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	Year ended December 31,
	2015			2014			2013			2012			2011
	(in thousands, except share and per share data)
Consolidated Statement of Operations Data:
Revenues:
Software licenses	$	4,459		$	2,437		$	2,930		$	1,111		$	1,123
Services		8,443			9,687			8,948			6,867			8,448
Maintenance		4,421			4,249			3,748			2,789			2,815
Total revenues		17,323			16,373			15,626			10,767			12,386
Cost of revenues:
Software licenses		97			175			170			62			93
Services		6,408			5,813			5,417			6,018			7,525
Maintenance		479			496			353			629			758
Total cost of revenues		6,984			6,484			5,940			6,709			8,376
Gross profit		10,339			9,889			9,686			4,058			4,010
Operating expenses:
Research and development		3,177			3,481			2,918			3,541			2,910
Sales and marketing		5,223			5,052			4,398			4,787			3,556
General and administrative		3,058			2,998			3,107			2,975			4,268

Total operating expenses		11,458			11,531			10,423			11,303			10,734
Operating loss		(1,119	)		(1,642	)		(737	)		(7,245	)		(6,724	)
Financial income (expense), net		(38	)		1,941			473			856			(12	)
Income (loss) from operations before taxes		(1,157	)		299			(264	)		(6,389	)		(6,736	)
Income tax benefit (expense)		(84	)		(967	)		382			(55	)		(62	)
Net income (loss	$	(1,241	)	$	(668	)	$	118		$	(6,444	)	$	(6,798	)

Basic net earnings (loss) per share	$	(0.30	)	$	(0.16	)	$	0.03		$	(1.55	)	$	(1.63	)

Diluted net earnings (loss) per share	$	(0.30	)	$	(0.16	)	$	0.03		$	(1.55	)	$	(1.63	)
Weighted average number of shares used in computing basic net earnings (loss) per share		4,166,433			4,159,576			4,159,134			4,159,134			4,159,134

Weighted average number of shares used in computing diluted net earnings (loss) per share		4,166,433			4,159,576			4,166,033			4,159,134			4,159,134

	2015		2014		2013		2012		2011
	(in thousands)

Consolidated Balance Sheet Data:
Cash and cash equivalents	$	3,438	$	3,048	$	3,632	$	3,587	$	2,944
Cash and investments		*7,082		*8,369		*10,376		*10,029		*14,107
Working capital		4,627		5,870		6,096		1,671		7,335
Total assets		10,862		13,124		14,700		13,213		18,063
Treasury stock		17,863		17,863		17,863		17,863		17,863
Shareholders’ equity	$	5,401	$	6,793	$	8,743	$	7,743	$	13,848

* Cash and investments include restricted cash of $585, $787, $597, $603 and $487 in 2015, 2014, 2013, 2012 and 2011, respectively.

B.	Capitalization and Indebtedness

Not applicable.

C.	Reasons for the Offer and Use of Proceeds

Not applicable.

D.	Risk Factors

Our business faces significant risks. You should carefully consider all of the information set forth in this Annual Report and in our other filings with the SEC, including the following risk factors which we face and which are faced by our industry. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks. In that event, the trading price of our ordinary shares would likely decline and you might lose all or part of your investment.

Risks Related to Our Business

Our business model is focused on continued growth in a market in which we have only several years of experience. Failure to continue our penetration into this market would negatively impact our results of operations.

We have focused on the customer service and support market since 2004. In the third quarter of 2012 we introduced Jacada Visual IVR (initially called Jacada Mobile Agent), our product offering designed to enhance self service capabilities from digital engagement channels (such as a website or smart phones) and improve the connectivity between these digital channels and the assisted service channels. With this product introduction, we entered the omnichannel market. We have limited experience in this evolving market. Our limited experience and knowledge regarding the omnichannel market may impede our ability to sell our products and result in decreased revenues and increased losses. In addition, we intend to continue to invest in research and development for products in this market. Failure to have our research and development efforts result in marketable products, and ultimately revenue-producing products, could result in increased losses.

The omnichannel market is an evolving market, and failure to achieve market acceptance of our products in this space may result in a failure to recover our research and development, and marketing expenditures, which would adversely impact our operating results.

Developing a relatively new market requires education of product capabilities, education of the potential return on investment for those purchasing the products, as well as proof of the technological feasibility of the product itself. We continue to focus research and development on new products within the omnichannel market and intend to introduce new products within our omnichannel customer engagement suite. Should our go-to-market strategy for educating the market to the benefits of Jacada Visual IVR (or other omnichannel products we may introduce) fail, or if we are unable to garner references from select early adopters, we may be unable to continue to generate revenue from our Jacada Visual IVR products.

The investment required in further developing the omnichannel market may generate little revenue while increasing our cost of sale.

In order to further develop a relatively new technology, on occasion, we have and may continue to be required to perform a proof of technology or pilots where we must prove the benefits of our omnichannel technologies, including Visual IVR, in a prospect’s specific business environment. These engagements may be performed for a fee, at no charge or at a substantially reduced fee, thereby increasing our cost of sale with limited or no funds to cover the cost.

We do not have a proven business model for the omnichannel market; if our business model is inappropriate for this market and our estimates regarding the sales cycle for this market are incorrect, our efforts to successfully commercialize our omnichannel solutions may be harmed or we will experience a further delay in generating revenues from these products.

In addition to our traditional perpetual license model, our recent omnichannel product offerings are being offered to the market under different pricing models such as transaction-based and software-as-a-service, or “SaaS”. We do not have enough experience to determine whether our business model is correct and appropriate for new sales or follow-on sales. In the event that our chosen business models are inappropriate, we may need to modify them and adjust the manner in which we sell these products in order to close subsequent transactions. This required adjustment may adversely affect our revenues and expense levels.

We have limited business experience in offering a software-as-a-service model; if we fail to meet the technical and support requirements of this model, our efforts to successfully commercialize our omnichannel solutions, as well as other solutions, may be harmed, we may obtain customers we are unable to support and we may incur significant costs in correcting technical and support concerns.

Recent company efforts have focused on the introduction of a cloud offering for our Jacada Visual IVR and Jacada Agent Scripting products, allowing us to offer these products in a SaaS model. This model requires us to host the software and allow customers to access and use the software remotely. This requires technical innovations to our products as well as an enhanced infrastructure to support active monitoring and disaster recovery efforts required in a SaaS model. If the products we develop fail to meet the technical requirements of a cloud offering, we may fail to successfully develop the digital transformation and omnichannel market and may fail to generate revenues. In addition, should we be unable to provide the level of monitoring support required of a SaaS model, we may be exposed to the risk of product liability or warranty claims based on failure to maintain certain service level requirements of our customers. In addition, the failure of our products to perform to customer expectations could give rise to warranty or other claims. Any of these claims, even if not meritorious, could result in costly litigation or divert management’s attention and resources. We may not have sufficient funds or insurance coverage to satisfy any or all liability that may be imposed upon us with respect to these claims.

We must continue our investment in our sales and marketing efforts, including our indirect distribution channels, in order to increase market awareness of our products and to generate increased revenues.

Our sales and marketing teams have limited resources. The size of our current sales and marketing departments may not be sufficient to increase market awareness or identify and qualify a sufficient number of sales opportunities to assist in revenue growth. In addition, we believe that in certain markets our future success may be dependent upon the expansion of our indirect distribution channels, consisting of relationships with partners, system integrators, call center outsourcers, resellers and distributors. During 2015, while our list of partners grew, we still had relationships with a limited number of partners. The number and quality of the partnerships we maintain may not be sufficient to allow us to expand into certain markets.

Our future growth will be limited if:

our sales and marketing teams fail to increase market awareness of our products and generate increased revenues;

we fail to work effectively with our indirect distribution partners;

there is a decrease in the willingness or ability of our indirect distribution partners to devote sufficient resources and efforts to market, sale and support our products; or

we fail to increase the number of indirect distribution partners with which we have relationships.

If any of these circumstances occurs, we will have to devote substantially more resources to the sales, marketing, distribution, implementation, customization and support of our products than we otherwise would, which would negatively impact our operating results.

Our revenues may decline if we do not increase the number of transactions that we effect in 2016.

Our backlog may decrease if we do not maintain or increase the number of our transactions. Reduced backlog means that we will be more dependent on signing new transactions in order to generate revenues. If we fail to sign a sufficient number of new transactions in 2016 for which we recognize revenue in 2016, our revenues and results of operations will be adversely affected.

Because our solutions are complex and generally involve significant capital expenditures by customers, we may invest significant time and expense in trying to make a sale to a potential customer that ultimately chooses not to purchase our solutions.

Our sales typically involve significant capital investment decisions by prospective customers, and often require us to expend a significant amount of time to educate prospective customers as to the benefits of our solutions. As a result, before purchasing our solutions, companies spend a substantial amount of time performing internal reviews and obtaining approvals. On occasion, particularly as we introduce our omnichannel solutions, we may be required to perform a proof of technology where we must prove the benefits of our technology in a prospect’s specific business environment. While these are typically performed for a fee, they may be performed at no charge or at a substantially reduced fee, thereby increasing our cost of sale with limited or no funds to cover the cost. Even if our solutions are effective, our target customers may not choose them for technical, cost, support or other reasons.

Revenues from our customer service and support solutions might be concentrated in a few large orders and a small number of customers, meaning that the loss of a significant customer or a failure to make even a small number of such sales could harm our results of operations.

During 2015, 2014 and 2013, revenues from our customer service and support solutions were derived from large orders from a small number of customers. In 2015, 2014 and 2013, three customers accounted for 25%, 45% and 38% of our total revenues, respectively. In 2015 we acquired a larger number of new customers with a slightly reduced average contract value than in previous years. While this allows us to be less reliant on a few customers, currently, we believe that our revenues will continue to be dependent on a relatively limited number of significant customers for the foreseeable future, and we cannot assure you that we will make repeat sales to these customers. We also cannot assure you that new customers will purchase our products and services in the future. The failure to secure new key customers, the loss of key customers or significant reductions in sales from a key customer would significantly reduce our revenues and make it significantly more difficult for us to become profitable.

Competition in the market in which we operate is intense. If we are unable to compete effectively, the demand for, or the prices of, our products may be reduced.

The markets in which we operate are competitive and subject to change. Our products compete with other customer experience optimization and customer service solutions offered by other vendors including NICE Systems, OpenSpan and Pega Systems. In addition, with our product offering, Jacada Visual IVR and our omnichannel solutions, we face new competitors in the digital customer service space, including Voxeo, Fonolo, CallVU, Interactive Intelligence, CafeX, 24/7 and Genesys. We expect additional competition from other established and emerging companies. Furthermore, our competitors may combine with each other and other companies may enter our markets by acquiring or entering into strategic relationships with our competitors.

In addition, our potential customers may choose to deploy traditional CRM application software, or utilize their own information technology personnel or system integrators to write new code or rewrite existing applications in an effort to develop their own customer service and support solutions. As a result, prospective clients may decide against purchasing and implementing externally-developed solutions such as ours.

Many of our current and potential competitors have significantly greater financial, technical and marketing resources, greater name recognition and larger customer bases than we do. We may be unable to create significant market barriers and our competitors may be able to quickly develop products comparable or superior to ours; adapt more quickly than us to new technologies, evolving industry trends or customer requirements; or devote greater resources than we do to the development, promotion and sale of products. Accordingly, we may not be able to compete effectively in our markets, competition may intensify and future competition may harm our business.

We rely on our key personnel and key management members, whose knowledge of our business and technical expertise would be extremely difficult to replace.

Our future success depends, to a certain degree, on the continued services of key management, as well as on our sales and technical personnel. The loss of services of any of our key management for any reason could have a material adverse effect on our business, financial condition and results of operations. We are also dependent on our ability to attract, retain and motivate highly skilled personnel. Competition for qualified personnel is intense in the markets in which we recruit. As a result, our ability to recruit and retain qualified candidates may be limited.

Our revenues could be adversely affected if we fail to recruit and retain consultants and other technical service personnel.

Sales of our customer service and support solutions require in many cases advance sales activity involving consultants and post-sale implementation and customization. We rely on our staff of professional consultants, other technical service personnel and subcontractors to implement our solutions after they are purchased by our customers. Unless we are able to recruit and retain professional consultants, other technical service personnel and subcontractors, or hire and train such personnel and subcontractors to replace those who leave us, it will be difficult for us to implement our solutions and obtain customer acceptance and to increase or possibly even maintain our present level of sales due to constraints on our capacity to implement sales.

Our future growth will be adversely affected and our future operating results may be adversely affected if we fail to develop and introduce new functionality for our products and new products for the customer service and support market or if our new products fail to achieve market acceptance.

In order to achieve sales growth we will need to develop and introduce new functionality for our customer service and support solutions and new products for our target market. Our ability to do so requires us to invest significant resources in research and development and in sales and marketing. If we fail to develop, integrate and market new functionality or new products successfully, we may not be able to recover our research and development expenditures or our sales and marketing expenditures, which would adversely impact our operating results. Specifically, we have invested, and expect to continue to invest, significant resources in the development and marketing of our omnichannel product offerings and extensions thereof. This segment of the customer service and support market is an evolving market and failure to achieve market acceptance of our products in this space may result in a failure to recover our development and marketing expenditures, which would adversely impact our operating results.

A majority of our revenues derives from the provision of professional services.

We derive our revenues from license fees for our software products; fees for professional services (which include customization, implementation, and integration of our solutions); training; and maintenance and support services. In 2015, 2014 and 2013, services revenues constituted a majority of our total revenues. Services revenues have lower gross margins than software revenues. If we do not increase the portion of our total revenues attributable to software license fees or if we do not increase our professional services gross margins, we may not be able to achieve or maintain profitability.

Failure to deliver professional services efficiently could negatively impact our gross margins.

Our relatively limited experience and knowledge regarding the omnichannel market, particularly for our newly introduced products, and the delivery of our products and solutions for this new market, may impact the efficiency of our professional services deliveries, as we may need to expend more resources in the delivery of professional services to a customer than we had originally estimated. In addition, failure by our professional services team to properly scope a project or install our products could require us to utilize more resources than anticipated to meet the customer requirements or correct defects, impacting our gross margins. Any such extraneous expenditure of resources may negatively impact our professional services gross margins and our ability to achieve or maintain profitability. Additionally, failure to deliver professional services efficiently and to our customers’ satisfaction may increase the potential of termination of projects by our customers.

Uncertain global economic conditions, including continued credit constraints, could adversely affect us.

The global economy continues to be mired in uncertainty, and prospects for sustained economic growth remain uncertain. During recent years, weakness in the global credit markets, failures or material business deterioration of investment banks, commercial banks, and other financial institutions and intermediaries in certain parts of the world, particularly in Europe, and reductions in asset values across businesses, households and individuals, combined with other financial and economic indicators, have caused ongoing economic uncertainty. These conditions, should they worsen, may result in reduced demand or funding for projects involving our customer service and support or omnichannel solutions, longer sales cycle for our projects or termination of projects by our customers, which may adversely affect our results of operations. Among other things, we might face:

potential declines in orders for our customer service and support or omnichannel solutions and in our revenues from such solutions due to reduced or postponed orders or other factors caused by economic challenges faced by our customers and prospective customers;

longer sales processes and a need for increased efforts to secure projects in order to be able to demonstrate to customers and prospective customers a return on investment that meets such customers’ and prospective customers’ business needs and requirements in such economic conditions;

an adverse impact on our customers’ ability to pay, when due, amounts payable to us, or on our ability to collect amounts payable to us in full (or at all) if any of our customers fail or seek protection under applicable bankruptcy or insolvency laws; and

a re-evaluation by our customers and prospective customers of approved or contracted projects in order to address budget reductions or other impacts and factors of such economic conditions by such customers and prospective customers.

Any of these consequences could adversely affect our business, financial condition, operating results and cash flow. These economic conditions also impact our ability to forecast orders and revenues and our ability to provide guidance for our performance.

Market factors, including the volume of shares traded and the market in which our shares are traded, may impact the volatility of our share price.

The market price of our shares is volatile and the volume of the daily trading of our shares is very low. Effective October 2012, trading in our shares was transferred from the NASDAQ Global Market to the OTCQB Marketplace, a result of our failure to maintain the listing requirements of the NASDAQ Global Market. Our shares may furthermore be voluntarily deregistered under the Exchange Act. Therefore you may be unable to sell your shares at or above the price you paid, if at all, and you may have access to less information about us. The risks described in this Item 3.D may adversely affect our share price. Our share price, like that of many technology companies, may be subject to volatility. The volume of trading of our ordinary shares has also been very low, a factor that adversely impacts your ability to resell our shares. Our share price may be adversely affected by changes in estimates of our financial results or recommendations by securities analysts, changes in the quarterly financial results of companies perceived to be similar to us, and changes in market valuations of similar companies. In addition, if the market for stocks in our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our ordinary shares could decline for reasons unrelated to our business, financial condition or results of operations.

As a public company with fewer than 300 shareholders, we are also eligible to deregister our stock under the Exchange Act, and may decide to do so in the future in order to avoid the costs and resource demands related to being a public company in the United States. In the event that we take such action, we would no longer be required to file current or annual reports with the SEC and would no longer be subject to various substantive requirements of Exchange Act regulations, which would reduce the amount of information available to investors about us.

Any deregistration under the Exchange Act would adversely impact your ability to sell our shares in the market due to the resulting reduction in demand and loss in liquidity for our shares. Since our shares are traded in the over-the-counter market in the OTCQB, our shares may have significantly less liquidity than securities traded on a national securities exchange, including lower trading volumes, delays in the timing of transactions, reduced securities analyst and news coverage, and lower market prices. In such case, we will be unable to ensure that market makers will make a market in our ordinary shares or that trading of our ordinary shares will continue in the United States.

A deregistration could also have other adverse effects, including limitations on our ability to issue additional securities for financing or other purposes, or to otherwise arrange for any financing that we need in the future, and a reduction in confidence in our company by current or prospective employees, customers, suppliers and others with whom we have, or may seek to initiate, business relationships.

We could be treated as a “passive foreign investment company”, which would have adverse United States federal income tax consequences to United States holders of our shares. In such case, U.S. holders should consider making certain elections to avoid any accompanying adverse consequences.

As a non-U.S. company, we could potentially be treated as a passive foreign investment company, or a PFIC, if either (1) at least 75% of our gross income for any taxable year consists of certain types of “passive income” (which we refer to as the Income Test) or (2) at least 50% of the average value of our assets produce or are held for the production of those types of “passive income” (which we refer to as the Asset Test). Please see the discussion under “Item 10E. Taxation” for further details regarding these tests. We believe that we were not a PFIC for United States federal income tax purposes in 2015, and we do not anticipate that we will be a PFIC in 2016. While we will attempt to manage our business so as to avoid PFIC status, to the extent consistent with our other business goals, we cannot predict whether our business plans will allow us to avoid PFIC status in the future or whether our business plans will change in a manner that affects our PFIC determination. Ultimately, our status is a factual determination made annually and may be subject to change.

If we are determined to be a PFIC, a U.S. Holder (as described in “Item 10E Taxation” below), may be subject to less advantageous tax consequences upon the sale, exchange or receipt of dividends with respect to our ordinary shares and may be required to pay United States federal income tax at ordinary income rates for gains, dividends, as well as an interest charge on certain “excess distributions,” as explained later on. See “Item 10E Taxation” for a more comprehensive discussion of our status in connection with the PFIC rules, our strategies for attempting to manage this risk and the United States federal income tax consequences if we were to be treated as a PFIC.

We expect to be subject to increasing risks of international operations.

Currently we market and sell our products and services primarily in North America and Europe, from which areas we received approximately 85% of our total revenues for the year ended December 31, 2015. Managing our operations in North America and Europe requires significant management attention and financial resources. Further, we currently have limited experience in marketing and distributing our products in regions other than North America and Europe. Other areas into which we market our products, either through direct sales or partners, include Israel, India and Asia Pacific. Our inability to increase our worldwide operations successfully could adversely impact our business.

Our products may contain unknown defects that could harm our reputation, result in product liability or decrease market acceptance of our products.

Our products may contain errors or defects, particularly when first introduced or when new versions or enhancements are released. Although we have not experienced any material software defects to date, defects could cause our customers to experience system failures. Our customers depend on our software for their critical systems and business functions. Any errors or defects could:

damage our reputation;

increase our product development costs;

divert our product development resources;

expose us to monetary damages;

cause us to lose future sales;

negatively impact our services margins due to additional investment to correct product errors;

damage our ability to deliver our solutions to the customer; or

delay or diminish market acceptance of our products.

Although we conduct extensive testing, we may not discover software defects that affect our products or enhancements until after they are sold. Furthermore, we are unable to test our products in each of the applications in which they are designed to work.

Certain of our products contain technology that we acquired or licensed from third parties. Because we did not develop the technology ourselves, there may be errors in the technology of which we are not aware. In addition, our products are integrated with our customers’ networks and software applications. The sale and support of our products may expose us to the risk of product liability or warranty claims based on damage to these networks or applications caused by the technology we developed or the technology developed by a third party and acquired by us. In addition, the failure of our products to perform to customer expectations could give rise to warranty or other claims. Any of these claims, even if not meritorious, could result in costly litigation or divert management’s attention and resources. We may not have sufficient funds or insurance coverage to satisfy any or all liability that may be imposed upon us with respect to these claims.

We may fail to maintain effective internal controls in accordance with Section 404(a) of the Sarbanes-Oxley Act of 2002.

The Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, imposes certain duties on us and our executives and directors. Our efforts to comply with the requirements of Section 404(a) of Sarbanes-Oxley may result in increased general and administrative expense and a diversion of management time and attention. If we fail to maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting. In the future, we may identify material weaknesses in our controls over financial reporting. Failure to maintain effective internal controls over financial reporting could result in investigation or sanctions by regulatory authorities, and could have a material adverse effect on our operating results, investor confidence in our reported financial information, and the market price of our ordinary shares.

Negative conditions in the global credit and stock markets may impair the liquidity and value of our investment portfolio.

We invest our cash, cash equivalents and marketable securities in a number of countries, and in the custody of financial institutions, with high credit ratings. In 2010, we invested the majority of our cash in the common stock of various highly capitalized publicly traded corporations. In 2014 we sold most of the common stock held by us, resulting in a gain of $1.9 million. As of December 31, 2015 we held $1.2 million in common stock. See “Item 10E Taxation” for more information regarding the purposes of these investments. In addition, we held $1.9 million in United States treasuries. As of December 31, 2015, the fair value of our investments, including common stock and United States treasuries, was $3.1 million.

While our investment policy and strategy attempt to manage interest rate risk, limit credit risk, limit stock market risk, and limit our investments to what we view as high-quality securities, the outlook for our investment holdings is dependent on general economic conditions, interest rate trends and volatility in the financial and stock markets, which can all affect the income that we receive, the value of our investments, and our ability to sell them. Our marketable securities are carried at fair value as of the relevant balance sheet dates. However, over time the economic and market environment may provide additional insight regarding the fair value of certain securities which could change our judgment regarding impairment. This could result in unrealized or realized losses relating to other than temporary declines being charged against future income. There is continuing risk that declines in fair value may occur and additional impairments may be charged to income in future periods, resulting in realized losses. In addition, our investments in common stock are subject to risks associated with the stock market and the risks associated with each particular company whose common stock we hold, and if we need to liquidate some or all of those investments in order to access cash, we may be forced to sell such investments at a loss.

Exchange rate fluctuations between the dollar and other currencies may negatively affect our results of operation.

Our results of operations are reported in U.S. dollars, however, a significant portion of our revenues and expenses are generated and incurred outside of the United States and in currencies other than the U.S dollar, particularly in NIS, British Pounds and Euros. As a result, we are subject to foreign currency risk. Specifically, our sales in Europe and our expenses in Israel and Europe are recorded in local currencies. This exposes us to the direct risk of local currency devaluations or fluctuations against the U.S dollar. Fluctuations in exchange rates between the currencies in which our costs are incurred or revenues are recorded and the U.S. dollar may have a material adverse effect on our results of operations. In certain instances, we use derivative financial instruments to reduce our net exposure to currency exchange rate fluctuations in the major foreign currencies in which we operate. However, we cannot assure you that we will be able to effectively limit all of our exposure to currency exchange rate fluctuations, which could affect our financial results.

We may have larger than anticipated tax liabilities.

The determination of our provision for income taxes requires significant judgment and estimation and there are many transactions and calculations where the ultimate tax determination is uncertain. Tax positions taken during the preparation of returns may ultimately not be sustained, giving rise to larger than anticipated tax liabilities. In addition, we are subject to tax in multiple US and foreign tax jurisdictions and the determination of our tax liability is always subject to audit and review by the applicable domestic or foreign taxing authority. In light of fiscal challenges in US federal and state governments and in many international locations, taxing authorities are increasingly focused on ways to increase revenues which may make resolving tax disputes more difficult.

Risks Related to Our Intellectual Property

Our technology may be subject to infringement claims or may be infringed upon.

Our success and ability to compete are substantially dependent upon our technology. During 2015, we were issued two patents by the United States Patent and Trade Office for our Visual IVR technology. Notwithstanding these patents, most of our intellectual property, other than our trademarks, consists of proprietary or confidential information that is not subject to patent or similar protection. Despite our efforts to protect our intellectual property rights, unauthorized third parties may attempt to copy or otherwise obtain and use the technology protected by those rights. Any infringement of our intellectual property could have a material adverse effect on our business, financial condition and results of operations. Furthermore, policing unauthorized use of our products is difficult and costly, particularly in countries where the laws may not protect our proprietary rights as fully as in the United States.

Although we do not believe that our products infringe upon any patent, trademark or other intellectual property rights of others, we cannot be certain that one or more persons will not make a claim of infringement against us. Any claims, with or without merit, could:

be expensive and time-consuming to defend;

cause product shipment and installation delays;

divert management’s attention and resources; or

require us to enter into royalty or licensing agreements, which may not be available on acceptable terms, or may not be available at all.

We incorporate open source technology in our products which may expose us to liability and have a material impact on our product development and sales.

Some of our products utilize open source technologies. These technologies are licensed to us via varying license structures but include the general public license. This license and others like it pose a potential risk to products that are integrated with these technologies. For example, in the event we integrate into one of our products a technology covered under the general public license, we may be required to disclose our source code for the integrated product. Disclosing our source code could enable our competitors to eliminate any technological advantage that our products may have over theirs, and thereby materially adversely affect our competitive advantage, results of operations and financial condition. In addition, from time to time there have been claims challenging the ownership of open source software against companies that incorporate open source software into their products. We use a limited amount of open source software in our products and may use more open source software in the future. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software.

A successful claim of product infringement against us or our failure or inability to license the infringed or similar technology could have a material adverse effect on our business, financial condition and results of operations.

Security breaches could compromise sensitive information belonging to us or our customers and could harm our business (including our intellectual property) and reputation.

The safeguarding of our information technology infrastructure is important to our business. A cyber-attack that bypasses our information technology (IT) security systems causing an IT security breach may lead to a material disruption of our IT business systems and/or the loss of business information, resulting in adverse business impact. Adverse effects could include:

adversely affected future results of operations due to the theft, destruction, loss, misappropriation or release of our or our customers' confidential data or our intellectual property;

operational or business delays resulting from the disruption of IT systems and subsequent clean-up and mitigation activities; and

negative publicity resulting in reputation or brand damage with our customers, partners or industry peers.

Risks Related to Our Location in Israel

Israeli courts might not enforce judgments rendered outside of Israel.

We are incorporated under the laws of the State of Israel and we maintain significant operations in Israel. Certain of our officers and directors reside outside of the United States. Therefore, you might not be able to enforce any judgment obtained in the United States against us or any of such persons. Additionally, you might not be able to bring civil actions under United States securities laws if you file a lawsuit in Israel. We have been advised by our Israeli counsel that, subject to certain limitations, Israeli courts may enforce a final executory judgment of a United States court for liquidated amounts in civil matters after a hearing in Israel, provided that certain conditions are met. If a foreign judgment is enforced by an Israeli court, it will be payable in Israeli currency.

Conditions in and around Israel could adversely affect our operations.

