PROSPECTS The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this Annual Report. Overview We provide cloud-native and 5G-ready network intelligence solutions for CSPs. Our world leading, innovative solutions are well-positioned to fulfill the CSPs’ ongoing needs to monitor their networks (fixed and mobile) and assure the delivery of a quality service to their subscribers. General Our discussion and analysis of our financial condition and results of operation are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. Our operating and financial review and prospects should be read in conjunction with our financial statements, accompanying notes thereto and other financial information appearing elsewhere in this Annual Report. 31 We commenced operations in 1991. Since then, we have focused on developing and enhancing our products, building our worldwide direct and indirect distribution network and establishing and expanding our sales, marketing, and customer support infrastructures. Most of our revenues are generated in U.S. dollars and the financing activities are made in U.S. dollars. Accordingly, we consider the U.S. dollar to be our functional currency and our consolidated financial statements are prepared in dollars. As we evaluate our growth prospects and manage our operations for the future, we believe that the deployments of 5G by leading CSPs will drive our growth. We followed the below sales strategy in 2024 in order to expand our sales pipeline and revenues: ● We focused on leveraging our implementations with AT&T, Rakuten and other customers to expand our value proposition to additional carriers; ● We expanded our business with our key existing customers; ● We increased our investment in our sales and marketing resources and have expanded our reach through the engagement of local representatives; ● We invested in marketing campaigns globally to enhance our market positioning and open new opportunities; ● We continued to invest in research and development to maintain our recognized technological leadership in cloud-based, 5G solutions, to meet the requirements of our customers, and to develop new product offerings and capabilities; ● We invested in sales and marketing to create more sales engagements that can lead to additional multi-year contracts and increased market share; ● We invested in our professional services team and resources to meet our customers’ deployment, customization and support requirements and to allow us to successfully deliver multiple proof of concept demonstrations to potential new customers; and ● We pursued strategic partnerships. Revenues. In general, our revenues derive from sales of our products or solutions, fixed-price projects, and sales of services which primarily include extended warranty, support services and managed services. Revenues consist of gross sales, less discounts and refunds, when applicable. Cost of revenues. Cost of revenues, consisting of salaries and related expenses derive primarily from employees engaged in managed services and ongoing customer support, solution deployment and software development customization activities. Cost of revenues also consists of the use of hardware, inventory write-offs, importation taxes, shipping and handling costs, license fees for software components of third parties, hardware warranty expenses, allocation of overhead expenses, subcontractors’, royalties to the IIA and share-based compensation. As part of our plan to reduce product cost and improve flexibility, we shifted during the last few years to a model whereby we install our software-based solutions on standard, non-proprietary third-party hardware that functions together with our software to deliver the product’s essential functionality. Our gross profit is affected by several factors, including the introduction of new products, price erosion due to increasing competition, the bargaining power of larger clients, the number of employees that we have in operations, deployment, software development customization, managed services and customer support, integration of third-party software components into our own, product mix, and exchange rate fluctuations. 32 Research and Development expenses, Net. Research and development expenses, net consist primarily of salaries and related expenses, including share-based compensation, payments for subcontractors and overhead expenses. Overhead expenses consist of a variety of costs, including rent, office and associated expenses. The R&D expenses have been partially offset by royalty-bearing grants from the IIA. Sales and Marketing expenses. Sales and marketing expenses consist primarily of salaries and related expenses, including share-based compensation, commissions and fees to third party representatives, advertising, trade shows, promotional expenses, domestic and international travels, web site maintenance, and overhead expenses. General and Administrative Expenses. General and administrative expenses consist primarily of salaries and related expenses including share-based compensation, professional fees (which include legal, audit and other consulting fees), bad debt expenses, other general corporate expenses and overhead expenses. Financial Income, Net. Financial income, net, consists primarily of interest earned on