on the Company's expectation as to future revenues of ACS products in the three subsequent annual periods following the Closing Date. The discount rate was based on the market interest rate and estimated operational capitalization rate.

Since the actual revenues from ACS products in the years ended December 31, 2016 and 2017 and the expected revenues of ACS products in 2017 and 2018 were lower than the Company’s expectation, the Company recorded income of $1,674 and $118 in the years ended December 31, 2016 and 2017, respectively, as a reversal of the previously recorded Earn-Out liability. Such income is included as an offset to general and administrative expenses in the consolidated statements of operations for the years ended December 31, 2016 and 2017.

As of December 31, 2016 and 2017, the estimated fair value of the Earn-Out amounted to $487 and $378, respectively.