Because our research and development facilities are located in Israel, we are directly influenced by the political, economic and military conditions affecting Israel. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Despite the negotiations towards peace between Israel and certain of its Arab neighbors, the future of these peace efforts is uncertain. From October 2000 until recently, there was a significant increase in violence primarily in the West Bank and the Gaza Strip and negotiations between Israel and Palestinian representatives have ceased for periods of time. In January 2006, Hamas, the Islamic Resistance Movement, won the majority of the seats in the Parliament of the Palestinian Authority. The election of a majority of Hamas-supported candidates in the Palestinian Parliament and the tension among the different Palestinian factions may create additional unrest and uncertainty. Hamas does not recognize Israel's right to exist as a state and Israel considers Hamas to be a terrorist organization. During December 2008 and January 2009, Israel was engaged in an armed conflict with Hamas and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group and political party. In November 2012 and again in July through August 2014, when Hamas increased the scope and intensity of its rocket attacks against Israeli civilian targets, Israel commenced military operations in Gaza in attempts to prevent the rocket attacks and disrupt the capabilities of the militant organization, including the destruction of tunnels dug by Hamas that were intended to be used to carry out massive terrorist attacks against Israeli civilians. These recent conflicts involved missile strikes against civilian targets Israel, and negatively affected business conditions in Israel. There can be no assurance that attacks on Israel will not reach our facilities, which could result in significant disruption of our business. Any major hostilities involving Israel, a significant increase in terrorism or the interruption or curtailment of trade between Israel and its present trading partners could materially adversely affect our operations. In addition, the current tension between the Western world and Israel, on the one hand, and the Islamic Republic of Iran, on the other hand, over the latter’s nuclear weapons program carries with it the potential for armed conflict that may involve Israel. Any renewed hostilities or other factors related to Israel could have a material adverse effect on us or on our business or adversely affect our share price.

Generally, all non-exempt male adult citizens and permanent residents of Israel under the age of 45 (or older, for citizens with certain occupations), including some of our officers, directors and employees, are obligated to perform military reserve duty annually, and are subject to being called to active duty at any time under emergency circumstances. The absence of these employees for significant periods may cause us difficulties in our operations. Additionally, a number of countries continue to restrict or ban business with Israel or Israeli companies, which may limit our ability to make sales in those countries.

Any failure to obtain the tax benefits from the State of Israel that we anticipate receiving could adversely affect our plans and prospects.

Pursuant to the Law for the Encouragement of Capital Investments, 1959, the Israeli government has granted “Approved Enterprise” status to our existing capital investment programs under the Alternative Benefits Program. Consequently, we are eligible for certain tax benefits for the first several years in which we generate taxable income. However, we have not yet begun to generate taxable income for purposes of this law. Once we begin to generate taxable income, our financial results could suffer if our tax benefits are significantly reduced.

In order to receive tax benefits, we must comply with a number of conditions and criteria. If we fail to comply in whole or in part with these conditions and criteria, we will not be entitled to the tax benefits. Although we believe that we have operated and will continue to operate in compliance with the required conditions, we cannot assure you that this will continue.

We cannot assure you that these tax benefits will be continued in the future at their current levels or at all. The termination or reduction of tax benefits (assuming that we generate taxable income that would enable us to utilize those benefits) could have a material adverse effect on our business, financial condition and results of operations. An amendment to the tax law, effective as of January 1, 2011 modified the benefit tracks. See “Item 5 Operating and Financial Review and Prospects— A. Operating Results— — Impact of Tax Policies and Programs on our Operating Results— Israeli Tax Considerations and Government Programs — Law for the Encouragement of Capital Investments, 5719-1959” for a description of such amendment. We cannot assure you that we will, in the future, be eligible to receive tax benefits under this law. In addition, in the event that we increase our activities outside of the State of Israel, these activities generally will not be eligible for inclusion in Israeli tax benefit programs. Accordingly, if we are found ineligible for these anticipated tax benefits, our future expected corporate taxes payable could increase significantly.

Certain provisions of our articles of association and of Israeli law could delay, hinder or prevent a change in our control.

Our articles of association contain provisions which could make it more difficult for a third party to acquire control of us, even if that change would be beneficial to our shareholders. For example, our articles of association provide that our board of directors is divided into four classes, three of which serve three-year terms. In addition, certain provisions of the Companies Law could also delay or otherwise make more difficult a change in control. The provisions of the Companies Law relating to mergers and acquisitions are discussed in greater detail in “Item 10.B: Memorandum and Articles of Association.”

As a foreign private issuer, we are subject to less stringent reporting requirements than domestic filers, which may negatively impact the volume of our shares traded and the volatility of our stock price.

As a foreign private issuer, we are required to report our financial results annually and are not required to report quarterly financial results as required of domestic filers. As a result, limited interim financial information may depress the volume of our shares traded, increasing the volatility of our stock price.

Item 4: INFORMATION ON THE COMPANY

A.	History and Development of the Company

Our legal and commercial name is Jacada Ltd. We were incorporated under the laws of the State of Israel in December 1990 as a limited liability company. On August 9, 1999, we changed our name from Client/Server Technology Ltd. to Jacada Ltd. Our commercial name is Jacada. Our registered office in Israel is 8 Hasadnaot Street, Herzliya 46728 Israel and our telephone number is 972-9-952-5900. Our agent in the United States is Oren Shefler, whose address is 5901 Peachtree Dunwoody Rd. Building B Suite 550, Atlanta, Georgia 30328. Our address on the Internet is http://www.jacada.com. The information on our website is not incorporated into this Annual Report. We operate under the Companies Law.

See Items 5 and 18 of this annual report on Form 20-F for a description of our capital expenditures for the past three fiscal years through the date of this annual report. We have made no divestitures during the same time period. In addition, we are not currently engaged in a capital divestiture and our current capital expenditures are for computers, software and peripheral equipment. These capital expenditures are financed with our internal cash resources.

We are not aware of any public takeover offers by third parties in respect of our shares, and we have made no public takeover offers in respect of other companies’ shares during fiscal years 2015 or 2016.

B.	Business Overview

Industry Overview

Jacada is a software company that helps enterprises simplify their customer interactions on both voice and digital channels, helping to reduce customer effort, reduce cost of operations, and drive additional revenue.

Jacada provides an omnichannel solution which is a digital interaction platform to bridge the voice and digital disconnect and create cross channel interactions for an enterprise’s customers. We refer to this market as the “omnichannel customer experience market”.

Jacada also provides software for the contact center to improve the productivity of an enterprise’s contact centers agents. We provide customer experience management and robotic process optimization solutions that simplify and automate customer service processes at the assisted service channels (voice and chat). We refer to this market as the “customer service and support market”.

Prior to the introduction of our customer service and support market products we had been operating in the application integration and web-enablement market for 16 years. We refer to this market as our “traditional market business.”

Omnichannel Customer Experience Market

In today’s highly competitive markets, companies increasingly focus on providing customer service as a means of increasing customer satisfaction and customer retention rates. Customers are demanding service when they need it and how they need it. The internet and mobile devices have had a huge impact on customer expectations. In today’s environment, customers prefer the ability to “self-serve” before placing a call to a contact center, or call center. They prefer to skip lengthy call menus and confusing options in a voice IVR and instead prefer to use visually guided menus on a company website or on their smartphone, allowing them to quickly find their desired answer without having to speak with an agent.

When agent involvement is required, customers expect to transition to the call or chat seamlessly. It is still common for customers to have to repeat information to a customer service agent even if that information had already been entered into the company’s website or mobile application. In addition, it is common for the self-service experience on the website, in the mobile application, and on the voice IVR to each be created separately, frequently by different organizations. This results in a fragmented customer experience with little to no ability for the customer to get a consistent experience across these touch-points and as the customer tries new touch-points to resolve their issue they commonly have to start over from the beginning especially when they give up and try to call for assistance from a live agent.

The complex and fragmented customer service experience results in:

Long and expensive average call handle times, or AHT;

Long and expensive training programs for the customer service representative;

High rate of call back or need to escalate calls to a more experienced agent;

High customer service representative turnover;

Poor customer satisfaction and low customer retention; and

An increased number of requests to contact live customer agents.

Customer Service and Support Market

Once an agent is reached, to provide quality customer service, customer service representatives must be able to answer customer’s questions quickly, handle any request the customer may have, and do so in an efficient and pleasant manner. One of the significant challenges in the provision of quality customer service is the complexity of the customer service representative desktop. This is due both to the number of software applications on the customer service representative’s computer desktop and to the complexity of the applications used on the desktop. Most customer service representatives must manage three or more applications on their desktop, including billing, inventory, delivery tracking, call tracking and customer relationship management, or CRM, applications, and many customer service representatives have six, eight, ten or more applications that they must learn and manage.

The number of applications on the typical customer service representative desktop is increasing due to the broader range of services that organizations are demanding of contact centers and the desire for agents to resolve calls during the first contact with the customer. The desire for first contact resolution is also driving a need to connect the customer service agents in the “front office” with processors in the back office to ensure that complex transaction are fulfilled correctly and completely and that the results are returned to the customer quickly. These applications are often a combination of Windows, web and host centric applications that are not integrated, and many of these applications have a unique user interface that customer service representatives must master to perform their jobs. The sharing of work between the front and back office workers is driving the need for business process automation tools to be added in order to coordinate front agent desktop process and activities with the back office workers.

Our Solutions

We develop, market and support omnichannel customer experience solutions, unified agent desktop and robotic process optimization solutions. Our omnichannel solutions allow our customers to deliver consistent customer service across multiple digital channels (such as smart-phones and web self-service) and ensure a seamless connectivity into the contact center in the event the user was unable to complete the self-service transaction in the digital channel. Our omnichannel customer experience solutions improve self-service across digital channels, reduce handling time if agent assistance is still required and provide an improved customer experience.

Our unified agent desktop and robotic process optimization solutions simplify and automate customer service processes and help organizations improve their customer experience. By bridging disconnected systems into a single, “intelligent” workspace and providing process guidance to contact center agents, our customer service and support market solutions create greater operational efficiency and increase agent and customer satisfaction. Our customer service and support market products simplify the desktop of customer service representatives and guide them through complex call types to reduce operational costs, enforce policies and improve the customer experience. Our solutions provide our clients’ organizations with a simplified customer service interaction designed to improve the efficiency and effectiveness of their customer service organization.

Benefits

Our solutions provide the following business benefits:

Seamless transition between self-service and assisted service channels, reduced inbound call volume through increased self-service resolution and reduction in agent handling time. Jacada omnichannel solutions bridge the gap between self-service and traditional customer service contact channels and improve self service capabilities. This results in a consistent customer service experience through the various channels, a reduced number of inbound calls and a shorter average handling time when agent assistance is still required. Because customers are more apt to provide information and select the correct menu options when using a visual experience, Jacada omnichannel solutions achieve better self-service rates compared to the traditional voice IVR. When self-service is not achieved, Jacada omnichannel solutions can use the information provided during the self-service attempt to route the call to the right agent. Jacada omnichannel solutions also transfer the information collected during the self-service attempt to the agent, preventing the need to repeat information, therefore reducing call handle time.

Reducing operating expense. Because our customer service and support market products present contact center agents with a single interface through which applications are accessed and provide the ability to guide the agents through complex processes, they eliminate the need to navigate through and between applications. Therefore, they eliminate redundant data entry, cut keystrokes and streamline or even eliminate process steps, including time consuming call wrap-up processes, thereby generating greater agent efficiency. This enables increased first call resolution, significant reduction in average handle times and operating costs and reduced error rates.

Significantly reducing customer service representative training costs. By simplifying the customer service representative desktop, reducing the number of applications with which a customer service representative must interact and offering process guidance, our contact center solutions allow our customers to significantly reduce their customer service representative training costs.

Increasing revenue opportunities. By blending the digital and voice experience with an agent, our solutions create an effortless customer journey. By reducing average handle times and making it easier for customer service representatives to access all of the data needed to answer a customer’s question or complete a customer’s request, our customer service and support market products enable customer service representatives to perform increased sales activities. Our process guidance solutions help guide the agent through sales campaigns, leading to potentially greater revenue opportunities.

Improving user and customer experience. Reduced average handle times and increased first call resolution enable our customers to improve their customers’ experience, helping generate increased customer satisfaction and loyalty. The access to multiple platforms through one user-friendly interface also improves the experience of the customer service representative, leading to improved customer service representative morale and productivity.

Our technology and approach to delivering solutions provide the following implementation benefits:

Leverage Existing Information Technology Resources. Our solutions permit companies to integrate their existing applications without modifying or replacing any existing systems. This eliminates the need for time-consuming and expensive custom programming or application upgrades or replacement projects.

Allow Rapid Implementation. We design our solutions to be implemented rapidly, which results in faster time-to-market than internally developed solutions or packaged application software implementations.

Flexibility to Adapt to Evolving Business Needs. We design our solutions to work effectively even as companies modify existing and add new applications in response to their evolving business needs. The access to multiple platforms through one interface also allows companies to respond more quickly to customer demands and changes in the marketplace as new business rules and processes can be adopted through the single user interface without rewriting any application code or data.

Reliability and Scalability. Our solutions are designed to provide the reliability required for applications that are critical to the operation of businesses, and are easily scalable to accommodate additional users in response to evolving business needs.

Products and Technology

Our products include:

Jacada® WorkSpace Agent Desktop. Jacada WorkSpace Agent Desktop is a built for purpose solution that unifies customer interaction tools and provides a single access point to all the mission-critical applications required by the customer service representatives to effectively complete a customer interaction. Jacada WorkSpace Agent Desktop delivers a wide range of capabilities that enable companies to freely implement optimal contact center processes and maximize customer service representative productivity. Jacada WorkSpace Agent Desktop eliminates the inefficiency of a desktop maze by providing an agent with a single interface to access the multitude of disparate systems and resources needed to effectively perform his or her job. In addition, by using dynamic, role-based desktop controls, Jacada WorkSpace Agent Desktop enables companies to transform product-specific or function-specific agents to ‘universal’ agents, maximizing agent productivity and reducing operational costs.

Jacada® Visual IVR. Jacada Visual IVR is our omnichannel solution which enables end users to engage in a mobile self-service session through smart phones, tablets or other smart devises (either as an extension to a native mobile application or independently from a native mobile application) which visually maps out the steps of the customer service interaction. This visual interaction, or Visual IVR, has full support for data entry and sophisticated self-service capabilities, including being able to proactively mine knowledge bases for information and retrieve or update customer information in real time. Jacada Visual IVR connects the customer’s self-serve interaction directly with a company’s underlying line of business applications to solve their problem. For calls that do require agent assistance, however, Jacada Visual IVR provides a seamless transition to the voice or chat channel from the self-service channel. Once the call is connected to the agent, all of the steps already taken by the customer, as well as any data entered, are visible to the agent. By doing so, customers will not have to repeat information. Additionally, the underlying systems can be pre-populated with the customer information, adding a further benefit of reduced handle times.

Jacada® Advisor. Jacada Advisor helps call centers improve customer service by providing real-time agent guidance, simplifying applications and automating redundant or repetitive tasks. Jacada Advisor works by capturing processes performed on an application and then automating all or parts of the process. Agents can be guided as to the next best action to perform using small pop-up’s or “bubbles” that are provided in real-time in context to the current action being performed. In addition, Jacada Advisor can monitor the activities of an agent in an application and automatically automate routine tasks, as and when appropriate. Thanks to its flexible customer interaction scripting capabilities, the customer experience can be tailored and adjusted to deliver an optimal experience using a graphical rule based environment.

Jacada® Integration and Automation (JIA). Jacada Integration and Automation is a non-invasive integration solution that allows companies to web-enable and integrate their Microsoft Windows client/server and web-based applications without modifying or changing anything in the existing application. Jacada Integration and Automation enables organizations to leverage their existing Windows client/server and web-based applications to automate business processes and seamlessly integrate and transfer data from one application to another. Jacada Integration and Automation can work with most graphic user interface technologies (Web and Windows based), which enables it to automate most Windows/Web applications.

Jacada Integration and Automation web service-enables Windows client/server or web-based applications. Without changing anything in the original application, and without needing to access the source code, Jacada Integration and Automation enables organizations to automate interactions with their applications and “drive” the system as a user would, navigating a series of Windows forms or web pages, and inserting or retrieving data as required. Jacada Integration and Automation exposes these interactions as Web services that can be integrated into any J2EE or .NET composite application in a scalable and secure fashion.

By service-enabling any Windows-based or web-based application, Jacada Integration and Automation provides for the rapid adoption of service-oriented architectures (SOA), enabling IT to rapidly deliver new functionality.

Jacada® Agent Scripting. Jacada Agent Scripting guides the customer service agent through an optimized interaction with the customer. A typical contact center interaction contains elements of “guidance language” presented to the agent as a best practice suggestion regarding how to answer the customer’s inquiry, mandatory language that must be read for compliance reasons, business rules to determine what the agent may offer or do next, and workflow between these steps to ensure that all necessary information is gathered and presented to the customer. Jacada Agent Scripting deploys in conjunction with Jacada WorkSpace ensuring seamless cooperation between the customer interaction workflow and the multiple business systems controlled by Jacada WorkSpace.

Jacada® Workflow. Jacada Workflow creates industry standard business process management (BPM) workflows that ensure that work items in the contact center that require interaction from another person or special handling are routed, tracked, assigned, and responded to in an organized and monitored manner. This ensures that sensitive and urgent business processes such as damage claims in the insurance industry or special requests to change a retail order already in the shipping process are routed to the correct person quickly and that they are followed up on completely in an appropriate amount of time. This ensures that customer interactions that are outside the scope or ability of a customer service agent to handle may be treated with the same efficiency, rigor, and process that is followed in the contact center. Ultimately ensuring that customer requests and transactions do not “fall between the cracks”. Deploying workflows into the contact center increases the ability to resolve complex customer requests on the first request and increases the accuracy of the response to the request. This saves costs by decreasing the number of customer interactions that are necessary to resolve complex issues and increases customer satisfaction as well as customer retention.

JacadaÒ HostFuse. Jacada HostFuse is a software solution for integrating core host-centric business systems, including the data and processes in those systems, with multiple packaged applications, frameworks and client environments. Users of Jacada HostFuse enjoy the benefits of on-line, real-time integration with back-office applications without rewriting any of their existing systems.

JacadaÒ Interface Server. Jacada Interface Server generates graphical user interfaces for mainframe and midrange software applications without requiring any change to the host applications. By generating Java or HTML graphical interfaces, Jacada Interface Server enables our customers to extend their host-centric applications and data to the Internet and their intranets without rewriting these applications. In addition, Jacada Interface Server provides the modern graphical features users expect from today’s applications. Jacada Interface Server also allows customers to enhance their applications to add functionality, integrate with other data sources and link to other Internet applications.

Our intellectual property rights in the Jacada Interface Server and the Jacada HostFuse products were sold in January 2008 as part of the sale of our traditional market business. We are licensed to develop and sell these products under an irrevocable license agreement. Our license to sell these products, on a stand-alone basis, is limited to sales for the use by our customers in their customer services and support business. See “Item 4A History and Development of the Company”.

JacadaÒ Multi-Channel Agent Desktop for EMC. The Jacada Multi-channel Agent Desktop is a “drop in” replacement for the existing Avaya Elite Multi-channel desktop, or EMC, that offers:

Multi context –Agents are able to simultaneously manage multiple customers across multiple EMC channels from a unified desktop reflecting a single view of the customer and the channel in use for each and every call.

Multi-channel – unifies EMC channels (Voice, Email, Chat) onto a single, convenient desktop for an improved and competitive agent experience, and efficient handling of multiple customers from multiple channels at the same time.

Thin client – A lightweight, highly performing user interface, ready to go "out of the box", and fully certified on the Avaya platform. The thin client solution installs in one hour and is maintained at a much lower cost than existing fat client technology.

Professional Services

Our professional services include training, consulting services (which include installation, implementation, integration and customization of our solutions), solution support and maintenance services and product support and maintenance services.

We provide our direct customers and our partners with professional services to assist them with installing, integrating, implementing and customizing our products into the customers’ systems, and with managing and enhancing their utilization of our products on an ongoing basis. We also provide customer and partner training services to assist our customers and partners in learning how to use our products with coursework related to various aspects of our products.

We bill for our professional consulting services (which includes installation, implementation, integration and customization of our solutions), either on a fixed fee basis or by the hour plus out-of-pocket expenses, and for training services by the day plus out-of-pocket expenses.

Product support and maintenance services are provided to our customers through agreements under which we provide technical support for our software products by telephone, fax, e-mail and the Internet and provide updates, upgrades and fixes to our software products on an if-and-when-available basis. Customers can select between standard support and maintenance services, offered during business hours, or enhanced support and maintenance services, offered 24 hours per day, seven days per week. In addition, we offer our customers solution support and maintenance services which include support and maintenance services for our products and the work product deliverables that were provided as part of our professional services. Our customers may purchase support and maintenance services for 12 months after the initial purchase of our solutions, renewable annually thereafter.

Principal Markets

Our principal markets are North America and Europe. We generate revenues from licensing our software products to customers and providing customers with training, professional services, product or solution support and maintenance services. Software licenses revenues constituted approximately 26%, 15% and 19% of our total revenues for the years ended December 31, 2015, 2014 and 2013, respectively, while professional services, support and maintenance revenues constituted approximately 74%, 85% and 81% of our total revenues, respectively, for the same periods. Software licenses revenues generated from North American customers constituted approximately 13%, 10% and 13% of our total revenues in the years ended December 31, 2015, 2014 and 2013, respectively, while professional services, support and maintenance revenues generated from North American customers constituted approximately 39%, 53% and 41% of our total revenues, respectively, for the same periods. Software license revenues generated from European customers constituted approximately 4%, 3% and 5% of our total revenues in the years ended December 31, 2015, 2014 and 2013, respectively, while professional services, support and maintenance revenues generated from European customers constituted approximately 29%, 29% and 35%, respectively, for the same periods.

Seasonality

Not applicable.

Sources and Availability of Raw Materials

Not applicable.

Sales and Marketing

We sell our products through our direct sales force in North America, Europe and Asia, as well as through our indirect distribution channels, consisting of system integrators, partners and call center outsourcers. We also use indirect distribution channels in countries where we have no direct sales operations. As of December 31, 2015, we had 27 people in our sales and marketing organization, compared to 26 as of December 31, 2014.

During 2015 we maintained our business arrangements with our strategic indirect sales channels for our customer service and support and our omnichannel solutions and also invested in the establishment of arrangements with new indirect channels. Our indirect distribution channels, which act as independent sales agents and value added resellers, include Avaya, a global leader in business communications, Amdocs, a global customer experience software solutions provider, Cognizant, Cornastone and Accenture, each a global management consulting, technology services and outsourcing provider, and IBM Global Services, Tech Mahindra and Wipro, each a large global IT services provider. It is our expectation that our indirect distribution channels will continue to extend our market reach by increasing market awareness of our solutions and presenting us to potential customers. We intend to continue to invest in 2016 in the development of our indirect sales channels, including the potential for OEM distribution agreements and software-as-a-service to call center host providers.

Our marketing efforts are focused on generating demand for our solutions and developing greater awareness among target customers of our solutions and the benefits they can provide. We market our products and services through a range of vehicles, including electronic media, such as e-mail and other online vehicles, social media, traditional media (public relations), webinars and through traditional demand generation channels, including outbound campaigns by a dedicated telesales team. We have developed a wide range of collateral materials and sales tools that are used by both our direct sales force and indirect distribution channels. These materials include videos, testimonials, brochures, white papers, case studies, press releases and our website.

Customers

Our customers include end users to whom we sell our products and services directly, system integrators, partners, distributors and other intermediaries who resell our products to end users, and end users who purchase our products from such distributors and other intermediaries. A typical customer for our solutions is a business that:

possesses an inbound contact center with 100 or more agents who manage repetitive call types such as billing, claims, service activation, etc;

recently completed a merger or acquisition resulting in an organization with disparate systems and processes;

operates complex business processes that require repetitive data entry by the contact center agent or inputting of various pieces of data across multiple screens;

possesses host-based legacy systems as systems of record;

does not use its CRM system as the primary system of record, or where the CRM is the primary system of record, the user interface is inefficient; and

has a strategic initiative to outsource its IT development, especially around the contact center.

Some examples of the industries in which our customers operate and their uses of our products include:

Telecommunications providers, which use our solutions to assist in streamlining and automating their customer service process, billing inquiries, account changes, and to generally improve the productivity and efficiency of their contact center.

Insurance companies, which use our omnichannel solutions to allow members to perform a greater level of self-service such as checking claims status, requesting ID cards and locating a provider from their mobile device and, if ultimately necessary, reduce call handle time when a member is transferred an agent. Our customer service and support solutions are used to modernize an insurance company’s contact center applications, enable Web access to these applications for customers to update account information via the Internet, and integrate their customer information systems with CRM applications.

Public utility providers, which use our solutions to automate critical call processes and integrate their existing business systems into a simplified customer service desktop, reduce customer service agent desktop complexity and optimize key customer service processes in their contact centers in order to reduce agent training time, increase agent productivity and improve overall customer service.

Research and Development

We believe that strong product development is essential to our strategy of continuing to enhance and expand the capabilities of our products. We have invested significant time and resources in creating a structured process for undertaking all product development. This process involves several functional groups at all levels within our organization and is designed to provide a framework for defining and addressing the activities required to bring product concepts and development projects to market successfully. In addition, we have recruited and intend in the future to recruit key software engineers and developers with experience in Java, .Net, communications, expert systems, Windows internals and Internet technologies. Our research and development efforts, which include internal development as well as acquisition of technology components, are primarily focused on enhancing and adding functionality to our customer service and support products as well as adding new products based on our expectations of future technologies and industry trends.

Our research and development expenses were $3.2 million, $3.5 million and $2.9 million for the years ended December 31, 2015, 2014 and 2013, respectively. As of both December 31, 2015 and 2014, 24 professionals were engaged in research and development activities. See also “Item 5. Operating and Financial Review and Prospects, A. Operating Results, Total Operating Expenses.”

Dependence on Patents and Licenses

We are generally not dependent on any third party licenses or patents with respect to our technology for the customer service and support products. However, sales of our customer services and support products, on occasion, include licenses to our traditional market products (specifically, Jacada Hostfuse and Jacada Interface Server) as part of the solution we provide to our customers. Our rights to develop and sell our traditional market products are granted to us under an irrevocable license agreement that we have entered into as part of the sale of our traditional market business in January 2008. Our license to sell those products, on a stand-alone basis, is limited to sales for the use by our customers in their customer service and support business. As part of that asset sale we also sold the two patents that we owned with respect to portions of our traditional market products technology.

Previous versions of the Jacada Agent Scripting product, which is a component of our customer service and support products, is based on technology licensed to us under a license agreement that we entered into in April 2007. That license includes the right to access the source code of such products and the right to modify, enhance and support such source code. The latest product version (version 7) released in June 2014 is based on our own source code.

The Jacada WorkFlow product is based on technology licensed to us under a distribution agreement that we entered into in October 2012. The distribution agreement provides for a royalty based right to distribute the technology bundled with our own products, or on a stand-alone basis.

Certain features of our Jacada Workspace Agent Desktop product are based on technology initially licensed to us under a distribution agreement that we entered into in March 2011. The distribution agreement provided us with the right to distribute the technology bundled with our own products, or on a stand-alone basis, subject to our obligation to pay royalties to the licensor. That license was amended in 2015 to include the right to access the source code of such technology, royalty-free, and the right to modify, enhance and support such source code.

Separately, certain functionality of our Jacada Workspace Agent Desktop product’s development licenses are based on technology licensed to use under a Software OEM License Agreement that we entered into in February 2014. The agreement allows us to reproduce and distribute the licensed software solely as integrated with Jacada Workspace Agent Desktop, subject to our obligation to pay royalties to the licensor.

Certain features of our Jacada Agent Scripting and Jacada VisualIVR products are based on technology licensed to us under an OEM Distribution and Subscription Agreement that we entered into in January 2014. The agreement provides us the right to copy and incorporate the licensed software into certain products, subject to our obligation to pay royalties to the licensor.

Competition

The markets in which we operate are extremely competitive and subject to rapid change. We believe that the competitive factors affecting the markets for our products and services include:

product functionality and features;

our ability to successfully deliver our projects/solutions

ease of product implementation;

availability of global support;

relationships with key distribution partners;

existing vendor relationships;

quality of customer support services;

product reputation; and

financial stability of vendors.

The relative importance of each of these factors depends upon the specific customer environment. Although we believe that our products and services currently compete favorably, we may not be able to maintain our competitive position against current and potential competitors. In addition, many companies choose to deploy their own information technology personnel or utilize system integrators to write new code or rewrite existing applications in an effort to develop new solutions. As a result, prospective customers may decide against purchasing and implementing externally developed and produced solutions such as ours. The omnichannel customer experience space, which we entered in 2012 with the introduction of our Jacada Visual IVR product (initially called Jacada Mobile Agent), is an emerging market and, while we believe our product will compete favorably with others in this market, we may not be able to gain a competitive advantage in this space.

Our customer service and support products compete with other contact center solutions offered by vendors including OpenSpan, NICE Systems, Pega Systems and Cicero. In addition, with our new omnichannel product offerings, we face new competitors in this market, including Voxeo, Fonolo, CallVU, Genesys, 24/7 and Interactive Intelligence. We expect additional competition from other established and emerging companies.

Furthermore, our competitors may combine with each other, or other companies may enter our markets by acquiring or entering into strategic relationships with our competitors. In addition, our potential customers may choose to deploy traditional CRM application software, or utilize their own information technology personnel or system integrators, to write new code or rewrite existing applications in an effort to develop their own customer service and support solutions.