bank deposits, bank charges, and gains or losses from the exchange rate differences of monetary balance sheet items denominated in non-U.S. dollar currencies. Summary of Our Financial Performance for the Fiscal Year Ended 2024 Compared to the Fiscal Year Ended 2023 For the year ended December 31, 2024, our revenues were approximately $61.0 million, compared to approximately $51.6 million in 2023, reflecting an increase of approximately 18.2%. Our operating activities generated approximately $11.4 million in cash during 2024, compared to approximately $4.7 million generated in 2023. Our net income for the year ended December 31, 2024, was approximately $7 million, compared to a net income of approximately $3.7 million in 2023. As of December 31, 2024, our cash and cash equivalents and bank deposits totaled approximately $94.7 million, compared with cash and cash equivalents and bank deposits of approximately $82.2 million as of December 31, 2023. Our 2024 and 2023 income includes non-cash expenses due to share-based compensation of approximately $6.1 million in each of such fiscal years. Reportable Segments Management receives sales information by customers and by geographical regions. Cost of revenues, research and development, sales and marketing, and general and administrative expenses are reported on a combined basis only (i.e., they are not allocated to product groups or geographical regions). Because a measure of operating profit or loss by product groups or geographical regions is not presented to management due to shared resources, we have concluded that we operate in one reportable segment. A. OPERATING RESULTS Results for the Year Ended December 31, 2024, compared to Year Ended December 31, 2023 The following table sets forth, for the periods indicated, certain financial data expressed as a percentage of revenues: Year ended December 31, 2024 2023 Revenues 100 % 100 % Cost of revenues 25.8 26.7 Gross profit 74.2 73.3 Operating expenses: Research and development 30.6 37.9 Less royalty-bearing participation 1.1 1.4 Research and development, net 29.5 36.5 Sales and marketing 29.2 28.3 General and administrative 10.5 9.8 Total operating expenses 69.1 74.6 Operating income (loss) 5.1 (1.3 ) Financial income, net 6.7 8.8 Income before taxes on income 11.8 7.5 Taxes on income (0.4 ) (0.4 ) Net Income 11.4 7.1 33 Revenues Year Ended December 31, (in millions of U.S. dollars) 2024 2023 Products 28.2 22.8 Services 32.8 28.8 Total Revenues 61.0 51.6 Revenues. In 2024, our revenues increased by approximately $9.4 million, or approximately 18.2%, compared to 2023 due to an increase of approximately $5.4 million in product revenues, and an increase of approximately $4.0 million in services revenues. The increase in product revenues relates mainly to an increase in revenues in EMEA and North America and derives from existing customers. The increase in services revenues relates to EMEA and Asia and mainly derives from existing customers. Revenues per geographic region, based on the location of the end-customer Year Ended December 31, (in millions of U.S. dollars) Year Ended December 31, (as percentages) 2024 2023 2024 2023 North America 36.1 31.8 59.1 61.7 Asia 12.7 9.8 20.9 18.9 Latin America 0.3 1.3 0.5 2.5 EMEA (including Israel) 11.9 8.7 19.5 16.9 Total revenues 61.0 51.6 100 % 100 % In 2024, our three largest customers amounted to approximately 88% of our total consolidated revenues. In 2023 our two largest customers amounted to approximately 76% our total consolidated revenues. Cost of Revenues and Gross Profit Year Ended December 31, (in millions of U.S. dollars) 2024 2023 Products 7.1 5.7 Services 8.6 8.1 Total cost of revenues 15.7 13.8 Gross profit 45.3 37.8 Cost of Revenues. During 2024, our gross profit as a percentage of revenues, calculated to include variable costs such as salaries and related expenses was approximately 74.2% compared to approximately 73.3% in 2023. Our cost of revenues for both 2024 and 2023 includes an expense of approximately $0.4 million for share-based compensation in each of the fiscal years. 34 The following table provides the operating costs and expenses of the Company in 2024 and 2023 as well as the percentage change of such expenses in 2024 as compared to 2023. Year ended December 31, (in millions of U.S. dollars) % Change 2024 vs. 2024 2023 2023 Research and development 18.7 19.6 (4.6 ) Less royalty-bearing participation 0.7 0.8 (12.5 ) Research and development, net 18.0 18.8 (4.3 ) Sales and marketing 17.8 14.6 21.9 General and administrative 6.4 5.1 25.5 Total operating expenses 42.2 38.5 9.6 Research and Development Expenses, gross. Research and development expenses, gross, decreased from approximately $19.6 million in 2023 to approximately $18.7 million in 2024. As a percentage of total revenues, research and development expenses, gross, decreased from approximately 37.9% in 2023 to approximately 30.6% in 2024. The decrease in our gross research and development expenses is attributable mostly to share-based compensation and salary expenses due to favorable impact of foreign exchange rate fluctuations. As of December 31, 2024, and December 31, 2023, our total research and development headcount, including contractors, was 134 and 137 respectively. Our research and development