NOTE 1:-

GENERAL

Business overview:

AudioCodes Ltd. (the "Company") and its subsidiaries (together the "Group") design, develop and market products and services for advanced voice networking and media processing solutions for the digital workplace. The Company enables enterprises and service providers to build and operate all-IP voice networks for unified communications, contact centers, and hosted business services. The Company offers a broad range of innovative products, solutions and services that are used by large multi-national enterprises and leading tier-1 operators around the world.

The Company operates through its wholly-owned subsidiaries in the United States, Europe, Asia, Latin America, Australia and Israel.

Asset Purchase Agreement with Mailvision Ltd ("Mailvision"):

In May 2013, the Company acquired Mailvision, in which the Company held 29.2% of the outstanding share capital prior to the acquisition.

Pursuant to the acquisition agreement, the Company acquired certain assets and assumed certain liabilities of Mailvision. The acquisition was accounted for using the purchase method. The $3,434 in consideration for the acquisition was composed of the following amounts: (i) $221, which represented the present value of a payment of $233 payable on the first anniversary date of the acquisition, which amount was paid in May 2014; (ii) $432, which represented the fair value of the estimated earn-out consideration, that was payable in the second and third anniversary in May 2015 and 2016, if certain milestones of revenues from the sale of Mailvision's product were met during the three annual periods following the closing of the acquisition (the "MV Earn-Out"); an amount of $233 was paid in May 2015 and May 2016 with respect to the MV Earn-Out; (iii) the waiver of $1,472 of debt owed by Mailvision to the Company; and (iv) $376, which represented the fair value of the right, since expired, of the sellers to receive certain amounts if the Company sold Mailvision prior to May 2014.

The MV Earn-Out liability was marked to market at fair value at each reporting date with subsequent changes in the value of the liability recorded in "financial income (expenses), net" in the statement of operations, while changes due to changes in estimates are recorded within "operating income or expenses" in the statement of operations.

As of December 31, 2016 and 2017, there is no outstanding amount of MV Earn-Out liability.

Acquisition of Active Communications Europe. ("ACS"):

On December 31, 2015 the Company acquired 100% of the outstanding shares of ACS, a Dutch company which provides unified communications solutions. (See also Note 3).

The Group is dependent upon sole source suppliers for certain key components used in its products, including certain digital signal processing chips. Although there are a limited number of manufacturers of these particular components, management believes that other suppliers could provide similar components at comparable terms. A change in suppliers, however, could cause a delay in manufacturing and a possible loss of sales, which could adversely affect the operating results of the Group and its financial position.

The Group had a major customer in the years ended December 31, 2015, 2016 and 2017, which accounted for 15.0%, 16.7% and 17.5%, respectively, of the total revenues in those years. In addition, during the years ended December 31, 2015, 2016 and 2017, the Company had an additional major customer which accounted for 12.6%, 11.9% and 12.7%, respectively, of the total revenues in those years. No other customer accounted for more than 10% of the Group's revenues in those periods.