Material Effects of Government Regulation in Israel

Pursuant to the Law for the Encouragement of Capital Investments, 1959, or the Capital Investment Law, the Israeli government has granted “Approved Enterprise” status to our existing capital investment programs under the Alternative Benefits Program. Consequently, we are eligible for certain tax benefits for the first several years in which we generate taxable income. In April 2005 and January 2011, the Capital Investment Law was amended to revise the criteria for qualifying for tax benefits under this law. See “Item 5 Operating and Financial Review and Prospects— A. Operating Results— Impact of Tax Policies and Programs on our Operating Results—. Israeli Tax Considerations and Government Programs— Law for the Encouragement of Capital Investments, 5719-1959” for more information.

As of December 31, 2015, we had not yet begun to generate taxable income for purposes of the Capital Investment Law. Once we do generate taxable income, if we fail to comply in whole or in part with the conditions and criteria set forth under this law, the tax benefits that we receive could be partially or fully canceled and we could be forced to refund the amount of the benefits we may receive, adjusted for inflation and interest.

As of December 31, 2015 we believe that we are in compliance with all of the conditions required by the Capital Investment Law.

We cannot assure you that we will, in the future, be eligible to receive tax benefits under this law. In addition, we cannot assure you that these tax benefits will be continued in the future at their current levels or at all. The termination or reduction of tax benefits could have a material adverse effect on our business, financial condition and results of operations. In addition, in the event that we increase our activities outside of the State of Israel, these activities generally will not be eligible for inclusion in Israeli tax benefit programs. Accordingly, if we are found ineligible for these anticipated tax benefits, our future expected corporate taxes payable could increase significantly.

C.	Organizational structure

We own 100% of the stock of Jacada, Inc., a corporation organized under the laws of the State of Delaware and 100% of the stock of Jacada (Europe) Limited, a company organized under the laws of England. Jacada (Europe) Limited owns 100% of the stock of Jacada Deutschland GmbH, a limited liability company organized under the laws of Germany.

D.	Property, Plants and Equipment

Our headquarters and principal administrative, research and development operations are located in approximately 8,000 square feet of leased office space in Herzliya, Israel. This lease expires in March 2020.

In the United States, we lease approximately 11,000 square feet in Atlanta, Georgia, which we utilize for marketing, sales, administration, service and technical support. The lease expires in June 2018.

We believe that our facilities are sufficient to meet our ongoing needs and that if we require additional space to accommodate our growth we will be able to obtain additional facilities on commercially reasonable terms.

Item 4A: UNRESOLVED STAFF COMMENTS

None.

Item 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview

We develop, market and support omnichannel customer service solutions, customer experience management and robotic process optimization solutions that simplify and automate customer service processes. By bridging disconnected systems into a single, “intelligent” workspace, and by improving our customers' self service capabilities through various digital channels, our solutions create greater operational efficiency and increase agent and customer satisfaction. We also provide related professional services, including training, consulting, support and maintenance.

We were incorporated in December 1990. In 2004, we introduced Jacada Fusion and elected initially to target corporate customer contact centers. Jacada Fusion may be also used by our customers for back office applications. In 2005, we introduced a solution specifically for customer service representatives called Jacada WorkSpace Agent Desktop.

In 2012 we introduced Jacada Visual IVR (initially called Jacada Mobile Agent), now part of our omnichannel product offering designed to enhance self-service capabilities from digital channels and improve the connectivity between these digital channels and the assisted service channels.

Our main goals for 2015 were as follows:

Expand our omnichannel solutions, focusing on product innovations which allow customers to use our products to not only save costs, but to generate revenues as well

Drive the urgency in Visual IVR adoption by sharing the value achieved by initial customers; increase the contracted value of Visual IVR deals by five times the amount contracted during 2014

Accelerate our footprint with partners and increase the revenues obtained from these partners

Extend our strategic partner engagements

During 2015, we increased our revenue to $17.3 million from $16.4 million in 2014. As mentioned above, one of our goals was to drive the urgency in Visual IVR adoption and, as a result, increase the contracted value of Visual IVR deals. With continued growth in referenceable accounts during 2015, we succeeded in contracting over five times the amount of Visual IVR deals contracted in 2014. While not all of this translated to revenue in 2015, we were able to increase our Visual IVR revenue by more than three times the amount recognized in 2014.

Revenue from our customer service and support products (our “Core” products), remained consistent between 2014 and 2015. We have been able to maintain consistent revenues by focusing on maintaining our existing customers and expanding our sales reach through partners. We continued to grow our “million dollar club”, those customers who consistently spend annually more than $1 million with us, expanding from four such customers in 2014 to five in 2015. In addition, 2015 revenues through reseller partners increased more than three times the amount recognized in 2014. We expanded our partner base by adding one of the largest business process outsourcing providers (“BPO”) in India and a South East Asian consulting group, providing technologies to the world’s leading communications companies.

Total revenue for 2015 was made up of $4.5 million in software, $8.4 million in services and $4.4 million in maintenance and support compared to $2.4 million in software, $9.7 million in services and $4.2 million in maintenance and support for 2014. The $2.1 million increase in software revenues were the result of (i) beginning 2015 with an additional $500,000 in software backlog compared to 2014, all of which was recognized in 2015, (ii) a $1 million increase in additional licenses purchased by existing customers during 2015 as compared to 2014 and (iii) an increase in contracts with new customers, primarily through partners, contributing the final $500,000 increase in revenues. Service revenues declined in 2015, the result of the completion of a multi-million dollar services engagement in the very early months of 2015. Finally, maintenance and support revenues improved to $4.4 million as we added new customers and increased maintenance fees.

Our gross margins were consistent between 2014 and 2015 at 60%. While our software and maintenance and support margins improved to 98% and 89% in 2015, respectively, from 93% and 88% in 2014, respectively, our services margins declined from 40% in 2014 to 24% in 2015. This was the result of several factors: (i) the investment of additional resources into two challenging projects, since completed, (ii) the inclusion of a multi-million dollar project with atypically higher margins throughout 2014 but completed in the very early months of 2015 and (iii) the impact of a reduction in the exchange rate of the Euro (in which the contract is denominated) to the US dollar while our employees are paid in English pounds.

In 2015, we had a desire to expand our omnichannel product offerings, focusing on product innovations intended to help customers drive revenue in addition to reduce costs, while facilitating their requirement for digital transformation. We incurred research and development expenses of $3.2 million in 2015. In addition to enhancements of Jacada Workspace Agent Desktop and Jacada Integration and Automation our efforts were primarily dedicated to monthly releases to the cloud version, and two releases to the on-premises version, of Jacada Interact, the platform underlying Jacada Visual IVR, Jacada Agent Scripting and our omnichannel solutions. Our development teams furthered the development of our cross-channel platform and facilitated the continuing development of future features within our omnichannel solutions to include proactive engagement and collaboration rooms. These features help corporations monitor website visitor intent, including when a customer may abandon an online shopping cart, and proactively engage that customer through their channel of choice including voice, chat, video chat or collaboration rooms, therefore improving their conversion rate and increasing revenues.

During 2015, we were awarded two patents in our continued drive to innovate while protecting our substantial intellectual property. One patent is centered around our VisualIVR omnichannel product, specifically for allowing transition from the digital channel to the voice channel, and the other patent pertains to improving the self-service experience with transition to assisted service.

Our sales and marketing expenses totaled $5.2 million in 2015, compared to $5.1 million in 2014. Our marketing efforts focused on go-to-market activities for our new omnichannel solutions, lead generation and co-marketing with our partners, website experience improvements and search engine optimization, among other things.

Another goal of 2015 was to expand our strategic partner engagements, furthering our sales and marketing activities. These engagements include certifying our products with leading technology partners who will make our product offerings more accessible to their existing customers and prospects. During 2015, our Visual IVR product was certified on Cisco’s Customer Voice Portal and is represented in Cisco’s Marketplace showcasing certified partners and providing product demos. Visual IVR was also integrated with Interactive Intelligence’s Customer Interaction Center IVR application and Jacada is now a member of the Interactive Intelligence Global Alliance Program.

We closed the year with an operating loss of $1.1 million, an improvement from the 2014 loss from operations of $1.6 million, and a net loss of $1.2 million.

In 2015, we derived approximately 25% of our revenue from three customers. To the extent that this trend continues, our revenues will be dependent on a relatively limited number of significant customers. The failure to secure new key customers, the loss of key customers or the occurrence of significant reductions in sales from a key customer would cause our revenues to significantly decrease and make it significantly more difficult for us to become profitable.

Revenue Sources

We generally sell our software as part of an overall solution offered to customers that combines the sale of software licenses with services, which normally include significant customization, implementation and integration. As a result, combined license and service revenues are generally recognized over the course of these projects, using the percentage of completion method of accounting and in accordance with software revenue recognition authoritative guidance. We also license certain of our software products in a subscription model where customers subscribe to our products on a monthly or annual basis. Maintenance, also called post-contract support or PCS, includes telephone support, bug repairs, and rights to receive upgrades and enhancements to licensed software on a when-and-if-available basis. We sell our products primarily through our direct sales force to customers and indirectly through resellers. Both the customers and the resellers are considered end users.

Cost of Revenues

Our costs of revenues are comprised of (a) costs of software licenses, (b) costs of services and (c) costs of maintenance.

Cost of software licenses revenues primarily consists of royalties.

Cost of services and maintenance revenues consists of compensation expense, related overhead and subcontractor costs for personnel engaged in training, consulting, support and maintenance services for our customers.

Research and Development Costs

Costs for the development of new software products and substantial enhancements to existing software products are expensed as incurred. Based on our product development process, technological feasibility is established upon completion of a working model. No material costs are incurred between the completion of the working model and the point at which the products are ready for general release. Therefore, all research and development costs are expensed. For a summary of our research and development costs over the last three fiscal years, please see “Item 4. Information on the Company— B. Business Overview—Research and Development” above.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These estimates are evaluated by us on an ongoing basis. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amount values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe that application of the following critical accounting policies entails the more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenues. Our revenue recognition policy is significant because our revenues are a key component of our results of operations. Revenue results are difficult to predict, and any shortfall in revenues or delay in recognizing revenues could cause our operating results to vary significantly from period to period and could result in future operating losses. We follow very specific and detailed guidelines in measuring revenues; however, certain judgments affect the application of our revenue policy. Our revenues are principally derived from the licensing of our software and the provision of related services.

We derive our revenue principally from:

the initial sales of licenses to use our products, including customization, implementation and integration services;

incremental license fees resulting from a customer’s increase in product licenses required;

post-implementation consulting and integration services for our solutions; and

ongoing support and maintenance provided to our customers, which generates recurring revenue.

Sales of software licenses are recognized when persuasive evidence of an agreement exists, delivery of the product has occurred, the fee is fixed or determinable, and collectability is probable. We consider all arrangements with payment terms extending beyond six months from the delivery of the elements not to be fixed or determinable. If the fee is not fixed or determinable, revenue is recognized as payments become due from the customer, provided that all other revenue recognition criteria have been met. We do not grant a right of return to our customers. In transactions where a customer’s contractual terms include a provision for customer acceptance based on customer-specified subjective criteria, or for evaluation purposes, we recognize revenues only when such acceptance has been obtained or as the acceptance provision lapses. However, in transactions where a customer's contractual terms include a provision for customer acceptance based on customer-specified objective criteria, we recognize revenue if we can demonstrate that the delivered product meets the specified criteria prior to customer acceptance.

We usually sell our software licenses as part of an overall solution offered to a customer that combines the sale of software licenses with customization, implementation and integration services. As a result, we generally recognize initial license fee and related service revenue over the course of these projects, using the percentage of completion method of accounting. Revenue from software that does not require services, or where services are not essential to the functionality of the software, including licenses sold subsequent to the initial installation, is recognized upon delivery, assuming that all other revenue recognition criteria have been met. Revenue from post-implementation consulting and integration services is recognized as work is performed. Maintenance revenue is recognized ratably over the term of the maintenance agreement.

A significant portion of our revenue is recognized over the course of projects under the percentage of completion method of accounting. The percentage of completion method requires the exercise of judgment, such as with respect to estimations of progress towards completion, contract revenue, contract costs and potential losses on contracts. Progress in completion of such projects may significantly affect our annual and periodic operating results.

With regard to software arrangements involving multiple elements, such as software, post-contract customer support, consulting and training, revenues are allocated to the different elements in the arrangement under the “residual method” when Vendor Specific Objective Evidence, or VSOE, of fair value exists for all undelivered elements and no VSOE exists for the delivered elements. The residual method of allocation requires an entity to first allocate revenue to the fair value of the undelivered elements (maintenance and other services) and the residual revenue to the delivered element (software licenses). Any discount in the arrangement is allocated to the delivered element.

VSOE of fair value for maintenance and other services is determined based on the price charged for the undelivered element when sold separately. Our process for establishing VSOE of fair value of maintenance services (post contact support, or PCS) is through performance of VSOE compliance test which is an analysis of the entire population of PCS renewal activity for our installed base of customers. Our process for the establishment of VSOE of fair value for consulting and training services is through a performance of an analysis of the entire population of separate sales of services.

Reimbursements received for out-of-pocket expenses incurred are characterized as revenue in the statement of operations.

Valuation of investments in marketable securities. Our marketable securities are classified as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in accumulated other comprehensive income (loss) in shareholders' equity. Realized gains and losses on sale of investments are included in financial income, net.

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization together with interest on securities is included in financial income, net.

We recognize an impairment charge when a decline in the fair value of our investments in debt and equity securities below the amortized cost basis of such securities is judged to be other-than-temporary. Factors considered in making such a determination include the duration and severity of the impairment, the reason for the decline in value, the potential recovery period and if we have the intent to sell the security, including whether it is more likely than not that we will be required to sell the investment before recovery of cost basis. However, if we do not expect to sell a debt security, we still need to evaluate expected cash flows to be received and determine if a credit loss exists. For securities that are deemed other-than-temporarily impaired, the amount of impairment is recognized in the statements of income as financial income, net and, with respect to debt securities, is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive income (loss).

Fair value of financial instruments. We measure our investments in marketable securities and our foreign currency derivative contracts at fair value, under the provisions of ASC 820, “Fair Value Measurements and Disclosures”. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

Level 1 -

Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.

Level 2 -

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 -

Unobservable inputs for the asset or liability.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The carrying amounts of financial instruments carried at cost, including cash and cash equivalents, restricted cash, trade receivables, other current assets, trade payables and other liabilities approximate their fair value due to the short-term maturities of such instruments.

Stock-based compensation expense. Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service periods. We estimate the fair value of stock options awards using the Black-Scholes option pricing model. Determining the fair value of share-based awards at the grant date requires the exercise of judgment, including the amount of share-based awards that are expected to be forfeited. If actual results differ from these estimates, equity- based compensation expense and our results of operations could be impacted.

Income Taxes. We use of the liability method to account for income taxes, 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. We provide a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value.

We implement a two-step approach to recognize 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% (cumulative basis) likely to be realized upon ultimate settlement.

Adoption of New Accounting Standards

In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2014-09, Revenue from Contracts with Customers. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration which the entity expects to receive in exchange for those goods and services. The effective date of ASU 2014-09 is for annual reporting periods beginning after December 15, 2017. In July 2015, the FASB decided to defer by one year the effective date of this ASU. This ASU has not yet been adopted, and we are currently evaluating the impact that the adoption of ASU 2014-09 will have on our financial statements.

In 2014, the FASB issued ASU 15-2014, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, which defines management’s responsibility to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures if there is substantial doubt about its ability to continue as a going concern. The pronouncement is effective for annual reporting periods ending after December 15, 2016 with early adoption permitted. We are currently evaluating the effect, if any, that the adoption of this guidance will have on our consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17 related to balance sheet classification of deferred taxes. The new guidance requires that deferred tax assets and liabilities be classified as noncurrent in a classified statement of financial position. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. We early adopted this guidance on a retrospective basis as of December 31, 2015. As a result, our current deferred tax assets as of December 31, 2014 in an amount of $443,000 were reclassified to noncurrent assets to conform to the current year presentation.

In February 2016, the FASB issued ASU 2016-02 - Leases (ASC 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The ASU is expected to impact our consolidated financial statements as we have certain operating lease arrangements. ASC 842 supersedes the previous leases standard, ASC 840 Leases. The standard is effective on January 1, 2019, with early adoption permitted. We are in the process of evaluating the impact of this new guidance.

A.	Operating Results

Our historical operating results for the years ended December 31, 2015, 2014 and 2013 as a percentage of total revenues are as follows:

	2015			2014			2013
Revenues:
Software Licenses		26	%		15	%		19	%
Services		49			59			57
Maintenance		25			26			24
Total revenues		100	%		100	%		100	%
Cost of revenues:
Software Licenses(*)		1			1			6
Services(*)		37			36			61
Maintenance(*)		2			3			9

Total cost of revenues		40			40			38
Gross profit		60			60			62
Operating expenses:
Research and development		18			21			19
Sales and marketing		30			31			28
General and administrative		18			18			20
Total operating expenses		66			70			67
Operating loss		(6	)		(10	)		(5	)
Financial income (expense), net		(1	)		12			3
Income (loss) from operations before taxes		(6	)		2			(2	)

Income tax (expense) benefit		(1	)		(6	)		3

Net income (loss)		(7	)		(4	)		1

* Respective revenues

Years Ended December 31, 2015, 2014 and 2013

Revenues and Cost of Revenues

Revenues. Revenues were $17.3 million, $16.4 million and $15.6 million for the years ended December 31, 2015, 2014 and 2013, respectively. Growth in sales of our Visual IVR product, contracts through our partners and from a significant increase in additional licenses sold to existing customers of our Core products drove the increase in revenues from 2014 to 2015. Both revenue from our Visual IVR products and revenue through our reselling partners tripled in 2015 when compared to 2014. These two factors, combined with a significant increase in additional licenses sold to existing customers allowed us to increase our software revenues by over $2.1 million. Services revenues however declined by $1.3 million, the result of the completion of a multi-million dollar services engagement in the very early months of 2015. Finally, maintenance and support revenues improved to $4.4 million as we added new customers and increased maintenance fees.

While the number of new customers increased in 2014 over 2013, several of these new customers were SaaS customers (particularly of our lower cost Jacada Agent Scripting solution), contributing little to revenue, particularly software revenue, in 2014. However, in early 2014, Jacada secured a large contract for the implementation of Jacada products into a new division of an existing customer. This contract alone represented approximately 20% of our revenue and had a very large services component. The combination of these two factors contributed to a decline in software revenue from $2.9 million in 2013 to $2.4 million in 2014, offset by an increase in services revenue from $8.9 million in 2013 to $9.7 million in 2014.

Backlog, excluding maintenance renewals, was $7.5 million, $6.1 million and $5.1 million as of December 31, 2015, 2014 and 2013, respectively.

In each of 2015, 2014 and 2013, a significant portion of our revenues was derived from a few large orders. In 2015, 2014 and 2013, three customers accounted for 25%, 45%, and 38% of our total revenues, respectively.

Software licenses revenues. Software license revenues were $4.5 million, $2.4 million and $2.9 million, or 26%, 15% and 19% of our total revenues for the years ended December 31, 2015, 2014 and 2013, respectively. The $2.1 million increase in software revenues in 2015 were the result of (i) beginning 2015 with an additional $500,000 in software backlog compared to 2014, all of which was recognized in 2015, (ii) an uncommon $1 million increase in additional licenses purchased by existing customers during 2015 as compared to 2014 and (iii) an increase in contracts with new customers, primarily through partners, contributing the final $500,000 increase in revenues.

During 2015, 2014 and 2013, approximately 64%, 77% and 58%, respectively, of our revenue was generated from existing customers, which typically represents additional services engagements with a limited, if any, software component. The fact that there was such a large increase in the portion of our revenue that came from existing customers during 2014 contributed to the reduction in software revenue from 2013 to 2014. The number of new customers actually increased over 2013, however, several of these new customers were SaaS customers (particularly of our lower cost Jacada Agent Scripting solution), contributing little to revenue, particularly software revenue, in 2014. This further contributed to the decline in software revenue.

Service revenues. Service revenues were $8.4 million, $9.7 million and $8.9 million, or 49%, 59% and 57% of our total revenues for the years ended December 31, 2015, 2014 and 2013, respectively. Service revenues are generated primarily from installation, implementation and customization of our software products. As discussed above, in early 2014, Jacada secured a large contract for the implementation of Jacada products into a new division of an existing customer. This contract alone represented approximately 20% of our 2014 revenue and had a very large services component. This contract ended in very early 2015, representing the primary factor in the decrease in services revenue between 2014 and 2015.

In 2014, the company focused on securing on-going contracts with existing customers to generate steady income which could be reinvested in product initiatives. In 2014, we had several significant contracts from existing customers, with three customers representing approximately 45% of our total revenues. Each of these four customers had over $850,000 in services revenue, with one particular customer contributing almost $3 million in services revenue. These significant contracts allowed us to increase services revenue from $8.9 million in 2013 to $9.7 million in 2014.

Maintenance revenues. Maintenance revenues were $4.4 million, $4.2 million and $3.7 million, or 25%, 26% and 24% of our total revenues for the years ended December 31, 2014, 2013, 2012, respectively. Maintenance revenue increased from 2013 to 2014 and again from 2014 to 2015 due to (i) the completion of the implementation of projects with new customers, which enabled us to begin recognition of the associated maintenance contract, (ii) additional maintenance from the additional software purchases of existing customers, as discussed above, and (iii) general increases in maintenance fees.

Geographic Distribution of Revenues

Revenues and the percentage of net sales (in thousands) by region for the last three years, as well as the percentage change, were as follows:

	Year ended December 31,
	2015								2014								2013
	Revenue		Percentage of total revenue			Percentage change			Revenue		Percentage of total revenue			Percentage change			Revenue		Percentage of total revenue			Percentage change
	(amounts in thousands, US dollars)
North America	$	8,942		52	%		(13	)%	$	10,248		63	%		22	%	$	8,407		54	%		35	%
Europe		5,728		33	%		9	%		5,268		32	%		(13	)%		6,072		39	%		44	%
Middle East and Africa		1,606		9	%		135	%		683		4	%		381	%		142		1	%		0	%
Other		1,047		6	%		502	%		174		1	%		(83	)%		1,005		6	%		461	%
	$	17,323		100	%		6	%	$	16,373		100	%		5	%	$	15,626		100	%		45	%

Total Cost of Revenues. Total cost of revenues was $7.0 million, $6.5 million and $5.9 million, representing 40%, 40% and 38% of our total revenues for the years ended December 31, 2015, 2014 and 2013, respectively. Total cost of revenues increased from 2014 to 2015 primarily due to additional resources required to complete significant projects, including two challenging projects, in 2015. Total cost of revenues increased from 2013 to 2014 primarily due to the additional resources required to support the growth in services revenue in 2014, and to a lesser extent, from additional resources required to be dedicated to solution support.

Cost of software licenses revenues was $0.1 million, $0.2 million and $0.2 million or 2%, 7% and 6% of software revenues for the years ended December 31, 2015, 2014 and 2013, respectively. In 2014, we entered into two new OEM agreements which obligate us to pay royalties on certain software integrated into our products. In 2015, we amended one of our OEM agreements to allow us the rights to the source code of the associated product without any royalties.

Software license revenue declined from 2013 to 2014 from $2.9 million to $2.4 million, but cost of software licenses remained consistent, primarily due to the inclusion of these two new OEM agreements entered into in 2014. In addition, there were certain costs associated with unique features we were required to develop for a certain cloud customer, which have also been included in cost of software licenses in 2014.

Cost of service revenues was $6.4 million, $5.8 million and $5.4 million, or 76%, 60% and 61% of service revenues for the years ended December 31, 2015, 2014 and 2013, respectively. Services margins were 24% in 2015, 40% in 2014 and 39% in 2013. The decline in services margins from 2014 to 2015 was the result of several factors: (i) the investment of additional resources into two challenging projects, since completed, (ii) the inclusion of a multi-million dollar project with atypically higher margins throughout 2014 but completed in the very early months of 2015 and (iii) the impact of a reduction in the exchange rate of the Euro (in which the contract is denominated) to the US dollar while our employees are paid in English pounds.

The growth in services revenue from $8.9 million in 2013 to $9.7 million in 2014, meant that our associated costs to provide those services increased proportionally. Despite the increase in costs, our services margins remained relatively consistent between 2013 and 2014. Service headcount during 2015, 2014 and 2013 averaged approximately 40, 30 and 30 individuals, respectively. We ended 2015 with 38 employees engaged in providing services. Please see the Risk Factor entitled: “Failure to deliver professional services efficiently could negatively impact our gross margins.”

Cost of maintenance revenues was $0.5 million, $0.5 million and $0.3 million, or 11%, 12% and 9% of maintenance revenues for the years ended December 31, 2015, 2014 and 2013, respectively. Maintenance headcount during 2015, 2014 and 2013 averaged approximately 4, 4, and 3 individuals (including subcontractors), respectively. Cost of maintenance revenue includes personnel allocated to provide solution support, which requires us to provide adaptive maintenance and upgrade support for a customer, as needed. During 2014, we had additional headcount allocated to support our solution support customers as they required significantly more adaptive maintenance and upgrade support than in prior years.

Total Operating Expenses. Total operating expenses in 2015 were $11.5 million, consistent with $11.5 million reported in 2014; however the makeup of those expenses changed as we increased sales and marketing expenses from $5.1 million in 2014 to $5.2 million in 2015 and decreased research and development expenses from $3.5 million in 2014 to $3.2 million in 2015. As we completed the full launch of Visual IVR and Jacada Interact, the technology platform underlying our omnichannel solutions and the full launch of our cloud solutions, we were able to reduce research and development expenses and instead invest those funds sales and marketing activities.

During 2014, significant increases were present in research and development expenses, as we developed the cloud versions of our products and other new features, and in sales and marketing, as we invested in additional sales personnel and marketing expenditures specifically focused on Visual IVR. These events contributed to the increase in operating expenses from $10.4 million in 2013 to $11.5 million in 2014. Our average overall headcount in operating areas of the business was 67, 65, and 53 in 2015, 2014 and 2013, respectively.

Research and Development. Research and development, or R&D, expenses were $3.2 million, $3.5 million and $2.9 million for the years ended December 31, 2015, 2014 and 2013, respectively. As we completed the full launch of Visual IVR and Jacada Interact, the technology platform underlying our omnichannel solutions and our cloud solutions, we were able to reduce research and development expenses during 2015. In addition to enhancements of Jacada Workspace Agent Desktop and Jacada Integration and Automation our 2015 R&D efforts were primarily dedicated to monthly releases to the cloud version, and two releases to the on-premises version, of Jacada Interact, in addition to the further development of our omnichannel solutions with the development of future features to include proactive engagement and collaboration rooms.

In 2014, we made significant investments in bringing Jacada Visual IVR and Jacada Agent Scripting to the cloud, enabling customers to license these products in a SaaS model. In addition, we made investments in the platform underlying Jacada Visual IVR and Jacada Agent Scripting (Jacada Interact) which enables us to easily build new features and functionality into these products moving forward. To accomplish these developments, we increased headcount by five individuals in 2014 and incurred certain third-party costs in setting up the cloud environment. As a percentage of total revenues, research and development expenses were 18%, 21% and 19% for the years ended December 31, 2014, 2013 and 2012.

Sales and Marketing. Sales and marketing expenses were $5.2 million, $5.1 million and $4.4 million for the years ended December 31, 2015, 2014 and 2013, respectively. During 2015, we increased our sales headcount by one individual, thus increasing salaries, while simultaneously terminating some our less fruitful sales agency relationships, saving us approximately $100,000. These savings were offset by increased commissions, due to increased sales, of approximately $100,000. In marketing, headcount changes allowed us to save approximately $100,000 in salaries, which we, in turn, invested a portion thereof into marketing activities such as website experience improvements, lead generation and co-marketing with our partners.

During 2014, we significantly increased our headcount in sales, primarily inside sales positions which focus on outbound lead generation. Our headcount increased by seven individuals over 2013, creating $600,000 in additional salary and related expenses. With additional sales representatives, travel expenses increased by $100,000. While revenues increased, commissions decreased primarily because services revenue, which is compensated at a lower rate, represented the increase in revenue and software revenue, which is compensated at a higher rate, actually declined. Marketing expenses remained relatively consistent with the prior year, but the focus of these investments was primarily on marketing Jacada Visual IVR and our cloud products.

As a percentage of total revenues, sales and marketing expenses were 30%, 31% and 28% for the years ended December 31, 2015, 2014 and 2013, respectively.

General and Administrative. General and administrative expenses were $3.1 million, $3.0 million and $3.1 million for the years ended December 31, 2015, 2014 and 2013, respectively. As a percentage of total revenues, general and administrative expenses were 18%, 18% and 20% for those years. The increase in general and administrative expenses in 2015 is primarily the result of additional incentives paid to certain of the company’s executives based on company performance.