costs included an expense of approximately $2.0 million for share-based compensation in 2024, as compared to approximately $2.7 million for share-based compensation in 2023. We are committed to continuously enhancing and expanding our product offerings and capabilities. Additionally, we plan to continue investing in our cloud solutions, 5G, automation, and AI. As a result, we will continue to allocate significant resources to research and development to drive innovation and growth. We believe that our research and development efforts are a key element of our strategy and are essential to our success. An increase or a decrease in our total revenues would not necessarily result in a proportional increase or decrease in the levels of our research and development expenditures, which could affect our operating margin. Sales and Marketing Expenses. Sales and marketing expenses increased from approximately $14.6 million in 2023 to approximately $17.8 million in 2024. The increase in our sales and marketing expenses is mainly related to supporting our revenue growth and was also attributable to an increase of sales efforts and expansion of the global sales and marketing team in 2024 compared to 2023. As a percentage of total revenues, sales and marketing expenses were 29.2% in 2024, compared to 28.3% in 2023. Our sales and marketing expenses included an expense of approximately $2.0 million for share based compensation in 2024, as compared to approximately $1.8 million for share-based compensation in 2023. 35 General and Administrative Expenses. General and administrative expenses increased from approximately $5.1 million in 2023 to approximately $6.4 million in 2024. The increase in our general and administrative expenses is mainly attributed to an increase in share-based compensation expenses and to an increase in professional services expenses in 2024 compared to 2023. As a percentage of total revenues, general and administrative expenses were 10.5% in 2024, compared to 9.8% in 2023. Our general and administrative expenses included approximately $1.6 million for share-based compensation in 2024, as compared to approximately $1.2 million for share-based compensation in 2023. Financial Income, Net. In 2024, the financial income, net, was approximately $4.1 million, as compared to financial income, net, of approximately $4.6 million in 2023. The decrease in our financial income, net is related to a negative impact of currency exchange rates. Taxes on Income. In 2024, we recorded tax expenses of approximately $234,000 as compared to tax expenses of approximately $182,000 in 2023. Tax expenses are mainly related to tax expenses of RADCOM India and RADCOM US. Comparison of Financial Data for Year Ended December 31, 2023, compared with Year Ended December 31, 2022 For a discussion of the financial data for the year ended December 31, 2023, compared with the year ended December 31, 2022, see “Item 5.A. —Operating and Financial Review and Prospects—Operating Results—Results for the Year Ended December 31, 2023, compared to the Year Ended December 31, 2022” included in our Annual Report on Form 20-F for the fiscal year ended December 31, 2023, filed with the SEC on April 2, 2024. Impact of Inflation and Foreign Currency Fluctuations Most of our revenues are generated in U.S. dollars and the financing activities are made in U.S. dollars. We also generate revenues in Brazilian reals, or BRLs, euros and other currencies; however, we consider the U.S. dollar to be our functional currency. In the future additional revenues may be denominated in currencies other than U.S. dollars. Since a significant portion of our expenses is in NIS, as we pay our Israeli employees’ salaries in NIS, the dollar cost of our operations is influenced by the exchange rates between the NIS and the U.S. dollar. Fluctuations in exchange rates between the U.S. dollar, the BRL, euro, and other currencies in which we generate revenue, and the U.S. dollar, may also have an effect on our results of operations. With respect to our Brazilian subsidiary, the functional currency has been determined to be their local currency. Assets and liabilities are translated at year-end exchange rates and statements of income items are translated at average exchange rates prevailing during the year. Such translation adjustments are recorded as a separate component of accumulated other comprehensive loss in shareholders’ equity. Because exchange rates between the NIS and the U.S. dollar fluctuate continuously, exchange rate fluctuations will have an impact on our profitability and period-to-period comparisons of our results. The effects of foreign currency re-measurements of financial assets and liabilities are reported in our financial statements as financial income or expense. Based on our budget for 2025, we expect that a change of NIS 0.10 to the exchange rate of the NIS to U.S. dollar will change our expenses expressed in dollar terms by approximately $625,000 per fiscal year and vice versa. Effective Corporate Tax Rate As of January 1, 2018, Israeli resident companies were generally subject to corporate tax at the rate of 23%. Israeli resident companies are generally subject to capital gains tax at the corporate tax rate. We do not generate taxable income in Israel, as we have historically incurred operating losses resulting in carry forward losses for tax purposes totaling approximately $38.5 million and an additional $1.7 million of capital loss as of December 31, 2024. We believe that we will be able to carry forward these tax losses to future tax years. We do not expect to pay taxes in Israel, on our incomes from operations, until we utilize our carry forward tax losses. We may be required to pay taxes on our passive income, if any. For more information on taxation, see “Item 10.E — Taxation.” 36 Our effective corporate tax rate may exceed the Israeli tax rate. Our non-Israeli subsidiaries will generally be subject to applicable federal, state and local taxation, and we may also be subject to taxation in the other foreign jurisdictions in which we own assets, have employees or conduct business activities. We recorded a valuation allowance of approximately $12 million on December 31, 2024, for all of our deferred tax assets and liabilities. Based on the weight of available evidence, we believe it is more likely than not that all of our deferred tax assets will not be realized. B. LIQUIDITY AND CAPITAL RESOURCES We have financed our operations through cash generated from operations, proceeds from the exercise of options, royalty-bearing participation from the IIA, up until 2017 from proceeds from our private and public equity offerings we conducted and others. Cash and cash equivalents, and bank deposits on December 31, 2024, and 2023, were approximately $94.7 and $82.2 million, respectively. We believe that our existing capital resources and cash flows from operations will be adequate to satisfy our expected liquidity requirements through the next twelve months. Without derogating from the foregoing estimate regarding our existing capital resources and cash flows from operations, we may decide to raise additional funds in the future. We believe that, if required, we will be able to raise additional capital or reduce discretionary spending to provide the required liquidity beyond the next twelve months. Net Cash Provided by Operating Activities. Net cash provided by operating activities was approximately $11.4 million in 2024 compared to net cash provided by operating activities of approximately $4.7 million in 2023. The positive net cash flow in 2024 was primarily due to net income of approximately $7 million, share-based and restricted share compensation expenses of approximately $6.1 million, an increase in deferred revenue and advances from customers of approximately $5.4 million, an increase of approximately $1.8 million in employees and payroll accruals, an increase of approximately $1.5 million in other liabilities and accrued expenses and depreciation and amortization of $0.7 million. This was partially offset by an increase of approximately $5.6 million in trade receivables, net, an increase of approximately $2.2 million in other account receivables and prepaid expenses, a decrease of $1.8 million in accrued interest on bank deposits and an increase of approximately $1.4 million in inventory. The positive net cash flow in 2023 was primarily due to share-based and restricted share compensation expenses of approximately $6.1 million, net income of approximately $3.7 million, an increase in other liabilities and accrued expenses of approximately $2.2 million, a decrease of approximately $1.4 million in other account receivables and prepaid expenses, a decrease in inventory of approximately $0.6 million, depreciation and amortization of $0.6 million, and an increase of approximately $0.2 million in employees and payroll accruals. This was partially offset by a decrease in deferred revenue and advances from customers of approximately $5.6 million, an increase in accrued interest on short-term bank deposits of approximately $2.2 million, and an increase of approximately $2.3 million in trade receivables, net. The trade receivables and days of sales outstanding are primarily impacted by payment terms, variations in the levels of shipment in the quarter, and collections performance. Trade receivables for 2024 increased to approximately $19 million from approximately $13.4 million in 2023. The increase in inventories in 2024 was mainly due to an increase in inventory delivered to customers for which revenue criteria have not been met. Net Cash Used in Investing Activities. Our investing activities generally consist of the purchase of equipment and investment in bank deposits. Net cash used in investing activities in 2024 was approximately $2.7 million, compared to net cash used in investing activities in 2023 of $3.6 million. In 2024, we invested approximately $75.5 million in bank deposits, received approximately $73.2 million from the maturity of a short-term bank deposit and invested approximately $0.4 million for the purchase of equipment. 