There were no significant changes in general and administrative expenses between 2013 and 2014 and the decrease in expenses of $100,000 was a reflection of minor cost savings in various areas.

Financial Income, Net. Financial income (expense), net, was $(0.04) million, $1.9 million and $0.5 million for the years ended December 31, 2015, 2014 and 2013, respectively. Financial expense in 2015 consisted of income of $30,000 in dividends from the company’s marketable securities, offset by bank fees of $25,000 and exchange rate losses of $45,000.

The $1.9 million of financial income in 2014 consisted primarily of the $1.9 million gain on the sale of our marketable securities. In addition, we had approximately $100,000 in income from dividends. See also “Item 3: Key Information. D. Risk Factors. Negative conditions in the global credit markets may impair the liquidity and value of our investment portfolio” and “Item 11: Quantitative and Qualitative Disclosures About Market Risk.”

Income (loss) before Taxes. As a result of the above factors, we generated pre-tax income (losses) of $(1.2) million in 2015, $0.3 million in 2014 and $(0.3) million in 2013.

Tax benefit (expense). In 2015, 2014 and 2013 we had tax benefit (expense) of $(84,000), $(1.0) million and $382,000, respectively. The $84,000 in income tax expense in 2015 represents income taxes due on business income generated in the United States. The $1.0 million income tax expense in 2014 represents income taxes due in the United States associated with the $1.9 million gain on sale of securities as well as business income generated in the United States. The 2013 tax benefit primarily consisted of a $345,000 deferred tax benefit associated with the reversal of a previously recorded valuation allowance on certain deferred tax assets in the United States.

As of December 31, 2015, we had an Israeli net operating loss carryforward of approximately $46.6 million which can be carried forward and offset against taxable income with no expiration date. As of December 31, 2015, our European subsidiaries had net operating loss carryforwards for income tax purposes of approximately $2.2 million, which can be carried forward and offset against taxable income with no expiration date.

Net Income (Loss). As a result of the above-described factors, we recorded a net loss of $1.2 million in 2015, net loss of $688,000 in 2014 and a net income of $0.1 million in 2013.

Impact of Tax Policies and Programs on our Operating Results

Israeli Tax Considerations and Government Programs

The following is a summary of the principal tax laws applicable to companies in Israel, with special reference to their effect on us, and certain Israeli Government programs benefiting us.

General Corporate Tax Structure

Israeli companies are generally subject to corporate tax on their taxable income. As of 2015, the corporate tax rate is 26.5% and will reduce to 25% in 2016. However, the effective tax rate payable by a company that derives income from an Approved Enterprise, a Benefited Enterprise or a Preferred Enterprise (as discussed further below) may be considerably less. Capital gains derived by an Israeli company are subject to corporate tax rate.

Foreign Exchange Regulations

Israeli companies may calculate their tax liability in US dollars according to certain orders. The tax liability, as calculated in US dollars, is translated into NIS according to the exchange rate as of December 31st of each year.

Commencing with taxable year 2003, we have elected to measure our results for tax purposes in U.S. dollars, according to the Israeli Income Tax Regulations (Principles Regarding the Management of Books of Account of Foreign Invested Companies and Certain Partnerships and the Determination of Their Taxable Income), 1986. We believe that we meet the necessary conditions and as such, continue to measure our results for tax purposes based on the U.S. dollar.

Besides being subject to the general corporate tax rules in Israel, we have also from time to time applied for and received certain tax benefits from, and participate in, programs sponsored by the Government of Israel, as described below.

Tax Benefits under the Law for the Encouragement of Industry (Taxes), 5729-1969

The Law for the Encouragement of Industry (Taxes), 5729-1969, generally referred to as the Industry Encouragement Law, provides several tax benefits for an Industrial Company. Pursuant to the Industry Encouragement Law, a company qualifies as an Industrial Company if it is an Israeli resident company which was incorporated in Israel and at least 90% of its income in any tax year (other than income from certain government loans), is generated from an Industrial Enterprise that it owns and located in Israel. An Industrial Enterprise is defined as an enterprise whose major activity in a given tax year is industrial production.

An Industrial Company is entitled to certain tax benefits, including:

Deduction of the cost of the purchases of patents, or the right to use a patent or know-how used for the development or promotion of the Industrial Enterprise, over an eight-year period, commencing on the year in which such rights were first exercised;

The right to elect, under certain conditions, to file a consolidated tax return together with Israeli Industrial Companies controlled by it;

Accelerated depreciation rates on equipment and buildings; and

Expenses related to a public offering are deductible in equal amounts over a three year period commencing on the year of the offering.

Under some tax laws and regulations, an Industrial Enterprise may be eligible for special depreciation rates for machinery, equipment and buildings. These rates differ based on various factors, including the date the operations begin and the number of work shifts. An industrial company owning an Approved Enterprise, as defined below, may choose between these special depreciation rates and the depreciation rates available to the Approved Enterprise.

Eligibility for benefits under the Industry Encouragement Law is not contingent upon the prior approval of any Government agency.

We believe that we currently qualify as an Industrial Company within the definition under the Industry Encouragement Law. We cannot assure you that the Israeli tax authority will agree that we qualify, or, if we qualify, that we will continue to qualify as an Industrial Company or that the benefits described above will be available to us in the future.

Law for the Encouragement of Capital Investments, 1959

The Law for Encouragement of Capital Investments, 1959, which is referred to below as the Capital Investments Law, provides certain incentives for capital investments in production facilities (or other eligible assets).

The Capital Investments Law has been amended several times over the last years, with the two most significant changes effective as of April 1, 2005 (which we refer to as the 2005 Amendment), and as of January 1, 2011 (which we refer to as the 2011 Amendment). Pursuant to the 2005 Amendment, tax benefits granted in accordance with the provisions of the Capital Investments Law prior to its revision by the 2005 Amendment remain in force but any benefits granted subsequently are subject to the provisions of the amended Capital Investments Law. Similarly, the 2011 Amendment introduced new benefits instead of the benefits granted in accordance with the provisions of the Capital Investments Law prior to the 2011 Amendment. Yet, companies entitled to benefits under the Capital Investments Law as in effect up to January 1, 2011 were entitled to choose to continue to enjoy such benefits, provided that certain conditions are met, or elect instead, irrevocably, to forego such benefits and elect the benefits of the 2011 Amendment.

The following discussion is a summary of the Capital Investments Law prior to its amendments as well as the relevant changes contained in the new legislation.

Tax benefits prior to the 2005 Amendment

Generally, an investment program that is implemented in accordance with the provisions of the Capital Investment Law prior to the 2005 Amendment, referred to as an Approved Enterprise, is entitled to certain benefits. These benefits may include cash grants from the Israeli government and tax benefits, based upon, among other things, the location of the facility in which the investment is made or the election of the grantee. A company that wished to receive benefits had to receive an approval from the Investment Center of the Israeli Ministry of Economy (formerly the Ministry of Industry, Trade and Labor), referred to as the Investment Center. Each certificate of approval for an Approved Enterprise relates to a specific investment program that is defined both by the financial scope of the investment, including sources of funds, and by the physical characteristics of the facility or other assets. The tax benefits available under any certificate of approval relate only to taxable income attributable to the specific program and are contingent upon meeting the criteria set out in the certificate of approval. Income derived from activity that is not integral to the activity of the Approved Enterprise does not enjoy tax benefits.

An Approved Enterprise is entitled to receive a cash grant from the Government of Israel. Taxable income derived from an Approved Enterprise under the Capital Investments Law grants program is subject to tax at the maximum rate of 10%-25%, depending on the level of foreign investment in the company. These tax benefits are granted for a limited period not exceeding 7 years, or 10 years for a company whose foreign investment level exceeds 25%, from the first year in which the Approved Enterprise has taxable income, after the year in which production commenced (as determined by the Investment Center). The period of benefits may in no event, however, exceed 12 years from the year in which the production commenced (as determined by the Investment Center) or 14 years from the year of receipt of Approved Enterprise status, whichever is earlier.

An Approved Enterprise may elect to forego any entitlement to the cash grants otherwise available under the Capital Investments Law and, in lieu of the foregoing, may participate in an Alternative Benefits Program. Under the Alternative Benefits Program, a company's undistributed income derived from an Approved Enterprise will be exempt from corporate tax for a period of between 2 and 10 years from the first year of taxable income, depending on the geographic location of the Approved Enterprise within Israel, and the company will be eligible for a reduced tax rate of between 10%-25% for an additional 5 to 8 years, depending on the level of foreign investment in the company in each year, as detailed below. We elected the Alternative Benefits Program, but there can be no assurance that the current programs will continue to be available or that we will continue to qualify for benefits under such programs.

A company that has an Approved Enterprise program is eligible for further tax benefits if it qualifies as a Foreign Investors’ Company (FIC). An FIC eligible for benefits is essentially a company with a level of foreign investment, as defined in the Capital Investment Law, of more than 25%. The level of foreign investment is measured as the percentage of rights in the company (in terms of shares, rights to profits, voting and appointment of directors), and of combined share and loan capital, that are owned, directly or indirectly, by persons who are not residents of Israel. The determination as to whether or not a company qualifies as an FIC is made on an annual basis. An FIC that has an Approved Enterprise program will be eligible for an extension of the period during which it is entitled to tax benefits under its Approved Enterprise status (so that the benefits period may be up to ten years) and for further tax benefits if the level of foreign investment is 49% and more. If a company that has an Approved Enterprise program is a wholly-owned subsidiary of another company, then the percentage of foreign investment is determined based on the percentage of foreign investment in the parent company.

Dividends paid out of income attributed to an Approved Enterprise (or out of dividends received from a company whose income is attributed to an Approved Enterprise) are generally subject to withholding tax at the rate of 15%, or at a lower rate provided under an applicable tax treaty. The 15% tax rate is limited to dividends and distributions out of income derived during the benefits period and actually paid at any time up to 12 years thereafter. After such period, the withholding tax is applied at a rate of up to 30%, or at a lower rate under an applicable tax treaty. In the case of an FIC, the 12-year limitation on reduced withholding tax on dividends does not apply. Under the Capital Investments Law, a company that has elected the Alternative Benefits Program is not obligated to distribute retained profits, and may generally decide from which year’s profits to declare dividends. In addition, a company that pays a dividend out of income attributed to its Approved Enterprise during the tax exemption period will be subject to tax in respect of the amount of the dividend distributed (grossed up to reflect the pre-tax income that it would have had to earn in order to distribute the dividend) at the corporate tax rate that would have otherwise been applicable. This rate generally ranges from 10% to 25%, depending on the level of foreign investment in the company in each year, as explained above.

The Capital Investments Law also provides that an Approved Enterprise is entitled to accelerated depreciation on its property and equipment that are included in an approved investment program in the first five years of using the equipment. This benefit is an incentive granted by the Israeli government regardless of whether the Alternative Benefits Program is elected.

Tax benefits Subsequent to the 2005 Amendment

The 2005 Amendment applies to new investment programs and investment programs commencing after 2004, and does not apply to investment programs approved prior to April 1, 2005. The 2005 Amendment provides that terms and benefits included in any certificate of approval that was granted before the 2005 Amendment became effective (April 1, 2005) will remain subject to the provisions of the Capital Investments Law as in effect on the date of such approval. Pursuant to the 2005 Amendment, the Investment Center will continue to grant Approved Enterprise status to qualifying investments. The 2005 Amendment, however, limits the scope of enterprises that may be approved by the Investment Center by setting criteria for the approval of a facility as an Approved Enterprise.

The 2005 Amendment provides that the approval of the Investment Center is required only for Approved Enterprises that receive cash grants. As a result, it is no longer required for a company to obtain the advance approval of the Investment Center in order to receive the tax benefits previously available under the Alternative Benefits Program. Rather, a company may claim the tax benefits offered by the Capital Investment Law directly in its tax returns, provided that its facilities meet the criteria for tax benefits set forth in the 2005 Amendment. Companies or programs under the new provisions receiving these tax benefits are referred to as Benefited Enterprises. A company that has a Benefited Enterprise may, at its discretion, approach the Israel Tax Authority for a pre-ruling confirming that it is in compliance with the provisions of the Capital Investment Law.

Tax benefits are available under the 2005 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than 25% of their business income from export to specific markets with a population of at least 14 million in 2012 (such export criteria will further increase in the future by 1.4% per annum). In order to receive the tax benefits, the 2005 Amendment states that a company must make an investment that meets certain conditions set forth in the amendment for tax benefits and that exceeds a minimum amount specified in the Capital Investment Law. Such investment entitles a company to receive a Benefited Enterprise status with respect to the investment, and may be made over a period of no more than three years from the end of the year in which the company chose to have the tax benefits apply to the Benefited Enterprise. Where a company requests to have the tax benefits apply to an expansion of existing facilities, only the expansion will be considered to be a Benefited Enterprise and the company’s effective tax rate will be the weighted average of the applicable rates. In such case, the minimum investment required in order to qualify as a Benefited Enterprise must exceed a certain percentage of the value of the company’s production assets before the expansion.

The extent of the tax benefits available under the 2005 Amendment to qualifying income of a Benefited Enterprise depends on, among other things, the geographic location in Israel of the Benefited Enterprise.

Dividends paid out of income attributed to a Benefited Enterprise during the tax exemption period will be subject to tax in respect of the amount of the dividend distributed (grossed-up to reflect the pre-tax income that it would have had to earn in order to distribute the dividend) at the corporate tax rate that would have otherwise been applicable. The dividend recipient is subject to withholding tax at the reduced rate of 15%, or at a lower rate as may be provided under an applicable tax treaty, applicable to dividends and distributions out of income attributed to a Benefited Enterprise (or out of dividends received from a company whose income is attributed to a Benefited Enterprise) during the benefits period and actually paid at any time up to 12 years thereafter (except with respect to an FIC, in which case the 12-year limit does not apply). This tax should be withheld by the company at the source, regardless of whether the dividend is converted into foreign currency. See “Israeli Taxation Applicable to Non-Israeli Shareholders”.

The benefits available to an Approved and Benefited Enterprise are subject to the fulfillment of certain conditions stipulated in the Capital Investments Law and its regulations and the criteria set forth in the specific certificate of approval, as described above. In the event that these conditions are violated, in whole or in part, we would be required to refund the amount of tax benefits, adjusted to the consumer price index (CPI) and interest, or other monetary penalty.

We believe that our capital investments qualify to receive tax benefits as a Benefited Enterprise, however no assurance can be given that such investments will be approved as in fact qualifying for such tax benefits by the Israel tax authority. Additionally, no assurance can be given that we will, in the future, be eligible to receive additional tax benefits under this law. See Item 3.D. “Risk Factors, and specifically - “Any failure to obtain the tax benefits from the State of Israel that we anticipate receiving could adversely affect our plans and prospects” for a discussion of the risks our business and prospects for growth face in connection with tax benefits under Israeli law.

We currently have Approved and Benefited Enterprise programs under the Capital Investments Law, which to our belief, entitle us to certain tax benefits. The tax benefit period for these programs has not yet commenced. We have elected the Alternative Benefits Program which provides for the waiver of grants in return for tax exemption. Accordingly, our income is tax exempt for a period of two years commencing with the year we first earn taxable income relating to each expansion program, and is subject to corporate taxes at the reduced rate of 10% to 25%, for an additional period of five years to eight years, depending on the percentage of the company’s ordinary shares held by foreign shareholders in each taxable year. The exact rate reduction is based on the percentage of foreign ownership in each tax year. See note 10 to our consolidated financial statements.

Tax benefits under the 2011 Amendment

The 2011 amendment cancelled the previous tax benefit routes that were afforded under the Capital Investment Law prior to 2011, specifically the tax-exemption periods previously allowed, and instead, introduced new tax benefits for a Preferred Company through its Preferred Enterprise (as such terms are defined in the Capital Investment Law) as of January 1, 2011. The definition of a Preferred Company includes a company incorporated in Israel that is not wholly-owned by a governmental entity, and that has, among other things, Preferred Enterprise status and is controlled and managed from Israel. The tax benefits under the 2011 amendment for a Preferred Company meeting the criteria of the law include, among others, the following:

A reduced corporate tax rate of 10% for preferred income attributed to the Preferred Enterprise located in development area A and 15% for those located elsewhere in Israel in the tax years 2011-2012, 7% for development area A and 12.5% for the rest of Israel in the tax year 2013, and 9% for development area A and 16% for the rest of Israel in the tax year 2014 and thereafter.

The reduced tax rates will no longer be contingent upon making a minimum qualifying investment in productive assets.

A definition of “preferred income” was introduced into the Capital Investments Law to include certain types of income that are generated by the Israeli production activity of a Preferred Enterprise.

A reduced dividend withholding tax rate of 20% will apply to dividends paid from preferred income to both Israeli and non-Israeli investors or at a lower rate as may be provided under an applicable tax treaty, with an exemption from such withholding tax applying to dividends paid to an Israeli company (although, if such dividends are subsequently distributed to individuals or a non-Israeli company, withholding tax at a rate of 20% or at a lower rate as may be provided under an applicable tax treaty will apply).

A special tax benefits route will be granted to certain Preferred Companies entitling them to a reduced tax rate of 5% for preferred income derived from industrial facilities located in development area A and 8% for those located elsewhere in Israel, provided certain threshold requirements are met and such enterprise can demonstrate its significant contribution to Israel’s economy and promotion of national market objectives.

A Preferred Company may generally elect to apply the provisions of the amendment to preferred income produced or generated by it commencing from January 1, 2011. The amendment provides various transitional provisions which allow, under certain circumstances, to apply, irrevocably, the new regime to investment programs previously approved or elected under the Capital Investments Law in its previous form, or to continue existing investment programs under the provisions of the Capital Investments Law in its previous form for a certain period of time.

We have evaluated the likely effect of these provisions of the 2011 Amendment and, at this time, do not intend to file a request to apply the new benefits under the 2011 Amendment.

Tax Benefits of Research and Development

Israeli tax law allows, under certain conditions, a tax deduction for research and development expenditures, including capital expenditures, for the year in which they are incurred. Such expenditures must relate to scientific research and development projects, and must be approved by the relevant Israeli government ministry, determined by the field of research, and the research and development must be for the promotion of the company. Furthermore, the research and development must be carried out by or on behalf of the company seeking such tax deduction. However, the amount of such deductible expenses is reduced by the sum of any funds received through government grants for the finance of such scientific research and development projects. Expenditures not approved by the relevant Israeli government ministry, but otherwise qualifying for deduction, are deductible over a three-year period. However, the amounts of any government grants made available to us are subtracted from the amount of the deductible expenses.

Israeli Transfer Pricing Regulations

On November 29, 2006, Income Tax Regulations (Determination of Market Terms), 2006, promulgated under Section 85A of the Ordinance, came into effect (which we refer to as the Transfer Pricing Regulations). Section 85A of the Tax Ordinance and the Transfer Pricing Regulations generally require that all cross-border transactions carried out between related parties be conducted on an arm’s length principle basis and will be taxed accordingly. We applied Section 85A and the Transfer Pricing Regulations on all cross-border transactions carried out with our related parties.

Foreign Currency.

B.	Liquidity and Capital Resources

Since our inception, we have funded operations through the private placement and public offering of equity securities, internal operations, the sale of our traditional market business and, to a lesser extent, borrowings from financial institutions.

As of December 31, 2015, we had $7.1 million of cash and investments, including $0.6 million of restricted cash, $3.4 million of chase and cash equivalents and $3.1 million of marketable securities. Cash equivalents are short-term, highly liquid investments that are readily convertible to cash with original maturities of three months or less at acquisition. Our marketable securities are available for sale, but may be subject to losses due to fluctuations in the market. During 2015, operating activities used $1.1 million in cash. The major components of this use of cash were our operating loss of $1.2 million, less non-cash adjustments to this loss for depreciation and stock-based compensation of $0.3 million, plus by changes in working capital of $0.2 million. The major components of the changes in working capital are a decrease in deferred taxes of $0.4 million and in trade receivable of $0.8 million, offset by an increase in other current assets of $0.2 million, a decrease in trade payables and accrued expenses of $0.3 million and deferred revenues of $0.9 million.

As of December 31, 2014, we had $8.4 million of cash and investments, including $0.8 million of restricted cash, $3.1 million of cash and cash equivalents and $4.5 million of marketable securities. During 2014, operating activities used approximately $2.0 million in cash. The major components of this use of cash were our operating loss of $0.7 million, plus the addition of adjustments to this loss of $1.6 million, which included non-cash adjustments for depreciation and stock-based compensation of $0.3 million and the adjustment for the gain on the sale of marketable securities of ($1.9) million to be reflected in investing activities, offset by changes in working capital of $0.3 million. The major components of the changes in working capital are an increase in trade receivable of $0.4 million, offset by an increase in accrued expenses of $0.4 million and deferred taxes of $0.2 million and a decrease in prepaid assets of $0.2 million. The increase in trade receivable was primarily due to an increase in revenues and associated billings at year-end. Accrued expenses increased as the result of accruals for deferred rent, year-end incentives and bonuses and income taxes. Deferred taxes, net, increased as the result of deferred tax assets associated with deferred revenue in the US. Cash provided by investing activities was $1.5 million, including net proceeds from the sale of marketable securities of $1.9 million, offset, in part, by purchases of property and equipment of $0.2 million and increase in restricted cash of $0.2 million. We believe that our cash and investments are sufficient to cover our operating expenditures and other obligations for the next twelve months.

As of December 31, 2013, we had $10.4 million of cash and investments, including $0.6 million of restricted cash, $3.6 million of cash and cash equivalents and $6.1 million of marketable securities. During 2013, operating activities used approximately $1.0 million in cash. The major components of this use of cash were changes in working capital of $1.1 million. The major components of this change in working capital were an increase in accounts receivable of $1.0 million, an increase in deferred taxes of $0.3 million, an increase in other current assets of $0.1 million offset, in part, by an increase in deferred revenues of $0.2 million, and increase in trade payables of $0.2 million. The increase in accounts receivable was primarily due to an increase in revenues and associated billings. Cash provided by investing activities was $1.0 million, including proceeds from the sale of marketable securities of $1.1 million, offset, in part, by purchases of property and equipment of $0.1 million. We believe that our cash and investments are sufficient to cover our operating expenditures and other obligations for the next twelve months.

In 2010, we invested $9.9 million of our cash in the common stock of various highly capitalized publicly traded corporations. We have subsequently sold almost all of these common stocks, as discussed below, so that as of December 31, 2015, we had approximately $1.2 million in stocks. See “Item 10.E Taxation” for more information regarding these investments. In 2011, we sold the stock of one such corporation, resulting in proceeds of $1.6 million. In 2012, we sold portions of each of the common stocks in our portfolio, resulting in proceeds of $5.6 million, which reflected a gain of $0.7 million. In 2013, we sold additional portions of each of the common stocks in our portfolio, resulting in proceeds of $1.1 million, which reflected a gain of $0.3 million. Finally, in 2014, we sold portions of each of the common stocks in our portfolio, resulting in proceeds of $7.9 million and a gain of $1.9 million. As of December 31, 2015, the fair value of our remaining investments in these stocks was $1.2 million, including a $0.5 million (before taxes) unrecognized net gain on investments. After selling a portion of these stocks in March 2016 (valued at $0.3 million), as of March 31, 2016, the fair value of the remaining investments was $0.8 million. In addition to these common stocks, we held $1.9 million in US treasuries as of December 31, 2015. As of March 31, 2016, we also held $1.9 million in US treasuries.

Expenditures for property and equipment were approximately $0.1 million, $0.2 million and $0.1 million for the years ended December 31, 2015, 2014 and 2013, respectively. These expenditures include computer hardware and software used in product development and testing, leasehold improvements relating to new and existing facilities and office equipment in support of our operations.

Our capital requirements depend on numerous factors, including market acceptance of our products, the resources we devote to developing, marketing, selling and supporting our products, the timing and extent of establishing additional international operations, acquisitions and other factors. We believe our working capital is sufficient for our projected requirements.

C.	Research and Development, Patents and Licenses, Etc.

We believe that strong product development is essential to our strategy of continuing to enhance and expand the capabilities of our products. We have invested significant time and resources in creating a structured process for undertaking all product development. This process involves several functional groups at all levels within our organization and is designed to provide a framework for defining and addressing the activities required to bring product concepts and development projects to market successfully. In addition, we have recruited key software engineers and developers with experience in Java, .Net, communications, expert systems, Windows internals and Internet technologies. Our research and development efforts in recent years have been primarily focused on enhancing and adding functionality to our contact center market products and adding new products based on our expectations of future technologies and industry trends. In 2015, our research and development efforts have been primarily focused on the enhancement of the cloud and on-premise version of Jacada Interact, the platform underlying our Visual IVR, Jacada Agent Scripting and omnichannel products. These enhancements have included the continuing development of future omnichannel features, including proactive engagement and collaboration rooms.

We submitted several patent applications with the United States patent and trademark office with respect to the technology of our Visual IVR product. In 2015, two of these patents, patent number 8,995,646 B2, and 9,008,288 were approved.

Our research and development expenses were $3.2 million, $3.5 million and $2.9 million for the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015, 2014 and 2013, we had 24, 24 and 19 employees engaged in our product development activities, respectively.

D.	Trend Information

Please see “Item 5. Operating and Financial Review and Prospects—Summary” for a discussion of the most recent trends impacting our operating results and financial condition In addition, over the past few years, our sales cycle for our customer service and support market products continued to lengthen due to the reasons discussed in the risk factors described above. While in recent years we saw certain improvements, reflected in the shortening of the sales cycle, the trend towards a longer sales cycle may continue. As a result, we are unable to determine what impact, if any, this may have on our business model. See Item 3. D. Risk Factors “Our business model is focused on continued growth in a market in which we have only several years of experience. Failure to continue our early penetration into this market would negatively impact our results of operations”, “We do not have a proven business model for the mobile customer services and support market; if our business model is inappropriate for this market and our estimates regarding the sales cycle for this market are incorrect, our efforts to successfully commercialize our mobile customer service and support solutions may be harmed or we will experience a further delay in generating revenues from these products” and “Weak and uncertain global economic conditions, including continued credit constraints, could continue to adversely affect us” for a discussion of the potential effects of this trend.

We have focused on the customer service and support market since 2004. In 2012 we introduced Jacada Visual IVR (initially called Jacada Mobile Agent), now part of our omnichannel product offering designed to enhance self service capabilities from digital channels and improve the connectivity between self-service and the assisted service channels, thus entering the omnichannel customer experience market. Our limited experience and knowledge regarding this market may impede our ability to sell our products. In addition, our continued investment in products for this market, which may not result in revenue-producing products, could result in increased losses. See Item 3. D. Risk Factors “Our business model is focused on continued growth in a market in which we have only several years of experience. Failure to continue our penetration into this market would negatively impact our results of operations.”, “The omnichannel market is an evolving market and failure to achieve market acceptance of our products in this space may result in a failure to recover our development and marketing expenditures, which would adversely impact our operating results.”, “The investment required in establishing the omnichannel market may generate little initial revenue while increasing our cost of sale.”, and “We do not have a proven business model for the omnichannel market; if our business model is inappropriate for this market and our estimates regarding the sales cycle for this market are incorrect, our efforts to successfully commercialize our omnichannel solutions may be harmed or we will experience a further delay in generating revenues from these products.”

Recent company efforts have focused on the introduction of a cloud offering for our Jacada Visual IVR and Jacada Agent Scripting products, allowing us to offer these products in a software-as-a-service model. We have limited business experience with this type of model, which may impede our ability to successfully launch the software-as-a-service model. See Item 3. D. Risk Factors, “We have limited business experience in offering a Software-as-a-Service model; if we fail to meet the technical and support requirements of this model, our efforts to successfully commercialize our omnichannel, as well as other solutions, may be harmed, we may obtain customers we are unable to support and we may incur significant costs in correcting technical and support concerns.”

In 2015 we acquired a larger number of new customers with a slightly reduced average contract value than in previous years. While this allows us to be less reliant on a few customers, currently, we anticipate that our customer service and support solutions might continue to generate revenues from a small number of deals with large average dollar amounts compared to our traditional market business. See Item 3. D. Risk Factor: “Revenues from our customer service and support solutions might be concentrated in a few large orders and a small number of customers, meaning that the loss of a significant customer or a failure to make even a small number of such sales could harm our results of operations” for a discussion of the risks our business and prospects for growth face in connection with continued customer concentration.

We anticipate that a large number of our future customer service and support solution deals will continue to involve substantial customization and implementation services of our solutions and that a majority of our revenues will continue to derive from the provision of professional services. If we do not increase the proportion of our total revenue attributable to software license fees or if we do not increase our professional services gross margins, we may not be able to achieve or maintain profitability. The complexity of implementations in the customer service and support market may impact the efficiency of our professional services deliveries, as we may need to expend more resources in the delivery of professional services to a customer than we had originally estimated. Any such expending of more resources may negatively impact the gross margins for our professional services and our ability to achieve or maintain profitability. See Item 3. D. Risk Factors: “Our revenues could be adversely affected if we fail to recruit and retain consultants and other technical service personnel”, “A majority of our revenues derives from the provision of professional services” and “Failure to deliver professional services efficiently could negatively impact our gross margins” for a discussion of the potential effects of this trend.