37 In 2023, we invested approximately $2.5 million in acquiring Continual, invested approximately $65 million in bank deposits, received approximately $64.1 million from the maturity of a short-term bank deposit and invested approximately $0.2 million for the purchase of equipment. Net Cash provided by (Used in) Financing Activities. In 2024 and in 2023, there was no net cash provided by or used in financing activities. On April 30, 2023, we acquired the technology, intellectual property, and customer agreements of Continual for $2.5 million in cash. The post-acquisition synergies from integrating Continual’s technology into our portfolio contributed to our product and services offering and to our operation. While we expect to continue to grow organically, we expect to continue to evaluate additional potential transactions to purchase other companies or technologies in the field in which we operate. Investments We may in the future undertake hedging or other similar transactions or invest in market risk-sensitive instruments, if our management determines that it is necessary to offset risks such as foreign currency and interest rate fluctuations. Impact of Related Party Transactions For more information, about our related party transactions, none of which currently has a material impact on us, see “Item 7.B—Major Shareholders and Related Party Transactions—Related Party Transactions” below. Government Grants and Related Royalties The Government of Israel, through the IIA, encourages research and development projects pursuant to the Innovation Law and the regulations promulgated thereunder. We may receive grants from the IIA at rates that range from 20% to 60% (and with respect to Magnet Programs up to 66%) of the research and development expenses, as prescribed by the research committee of the IIA in accordance with the Innovation Law. We recorded such grants from the IIA in the total amount of approximately $0.7 million in 2024 and $0.8 million in each of 2023 and 2022. Pursuant to the specific terms of these grants, we are obligated to pay royalties of 3% of the revenues generated by sales of products (and certain related services) funded with these grants (excluding grants received in the Magnet project). In the event that a project funded by the IIA does not result in the development of a product which generates revenues, we would not be obligated to repay the grants we received for the product’s development. Royalty expenses relating to the IIA grants included in the cost of revenues for years ended December 31, 2024 and 2023 were approximately $1.8 million and $1.5 million, respectively. The total grants regarding projects that we have received from the IIA as of December 31, 2024 were approximately $50.2 million. For projects authorized as a research and development program under the Innovation Law since January 1, 1999, the repayment interest rate was LIBOR, as further detailed and qualified below. As of December 31, 2024, the accumulated interest was approximately $28.6 million, the accumulated royalties paid to the IIA were approximately $22.6 million and our total amount of contingent liability to the IIA in respect of grants received was, according to our records, approximately $56.2 million. In September 2021, the Bank of Israel, which determines annual interest rates, published a directive which stated that annual interest at a variable rate linked to the LIBOR rate for loans in U.S. dollars will be replaced by the SOFR, in June 2023. Grants received from the IIA before June 30, 2017, bear an annual interest rate that applied at the time of the approval of the applicable IIA file, and that interest rate will apply to all of the funding received under that IIA approval, and grants received from the IIA after June 30, 2017, bear an annual interest rate based on the 12-month LIBOR, until December 31, 2023, and as of January 1, 2024, bear an annual interest rate based on the 12-month SOFR, or at an alternative rate published by the Bank of Israel, with the addition of 0.72%. Grants approved after January 1, 2024 will bear the higher of (i) the 12 months SOFR, plus 1%, or (ii) a fixed annual interest rate of 4%. 38 We are also obligated to pay royalties to the BIRD Foundation, with respect to sales of products based on technology resulting from research and development funded by the BIRD Foundation. Royalties to the BIRD Foundation are generally payable at the rate of 5% of the sales of such products, up to 150% of the grant received, linked to the United States Consumer Price Index. As of December 31, 2024, we had a contingent obligation to pay the BIRD Foundation aggregate royalties in the amount of approximately $478,606. C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC. See “Item 4.B—Information on the Company—Business Overview—Research and Development,” “Item 4.B—Information on the Company—Business Overview—Proprietary Rights”, and “Item 5—Operating and Financial Review and Prospects—Research and Development expenses, Net” and “Item 5.A—Operating and Financial Review and Prospects—Operating Results”. D. TREND INFORMATION According to industry research, as of January 2025, 67 operators in 35 countries, launched 5G standalone networks and we expect that the number of 5G SA deployments will grow in the coming years, although the pace of such growth is still unknown. CSPs are continuing to invest in 5G networks and more devices have become commercially available despite the economic disruption. 