We may continue to be subject to foreign currency risk. Our results of operations are reported in U.S. dollars; however, we expect that a significant portion of our revenues and expenses will continue to be generated and incurred outside of the United States and in currencies other than the U.S Dollar. Depreciation of the Euro or the English Pound against the U.S. dollar will have the effect of reducing our U.S. dollar revenues from transactions recorded in these currencies. Additionally, fluctuations in the U.S. dollar against the New Israeli Shekel (NIS), English Pound or Euro exchange rate will have the effect of impacting the U.S. dollar cost of our operations in Israel, in the UK or in European countries as applicable. Finally, fluctuations between currencies of the countries in which our contracts are executed and the currencies of the countries in which our professional service employees are compensated may have an effect of reducing our services margins. As a result, we may be subject to the effects of foreign currency exchange fluctuations. See Item 3. D. Risk Factor: Exchange rate fluctuations between the dollar and other currencies may negatively affect our results of operation” for a discussion of the potential effects of this trend.

Until 2012, our backlog had been decreasing and may decrease again if we do not maintain or increase the number of our transactions. See Item 5: “Operating and Financial Review and Prospects. A. Operating Results, Revenues and Cost of Revenues” for further disclosure regarding our revenue recognition policies. Reduced backlog means that we will be more dependent on signing new transactions in order to generate revenues. See “Risk Factor: Our revenues may decline if we do not increase the number of transactions we enter into in 2016” for a discussion of the potential effects of this trend.

In 2010, we invested $9.9 million of our cash in the common stock of various highly capitalized publicly traded corporations. The majority of the common stock has since been sold so that as of December 31, 2015, we had $1.2 million of common stock remaining. See Item 10E: “Taxation” for more information regarding these investments. See also Item 3. D. “Risk Factor: Negative conditions in the global credit and stock markets may impair the liquidity and value of our investment portfolio”. These investments in common stock are subject to risks associated with stock market investments and the risks associated with each particular company whose common stock we hold. If we need to liquidate some or all of those investments in order to access cash, we may be forced to sell them at a loss.

E.	Off-balance sheet arrangements. We are not party to any off-balance sheet arrangements. See “Item 4.B: Material Effects of Government Regulation in Israel”.

F.	Tabular Disclosure of Contractual Obligations. The following table summarizes our contractual obligations and commercial commitments as of December 31, 2015:

	Payments due by period (in thousands)
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Facilities	$	1,138	$	404	$	712	$	22	$	-
Severance pay*	$	418	$	-	$	-	$	-	$	-
Uncertain tax positions**	$	418	$	-	$	-	$	-	$	-

* Severance pay relates to accrued severance obligations to our Israeli employees as required under Israeli labor laws. For employees whose employment commencement date is prior to January 1, 2005 these obligations are payable only upon the termination of the respective employees. However, while this amount may be reduced upon voluntary termination by an employee, it is not our general practice to reduce the amounts of severance payments in cases of voluntary termination. As of December 31, 2015, we had $0.1 million in our severance pay funds, which will be used to satisfy a portion of our obligations.

** Accrual for uncertain tax positions under ASC 740 “Income Taxes” is paid upon settlement and we are unable to reasonably estimate the ultimate amount or timing of settlement. See Note 10i. of our Consolidated Financial Statements for further information regarding the Company’s liability under ASC 740.

Item 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.	Directors and Senior Management

The following table sets forth certain information regarding our executive officers and directors as of March 31, 2016:

Name	Age	Position
Gideon Hollander(1)	51	Co-Chief Executive Officer
Guy Yair	44	Co-Chief Executive Officer
Caroline Cronin	45	Chief Financial Officer
Yossie Hollander	58	Director and Chairman of the Board of Directors
Ohad Zuckerman(2)(1)	51	External Director
Tzvia Broida(2)	47	External Director
Barak Gablinger (2)	52	Director
Ofer Timor	63	Director

(1) Member of the Options Committee

(2) Member of the Audit Committee and Compensation Committee

Gideon Hollander was a co-founder of Jacada in 1990. Mr. Hollander was the active Chairman of our Board of Directors between February 2012 and January 2016 and serves as our Chief Executive Officer since August 2011 (having shared the position, in the capacity of Co-Chief Executive Officer, between August 2011 to March 2012, and since August 2012). Mr. Hollander also previously served as our Chief Executive Officer from 1990 to December 2007 and our Chairman of our Board of Directors from January 2008 to August 2011, participating in an active role in the latter capacity from January 2011 to August 2011. From 1988 to 1990, Mr. Hollander worked in the area of research and development at Comverse Technology. From 1982 to 1987, Mr. Hollander served in various technology and management positions in an elite unit of the Israeli Defense Forces, where he specialized in expert systems and user interface design. Two of the projects that Mr. Hollander managed won the most prominent Israeli award for technological innovations. Gideon Hollander is Yossie Hollander’s brother.

Guy Yair joined us in June 2011 as Senior Vice President and General Manager, EMEA and APAC, prior to being promoted to Co-Chief Executive Officer in August 2012. Prior to joining Jacada between 2007 and 2012, Mr. Yair served as General Manager of Enterprise Line of Business for Alvarion, a high tech equipment manufacturer. Between 1998 and 2007 Mr. Yair served in sales and marketing executive management positions at Rad-Bynet Group, a group of companies specializing in data communication, computing and telecommunications. Mr. Yair holds an Executive MBA from Tel Aviv University Recanati School.

Caroline Cronin joined us in June 2009 as Vice President of Finance, prior to being promoted to Chief Financial Officer in January 2010. Ms. Cronin is a CPA with several years of experience in financial leadership, management and reporting. Prior to joining Jacada, between November 1999 and June 2008 Ms. Cronin served as corporate controller and chief financial officer of Optio Software, a document automation software provider, where she led the divestiture team and successfully negotiated the sale of the company to Bottomline Technologies. Between 1997 and 1999 Ms. Cronin served as an Assistant Corporate Controller for Medical Manager Corporation, a healthcare management software provider. Ms. Cronin holds a BS in Accounting and an MBA from Florida State University.

Yossie Hollander has been director since 1990 and has been the Chairman of our Board of Directors from November 1995 to December 2007 and again since January 2016. Mr. Hollander was a founder, and from 1983 to 1994 served as the Chief Executive Officer, of New Dimension Software Ltd., an enterprise system and management software company that was acquired by BMC Software in April 1999. Mr. Hollander is a member of the executive board management committee of the Weizmann Institute of Science. He is on the board of councilors of the USC Dornsife College of Arts and Sciences and is a member of the Advisory board of the Cornell Atkinson Center for Sustainable Future. Yossie Hollander is Gideon Hollander’s brother.

Ohad Zuckerman has served as an external director under the Companies Law since December 2000. Mr. Zuckerman is the CEO of UniVerve Ltd., a renewable energy group, specializing in Waste-to-Energy and Microalgae-to-Biofuel. Between January 2000 and March 2008 Mr. Zuckerman served as the President and CEO of Zeraim Gedera Ltd., an agricultural company which specializes in breeding of vegetable varieties as well as in production and marketing to the seeds of such varieties worldwide. Prior to this position Mr. Zuckerman served as Zeraim Gedera's Executive Vice President between 1998-2000 and as its Marketing Manager between 1990-1998. Between 1998 and 2002, Mr. Zuckerman served as a member of the board of directors at Maximal Innovative Intelligence Ltd., a provider of software for extracting information from data warehouses, which was sold to Microsoft.

Tzvia Broida joined us as an external director under the Companies Law in December 2013. Ms. Broida has also served as Chief Financial Officer for Sensible Medical Innovations since March 2011. Prior to that, Ms. Broida was Chief Financial Officer at Jacada from January 2005 until May 2009, previously serving as our Vice President, Finance from March 2000 and in various positions at Jacada since August 1995.

Barak Gablinger joined us as a director in January 2016. Mr. Gablinger serves as the Vice President, Customer Delivery, at K2 View, an Israeli company. Prior to that, from November 2005 to April 2010, Mr. Gablinger served as the Director of Program Management at NICE Systems. From August 2001 to October 2005, he served as a Senior Product Manager at Amdocs, and, prior to that time, from August 1996 to August 2001 served as a Group Leader at Amdocs.

Ofer Timor joined us as a director in January 2016. Mr. Timor is one of the founders of Inimiti Capital Partners, a venture capital fund that focuses upon investments in software platforms and services in the New Media space (Internet, Mobile and anything in between). Prior to co-founding lnimiti, Mr. Timor co-founded and managed Delta Ventures, a seed and early stage Israeli fund. Prior to that Mr. Timor served as President of our Company during the mid-1990’s, helping to bring the Company from the startup stage to maturity. Mr. Timor was also a board member of Borderfree Inc., which was sold to Pitney Bowes Inc. in 2015, and a board member of ClickFox, Inc.

The term of our former external director, Mr. Avner Atsmon, who had served since October 2006, expired at our annual general shareholders meeting in January 2016.

B.	Compensation

The aggregate remuneration that we paid for the year ended December 31, 2015 to all executive officers and directors as a group was $0.9 million in salaries, fees, commissions and bonuses. Certain members of the executive management participate in a bonus plan whereby bonuses or commissions may be paid upon the achievement of certain revenue, booking or operating income targets. Since August 2008, each our directors has received annual compensation of NIS 42,600 (approximately $11,000), plus NIS 2,200 (approximately $600) for each meeting of the board and each meeting of a committee of the board attended. In addition, all directors are entitled to be reimbursed for their expenses incurred in connection with the discharge of their responsibilities as board members, including attending board of directors meetings. Directors also receive options to purchase our ordinary shares. Effective with the annual general meeting of shareholders held in January 2016, the compensation of Messrs. Timor and Gablinger was set, and the compensation of Mr. Zuckerman was modified, to the maximum compensation payable under the Companies Law regulations (Principles Concerning Compensation and Expenditures for External Directors), 5760-2000, as directors of a company with the level of shareholder equity possessed by the Company. The annual compensation of each such director is now NIS 37,260 (approximately $10,000), plus NIS 2,490 (approximately $700) for each meeting of the board and each meeting of a committee of the board attended, NIS 1,494 (approximately $400) for each telephonic meeting and NIS 1,245 (approximately $300) for each written consent of the board. The compensation of Mr. Yossie Hollander and Ms. Broida was not modified.

Mr. Gideon Hollander, our Co-Chief Executive Officer, receives, effective as of January 2011, a monthly fee of NIS 83,333 (equal to approximately $21,500 based on the current rate of exchange between the New Israeli Shekel and US Dollars) as total consideration for his services to our company.

As of December 31, 2015, options to purchase 369,250 ordinary shares granted to our directors and executive officers (7 persons) under our option plans were outstanding. The weighted average exercise price of these options was $2.01 per share ranging from $0.85to $7.52, and the expiration dates of the options range from September 2, 2015 to June 24, 2022.

Office Holder Compensation in 2015

Under the Companies Law regulations, we are required to disclose the compensation of our five most highly compensated senior office holders (as defined in the Companies Law and described below in part C of this Item 6 under the heading “External Directors”) on an individual basis in the notice of our annual general shareholder meeting or in an accompanying document (such as a proxy statement).

The table below outlines the compensation paid to or accrued in respect of our five most highly compensated senior office holders with respect to the year ended December 31, 2015, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports), 1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”

For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes base salary, bonuses, equity-based compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and any undertaking to provide such compensation.

Summary Compensation Table

Information Regarding the Covered Executive(1)

(in thousands, U.S. dollars)

Name and Principal Position(2)	Base Salary ($)		Benefits and Perquisites ($)(3)		Variable compensation ($)(4)		Equity-Based Compensation ($)(5)		Total ($)
Guy Yair – Co-CEO	$	250	$	25	$	122	$	5	$	402
Gideon Hollander – Co-CEO		256		-		-		1		257
Tzacki Naim – General Manager EMEA and APAC		172		38		49		13		272
Oren Shefler – General Counsel and Vice President, Sales North America		133		22		71		15		241
Kumaran Shanmuhan – Vice President, Solutions	$	163	$	22	$	48	$	17	$	250

(1)	All amounts reported in the table are in terms of cost to the Company, as recorded in the Company’s financial statements.

(2)	All current executive officers listed in the table are full-time employees or consultants of the Company. Cash compensation amounts denominated in currencies other than the U.S. dollar were converted into U.S. dollars at the average conversion rate for 2015.

(3)

Amounts reported in this column include benefits and perquisites, including those mandated by applicable law. Such benefits and perquisites may include, to the extent applicable to the Covered Executive, payments, contributions and/or allocations for savings funds, pension, severance, vacation, car or car allowance, medical insurances and benefits, risk insurances (e.g., life, disability, accident), , convalescence pay, payments for social security, tax gross-up payments and other benefits and perquisites consistent with Jacada’s guidelines.

(4)	Amounts reported in this column refer to commission, incentive and other objective-based bonus payments that were paid or accrued in respect of 2015.

(5)

Amounts reported in this column represent the expense recorded in our financial statements for the year ended December 31, 2015 with respect to equity-based compensation. Assumptions and key variables used in the calculation of such amounts are described in paragraph l. of Note 2 to our audited consolidated financial statements, which are included in this Annual Report on Form 20-F.

C.	Board Practices

Election and Term of Directors

Directors are elected by an ordinary resolution at the annual general meeting of shareholders, and by a vote of the holders of a majority of the voting power represented at the meeting. Our ordinary shares do not have cumulative voting rights in the election of directors. As a result, the holders of ordinary shares that represent more than 50% of the voting power have the power to elect all of our directors.

At our annual meeting in August 2004, our shareholders voted to fix the number of directors at six directors. During 2015, we had five directors, but effective as of our January 2016 annual shareholders’ meeting, we now have six directors. In accordance with the terms of our articles of association, the board of directors is divided into four classes, with the following terms of office:

Class I directors, whose terms expire at the annual meeting of shareholders to be held in 2018;

Class II directors, whose terms expire at the annual meeting of shareholders to be held in 2016;

Class III directors, whose terms expire at the annual meeting of shareholders to be held in 2017; and

A class of directors whose terms expire after one year, at each annual meeting of shareholders.

Our Class I directors are Barak Gablinger and Ohad Zuckerman. Our Class II director is Tzvia Broida. Our Class III directors are Gideon Hollander and Yossie Hollander. Our unclassified director is Ofer Timor.

At each annual meeting of shareholders, the successors to directors whose terms will then expire are elected to serve from the time of election and qualification until the third annual meeting following the election, other than the class of directors whose terms expire after one year. Any additional directorships resulting from an increase in the number of directors will be distributed among the four classes. This classification of our board of directors may have the effect of delaying or preventing changes in control or management of our company.

Directors may be removed at any time by the holders of 75% of the voting power at a general meeting of shareholders. Shareholders may, by a majority vote (Ordinary Resolution), elect a director to fill a vacancy caused by such a removal. If the shareholders do not elect a director to fill such vacancy within 30 days after the removal of the incumbent director, the board of directors may also elect a director to fill such vacancy. Any director elected to fill a vacancy will hold office for the remainder of the full term of the class of directors in which the vacancy occurred and until such director’s successor is elected and qualified.

We do not have service contracts with any of our directors, other than with Gideon Hollander, our Co-Chief Executive Officer, that provides for benefits upon termination of employment.

Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financial expertise. Under applicable regulations, a director with accounting and financial expertise is a director who, by reason of his or her education, professional experience and skill, has a high level of proficiency in and understanding of business accounting matters and financial statements. See “—External Directors.” He or she must be able to thoroughly comprehend the financial statements of the company and initiate debate regarding the manner in which financial information is presented. In determining the number of directors required to have such expertise, our board of directors must consider, among other things, the type and size of our company and the scope and complexity of its operations. Our board of directors has determined that our company requires one director with such expertise, and that Ms. Tzvia Broida has accounting and financial expertise.

Board Committees

Audit Committee

Under the Companies Law, the board of directors of a public company such as ours must appoint an audit committee. The audit committee must consist of at least three members, and include the two external directors whom we are also required to appoint pursuant to Israeli law. Neither the chairman of the board of directors, directors employed by us or granting services to us on a permanent basis, nor any controlling shareholder or any relative of a controlling shareholder may serve on the audit committee.

Under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. An “unaffiliated director” is defined as either an external director or as a director who meets the following criteria:

he or she meets the qualifications for being appointed as an external director (see below under “- External Directors”), except for (i) the requirement that the director be an Israeli resident (which does not apply to companies such as ours whose securities have been offered outside of Israel or are listed outside of Israel) and (ii) the requirement for accounting and financial expertise or professional qualifications; and

he or she has not served as a director of the company for a period exceeding nine consecutive years. For this purpose, a break of less than two years in the service shall not be deemed to interrupt the continuation of the service.

Under the Companies Law, our audit committee is responsible for (i) determining whether there are deficiencies in the business management practices of our company, including in consultation with our internal auditor or the independent auditor, and making recommendations to the board of directors to improve such practices, (ii) determining whether to approve certain related party transactions (including compensation of office holders or transactions in which an office holder has a personal interest and whether such transaction is material), (iii) where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to the board and propose amendments thereto, (iv) examining our internal controls and internal auditor's performance, including whether the internal auditor has sufficient resources and tools to dispose of its responsibilities, (v) examining the scope of our auditor's work and compensation and submitting a recommendation with respect thereto to our board or shareholders, depending on which of them is considering the appointment of our auditor and (vi) establishing procedures for the handling of employees' complaints as to the management of our business and the protection to be provided to such employees. Our audit committee may not approve an action or a related party transaction, or take any other action required under the Companies Law, unless at the time of approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one an external director.

Pursuant to the requirements of the Companies Law, we have appointed an audit committee, consisting of three members, each of whom is considered an unaffiliated director under the Companies Law. The current members of the audit committee are Ohad Zuckerman, Barak Gablinger and Tzvia Broida.

In addition, the Companies Law requires the board of directors of a public company to appoint an internal auditor nominated by the audit committee. A person who does not satisfy certain independence requirements may not be appointed as an internal auditor. We have appointed Mr. Doron Cohen from Fahn Kanne Control Management Ltd. (an affiliate of Grant Thornton LLP) to serve as our internal auditor.

Options Committee

Our board of directors has appointed an options committee, which bears the responsibilities related to granting of options under our stock options plans in accordance with policies determined by our board of directors.

The current members of the options committee are Gideon Hollander and Ohad Zuckerman.

Compensation Policy and Committee

Pursuant to the requirements of the Companies Law, we have appointed a compensation committee, consisting of Ohad Zuckerman, Barak Gablinger and Tzvia Broida and established a compensation policy regarding the terms of engagement of office holders. Such compensation policy was set by our board, after considering the recommendations of the compensation committee, and was approved by our shareholders in December 2013. The compensation policy serves as Exhibit 4.4 to this Annual Report.

The compensation policy serves as the basis for decisions concerning the financial terms of employment or engagement of office holders, including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy relates to certain factors, including advancement of the company’s objectives, the company’s business and its long-term strategy, and creation of appropriate incentives for executives. It also considers, among other things, the company’s risk management, size and the nature of its operations. The compensation policy considers the following additional factors:

the knowledge, skills, expertise and accomplishments of the relevant director or executive;

the director’s or executive’s roles and responsibilities and prior compensation agreements with him or her;

the relationship between the terms offered and the average compensation of the other employees of the company, including those employed through manpower companies;

the impact of disparities in salary upon work relationships in the company;

the possibility of reducing variable compensation at the discretion of the board of directors; and the possibility of setting a limit on the exercise value of non-cash variable compensation; and

as to severance compensation, the period of service of the director or executive, the terms of his or her compensation during such service period, the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and the maximization of its profits, and the circumstances under which the person is leaving the company.

The compensation policy also includes the following principles:

the link between variable compensation and long-term performance and measurable criteria;

the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;

the conditions under which a director or executive would be required to repay compensation paid to him or her if it was later shown that the data upon which such compensation was based was inaccurate and was required to be restated in the company’s financial statements; and

the minimum holding or vesting period for variable, equity-based compensation.

The compensation policy also considers appropriate incentives from a long-term perspective and maximum limits for severance compensation.

Under the amendment, the compensation committee is responsible for (a) recommending the compensation policy to our board of directors for its approval (and subsequent approval by our shareholders) and (b) duties related to the compensation policy and to the compensation of our office holders as well as functions previously fulfilled by our audit committee with respect to matters related to approval of the terms of engagement of office holders, including:

recommending whether a compensation policy should continue in effect, if the then-current policy has a term of greater than three (3) years (approval of either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);

recommending to the board periodic updates to the compensation policy;

assessing implementation of the compensation policy; and

determining whether the compensation terms of the chief executive officer of the company need not be brought to approval of the shareholders (under special circumstances).

The compensation committee must consist of at least three (3) members, including all of our external directors. Each remaining compensation committee member must be a director whose compensation does not exceed an amount that may be paid to an external director. The compensation committee is be subject to the same Companies Law restrictions as the audit committee as to (a) committee membership and (b) who may not be present during committee deliberations (as described under “—Approval of Related Party Transactions Under Israeli Law— Fiduciary Duties of Directors and Executive Officers— Disclosure of Personal Interests of an Office Holder” below).

External Directors

Under the Companies Law, the boards of directors of companies whose shares are publicly traded are required to include at least two members who qualify as external directors.

The Companies Law provides that external directors must be elected by a majority vote of the shares present and voting at a shareholders meeting, provided that either:

the majority voted in favor of election includes a majority of the shares held by non-controlling shareholders who do not have a personal interest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) that are voted at the meeting, excluding abstentions, which we refer to as a disinterested majority; or

the total number of shares held by non-controlling, disinterested shareholders (as described in the previous bullet-point) voted against the election of the director does not exceed two percent (2%) of the aggregate voting rights in the company.

The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, other than by virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of the company or its general manager.

After an initial term of three years, external directors may be reelected to serve in that capacity for up to two additional three year terms, provided that either (i) his or her service for each such additional term is recommended by one or more shareholders holding at least one percent (1%) of the company’s voting rights and is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by non-controlling, disinterested shareholders voting for such reelection exceeds two percent (2%) of the aggregate voting rights in the company; or (ii) his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the same disinterested majority required for the initial election of an external director (as described above).

If an external directorship becomes vacant and there are less than two external directors on the board of directors at the time, then the board of directors is required under the Companies Law to call a shareholders meeting immediately to appoint a replacement external director.

Each committee of the board of directors that exercises the powers of the board of directors must include at least one external director, except that the audit committee and our compensation committee must include all external directors then serving on the board of directors. Under the Companies Law, external directors of a company are prohibited from receiving, directly or indirectly, any compensation from the company other than for their services as external directors pursuant to applicable regulations. Compensation of an external director is determined prior to his or her appointment and may not be changed throughout his or her term (subject to certain exemptions).

The Companies Law provides that a person is not qualified to serve as an external director if (i) the person is a relative of the controlling shareholder of the company, or (ii) if that person or his or her relative, partner, employer, another person to whom he or she was directly or indirectly subject, or any entity under the person’s control, has or had, during the two years preceding the date of appointment as an external director: (a) any affiliation or other prohibited relationship with the company or, with any person or entity controlling the company of a relative of such person, with any entity controlled by or under common control with the company; or (b) in the case of a company with no controlling shareholder, any affiliation or other prohibited relationship with a person serving as chairman of the board, chief executive officer, a substantial shareholder or the most senior office holder in the company’s finance department.

The term relative is defined as a spouse, sibling, parent, grandparent or descendant; spouse’s sibling, parent or descendant; and the spouse of each of the foregoing persons. The term affiliation and the similar types of prohibited relationships include (subject to certain exemptions):

an employment relationship;

a business or professional relationship even if not maintained on a regular basis (excluding insignificant relationships);

control; and

service as an office holder, excluding service as a director in a private company prior to the first offering of its shares to the public if such director was appointed as a director of the private company in order to serve as an external director following the public offering.

The term office holder is defined under the Companies Law as a director, chief executive officer (referred to as a “general manager”), chief business manager, deputy general manager, vice general manager, other manager directly subordinate to the general manager or any other person assuming the responsibilities of any of these positions regardless of that person’s title.

In addition, no person may serve as an external director if that person’s position or professional or other activities create, or may create, a conflict of interest with that person’s responsibilities as a director or otherwise interfere with that person’s ability to serve as an external director or if the person is an employee of the Israel Securities Authority or of an Israeli stock exchange. A person may furthermore not continue to serve as an external director if he or she received direct or indirect compensation from the company for his or her role as a director. This prohibition does not apply to compensation paid or given in accordance with Companies Law regulations or amounts paid pursuant to indemnification and/or exculpation contracts or commitments and insurance coverage. Following the termination of an external director’s service on a board of directors, such former external director and his or her spouse and children may not be provided a direct or indirect benefit by the company, its controlling shareholder or any entity under its controlling shareholder’s control. This includes engagement as an executive officer or director of the company or a company controlled by its controlling shareholder or employment by, or provision of services to, any such company for consideration, either directly or indirectly, including through a corporation controlled by the former external director. This restriction extends for a period of two years with regard to the former external director and his or her spouse or child and for one year with respect to other relatives of the former external director.

If at the time at which an external director is appointed all members of the board of directors not otherwise affiliated with the Company are of the same gender, the external director must be of the other gender. A director of one company may not be appointed as an external director of another company if a director of the other company is acting as an external director of the first company at such time.

A person may be appointed as an external director only if he or she has professional qualifications or if he or she has accounting and financial expertise. In addition, at least one of the external directors must be determined by our board of directors to have accounting and financial expertise.

Ohad Zuckerman and Tzvia Broida currently serve as our external directors.

Employees

As of December 31, 2015, we had 41employees in Israel, 47 in the United States and 21 in Europe. With respect to our Israeli and European employees, we are subject to local labor laws and regulations. These laws principally concern matters such as paid annual vacation, paid sick days, length of the workday and work week, minimum wages, pay for overtime, insurance for work-related accidents, severance pay, termination of employment procedures and other conditions of employment.

Furthermore, with respect to our Israeli employees, we are subject to provisions of the collective bargaining agreements between the Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations (including the Industrialists Association) by order of the Israeli Ministry of Labor and Welfare. These provisions principally concern cost of living increases, recreation pay and other conditions of employment. To date, we have not experienced any work stoppages.

The following tables set forth as of the end of each of the last three fiscal years, the number of our employees, categorized by activity and geographic location:

As of December 31,	2015		2014		2013

Research and Development		24		24		19
Marketing, Sales, Services and Customer Support		69		58		54
Administration Management and Information Systems		16		15		15
Total		109		97		88

As of December 31,	2015		2014		2013

Israel		41		39		30
United States		47		42		38
Europe		21		16		20
Total		109		97		88

E.	Share Ownership

Other than Gideon Hollander, Guy Yair and Yossie Hollander, whose shareholdings are listed in the table in Item 7.A below, none of our executive officers and directors owns in excess of one percent of our outstanding ordinary shares. Our executive officers and directors who own ordinary shares do not have different voting rights than our other shareholders.

Option Plans

We currently maintain three option plans, the 1999 Option Plan, the 2003 Share Option Plan and the 2012 Share Option and Incentive Plan. The purpose of our option plans is to afford an incentive to officers, directors, employees and consultants of ours, or any of our subsidiaries, to acquire a proprietary interest in us, to continue as officers, directors, employees and consultants, to increase their efforts on behalf of us and to promote the success of our business.

As of December 31, 2015, 932,069 ordinary shares were available for future grants under these option plans to be granted to officers, directors, employees and consultants. As of December 31, 2015, options to purchase 696,664 ordinary shares were outstanding under the option plans. As of December 31, 2015, the weighted average exercise price of options outstanding under our option plans is $2.90. Our option plans are administered by our board of directors and the options committee of our board of directors. Under the option plans, options to purchase our ordinary shares may be granted to officers, directors, employees or consultants. In addition, pursuant to the option plans, the exercise price of options shall be determined by our board of directors or our options committee but may not be less than the fair value of the ordinary shares and is typically the fair market value on the date of grant. The vesting schedule of the options is also determined by our board of directors or our options committee but generally the options vest over a four year period. Generally, options granted under the option plans are exercisable until seven to ten years from the date of the grant. The 1999 Option Plan and the 2003 Share Option Plan expired on December 31, 2009 and December 31, 2012, respectively.

As of December 31, 2016, options to purchase 369,250 ordinary shares granted to our directors and executive officers (7 persons) under our option plans were outstanding. The weighted average exercise price of these options was $2.01 per share ranging from $0.85 to $7.52, and the expiration dates of the options range from September 2, 2015 to June 24, 2022.