5G networks and services are becoming much more complex and dynamic. They use cloud-native technologies such as containers and kubernetes to enable automation and simplification and to reduce operating costs. These and the evolution to 5G advanced and GenAI embedded network technologies may result in potential increased interest by CSPs in our solutions. We consider customer experience as another driver for CSPs to invest in solutions that enable them to better monitor, understand customer affecting issues, and proactively offer resolution and upgrade of quality of service. As services become more technologically complex and their volumes increase, service quality becomes an issue that must be addressed to allow for end-to-end visibility across the different network areas. Our automated assurance solutions address this need by providing end-to-end network visibility from RAN to core, enabling CSPs to monitor their networks end-to-end as they progress with 5G deployments. E. CRITICAL ACCOUNTING ESTIMATES Critical Accounting Policies and Estimates The preparation of Consolidated Financial Statements and related disclosures in conformity with U.S. GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Note 2 of the Notes to the Consolidated Financial Statements describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. The accounting policies described below are significantly affected by critical accounting estimates. Such accounting policies require significant judgments, assumptions, and estimations used in the preparation of the Consolidated Financial Statements, and actual results could differ materially from the amounts reported based on these policies. 39 Revenue recognition. We recognize revenues in accordance with ASC No. 606, “Revenue from Contracts with Customers”. As such, we identify a contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to each performance obligation in the contract and recognize revenues when (or as) performance obligations are satisfied as follows: a) Identify the contract with a customer: We generally consider either agreements or purchase orders, which in some cases are governed by master agreements, to be contracts with customers. In evaluating the contract with a customer, we analyze the customer’s intent and ability to pay the amount of promised consideration (credit risk) and consider the probability of collecting substantially all of the consideration. b) Identify the performance obligations in the contract: At a contract’s inception, we assess the goods or services promised in a contract with a customer and identify the performance obligations. The main performance obligations would generally include: License for our software solutions, professional services, managed services, service type warranty and post-contract customer support, each of which are distinct. c) Determine the transaction price: The transaction price is the amount of consideration to which we are entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. We don’t usually grant our customers with a right to return the products sold. However, in some cases, the arrangements may include refunds, liquidated damages, penalties or other damages if we fail to deliver future goods or services or if the goods or services fail to meet certain specifications to acceptance criteria. All of the above are accounted for as variable considerations, which may be considered as adjustments to the transaction price. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available. The Company uses the practical expedient and does not assess the existence of a significant financing component when the difference between payment and revenue recognition is a year or less. As our standard payment terms are less than one year, the contracts have no significant financing component. In instances of contracts where revenue recognition differs from the timing of invoicing, we have determined that those contracts generally do not include a significant financing component. The primary purpose of the invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive or provide financing. d) Allocate the transaction price to the performance obligations in the contract: For software licenses where the standalone selling prices, cannot be determined based on observable prices, given the same products are sold for a broad range of amounts and the selling price is highly variable, the standalone selling prices included in a contract with multiple performance obligations are determined by applying a residual approach. Standalone selling prices of services are typically estimated based on observable transactions when these services are sold on a standalone basis or on a cost basis. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. e) Recognize revenue when a performance obligation is satisfied: Revenue is recognized when or as performance obligations are satisfied by transferring control of a promised good or service to a customer. Control is either transferred over time or at a point in time, which affects the revenue recognition schedule. 