Item 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.	Major Shareholders

The following table sets forth, to the best of our knowledge, as of March 31, 2016, those shareholders that own 5% or more of our capital stock and executive officers and directors who own 1% or more of our capital stock. The beneficial ownership of ordinary shares is determined in accordance with the rules of the SEC and generally includes any ordinary shares over which a person exercises sole or shared voting or investment power, or the right to receive the economic benefit of ownership. For purposes of the table below, we deem shares subject to options that are currently exercisable or exercisable within 60 days of March 31, 2016 to be outstanding and to be beneficially owned by the person holding the options for the purposes of computing the percentage ownership of that person but we do not treat them as outstanding for the purpose of computing the percentage ownership of any other person. The percentage of shares beneficially owned is based on 4,192,409 ordinary shares outstanding as of March 31, 2016.

Name of Beneficial Owner	Number of Shares Owned		Percentage*
Principal Shareholders (other than Executive Officers and Directors)
Lloyd I. Miller, III (1)		992,548		23.7	%
Robert B. Ashton (2)		562,984		13.4	%
New Resources (3)		230,000		5.5	%
Gunar Anstalt (4)		223,750		5.3	%
Executive Officers and Directors
Yossie Hollander (5)		541,003		12.9	%
Gideon Hollander (6)		422,497		10.0	%
Guy Yair (7)		212,500		4.8	%

During 2008 we purchased a total of 1,111,796 of our ordinary shares pursuant to a share repurchase program as well as a self tender offer conducted by us. The shares we repurchased are held by us as treasury shares. Under the Companies Law, for so long as such treasury shares are owned by us, they have no rights and, accordingly, are neither eligible to participate in or receive any future dividends which may be paid to our shareholders nor are they entitled to participate in, be voted at or be counted as part of the quorum for, any meetings of our shareholders. The shareholding percentage information in this table and the financial information provided in this annual report do not consider these treasury shares as part of our issued and outstanding share capital.

(1)

Based on Amendment No. 2 to Schedule 13G filed by Mr. Miller with the SEC on August 29, 2014. We make no representation as to the accuracy or completeness of the information reported. Mr. Miller’s address is 222 Lakeview Avenue, Suite 160-365, West Palm Beach, Florida, 33401. Mr. Miller has increased his percentage beneficial ownership during the last three years from 18.38% to 23.7%. The increase is due to open market purchases by Mr. Miller.

(2)

Based on Amendment No. 3 to Schedule 13D filed by Robert B. Ashton and Kinetic Catalyst Partners LLC, or Kinetic, with the SEC on December 28, 2015. We make no representation as to the accuracy or completeness of the information reported. Mr. Ashton is the portfolio manager of Kinetic, and in this capacity has the legal power to direct the voting and disposition of the ordinary shares of the Company beneficially owned by Kinetic. The address of these shareholders is 6 Occom Ridge, Hanover, NH 03755. Mr. Ashton and Kinetic have increased their percentage beneficial ownership during the last three years from less than 5% to 13.4%. The increase is due to open market purchases by Mr. Ashton and Kinetic.

(3)

Based on a Schedule 13G filed with the SEC, on February 16, 2010. We make no representation as to the accuracy or completeness of the information reported. New Resources’ address is P.O. Box 309 GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands.

(4)

Based on a Schedule 13G filed with the SEC on February 23, 2010. We make no representation as to the accuracy or completeness of the information reported. Gunar Anstalt’s address is AeuleStrasse 5, FL-9490 Vaduz, Liechtenstein.

(5)

Based on a Directors and Officers Questionnaire submitted to us by Mr. Yossie Hollander. Consists of 325,320 ordinary shares owned individually by Mr. Hollander, 75,668 ordinary shares owned by Mr. Hollander’s spouse and 125,015 ordinary shares owned individually by Dana Hollander Settlement 1991, LLC, a Nevada limited liability company, as to which Mr. Hollander is an income beneficiary of a trust holding a 99% membership interest therein. Includes 15,000 ordinary shares issuable pursuant to options held by Mr. Hollander which are exercisable within 60 days of the date hereof. Does not include 120,000 ordinary shares owned by Mr. Hollander’s mother, as Mr. Hollander disclaims beneficial ownership of such shares, and an aggregate of 387,400 ordinary shares owned indirectly by various trusts, as equity holders of certain foreign entities, as to which Mr. Hollander and/or his children, as beneficiaries of such trusts, may be deemed to have interests. Any such interest would be in an indeterminable number of the ordinary shares owned indirectly by such trusts. Mr. Hollander disclaims beneficial ownership of any ordinary shares so held by such trusts. We make no representation as to the accuracy or completeness of the information reported.

(6)

Based on a Directors and Officers Questionnaire submitted to us by Mr. Gideon Hollander. Consists of 391,247 ordinary shares owned individually by Mr. Hollander, and 31,250 ordinary shares issuable pursuant to options held by Mr. Hollander which are exercisable within 60 days of the date hereof. Does not include 120,000 ordinary shares owned by Mr. Hollander’s mother, as Mr. Hollander disclaims beneficial ownership of such shares. We make no representation as to the accuracy or completeness of the information reported.

(7)

Represents ordinary shares issuable pursuant to options held by Mr. Yair which are exercisable within 60 days of the date hereof.

The shareholders that own 5% or more of our capital stock do not have different voting rights than any of our other shareholders. We know of no arrangements that would, at a subsequent date, result in a change of control of our company.

Based upon a review of the information provided to us by our transfer agent, as of March 31, 2016, there were 37 holders of record of our shares, of which 28 record holders holding 3,893,392, or approximately 93%, of our outstanding ordinary shares, had registered addresses in the United States. These numbers are not representative of the number of beneficial holders of our shares nor is it representative of where such beneficial holders reside, since many of these shares were held of record by brokers or other nominees. As of the said date, CEDE & Co, the nominee company of the Depository Trust Company (with a registered address in the United States), held of record 3,490,256 ordinary shares on behalf of an firms of brokers and banks in the United States, who in turn held such shares on behalf of several thousand clients and customers.

B.	Related Party Transactions

Except as described below or elsewhere in this Annual Report, since January 1, 2015, we have had no transaction or loan, nor do we have any presently proposed transaction or loan, involving any related party described in Item 7.B of Form 20-F promulgated by the SEC.

In furtherance of the business purposes of Jacada and as permitted under the Sarbanes Oxley Act of 2002, we provided two loans to Mr. Guy Yair, our Co-CEO, to purchase vehicles in connection with his relocation to the United States. The loans amounted, in the aggregate, to $35,000, bore no interest, and as of March 31, 2016, were fully repaid to the Company.

As of August 2008, our directors each received annual compensation of NIS 42,600 (approximately $12,000) plus NIS 2,200 (approximately $600) for each meeting of the board and each meeting of a committee of the board attended. Effective beginning with the January 2016 annual shareholders’ meeting, the compensation of Messrs. Timor and Gablinger was set at, and the compensation of Mr. Zuckerman was modified to, the maximum compensation payable under the Companies Law regulations (Principles Concerning Compensation and Expenditures for External Directors), 5760-2000, as directors of a company with the level of shareholder equity possessed by the Company. The annual compensation of each said director is now NIS 37,260 (approximately $10,000), plus NIS 2,490 (approximately $700) for each meeting of the board and each meeting of a committee of the board attended, NIS 1,494 (approximately $400) for each telephonic meeting and NIS 1,245 (approximately $300) for each written consent of the board. The compensation of Mr. Yossie Hollander and Ms. Broida was not modified. In addition, Mr. Gideon Hollander, our Co-Chief Executive Officer, has received, and continues to receive, compensation for his services in various capacities to our company. See “Item 6.B Directors, Senior Management and Employees— Compensation” for a description of the compensation payable to our directors and Mr. Hollander.

C.	Interests of Experts and Counsel

Not applicable.

Item 8: FINANCIAL INFORMATION

A.	Consolidated Statements and Other Financial Information

See Item 18 for our audited consolidated financial statements.

Export Sales

We generated $8.9million, constituting approximately 52% of our revenues, in North America and $5.7 million, constituting approximately 33% of our total revenues, in Europe through wholly owned subsidiaries during the year ended December 31, 2015. Our export sales consist mainly of intercompany transactions with our subsidiaries.

Legal Proceedings

We are, from time to time, a party to legal or arbitration proceedings that are incidental to our business, none of which we believe is likely to have a significant effect on our financial position or profitability.

Dividend Policy

Our policy has been not to pay dividends. See “Item 10.B Memorandum and Articles of Association” for disclosure regarding the procedures for dividend distributions.

B.	Significant Changes

Other than as may be described elsewhere in this annual report, no significant change has occurred with respect to our company since the date of the annual financial statements included in this annual report.

Item 9: THE OFFER AND LISTING

A.	Offer and Listing Details

Share History

Our ordinary shares were quoted on the NASDAQ Global Market under the symbol “JCDA” from October 1999 until October 2012. Since October 2012 trading in our shares is conducted in the over-the-counter market in the OTCQB Marketplace under the symbol “JCDAF”. From June 2001 until October 2011, our ordinary shares were also quoted on the TASE under the symbol “JCDA” or its Hebrew equivalent.

The following tables present the high and low market prices of our ordinary shares on the NASDAQ Global Market or the over-the-counter market in the OTCQB Marketplace, as applicable, for the indicated fiscal years, fiscal quarters and months.

Year	High		Low

2011	$	4.20	$	1.69
2012		2.08		0.26
2013		2.80		0.81
2014		5.00		2.70
2015	$	5.66	$	3.01

Fiscal Quarter	High		Low
01/01/14 – 03/31/14	$	4.55	$	2.70
04/01/14 – 06/30/14		4.49		3.80
07/01/14 – 09/30/14		5.00		3.41
10/01/14 – 12/31/14		3.75		3.27
01/01/15 – 03/31/15		5.66		3.15
04/01/15 – 06/30/15		5.24		3.65
07/01/15 – 09/30/15		4.85		3.65
10/01/15 – 12/31/15	$	5.00	$	3.01

Month	High		Low
10/2015	$	5.00	$	3.75
11/2015		4.30		3.50
12/2015		3.95		3.01
01/2016		3.80		3.25
02/2016		4.03		3.12
03/2016		3.90		3.15
04/2016 (through 04/18/2016)	$	3.78	$	3,78

B.	Plan of distribution

Not applicable.

Markets

Our ordinary shares were quoted on the NASDAQ Global Market under the symbol “JCDA” until October 2012. Since October 2012 trading in our shares is conducted in the over-the-counter market in the OTCQB Marketplace under the symbol “JCDAF”.

D.	Selling Shareholders

Not applicable.

Dilution

Not applicable.

F.	Expenses of the Issue

Not applicable.

Item 10: ADDITIONAL INFORMATION

A.	Share Capital

Not applicable.

B.	Memorandum and Articles of Association

For a copy of our Memorandum of Association and our Articles of Association, see Item 19, Exhibits 1.1 and 1.2 which have been incorporated by reference as part of this Annual Report from our Registration Statement on Form F-1, File No. 333-10882, as well as Exhibit 1.3 (incorporated by reference to Exhibit 1.3 to our Annual Report on Form 20-F for the year ended December 31, 2003), Exhibit 1.4 (incorporated by reference to Exhibit 1.4 to our Annual Report on Form 20-F for the year ended December 31, 2004) and Exhibit 1.5 (incorporated by reference to Exhibit 1.5 to our Annual Report on Form 20-F for the year ended December 31, 2010). In addition, because we are an Israeli company, we are governed by the provisions of the Companies Law, which are described below, and by our governing documents.

Objects and Purposes

The objects and purposes of our company appear in our Memorandum of Association and include: engaging in all businesses of trade, finance, import, export, distribution, services, economic initiatives and capital investments; engaging in production, processing and development of any kind; engaging in any activities of initiators, founders, and managers of plants, companies, corporations, and real estate; serving as brokers and agents for any person, business or corporation in Israel and abroad; and engaging in research, exploration, and development.

Approval of Related Party Transactions Under Israeli Law

Fiduciary Duties of Directors and Executive Officers

The Companies Law codifies the fiduciary duties that office holders (as defined above under “Item 6.C: Board Practices—External Directors”) owe to a company. Each person listed in the table under “Item 6. Directors, Senior Management and Employees” is an office holder under the Companies Law.

An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care with which a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in good faith and in the best interests of the company. The duty of care includes a duty to use reasonable means to obtain:

information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and

all other important information pertaining to these actions.

The duty of loyalty requires an office holder to act in good faith and for the benefit of the company, and includes a duty to:

refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;

refrain from any activity that is competitive with the company;

refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and

disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or her position as an office holder.

Disclosure of Personal Interests of an Office Holder

The Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may have and all related material information known to him or her and any documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be made promptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest of any person in an act or transaction of a company, including a personal interest of one’s relative or of a corporate body in which such person or a relative of such person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, but excluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person for whom the office holder holds a voting proxy or the interest of the office holder with respect to his or her vote on behalf of the shareholder for whom he or she holds a proxy even if such shareholder itself has no personal interest in the approval of the matter. An office holder is not, however, obliged to disclose a personal interest if it derives solely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinary transaction is defined as any of the following:

a transaction other than in the ordinary course of business;

a transaction that is not on market terms; or

a transaction that may have a material impact on a company’s profitability, assets or liabilities.

If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless the company’s articles of association provide for a different method of approval. Further, so long as an office holder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemed a breach of duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed by the office holder in good faith. Approval first by the company’s audit committee and subsequently by the board of directors is required for an extraordinary transaction with an office holder who is not a director. Compensation of, or an undertaking to indemnify or insure, an office holder (other than the chief executive officer) who is not a director requires approval first by the compensation committee, followed by the board of directors as a whole. Arrangements regarding the compensation, indemnification or insurance of a director and the chief executive officer require the approval of the compensation committee, board of directors and shareholders, in that order.

Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors, the audit committee or the compensation committee may not be present at such a meeting or vote on that matter unless a majority of the directors or members of the audit committee or compensation committee have a personal interest in the matter, or unless the chairman of the audit committee, compensation committee or board of directors (as applicable) determines that he or she should be present in order to present the transaction or compensation (as applicable) that is subject to approval. If a majority of the members of the audit committee and/or the board of directors has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee and/or the board of directors on such transaction and the voting on approval thereof, but shareholder approval is also required for such transaction.

Disclosure of Personal Interests of Controlling Shareholders

Pursuant to Israeli law, the disclosure requirements regarding personal interests that apply to office holders also apply to a controlling shareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes any shareholder who holds 25% or more of the voting rights if no other shareholder holds more than 50% of the voting rights. Two or more shareholders with a personal interest in the approval of the same transaction are deemed to be a single shareholder and may be deemed a controlling shareholder for the purpose of approving such transaction. Extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, or a transaction with a controlling shareholder or his or her relative, directly or indirectly, require the approval of the audit committee, the board of directors and the shareholders of the company, in that order. The terms of engagement and compensation of a controlling shareholder who is an office holder or an employee of the company require the approval of the compensation committee, the board of directors and the shareholders of the company, in that order. In addition, the shareholder approval (in each case, whether for a transaction or the terms of engagement and compensation) must fulfill one of the following requirements:

a disinterested majority of non-controlling shareholders; or

the votes of non-controlling shareholders who have no personal interest in the transaction and who are present and voting, in person, by proxy or by voting deed at the meeting, and who vote against the transaction may not represent more than two percent (2%) of the voting rights in the company.

To the extent that any such transaction with a controlling shareholder is for a period extending beyond three years, approval is required once every three years, unless the audit committee determines that the duration of the transaction is reasonable given the circumstances related thereto.

Shareholder Duties

Pursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders and to refrain from abusing his or her power in the company, including, among other things, in voting at the general meeting of shareholders and at class shareholder meetings with respect to the following matters:

an amendment to the company’s articles of association;

an increase of the company’s authorized share capital;

a merger; or

the approval of interested party transactions and acts of office holders that require shareholder approval.

A shareholder also has a general duty to refrain from discriminating against other shareholders.

In addition, certain shareholders have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder who knows that it has the power to determine the outcome of a shareholder vote or a shareholder class vote and any shareholder who has the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does not define the substance of this duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness.

Under our articles of association, our board can, among other things, determine our plans of activity and the principles of financing such plans, examine our financial situation and set the framework of credit which we may take and decide to issue a series of debentures.

Our directors are not subject to any age limit requirement, nor are they disqualified from serving on our board of directors because of a failure to own our shares.

Insurance, Indemnification, and Exculpation of Directors and Officers

Under the Companies Law, an Israeli company may not exculpate an office holder from liability for a breach of the duty of loyalty of the office holder. However, the company may approve an act performed in breach of the duty of loyalty of an office holder provided that the office holder acted in good faith, the act or its approval does not harm the company, and the office holder discloses the nature of his or her personal interest in the act and all material facts and documents a reasonable time before discussion of the approval. An Israeli company may exculpate an office holder in advance from liability to the company, in whole or in part, for a breach of duty of care but only if a provision authorizing such exculpation is inserted in its articles of association. Our articles of association include such a provision. An Israeli company may not exculpate a director for liability arising out of a prohibited dividend or distribution to shareholders.

An Israeli company may indemnify an office holder in respect of certain liabilities either in advance of an event or following an event provided a provision authorizing such indemnification is inserted in its articles of association. Our articles of association contain such an authorization. An undertaking provided in advance by an Israeli company to indemnify an office holder with respect to a financial liability imposed on him or her in favor of another person pursuant to a judgment, settlement or arbitrator’s award approved by a court must be limited to events which in the opinion of the board of directors can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the abovementioned events and amount or criteria. In addition, a company may undertake in advance to indemnify an office holder against the following liabilities incurred for acts performed as an office holder:

reasonable litigation expenses, including attorneys’ fees, incurred by the office holder as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability, such as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and

reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf or by a third party or in connection with criminal proceedings in which the office holder was acquitted or as a result of a conviction for a crime that does not require proof of criminal intent.

An Israeli company may insure an office holder against the following liabilities incurred for acts performed as an office holder:

a breach of duty of loyalty to the company, to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;

a breach of duty of care to the company or to a third party, including a breach arising out of the negligent conduct of the office holder; and

a financial liability imposed on the office holder in favor of a third party.

An Israeli company may not indemnify or insure an office holder against any of the following:

a breach of duty of loyalty, except to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;

a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;

an act or omission committed with intent to derive illegal personal benefit; or

a fine levied against the office holder.

Under the Companies Law, exculpation, indemnification and insurance of office holders must be approved by our compensation committee and our board of directors and, in respect of our directors, controlling shareholders, their relatives and third parties in which such controlling shareholders have a personal interest, and our co-chief executive officers, also by our shareholders.

Our articles of association, as amended, provide that, subject to the provisions of the Companies Law, we may enter into a contract for the insurance of all or part of the liability of any of our office holders with respect to:

a breach of his duty of care to us or to another person;

a breach of his duty of loyalty to us, provided that the office holder acted in good faith and had reasonable cause to assume that his act would not prejudice our interests; or

a financial liability imposed upon such office holder in favor of another person concerning an act performed by the office in his/her capacity as an office holder.

Our articles of association also provide that we may indemnify an office holder against:

a financial liability imposed on him in favor of another person by a court judgment, including a compromise judgment or an arbitrator's award which has been confirmed by a court; and

reasonable litigation expenses, including attorneys' fees, expended by the office holder or which were imposed on the office holder by a court in proceedings instituted against the office holder by us or in our name or by any other person or in a criminal charge from which the office holder was acquitted or in a criminal proceeding in which the office holder was convicted for a criminal offense that does not require proof of criminal intent.

Required Approvals

Under the Companies Law, indemnification of, and procurement of insurance coverage for office holders must be approved by the compensation committee and board of directors and, in specified circumstances, by the shareholders of a company. Our shareholders have approved indemnification agreements with our directors under which we have undertaken to indemnify our directors to the fullest extent permitted under the Companies Law.

Rights, Preferences and Restrictions upon Shares

Our board of directors may from time to time declare, and cause us to pay, an interim dividend and final dividend for any fiscal year only out of retained earnings, or earnings derived over the two most recent fiscal years, whichever is higher. Our articles provide that the final dividend in respect of any fiscal year shall be proposed by the board of directors and shall be payable only after the same has been approved by a resolution of our shareholders, approved by a majority of the shares voting thereon. However, no such resolution shall provide for the payment of an amount exceeding the amount proposed by the board of directors for the payment of such final dividend, and no such resolution or any failure to approve a final dividend shall affect any interim dividend theretofore declared and paid. The board of directors shall determine the time for payment of such dividends, both interim and final, and the record date for determining the shareholders entitled thereto.

Subject to the provisions of our articles of association and subject to any rights or conditions attached at that time to any of our shares granting preferential, special or deferred rights or not granting any rights with respect to dividends, profits which shall be declared as dividends shall be distributed according to the proportion of the nominal value paid upon account of the shares held at the date so appointed by us, without regard to the premium paid in excess of the nominal value, if any. No amount paid or credited as paid on a share in advance of calls shall be treated as paid on a share.

If we are wound up, after satisfying liabilities to creditors, then subject to applicable law and to the rights of the holders of shares with special rights upon winding up, our assets available for distribution among the shareholders shall be distributed to them in proportion to their respective holdings.

Holders of ordinary shares have one vote for each fully-paid share held of record, on every resolution, without regard to whether the vote thereon is conducted by a show of hands, by written ballot or by any other means.

We may, subject to applicable law, issue redeemable shares and redeem the same. In addition, our board of directors may, from time to time, as it, in its discretion, deems fit, make calls for payment upon shareholders in respect of any sum which has not been paid up in respect of shares held by such shareholders.

Amendment of Articles of Association

Our articles of association require, in order to amend the articles, the approval of the holders of at least 75% of the shares represented at a meeting, in person or by proxy, with the right to vote on the issue. Our articles differ from the Companies Law in this respect as the law requires only the consent of at least 50% of the voting power of the company represented at a meeting and voting on the change for amendment of articles of association.

Shareholders Meetings and Resolutions

We are required to hold an annual general meeting of our shareholders once every calendar year, but no later than 15 months after the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as extraordinary general meetings. Extraordinary general meetings may be called by our board whenever it sees fit, at such time and place, within or without the State of Israel, as it may determine. In addition, the Companies Law provides that the board of a public company is required to convene an extraordinary meeting upon the request of (a) any two directors of the company or one quarter of the company’s board of directors or (b) one or more shareholders holding, in the aggregate, (i) five percent of the outstanding shares of the company and one percent of the voting power in the company or (ii) five percent of the voting power in the company.

The quorum required by our articles for a meeting of shareholders consists of at least two shareholders present in person or by proxy who hold or represent between them at least 33.3% of the voting power in our Company. Our articles differ from the Companies Law in this respect, as under the Companies Law only the presence of two shareholders holding at least 25% of the voting power in the Company is required for a quorum. A meeting adjourned for lack of quorum is adjourned to the same day in the following week at the same time and place or any time and place as the chairman of the meeting decides with the consent of the holders of a majority of the voting power represented at such meeting. At such reconvened meeting, the required quorum consists of any two shareholders present in person or by proxy.

The Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting and if the agenda of the meeting includes the appointment or removal of directors, the approval of transactions with office holders or interested or related parties, or an approval of a merger, notice must be provided at least 35 days prior to the meeting.

Our articles enable our board to fix a record date to allow us to determine the shareholders entitled to notice of, or to vote at, any general meeting of our shareholders. The Companies Law provides that a record date may not be more than 40 nor less than four days before the date of the meeting. Each shareholder of record as of the record date determined by the board may vote the shares then held by that shareholder unless all calls and other sums then payable by the shareholder in respect of its shares have not been paid.

Limitation on Ownership of Securities

The ownership and voting of our ordinary shares by non-residents of Israel are not restricted in any way by our articles or by the laws of the State of Israel, except for shareholders who are subjects of countries that are in a state of war with the State of Israel.

Mergers and Acquisitions; Anti-takeover Provisions

The Companies Law includes provisions allowing corporate mergers. These provisions require that the board of directors of each company that is party to the merger approve the transaction. In addition, the shareholders of our Company must approve a merger involving our company by a vote of 75% of our shares, present and voting on the proposed merger at a shareholders’ meeting, provided that the merger is not objected to by a majority of the shares represented at the meeting after excluding shares held by the other party to the merger or any person holding at least a 25% interest in such other party, including related parties or entities under the other party’s control. Our articles differ from the Companies Law in this respect, as under the law mergers require approval only of a majority of the voting power of a company represented at the relevant shareholders meeting and voting thereon after excluding shares held by the other party to the merger or any person holding at least a 25% interest in such other party, including related parties or entities under the other party’s control. Notwithstanding the foregoing, if the merger involves a merger with a company’s own controlling shareholder or if the controlling shareholder has a personal interest in the merger, then the merger is subject to the same special majority approval that governs all extraordinary transactions with controlling shareholders.

The Companies Law does not require court approval of a merger other than in specified situations. However, upon the request of a creditor of either party to the proposed merger, a court may delay or prevent the merger if it concludes that there exists a reasonable concern that as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties of the merger to their creditors.

A merger may not be completed unless at least 50 days have passed from the date that a request for the approval of the merger was filed with the Israeli registrar of companies and 30 days from the date that shareholder approval of both merging companies was obtained. The request for the approval of a merger may be filed once a shareholder meeting has been called to approve the merger.

The Companies Law also provides that the acquisition of shares in a public company on the open market must be made by means of a tender offer if, as a result of the acquisition, the purchaser would become a 25% shareholder of the company. The rule does not apply if there already is another 25% shareholder of the company. Similarly, the law provides that an acquisition of shares in a public company must be made by means of a tender offer if, as a result of the acquisition, the purchaser would acquire greater than 45% of the company’s outstanding shares, unless there already is another greater-than-45% shareholder of the company.

If, following any acquisition of shares, the purchaser would hold 90% or more of the shares of the company that acquisition must be made by means of a tender offer for all of the target company’s shares. An acquirer who wishes to eliminate all minority shareholders must do so by means of a tender offer and acquire 95% of all shares not held by or for the benefit of the acquirer prior to the acquisition (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved it, which condition shall not apply if, following consummation of the tender offer, the acquirer would hold at least 98% of all of the company’s outstanding shares or shares of the relevant class). However, the acquirer may not acquire in such tender offer any tendered shares to the extent that the acquisition of those shares would bring the acquirer’s ownership to more than 90% but less than 95% of the shares of the target company. In addition, in the event that the tender offer to acquire that 95% is not successful, the acquirer may not acquire tendered shares if by doing so the acquirer would own more than 90% of the shares of the target company.

Our articles contain provisions which could delay, defer or prevent a change in our control. These provisions include the staggered board provisions of our articles described above under Item 6.C.

Changes in Capital

Our articles enable us to increase our share capital. Any such changes are subject to the provisions of the Companies Law and must be approved by a resolution passed by a majority of the holders of at least 75% of our shares represented, in person or by proxy, at a general meeting voting on such change in the capital. Our articles differ from the Companies Law in this respect, as under the law changes in capital require approval only by a majority of the voting power of a company represented at the relevant shareholders meeting and voting thereon.

C.	Material Contracts

None.

D.	Exchange Controls

In 1998, the Israeli currency control regulations were liberalized significantly, so that Israeli residents generally may freely deal in foreign currency and foreign assets, and nonresidents may freely deal in Israeli currency and Israeli assets. There are currently no Israeli currency control restrictions on remittances of dividends on the ordinary shares or the proceeds from the sale of the shares provided that all taxes were paid or withheld; however, legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.

Nonresidents of Israel may freely hold and trade our securities. Neither our Memorandum of Association nor our Articles of Association nor the laws of the State of Israel restrict in any way the ownership or voting of ordinary shares by nonresidents, except that such restrictions may exist with respect to citizens of countries which are in a state of war with Israel. Israeli residents are permitted to purchase our ordinary shares.

Taxation

The following discussion sets forth the material United States and Israeli tax consequences of the ownership of ordinary shares by a holder that holds our ordinary shares, as capital assets.

The following discussion does not address the tax consequences to holders of ordinary shares to which special tax rules may apply, such as tax-exempt entities, certain insurance companies, broker-dealers, traders in securities that elect to mark to market, holders liable for alternative minimum tax, holders that actually or constructively own 10% or more of our voting stock, holders that hold ordinary shares as part of a straddle or a hedging or conversion transaction or holders whose functional currency is not the U.S. dollar. This discussion also does not apply to holders who acquired their ordinary shares pursuant to the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan. This discussion is based on the tax laws of Israel and the United States, including the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations under the Internal Revenue Code, published rulings and court decisions, as in effect on the date of this document, as well as the Income Tax Treaty between the United States of America and Israel, as amended, which we refer to as the Treaty, all of which are subject to change or change in interpretation, possibly with retroactive effect.

United States Federal Income Taxation of Owning and Selling Ordinary Shares.

This discussion does not address any aspects of United States taxation other than United States federal income taxation. Holders are urged to consult their tax advisors regarding the United States federal, state and local and the Israeli and other tax consequences of owning and disposing of ordinary shares.