40 Products. Revenues from sales of software solutions which include customer acceptance or software licenses only are recognized at a point in time of the acceptance of the solution or the point in time the software license is delivered. Services. Revenues related to managed services, service type warranty and post-contract customer support are recognized over time. Deferred revenues represent unrecognized fees collected as well as other advances and payments received from customers, for which revenue has not yet been recognized. Deferred revenues are classified as short-term and long-term deferred revenues based on the period in which revenues are expected to be recognized. We record unbilled receivables from contracts when the revenue recognized exceeds the amount billed to the customer. We capitalize an asset for the incremental costs of obtaining a contract whenever such expenses are expected to be recovered. Capitalized costs derive primarily from sales commissions or incentives granted to employees and partners. Our contracts with customers include performance obligations related to products and services, some of which are satisfied at a point in time and others over time. Commission costs related to performance obligations satisfied at a point in time are expensed at the time of sale, which is when revenue is recognized. Commission costs related to long-term service contracts and performance obligations satisfied over time are deferred and recognized on a systematic basis that is consistent with the transfer of the products or services to which the asset relates. Amortization expense is included in sales and marketing expenses in the accompanying consolidated statements of income (loss). Share-based compensation. Our accounts for share-based compensation are in accordance with ASC No. 718 “Compensation – Stock-based Compensation”, or ASC 718, which requires us to estimate the fair value of share-based payment awards on the grant date using an option-pricing model. We recognize compensation expenses for the value of its awards over the requisite service period of each of the awards. For graded vesting awards subject to service conditions only, we use the straight-line attribution method. We estimate expected forfeitures. We selected the Black-Scholes option-pricing model as the most appropriate fair value method for its share-options awards. The option-pricing model requires a number of assumptions, of which the most significant are the expected share price volatility and the expected option term. Expected volatility was calculated based upon actual historical share price movements over the most recent periods ending on the grant date, equal to the expected option term. The expected term was generated pursuant to historical option exercise information. The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term to the expected term of the options. Historically the Company has not paid dividends and in addition has no foreseeable plans to pay dividends, and therefore uses an expected dividend yield of zero in the option-pricing model. Our determination of the fair value of restricted share units or RSUs is based on the closing market value of the underlying shares at the date of grant. Business combination. We account for our business combinations using the acquisition method of accounting, which requires, among other things, allocation of the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date. The excess of the fair value of purchase consideration over the values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair value of assets acquired and liabilities assumed, we make estimates and assumptions, especially with respect to intangible assets. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable, and, as a result, actual results may differ from estimates. During the measurement period, not to exceed one year from the date of acquisition, we may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill if new information is obtained related to facts and circumstances that existed as of the acquisition date. Acquisition costs, such as legal and consulting fees, are expensed as incurred. 41 Goodwill and Other Intangible Assets. Goodwill and certain other purchased intangible assets have been recorded in our financial statements as a result of acquisitions. In business combinations, in accordance with ASC Topic 805, “Business Combinations”, we allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. Such valuations require us to make significant estimates, assumptions, and judgments, especially with respect to intangible assets. The estimated fair values and useful lives of identifiable intangible assets are based on many factors, including estimates and assumptions of future operating performance and cash flows of the acquired business, market conditions, technological developments and specific characteristics of the identified intangible assets. Goodwill represents excess of the purchase price in a business combination over the fair value of identifiable tangible and intangible assets acquired. Goodwill is not amortized, but rather is subject to an impairment test. ASC No. 350, “Intangible—Goodwill and Other” requires goodwill to be tested for impairment at least annually and, in certain circumstances, between annual tests. The accounting guidance gives the option to perform a qualitative assessment to determine whether further impairment testing is necessary. The qualitative assessment includes judgement and considers events and circumstances that might indicate that a reporting unit’s fair value is less than its carrying amount. For the years ended December 31, 2024 and 2023 no impairment loss was identified.