For purposes of this discussion, a “U.S. Holder” is any beneficial owner of ordinary shares that is:

a citizen or resident of the United States;

a corporation or other entity taxable as a corporation organized under the laws of the United states or any political subdivision of the United States;

an estate the income of which is subject to United States federal income taxation without regard to its source; or

a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust.

If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds ordinary shares, the tax treatment of such partnership and a partner in such partnership generally will depend on the status of the partner and the activities of the partnership. Such a partnership or partner should consult its own tax advisors as to its consequences.

Dividends and Distributions

U.S. Holders

Subject to the passive foreign investment company rules discussed below, U.S. Holders will include in gross income the gross amount of any dividend paid, before reduction of Israeli withholding taxes, by us out of current or accumulated earnings and profits, as determined for Untied States federal income tax purposes, as ordinary income when the dividend is actually or constructively received by the U.S. Holder. Dividends will be income from sources outside the United States for foreign tax credit limitation purposes, but generally will be “passive income” which is a type of income that is treated separately from other types of income for foreign tax credit limitation purposes. Dividends will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. The amount of the dividend distribution included in income of a U.S. Holder will be the U.S. dollar value of the NIS payments made, determined at the spot NIS/U.S. dollar rate on the date such dividend distribution is included in the income of the U.S. Holder, regardless of whether the payment is in fact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend distribution is included in income to the date such dividend distribution is converted into U.S. dollars will be treated as ordinary income or loss. Such gain or loss will generally be income from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a return of capital to the extent of the U.S. Holder’s basis in the ordinary shares and thereafter as capital gain. We will notify our shareholders of any distribution in excess of current and accumulated earnings and profits at the time of such distribution in accordance with the requirements of the Internal Revenue Code.

Subject to certain limitations, the Israeli tax withheld in accordance with the Treaty and paid over to Israel will be creditable against the U.S. Holder’s United States federal income tax liability. To the extent a refund of the tax withheld is available to a U.S. Holder under the laws of Israel or under the Treaty, the amount of tax withheld that is refundable will not be eligible for credit against the U.S. Holder’s United States federal income tax liability, whether or not the refund is actually obtained.

For certain non-corporate U.S. Holders, subject to the discussion below under “Passive Foreign Investment Company Rules” (which we refer to as the PFIC discussion), a dividend paid by us to certain shareholders will be taxed at the preferential tax rates applicable to long-term capital gains if (a) we are a “qualified foreign corporation” (as defined below), (b) the U.S. Holder receiving such dividend is an individual, estate, or trust and (c) such dividend is paid on our shares that have been held by such U.S. Holder for more than 60 days during the 120-day period beginning 60 days before the “ex-dividend date” (i.e., the first date that a purchaser of such Share will not be entitled to receive such dividend). Generally, we may be considered a “qualified foreign corporation,” or a QFC, if we are eligible for the benefits of a comprehensive income tax treaty with the United States which includes an information exchange program that the IRS determines is satisfactory. However, even we are so eligible, we will not be treated as a QFC if we were a PFIC for the taxable year during which we paid a dividend or for the preceding taxable year. See the discussion below as to PFIC status.

Non-U.S. Holders

A non-U.S. Holder is not subject to United States federal income tax with respect to dividends paid on ordinary shares unless (i) the dividends are “effectively connected” with that non-U.S. Holder’s conduct of a trade or business in the United States, and attributable to a permanent establishment maintained in the United States (if that is required by an applicable income tax treaty as a condition for subjecting that non-U.S. Holder to United States taxation on a net income basis), or (ii) that non-U.S. Holder is an individual present in the United States for at least 183 days in the taxable year of the dividend distribution and certain other conditions are met. In such cases, a non-U.S. Holder will be taxed in the same manner as a U.S. Holder. A corporate non-U.S. Holder may also, under certain circumstances, be subject to an additional branch profits tax at a 30% rate, or at a lower rate if that corporate non-U.S. Holder is eligible for the benefits of an income tax treaty providing for a lower rate, with respect to gains that are “effectively connected” with its conduct of a trade or business in the United States.

Subject to the discussion under “Backup Withholding Tax and Information Reporting Requirements” below in this section, a non-U.S. Holder of ordinary shares generally will not be subject to U.S. federal income or withholding tax on dividends received on shares or unless such income is effectively connected with the conduct by such non-U.S. Holder of a trade or business in the United States.

Sale or Exchange of Ordinary Shares

U.S. Holders

Subject to the passive foreign investment company rules discussed below, a U.S. Holder that sells or otherwise disposes of ordinary shares generally will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the U.S. dollar value of the amount realized on the sale or disposition and the tax basis, determined in U.S. dollars, in the ordinary shares. Capital gain of a non-corporate U.S. Holder is generally taxed at a maximum rate of 20% if the ordinary shares were held for more than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.

Non-U.S. Holders

A non-U.S. Holder will not be subject to United States federal income tax on gain recognized on the sale or other disposition of ordinary shares unless (i) the gain is “effectively connected” with the non-U.S. Holder’s conduct of a trade or business in the United States, and the gain is attributable to a permanent establishment maintained in the United States (if that is required by an applicable income tax treaty as a condition for subjecting that non-U.S. Holder to United States taxation on a net income basis), or (ii) the non-U.S. Holder is an individual and present in the United States for at least 183 days in the taxable year of the sale and certain other conditions are met. In such cases, a non-U.S. Holder will be taxed in the same manner as a U.S. Holder. A corporate non-U.S. Holder may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate, or at a lower rate if eligible for the benefits of an income tax treaty that provides for a lower rate, on “effectively connected” gains recognized.

Passive Foreign Investment Company Rules

We believe that we are not a passive foreign investment company, or a PFIC, for United States federal income tax purposes, and we will attempt to manage our business so as to avoid PFIC status, to the extent consistent with our other business goals, but we cannot predict whether our business plans will allow us to avoid PFIC status in the future or whether our business plans will change in a manner that affects our PFIC determination. Ultimately, our status is a factual determination made annually and may be subject to change. A U.S. Holder may have less advantageous tax consequences upon the sale, exchange or receipt of dividends with respect to our shares if we are deemed a PFIC, unless such U.S. Holder makes certain elections which may have additional tax consequences, as described below.

Generally, a non-United States corporation is deemed to be a PFIC if either (i) 75% or more of its gross income (including the pro rata gross income of any company (United States or non-United States) in which such corporation is considered to own 25% or more of the stock by value) for the taxable year is passive income (generally referred to as the “income test”) or (ii) 50% or more of the average value of its assets (including the pro rata value of the assets of any company in which such corporation is considered to own 25% or more of the stock by value) during the taxable year, measured at the end of each quarter, produce, or are held for the production of, passive income in the taxable year (generally referred to as the “asset test”).

Based on the active nature of our assets and income, we do not believe that we were a PFIC for the tax year ending December 31, 2015. However, the statutory provisions, legislative history and administrative pronouncements related to the application of the asset test leave unanswered a number of questions pertaining to the application of such test to us. In addition, there are circumstances both in our control and out of our control that may affect our potential status as a PFIC. For example, the sale of non-passive assets in exchange for passive assets (such as cash) may impact the percentage of passive assets in applying the assets test. Fluctuation in the market price of our shares may also impact the application of such test.

While we will attempt to manage our business so as to avoid PFIC status, to the extent consistent with our other business goals, we cannot predict whether our business plans will allow us to avoid PFIC status in the future or whether our business plans will change in a manner that affects our PFIC determination.

Taxation of U.S. Holders of PFIC Shares Generally

If we were deemed to be a PFIC for any taxable year during which a U.S. Holder held our ordinary shares and such holder failed to make either a “QEF election” or a “mark-to-market election” (each as described below), then the following would apply to the U.S. Holder:

gain recognized by the U.S. Holder upon the disposition of, as well as income recognized upon receiving excess distributions on, our ordinary shares would be taxable as ordinary income (“excess distributions” are the portion of any distributions received in a taxable year in excess of 125% of the average annual distributions received in the three preceding taxable years, or, if shorter, during the U.S. Holder's holding period for our ordinary shares);

the U.S. Holder would be required to allocate such excess distribution income and/or disposition gain ratably over such holder's entire holding period for our ordinary shares;

the amount allocated to each year other than the year of the distribution payment or disposition would be subject to tax at the highest individual or corporate tax rate, as applicable, in effect for such other year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax liability for each such other year;

the U.S. Holder would be required to file an annual return on IRS Form 8621 regarding distributions received on, and gain recognized on dispositions of, our ordinary shares; and

any U.S. Holder who acquired our ordinary shares upon the death of a U.S. Holder would not receive a step-up of the income tax basis to the fair market value of such shares. Instead, such U.S. Holder beneficiary would have a tax basis equal to the decedent's basis, if lower.

A determination as to a corporation's PFIC status is made annually. However, a determination that a corporation is a PFIC for any taxable year generally will cause the PFIC status to continue to apply during all future years with respect to U.S. Holders who hold the corporation's shares during the year in which the determination was made and who did not timely make a QEF election or mark-to-market election (each as described below) for the first tax year in which such U.S. Holder owned the shares and the corporation was a PFIC. This PFIC treatment will continue to apply even if the corporation actually ceases to be a PFIC in later years. However, once a corporation's PFIC status ceases, a U.S. Holder may avoid some of the adverse consequences of the PFIC regime by making a deemed sale election with respect to the subject shares. In such case, the U.S. Holder will be treated as if it had sold the subject shares for their fair market value on the last day of the taxable year and will recognize gain, but not loss, on such deemed sale in accordance with the general PFIC rules, including the interest charge provisions described above. Thereafter, the U.S. Holder's interest will be treated as an interest in a non-PFIC.

Taxation of U.S. Holders of PFIC Shares Making Timely QEF Election

In order to avoid some of the adverse consequences resultant from our being deemed a PFIC, a U.S. Holder that holds our ordinary shares may elect to have us treated, with respect to that person, as a “Qualified Electing Fund” or QEF. We refer to such election as a “QEF Election” and to a U.S. Holder who makes such QEF election as an “Electing Shareholder.” The QEF Election applies to all ordinary shares that the Electing Shareholder held or subsequently acquired and can only be revoked with consent of the IRS. The QEF Election must be made on or before the due date (after taking into account extensions) for the Electing Shareholder's tax return for the taxable year for which the election is made and, once made, will be effective for all subsequent taxable years of such person unless revoked.

An Electing Shareholder generally will be required to include currently in gross income his or her pro rata share of our annual ordinary earnings and net capital gains, if any, in any taxable year for which we are a PFIC, regardless of whether or not distributions were received from us by the Electing Shareholder. Any income inclusion will be required whether or not the Electing Shareholder owns our ordinary shares for an entire taxable year or merely at the end of our taxable year. The amount required to be included in income will be determined without regard to our prior year losses. Tax would need to be paid currently on such income, unless an election is made to defer such payment (interest charges would apply as a result, however). The Electing Shareholder’s adjusted tax basis in our ordinary shares would be increased to reflect such taxes paid on undistributed earnings and profits. Subsequent distributions of our earnings and profits that had been previously taxed will result in a corresponding reduction in the adjusted tax basis in the ordinary shares held by the Electing Shareholder and will not be taxed again once distributed.

A primary advantage of a QEF election relates to treatment of gain upon disposition of ordinary shares. So long as an Electing Shareholder's QEF election is in effect with respect to the entire holding period for its ordinary shares, any gain or loss realized by such shareholder on the sale or exchange of such ordinary shares held as capital assets ordinarily would be a capital gain or loss and taxable to such shareholder in the same manner as if the shares were not shares in a PFIC.

Even if it is not made in a timely fashion, a QEF election can still be made together with a deemed sale election or “purging election” for the same taxable year. If a purging election is made, the U.S. Holder will be treated as if it had sold our ordinary shares for their fair market value on the last day of the taxable year and will recognize gain, but not loss, on such deemed sale in accordance with the general PFIC rules, including the interest charge provisions described above. Thereafter, the U.S. Holder's interest will be treated as an interest in a QEF.

Protective QEF Election

A “protective” QEF election is a useful tool that allows U.S. Holders to continue to treat their stock as non-PFIC stock, while preserving their right to make a retroactive QEF election if it is later determined that they in fact held PFIC shares. U.S. Holders will be permitted to make retroactive elections in particular circumstances, including if the U.S. Holder had a reasonable belief that the Company was not a PFIC and filed a protective election. If it is later determined that the company was a PFIC, U.S. Holders may then make a valid retroactive QEF election and will be taxed on their cumulative annual pro rata share of the company’s ordinary earnings and net capital gains (regardless of whether any distributions were received) as the election was made on a timely basis (i.e., on a non-retroactive basis), plus an interest charge to eliminate the tax deferral arising from the retroactive election. U.S. Holders should consult their tax advisors as to the consequences of making a protective QEF election or other consequences of making the QEF election.

Taxation of U.S. Holders of PFIC Shares Making Mark-to-Market Election

Alternatively, if we were to be deemed a PFIC for any taxable year and our ordinary shares are treated as “marketable stock,” a U.S. Holder would be allowed to make a “mark-to-market” election with respect to the ordinary shares he or she holds. The term “marketable stock” generally includes stock of a PFIC that is “regularly traded” on a “qualified exchange or other market” as these terms are explained below.

Generally, a “qualified exchange or other market” means (i) a national securities exchange which is registered with the SEC or the national market system established pursuant to Section 11A of the Exchange Act; or (ii) a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located and that has the following characteristics: (a) the exchange has trading volume, listing, financial disclosure, surveillance and other requirements designed to prevent fraudulent and manipulative acts and practices, to remove impediments to and perfect the mechanism of a free and open, fair and orderly, market, and to protect investors, and the laws of the country in which the exchange is located and the rules of the exchange ensure that such requirements are actually enforced and (b) the rules of the exchange effectively promote active trading of listed stocks. A class of stock is “regularly traded” on a qualified exchange or other market for any calendar year during which such class of stock is traded (other than in de minimis quantities) on at least 15 days during each calendar quarter, subject to special rules for an initial public offering.

As with a QEF election, a mark-to-market election is made on a shareholder-by-shareholder basis, applies to all ordinary shares held or subsequently acquired by a U.S. Holder and can only be revoked with consent of the IRS (except to the extent the ordinary shares no longer constitute “marketable stock”). As a result of a mark-to-market election, in any taxable year in which we are a PFIC, a U.S. Holder would generally be required to report gain or loss annually to the extent of the difference between the fair market value of our ordinary shares at the end of the taxable year and such U.S. Holder's adjusted tax basis in our ordinary shares at that time. Any gain under this computation, and any gain on an actual disposition of the ordinary shares, would be treated as ordinary income. Any loss under this computation, and any loss on an actual disposition of ordinary shares, generally would be treated as ordinary loss to the extent of the cumulative net mark-to-market gain previously included. Any remaining loss from marking ordinary shares to market will not be allowed, and any remaining loss from an actual disposition of ordinary shares generally would be capital loss. The U.S. Holder's tax basis in the ordinary shares is adjusted annually for any gain or loss recognized under the mark-to-market election.

Unless either (i) the mark-to-market election is made with respect to the taxable year in which the U.S. Holder's holding period for the ordinary shares commences or (ii) a QEF election has been in effect for such person's entire holding period, any mark-to-market gain for the election year generally will be subject to the general rules applicable to the disposition of shares of a PFIC, discussed above.

U.S. HOLDERS OF OUR ORDINARY SHARES SHOULD CONSULT THEIR TAX ADVISORS ABOUT THE PFIC RULES, INCLUDING THE POSSIBILITY, AND ADVISABILITY OF, AND THE PROCEDURE AND TIMING FOR MAKING A QEF (OR A PROTECTIVE QEF) ELECTION OR MARK-TO-MARKET ELECTION IN CONNECTION WITH THEIR HOLDING OF ORDINARY SHARES, AS WELL AS OPTIONS TO ACQUIRE OUR ORDINARY SHARES.

Tax on Net Investment Income

A U.S. Holder that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from the tax, will be subject to a 3.8% tax on the lesser of (1) the U.S. Holder’s “net investment income” for the relevant taxable year and (2) the excess of the U.S. Holder’s modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals will be between $125,000 and $250,000, depending on the individual’s circumstances). A U.S. Holder’s net investment income generally will include its dividends on our ordinary shares and net gains from dispositions of our ordinary shares, unless those dividends or gains are derived in the ordinary course of the conduct of trade or business (other than trade or business that consists of certain passive or trading activities). Net investment income, however, may be reduced by deductions properly allocable to that income. A U.S. holder that is an individual, estate or trust is urged to consult its tax adviser regarding the applicability of the Medicare tax to its income and gains in respect of its investment in the ordinary shares.

Information Reporting and Backup Withholding

U.S. information reporting requirements and backup withholding tax generally will apply to payments to some U.S non-corporate holders of ordinary shares. Information reporting generally will apply to payments of dividends on, and to proceeds from the sale or redemption of, ordinary shares by a payor within the United States to a holder of ordinary shares other than an “exempt recipient,” including a corporation and any payee that is not a U.S. Holder that provides an appropriate certification.

A payor within the United States will be required to withhold at the fourth lowest rate of tax applicable to single individual taxpayers (currently 28%) on any payments of dividends on, or proceeds from the sale of, ordinary shares within the United States to a holder, other than an “exempt recipient,” if the holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption from, backup withholding tax requirements.

Israeli Taxation

The following is a summary of the material Israeli tax consequences to persons acquiring ordinary shares. This summary does not discuss all the acts of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to certain types of investors subject to special treatment under Israeli law, such as traders in securities or persons that own, directly or indirectly, 10% or more of our outstanding voting share capital. To the extent that the discussion is based on new tax legislation which has not been subject to judicial or administrative interpretation, there can be no assurance that the views expressed in this discussion will be accepted by the tax authorities. This discussion is not intended, should not be construed, as legal or professional tax advice and is not exhaustive of all possible tax considerations.

Potential investors are urged to consult their own tax advisors as to the Israeli or other tax consequences of the purchase, ownership and disposition of ordinary shares, including, in particular, the effect of any foreign, state or local taxes.

Taxation of our non-Israeli shareholders

Taxation of Non-Israeli shareholders on receipt of dividends. Non-Israeli residents (whether individuals or corporations) are generally subject to Israeli income tax on the receipt of dividends paid on our ordinary shares at the rate of 25% or 30% (if the dividend recipient is a substantial shareholder, at the time of distribution or at any time during the preceding 12-month period). Such dividends are generally subject to Israeli withholding tax at a rate of 25% so long as the shares are registered with a nominee company (whether the recipient is a substantial shareholder or not), unless a reduced rate is provided under a tax treaty between Israel and the shareholder’s country of residence and provided that a certificate from the Israel tax authority allowing for a reduced withholding tax rate is obtained in advance. A “substantial shareholder” is generally a person who alone or together with such person’s relative or another person who collaborates with such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits, nominate a director or an officer, receive assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, and all regardless of the source of such right. However, distribution of dividends from income attributed to an Approved Enterprise or a Benefited Enterprise is subject to Israeli income tax at a rate of 15% (and 20% with respect to a Preferred Enterprise), unless a reduced tax rate is provided under an applicable tax treaty.

For example, under the U.S.-Israel Tax Treaty, the maximum rate of tax withheld in Israel on dividends paid to a holder of our ordinary shares who is a U.S. resident (for purposes of the U.S.-Israel Tax Treaty) is 25%. However, generally, the maximum rate of withholding tax on dividends, not generated by our Approved and Benefited Enterprises, that are paid to a U.S. corporation holding 10% or more of our outstanding voting rights throughout the tax year in which the dividend is distributed as well as the previous tax year, is 12.5%, provided that not more than 25% of our gross income for such preceding year consists of certain types of dividends and interest. Furthermore, dividends paid from income attributed to an Approved Enterprise or Benefited Enterprise are subject, under certain conditions, to withholding at the rate of 15% for such a U.S. corporate shareholder. If the dividend is attributable partly to income derived from an Approved Enterprise or Benefited Enterprise and partly to other sources of income, the withholding rate will be a blended rate reflecting the relative portions of the different types of income. U.S. residents who are subject to Israeli withholding tax on a dividend may be entitled to a credit or deduction for United States federal income tax purposes in the amount of the taxes withheld, subject to detailed rules contained in U.S. tax legislation.

A non-Israeli resident who receives dividend from which tax was withheld, is generally exempt from the obligation to file tax returns in Israel with respect to such income, provided that (i) such income was not derived from a business conducted in Israel by the taxpayer, and (ii) the taxpayer has no other taxable sources of income in Israel with respect to which a tax return is required to be filed.

Capital Gain Taxes Applicable to Non-Israeli Resident Shareholders. Non–Israeli residents (individuals and corporations) are generally exempt from Israeli capital gain tax derived from the sale of our ordinary shares for so long as (i) our ordinary shares are listed for trading on the Tel Aviv Stock Exchange or on a recognized stock exchange outside of Israel, (ii) such capital gain is not accrued or derived by the non-Israeli resident’s permanent establishment in Israel, (iii) the ordinary shares in relation to which the capital gain is accrued or derived were acquired by the non-Israeli resident shareholder after the initial listing of the ordinary shares on a recognized stock exchange, and (iv) with respect to shares listed on a recognized stock exchange outside of Israel, neither the shareholder nor the particular capital gain is otherwise subject to the Israeli Income Tax Law (Inflationary Adjustments) 5745-1985. These provisions dealing with capital gain are not applicable to a person whose gains from selling or otherwise disposing of the shares are deemed to be business income. Notwithstanding this, non-Israeli companies will not benefit from this exemption if Israeli residents (i) have a controlling interest of 25% or more in such non-Israeli company, or (ii) are the beneficiaries of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli company, whether directly or indirectly.

In addition, a sale of shares by a non-Israeli resident may also be exempt from Israeli capital gain tax under the provisions of an applicable tax treaty. For example, under the U.S.-Israel Tax Treaty, the sale, exchange or disposition of our ordinary shares by a person who (i) holds the ordinary shares as a capital asset; (ii) qualifies as a resident of the United States within the meaning of the Treaty; and (iii) is entitled to claim the benefits afforded to such resident by the Treaty (called a “Treaty U.S. Resident”) will generally be exempt from Israeli capital gain tax. Such exemption will not apply if (i) such Treaty U.S. Resident is an individual and was present in Israel for a period or periods aggregating 183 days or more during the relevant taxable year or (ii) such Treaty U.S. Resident held, directly or indirectly, shares representing 10% or more of the voting rights of a company during any part of the 12-month period preceding such sale, exchange or disposition, subject to certain conditions, or (iii) the capital gain arising from such sale, exchange or disposition can be attributable to a permanent establishment of the shareholder maintained in Israel. In each case, the sale, exchange or disposition of our ordinary shares would be subject to such Israeli tax, to the extent applicable; however, under the U.S.-Israel Tax Treaty, such Treaty U.S. Resident would be permitted to claim a credit for such taxes against the U.S. federal income tax imposed with respect to such sale, exchange or disposition, subject to the limitations in U.S. laws applicable to foreign tax credits.

In some instances where our shareholders may be liable for Israeli tax on the sale of their ordinary shares, the payment of the consideration may be subject to the withholding of Israeli tax at source. Shareholders may be required to demonstrate that they are exempt from tax on their capital gain in order to avoid withholding at source at the time of sale. Specifically, in transactions involving a sale of all of the shares of an Israeli resident company, in the form of a merger or otherwise, the Israel Tax Authority may require from shareholders who are not liable for Israeli tax to sign declarations in forms specified by this authority or obtain a specific exemption from the Israel Tax Authority to confirm their status as non Israeli resident, and, in the absence of such declarations or exemptions, may require the purchaser of the shares to withhold taxes at source.

Excess Tax

Individuals who are subject to tax in Israel are also subject to an additional tax at a rate of 2% on annual income exceeding NIS 810,720 for 2015, which amount is linked to the annual change in the Israeli consumer price index, including, but not limited to, dividends, interest and capital gain.

F.	Dividends and Paying Agents

Not applicable.

G.	Statement by Experts

Not applicable.

H.	Documents on Display

We are currently subject to the information and periodic reporting requirements of the Exchange, and file periodic reports and other information with the SEC, through its electronic data gathering, analysis and retrieval (EDGAR) system. Our securities filings, including this Annual Report and the exhibits thereto, are available for inspection and copying at the public reference facilities of the SEC located at Room 1024, 450 Fifth Street, NW, Washington, D.C. 20549, and the SEC’s regional offices located in New York, New York and Chicago, Illinois. Copies of all or any part of our Annual Report or other filings may be obtained from these offices after payment of fees required by the SEC. Please call the SEC at 1-800-SEC-0330 for further information. The SEC also maintains a website at http://www.sec.gov from which certain EDGAR filings may be accessed.

As a foreign private issuer, we are exempt from certain rules under the Exchange Act prescribing the furnishing and content of proxy statements to our shareholders. In addition, our directors, executive officers and 10% shareholders are also exempt from the short-swing profit recovery and disclosure regime under Section 16 of the Exchange Act.

I.	Subsidiary Information

Not applicable.

Item 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our results of operations are reported in U.S. dollars; however, a significant portion of our revenues and expenses in 2015 were generated and incurred outside of the United States and in currencies other than the U.S dollar, particularly in NIS, British Pounds and Euros. As a result, we are subject to foreign currency risk. Our sales in Europe and in the UK and our expenses in Israel, Europe and the UK are recorded in local currencies which exposes us to the direct risk of local currency devaluations or fluctuations against the U.S dollar. Fluctuations in exchange rates between the currencies in which our costs are incurred or revenues are recorded and the U.S. dollar may have a material adverse effect on our results of operations. We therefore use currency exchange forward contracts to hedge the impact of the variability in the exchange rates on future cash flows from certain NIS-denominated expenses. Our hedging program reduces, but does not eliminate, the impact of foreign currency rate movements. As of December 31, 2015, we had forward contracts to sell $2,793,932 for a total amount of NIS 10,901,921 that matures prior to November 30, 2016.

The table below details the hedging acquired in derivative instruments in order to limit the exposure to exchange rate fluctuations. The data is as of December 31, 2015 and is presented in U.S. dollars (in thousands).

	Cross Currency		Notional Amount				Fair Value
Foreign contracts to hedge payroll expenses	New Israeli Shekel			2,794				10

In addition, our subsidiaries enter into transactions denominated in a currency other than their respective functional currency, which in our case, is their local currency. A change in exchange rates between the functional currency and the currency in which a transaction is denominated increases or decreases the expected amount of functional currency cash flows upon settlement of the transaction. Transaction gains or losses result from a change in exchange rates between the functional currency and the currency in which a foreign currency transaction is denominated.

The table below details the net balance sheet exposures in currencies other than the functional currency, by geography, as of December 31, 2015. All data in the table have been converted to U.S. dollar equivalents (in thousands):

	Euro		New Israeli Shekel		Australian Dollar			GBP			Total
Israel	$	2	$	36	$	(18	)	$	(13	)	$	7
UK	$	274	$	-	$	-		$	-		$	274

We invest our cash, cash equivalents and marketable securities in a variety of investment vehicles in a number of countries with and in the custody of financial institutions with high credit ratings. In 2010, we invested $9.9 million of our cash in the common stock of various highly capitalized publicly traded corporations. We have since sold the majority of the common stock so that as of December 31, 2015, we had $1.2 million remaining. See “Item 10E. Taxation” for more information regarding these investments. While our investment policy and strategy attempt to manage interest rate risk, limit credit risk, limit stock markets risk and only invest in what we view as high-quality securities, the outlook for our investment holdings is dependent on general economic conditions, interest rate trends and volatility in the financial and stock marketplace, which can all affect the income that we receive, the value of our investments, and our ability to sell them. We believe that our marketable securities are carried at fair value. The fair value of our marketable securities, including common stock and US treasuries, as of December 31, 2015 was $3.1 million and the fair value of our marketable securities as of March 31, 2016 was $2.8 million after we sold $0.3 million of our marketable securities in the first quarter of 2016. However, over time, the economic and market environment may provide additional insight regarding the fair value of certain securities which could cause us to change our judgment regarding impairment. This could result in unrealized or realized losses relating to other than temporary declines being charged against future income. Given the current market conditions, there is continuing risk that further declines in fair value may occur and additional impairments may be charged to income in future periods, resulting in realized losses. See Item 3.D “Risk Factor: Negative conditions in the global credit markets may impair the liquidity and value of our investment portfolio”.

Item 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

Item 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

Item 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

Item 15: CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures. Our co-chief executive officers and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Exchange Act) as of December 31, 2015, have concluded that, as of such date, our disclosure controls and procedures were effective.

(b) Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of our consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our co-chief executive officers and chief financial officer assessed the effectiveness of our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-(f) promulgated under the Exchange Act) as of December 31, 2014. In making this assessment, they used the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, our co-chief executive officers and chief financial officer have concluded that, as of December 31, 2015, our internal control over financial reporting is effective.

Notwithstanding the foregoing, all internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

(d) Changes in Internal Control over Financial Reporting. Based on the evaluation conducted by our management, with the participation of our co-chief executive officers and chief financial officer, pursuant to Rules 13a-15(d) and 15d-15(d) promulgated under the Exchange Act, our management (including such officers) has concluded that there has been no change in our internal control over financial reporting that occurred during 2015, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 16A: AUDIT COMMITTEE FINANCIAL EXPERT

At our annual shareholders meeting in December 2013, our shareholders elected Ms. Tzvia Broida to our board of directors as an external director to serve for a three years term. Our board of directors has determined that Ms. Broida qualifies as an “audit committee financial expert,” as defined in Item 407(d)(5) of SEC Regulation S-K and Item 16A of SEC Form 20-F, and appointed Ms. Broida to serve on the audit committee. Ms. Broida also meets the definition of an “independent director,” as defined in Rule 5600(a)(2) of the NASDAQ Listing Rules.

Item 16B: CODE OF ETHICS

In March 2003, our board of directors adopted a Code of Ethics, or the Code, applicable to, among other people, our principal executive officer, principal financial officer and principal accounting officer or controller (or persons performing similar functions). The Code was filed as Exhibit 11 to our Annual Report for the year ended December 31, 2003 and is incorporated by reference herein. The code is available and can be reviewed via the “About Jacada, Corporate Profile” link on our website, www.jacada.com.

Item 16C: PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following captions and tables sets forth, for the years ended December 31, 2014 and 2015, the fees billed to us and our subsidiaries by Kost, Forer, Gabbay and Kasierer, a member of EY Global, our principal accountant with respect to each of those years:

Audit Fees

The aggregate fees billed for professional services rendered to us by our principal accountant for the audit of our financial statements in 2014 and 2015 appear in the table below:

2014	$80,000
2015	$95,000

Tax Fees

The aggregate fees billed for professional services rendered to us by our principal accountant for tax compliance, tax advice and tax planning in 2014 and 2015 appear in the table below. Such fees related to the preparation of tax returns.

2014	$74,000
2015	$85,500

Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Accountants

Our audit committee is responsible for the appointment and oversight of our independent auditors’ work. Pursuant to its charter, the audit committee also has the sole authority to review in advance, and grant any appropriate pre-approvals of: (a) all auditing services to be provided by our independent auditors; (b) all non-audit services to be provided by our independent auditors as permitted by Section 10A of the Exchange Act; and (c) all fees and other terms of engagement. The audit committee’s policy is to specifically pre-approve all annual services provided by our independent auditors in connection with the preparation of their audit, which may include audit services and audit-related services, as well as tax services and other services that are not related to the annual audit. The audit committee sets forth the basis for its pre-approval in detail, listing the particular services or categories of services which are pre-approved, and setting a specific budget for such services. Additional services may be commissioned, without specific pre-approval, on the basis of a general pre-approval provided by the audit committee, up to a specified amount (a “de minimis exception”). Once such services have been pre-approved and performed, the independent auditors and our management report to the audit committee on a periodic basis regarding the extent of services actually provided in accordance with the applicable pre-approval, and regarding the fees for the services performed. During each of 2014 and 2015, none of the tax fees described above were approved through the de minimis exception.

Item 16D: EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

Item 16E: PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

None.

Item 16F: CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

Item 16G: CORPORATE GOVERNANCE

Not applicable.

Item 16H: MINE SAFETY DISCLOSURE

Not applicable.

PART III

Item 17: FINANCIAL STATEMENTS

We have elected to provide financial statements and related information pursuant to Item 18.

Item 18: FINANCIAL STATEMENTS

See pages F-1 through F-33 appended hereto.

Item 19: EXHIBITS

Please see the Exhibit Index incorporated herein by reference.

JACADA LTD. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015

U.S. DOLLARS IN THOUSANDS

INDEX

	Page

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets	F-3 - F-4

Consolidated Statements of Operations	F-5

Consolidated Statements of Comprehensive Income (Loss)	F-6

Consolidated Statements of Changes in Shareholders' Equity	F-7

Consolidated Statements of Cash Flows	F-8 - F-9

Notes to Consolidated Financial Statements	F-10 - F-33

Kost Forer Gabbay & Kasierer

3 Aminadav St.

Tel-Aviv 6706703, Israel

Tel: +972-3-6232525

Fax: +972-3-5622555

ey.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

JACADA LTD.

We have audited the accompanying consolidated balance sheets of Jacada Ltd. and its subsidiaries (collectively "the Company") as of December 31, 2015 and 2014 and the related consolidated statements of operations, comprehensive income (loss), changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2015 and 2014 and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.

Tel-Aviv, Israel	KOST FORER GABBAY & KASIERER
April 21, 2016	A Member of EY Global

F - 2

JACADA LTD. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

	December 31,
	2015		2014

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	3,438	$	3,048
Marketable securities		1,898		3,349
Trade receivables		2,207		3,076
Restricted cash		585		787
Prepaid expenses		349		240
Other current assets		496		425

Total current assets		8,973		10,925

LONG-TERM ASSETS:
Marketable securities		1,161		1,185
Severance pay fund		148		136
Deferred taxes		72		442
Other assets		120		38
Property and equipment, net		388		397

Total long-term assets		1,889		2,198

Total assets	$	10,862	$	13,123

The accompanying notes are an integral part of the consolidated financial statements.

F - 3

JACADA LTD. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands, except share data

	December 31,
	2015			2014

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Trade payables	$	1,074		$	1,190
Accrued expenses and other liabilities		1,787			2,152
Deferred revenues		1,485			2,156

Total current liabilities		4,346			5,498

LONG-TERM LIABILITIES:
Deferred revenues		202			369
Accrued severance pay		418			376
Other long-term liabilities		495			87

Total long-term liabilities		1,115			832

SHAREHOLDERS' EQUITY:
Share capital -
Ordinary shares of NIS 0.04 par value -
Authorized: 7,500,000 shares at December 31, 2015 and 2014; Issued: 5,297,054 and 5,271,372 shares at December 31, 2015 and 2014, respectively; Outstanding: 4,185,258 and 4,159,576 shares at December 31, 2015 and 2014, respectively.		61			60
Additional paid-in capital		76,202			76,022
Treasury shares at cost - 1,111,796 Ordinary shares at December 31, 2015 and 2014		(17,863	)		(17,863	)
Accumulated other comprehensive income, net		388			720
Accumulated deficit		(53,387	)		(52,146	)

Total shareholders' equity		5,401			6,793

Total liabilities and shareholders' equity	$	10,862		$	13,123

The accompanying notes are an integral part of the consolidated financial statements.

F - 4

JACADA LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands, except per share data

	Year ended December 31,
	2015			2014			2013
Revenues:
Software licenses	$	4,459		$	2,437		$	2,930
Services		8,443			9,687			8,948
Maintenance		4,421			4,249			3,748

Total revenues		17,323			16,373			15,626

Cost of revenues:
Software licenses		97			175			170
Services		6,408			5,813			5,417
Maintenance		479			496			353

Total cost of revenues		6,984			6,484			5,940

Gross profit		10,339			9,889			9,686

Operating expenses:
Research and development		3,177			3,481			2,918
Sales and marketing		5,223			5,052			4,398
General and administrative		3,058			2,998			3,107

Total operating expenses		11,458			11,531			10,423

Operating loss		(1,119	)		(1,642	)		(737	)
Financial income (expense), net		(38	)		1,941			473

Income (loss) before taxes		(1,157	)		299			(264	)
Income tax expenses (benefit)		84			967			(382	)

Net income (loss)	$	(1,241	)	$	(668	)	$	118

Basic net earnings (loss) per share	$	(0.30	)	$	(0.16	)	$	0.03
Diluted net earnings (loss) per share	$	(0.30	)	$	(0.16	)	$	0.03

Weighted average number of shares used in computing basic net earnings (loss) per share		4,166,433			4,159,576			4,159,134
Weighted average number of shares used in computing diluted net earnings (loss) per share		4,166,433			4,159,576			4,166,033

The accompanying notes are an integral part of the consolidated financial statements.

F - 5

JACADA LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

U.S. dollars in thousands

	Year ended December 31,
	2015			2014			2013

Net income (loss)	$	(1,241	)	$	(668	)	$	118

Other comprehensive income (loss)
Foreign currency translation adjustments		(128	)		(125	)		8

Change in unrealized gains (losses) on cash flow hedges:
Unrealized gain (loss) on cash flow hedges arising during the period		8			(226	)		132
Reclassification to earnings of realized (gains) losses on cash flow hedges		134			45			(171	)

Change in unrealized gains (losses) on marketable securities:
Unrealized gains on marketable securities, net of tax expense (benefit)		(345	)		581			1,144
Gains of marketable securities reclassified into earning, net of tax expenses		(1	)		(1,624	)		(326	)

Other comprehensive income (loss), net of tax		(332	)		(1,349	)		787

Comprehensive income (loss)	$	(1,573	)	$	(2,017	)	$	905

The accompanying notes are an integral part of the consolidated financial statements.

F - 6

JACADA LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

U.S. dollars in thousands, except share data

											Accumulated
						Additional		Treasury			other						Total
	Ordinary shares					paid-in		shares			comprehensive			Accumulated			shareholders'
	Shares		Amount			capital		at cost			income			deficit			equity

Balance as of January 1, 2013		4,159,134	$	60		$	75,860	$	(17,863	)	$	1,282		$	(51,596	)	$	7,743

Stock-based compensation		-		-			95		-			-			-			95
Net income		-		-			-		-			-			118			118
Other comprehensive income		-		-			-		-			787			-			787

Balance as of December 31, 2013		4,159,134		60			75,955		(17,863	)		2,069			(51,478	)		8,743

Exercise of stock options		442		*	)		1		-			-			-			1
Stock-based compensation		-		-			66		-			-			-			66
Net Loss		-		-			-		-			-			(668	)		(668	)
Other comprehensive loss		-		-			-		-			(1,349	)		-			(1,349	)

Balance as of December 31, 2014		4,159,576		60			76,022		(17,863	)		720			(52,146	)		6,793

Exercise of stock options		25,682		1			36		-			-			-			37
Stock-based compensation		-		-			144		-			-			-			144
Net Loss		-		-			-		-			-			(1,241	)		(1,241	)
Other comprehensive loss		-		-			-		-			(332	)		-			(332	)

Balance as of December 31, 2015		4,185,258	$	61		$	76,202	$	(17,863	)	$	388		$	(53,387	)	$	5,401

*) Represents an amount lower than $ 1.

The accompanying notes are an integral part of the consolidated financial statements.

F - 7

JACADA LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

	Year ended December 31,
	2015			2014			2013
Cash flows from operating activities:

Net income (loss)	$	(1,241	)	$	(668	)	$	118

Adjustments required to reconcile net income (loss) from continuing operations to net cash used in operating activities:
Depreciation		151			190			241
Stock-based compensation		144			66			95
Gain on sale of marketable securities		(1	)		(1,862	)		(326	)
Increase in accrued severance pay, net		30			23			7
Deferred taxes, net		49			230			(345	)
Decrease (increase) in trade receivables		805			(443	)		(984	)
Decrease (increase) in other current assets and prepaid expenses		(256	)		158			(138	)
Increase (decrease) in trade payables		(110	)		(9	)		193
Increase (decrease) in accrued expenses and other liabilities		(221	)		352			32
Increase (decrease) in deferred revenue		(853	)		34			160
Increase (decrease) in other long-term liabilities		408			(41	)		(40	)
Other		-			1			6

Net cash used in operating activities		(1,095	)		(1,969	)		(981	)

Cash flows from investing activities:

Proceeds from sale of marketable securities		3,350			7,879			1,111
Investment in marketable securities		(1,899	)		(6,048	)		-
Purchase of property and equipment		(142	)		(150	)		(127	)
Decrease (increase) in restricted cash		202			(190	)		6

Net cash provided by investing activities		1,511			1,491			990

Cash Flows from financing activities

Proceeds from exercise of stock options		37			1			-
Net cash provided by financing activities		37			1			-

Effect of exchange rate changes on cash		(63	)		(107	)		36

Increase (decrease) in cash and cash equivalents		390			(584	)		45
Cash and cash equivalents at the beginning of the year		3,048			3,632			3,587

Cash and cash equivalents at the end of the year	$	3,438		$	3,048		$	3,632

F - 8

JACADA LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

	Year ended December 31,
	2015		2014		2013

Supplemental disclosure of cash flows activities:

Cash paid during the year for:

Taxes on income	$	90	$	219	$	104

Non-cash investing information:

Investment in leasehold improvements and Computers and peripheral equipment upon accrued expenses and other liabilities and other long-term liabilities	$	17	$	10	$	6

The accompanying notes are an integral part of the consolidated financial statements.

F - 9

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 1:-

GENERAL

Jacada Ltd. ("Jacada") and its subsidiaries (collectively - "the Company") develop, market and support unified service desktop process optimization, and omnichannel solutions that simplify and automate customer service processes and interactions across various channels including mobile, web, voice and chat. The Company generates revenues from licensing its software products and from services such as implementation and customization, consulting, training and maintenance and support.

Jacada Ltd.'s wholly-owned subsidiaries include Jacada, Inc., a corporation organized under the laws of the state of Delaware, and Jacada (Europe) Limited, a company organized under the laws of England. Jacada (Europe) Limited owns 100% of the stock of Jacada Deutschland GmbH, a limited liability company organized under the laws of Germany. The majority of the Company's sales are made in North America and Europe.

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP").

Use of estimates:

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company's management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. Actual results could differ from those estimates.

Financial statements in U.S. dollars:

The currency of the primary economic environment in which the operations of Jacada and certain subsidiaries are conducted is the U.S. dollar ("dollar"); thus, the dollar is the functional currency of Jacada and certain subsidiaries.

Jacada and certain subsidiaries' transactions and balances denominated in dollars are presented at their original amounts. Non-dollar transactions and balances have been remeasured to dollars in accordance with Accounting Standard Codification ("ASC") 830, "Foreign Currency Matters". All transaction gains and losses from remeasurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statements of operations as financial income or expenses, as appropriate.

F - 10

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (CONT.)

For those subsidiaries whose functional currency has been determined to be their local currency, assets and liabilities are translated at year-end exchange rates and statements of operations items are translated at average exchange rates prevailing during the year. Such translation adjustments are recorded as a separate component of accumulated other comprehensive income in shareholders' equity.

Principles of consolidation:

The consolidated financial statements include the accounts of Jacada and its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation.

Cash equivalents:

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

Investments in marketable securities:

The Company accounts for investments in debt and equity marketable securities in accordance with ASC 320, "Investments - Debt and Equity Securities".

Management determines the appropriate classification of its investments at the time of purchase and reevaluates such determinations at each balance sheet date.

The Company classifies all of its marketable securities as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in accumulated other comprehensive income (loss) in shareholders’ equity. Realized gains and losses on sale of investments are included in financial income, net.

The Company recognizes an impairment charge when a decline in the fair value of its investments in debt and equity securities below the amortized cost basis of such securities is judged to be other-than-temporary. Factors considered in making such a determination include the duration and severity of the impairment, the reason for the decline in value, the potential recovery period and if the entity has the intent to sell the security, including whether it is more likely than not that it will be required to sell the security before recovery of its cost basis. However, if an entity does not expect to sell a debt security, it will still need to evaluate expected cash flows to be received and determine if a credit loss exists. For securities that are deemed other-than-temporarily impaired, the amount of impairment is recognized in the statements of income as financial income, net and, with respect to debt securities, is limited to the amount related to credit losses, while impairment related to other factors is recorded in other comprehensive income (loss).

F - 11

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (CONT.)

No other-than-temporary impairments were identified in 2015, 2014 and 2013. The gain on sale of marketable securities previously impaired for the years ended December 31, 2015, 2014 and 2013 amounted to $ 0, $ 172 and $ 48, respectively.

Restricted cash:

Restricted cash is invested in bank deposits, which are pledged in favor of the banks which provide to the Company guarantees with respect to office lease agreements, credit card, hedging transactions and car leasing.

Long-term lease deposits:

Long-term deposits include long-term deposits for motor vehicles under operating leases, presented at their cost and are included in other assets in the consolidated balance sheets.

Property and equipment:

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

		%

Computers and peripheral equipment		14 - 33
Office furniture and equipment		7 - 15
Motor Vehicles		17
Leasehold improvements		Over the shorter of the related lease period (including option terms) or the life of the asset

Impairment of long-lived assets:

The Company's long-lived assets are reviewed for impairment in accordance with ASC 360, "Property Plant and Equipment", whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. In 2015, 2014 and 2013, no impairment losses were identified.

F - 12

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (CONT.)

Research and development costs:

Research and development costs are charged to the statement of operations as incurred. ASC 985-20 "Costs of Software to Be Sold, Leased, or Marketed", requires capitalization of certain software development costs subsequent to the establishment of technological feasibility.

Based on the Company's product development process, technological feasibility is established upon completion of a working model. No material costs are incurred by the Company between the completion of the working model and the point at which the products are ready for general release. Therefore, research and development costs have been expensed as incurred.

Income taxes:

The Company accounts for income taxes in accordance with ASC 740, "Income Taxes". This Statement 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 their estimated realizable value.

The Company implements a two-step approach to recognize 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% (cumulative basis) likely to be realized upon ultimate settlement. The Company classifies interest as income tax expenses.

Revenue recognition:

The Company derives its revenue principally from:

the initial sales of licenses to use the Company's products, including professional services such as customization, implementation and integration services,

incremental license fees resulting from a customer's increase in agent licenses required,

post-implementation consulting and integration services for the Company's solutions, and

the recurring revenue from ongoing support and maintenance, also called post-contract support or PCS, which includes telephone support, bug repairs, and rights to receive upgrades and enhancements to licensed software on a when-and-if-available basis.

F - 13

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company does not grant a right of return to its customers. In transactions where a customer's contractual terms include a provision for customer acceptance based on customer-specified subjective criteria, or for evaluation purposes, the Company recognizes revenues only when such acceptance has been obtained or as the acceptance provision lapses. However, in transactions where a customer's contractual terms include a provision for customer acceptance based on customer-specified objective criteria, the Company recognizes revenue if it can demonstrate that the delivered product meets the specified criteria prior to customer acceptance.

The Company usually sells its software licenses as part of an overall solution offered to a customer that combines the sale of software licenses with customization, implementation and integration services. In arrangements which include significant customization of software and services, the Company accounts for the services together with the software under contract accounting in accordance with ASC 605-35, "Construction-Type and Production-Type Contracts".

Revenues recognized in accordance with ASC 605-35 are accounted for using the percentage of completion method. The percentage of completion method is used when the required services are quantifiable, based on the estimated number of labor hours necessary to complete the project, and under that method revenues are recognized using labor hours incurred as the measure of progress towards completion.

Revenue from software that does not require services, including licenses sold subsequent to the initial installation, is recognized upon delivery, assuming all other revenue recognition criteria has been met.

Revenue from post-implementation consulting and integration services is recognized as work is performed. Maintenance revenue is recognized ratably over the term of the maintenance agreement. Deferred revenues include unearned amounts received under maintenance and support agreements and amounts received from customers, for which revenues have not yet been recognized.

F - 14

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Revenues from software arrangements involving multiple elements, such as software, post-contract customer support and maintenance, consulting and training, are allocated to the different elements in the arrangement under the "residual method" when Vendor Specific Objective Evidence ("VSOE") of fair value exists for all undelivered elements and no VSOE exists for the delivered elements. The residual method of allocation requires an entity to first allocate revenue to the fair value of the undelivered elements (maintenance and other services) and the residual revenue to the delivered element (software licenses). Any discount in the arrangement is allocated to the delivered element.

VSOE of fair value for maintenance and other services is generally determined based on the price charged for the undelivered element when sold separately. The Company's process for establishing VSOE of fair value of maintenance services (PCS) is through performance of VSOE compliance test which is an analysis of the entire population of PCS renewal activity for its installed base of customers. The Company's process for the establishment of VSOE of fair value for professional services is through a performance of an analysis of the entire population of separate sales of services.

The Company accounts for reimbursements received for out-of-pocket expenses incurred, in accordance with ASC 605-45-45, "Reimbursements Received for Out-of-Pocket Expenses Incurred", under which reimbursements received for out-of-pocket expenses incurred should be characterized as revenue in the statements of operations. The reimbursements received for out-of-pocket expenses for years ended December 31, 2015, 2014 and 2013 amounted to $ 452 $ 305 and $ 347, respectively.

Accounting for stock-based compensation:

The Company accounts for stock-based compensation in accordance with ASC 718, "Compensation - Stock Compensation, which requires the measurement and recognition of compensation expense based on estimated fair values for all stock-based payment awards made to employees and directors. ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's statements of operations.

The Company recognizes compensation expenses for the value of its awards based on the accelerated attribution method over the requisite service period of each of the awards, net of estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Estimated forfeitures are based on actual historical pre-vesting forfeitures.

F - 15

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company estimates the fair value of stock options awards using the Black-Scholes option pricing model. This option-pricing model requires a number of assumptions, described below. The Company has historically not paid dividends and has no foreseeable plans to pay dividends. The Company used its historical stock prices for calculating volatility. The risk-free interest rate assumption is based on the rate of zero-coupon U.S. government securities appropriate for the expected term of the Company's employee stock options. The Company determined the expected life of the options according to the average of the vesting period and the expiration period.

The fair value for options granted in 2015, 2014 and 2013 was estimated at the date of grant using the following weighted average assumptions:

	2015			2014			2013

Dividend yield		0	%		0	%		0	%
Expected volatility		65	%		64	%		58	%
Risk-free interest		1.75	%		1.83	%		1.33	%
Expected term (years)		5.5			5.5			5.6

The Company recognizes compensation expenses for the value of its awards granted based on the accelerated method over the requisite service period of each of the awards.

The Company applies ASC 505-50, "Equity-Based Payments to Non-Employees" ("ASC 505") with respect to options and warrants issued to non-employees which requires the use of option valuation models to measure the fair value of the options and warrants at the measurement date.

Advertising expenses:

Advertising expenses are charged to the statements of operations, as incurred. Advertising expenses for the years ended December 31, 2015, 2014 and 2013 were $220, $ 228 and $ 170, respectively.

F - 16

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Severance pay:

The Company's liability for severance pay for its Israeli employees is calculated pursuant to Israel's Severance Pay Law based on the most recent salary of the employees multiplied by the number of years of employment, as of the balance sheet date. Israeli employees are entitled to severance equal to one month's salary for each year of employment or a portion thereof. The Company's liability for its Israeli employees, not under section 14 discussed below, is fully provided by monthly deposits with insurance policies and by an accrual. The value of these policies is recorded as an asset in the Company's balance sheet.

The deposited funds include profits (losses) accumulated up to the balance sheet date. The deposited funds may be withdrawn only upon the fulfillment of the obligation pursuant to Israel's Severance Pay Law or labor agreements. The value of the deposited funds is based on the cash surrendered value of these policies.

Commencing from 2005, new employees of the Company are subject to Section 14 of the Severance Pay Law, under which the payments to the pension funds and insurance companies discharge the Company's obligation to the employees. Accumulated amounts in the pension funds and with the insurance companies are not under the control or administration of the Company, and accordingly, neither those amounts nor the corresponding accrual for severance pay are reflected in the balance sheet.

The severance pay expense for the years ended December 31, 2015, 2014 and 2013 amounted to $221, $ 213 and $ 196, respectively.

Fair value of financial instruments:

The Company measures its investments in marketable securities and its foreign currency derivative contracts at fair value. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

Level 1 -

Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.

Level 2 -

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 -

Unobservable inputs for the asset or liability.

F - 17

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The carrying amounts of financial instruments carried at cost, including cash and cash equivalents, restricted cash, trade receivables, other current assets, trade payables and other liabilities approximate their fair value due to the short-term maturities of such instruments.

Derivative instruments:

The Company carries out transactions involving foreign currency exchange derivative financial instruments. The transactions are designed to hedge the Company's exposure in currencies other than the dollar. The Company recognizes derivative instruments as either assets or liabilities and measures those instruments at fair value. If a derivative meets the definition of a hedge and is so designated, changes in the fair value of the derivative are recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative designated as a hedge is recognized in earnings. If a derivative does not meet the definition of a hedge, the changes in the fair value are included in earnings.

Net earnings (loss) per share:

Basic net earnings (loss) per share are computed based on the weighted average number of Ordinary shares outstanding during each year. Diluted net earnings (loss) per share are computed based on the weighted average number of Ordinary shares outstanding during each year, plus potentially dilutive Ordinary shares considered outstanding during the year, in accordance with ASC 260, "Earnings Per Share".

All outstanding stock options have been excluded from the calculation of the diluted net loss per share in 2015 and 2014. The total weighted average number of shares related to the outstanding stock options excluded from the calculations of diluted net earnings (loss) per share due to their anti-dilutive effect was 595,439, 515,053 and 510,705 for the years ended December 31, 2015, 2014 and 2013, respectively.

Concentrations of credit risk:

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

F - 18

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company's marketable securities include investments in equity and US treasury bills. The Company's investment policy limits the amount the Company may invest in any one type of issuer, thereby reducing credit risk concentrations. In addition, the policy establishes minimum credit ratings for all types of securities.

The Company's trade receivables are mainly derived from sales to customers in North America and Europe. In judging the probability of collection from customers the Company continuously monitors collection and payments based upon the Company's historical experience of its existing customers. In connection with customers with whom the Company does not have previous experience, it evaluates the creditworthiness of those customers. An allowance for doubtful accounts is determined with respect to those amounts that the Company has determined to be doubtful of collection.

Treasury shares:

The Company presents the cost to repurchase treasury shares as a reduction of shareholders' equity.

Comprehensive income:

The Company accounts for comprehensive income in accordance with ASC 220 "Comprehensive Income". This Statement establishes standards for the reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Comprehensive income generally represents all changes in shareholders' equity during the period except those resulting from investments by, or distributions to, shareholders. The Company determined that its items of comprehensive income relate to foreign currency translation adjustments, gains (losses) on hedging derivative instruments and unrealized gains (losses) on marketable securities.

F - 19

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The following table shows the components of accumulated other comprehensive income, net of taxes, for the year ended December 31, 2015:

	Year ended December 31, 2015
	Unrealized gains (losses) on marketable securities			Foreign currency translation adjustments			Unrealized gains (losses) on cash flow hedges			Total

Beginning balance		810			42			(132	)		720

Other comprehensive income (loss)		(345	)		(128	)		8			(465	)
Amounts reclassified from accumulated other comprehensive income		(1	)		-			134			133

Net current-period other comprehensive loss		(346	)		(128	)		142			(332	)

Ending balance		464			(86	)		10			388

Impact of recently issued accounting standards:

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration which the entity expects to receive in exchange for those goods and services. The effective date of ASU 2014-09 is for annual reporting periods beginning after December 15, 2017. In July 2015, the FASB decided to defer by one year the effective date of this ASU. The ASU has not yet been adopted and the Company is currently evaluating the impact that the adoption of ASU 2014-09 will have on its financial statements.

In 2014, the FASB issued ASU 15-2014, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, which defines management’s responsibility to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures if there is substantial doubt about its ability to continue as a going concern. The pronouncement is effective for annual reporting periods ending after December 15, 2016 with early adoption permitted. The Company is currently evaluating the effect, if any, that the adoption of this guidance will have on its consolidated financial statements.

F - 20

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

In November 2015, the FASB issued ASU No. 2015-17 related to balance sheet classification of deferred taxes. The new guidance requires that deferred tax assets and liabilities be classified as noncurrent in a classified statement of financial position. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company early adopted this guidance on a retrospective basis as of December 31, 2015. As a result, the Company’s current deferred tax assets as of December 31, 2014 in an amount of $443 were reclassified to noncurrent assets to conform to the current year presentation.

In February 2016, the FASB issued ASU 2016-02 - Leases (ASC 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The ASU is expected to impact our consolidated financial statements as we have certain operating lease arrangements. ASC 842 supersedes the previous leases standard, ASC 840 Leases. The standard is effective on January 1, 2019, with early adoption permitted. The Company is in the process of evaluating the impact of this new guidance.

NOTE 3:-

MARKETABLE SECURITIES

The Company invests in US Government treasuries and equity marketable securities, which are classified as available-for-sale. The following is a summary of the Company's investment in marketable securities:

	December 31, 2015								December 31, 2014
			Gross unrealized		Gross unrealized		Fair				Gross unrealized		Gross unrealized		Fair
	Cost		gains		Losses		value		Cost		gains		losses		value
Available-for-sale:

US Government treasuries	$	1,898	$	-	$	-	$	1,898	$	3,349	$	-	$	-	$	3,349
Equity securities	$	703	$	458	$	-	$	1,161	$	703	$	482	$	-	$	1,185

	$	2,601	$	458	$	-	$	3,059	$	4,052	$	482	$	-	$	4,534

As of December 31, 2015 the U.S government treasuries are expected to mature within the next 12 months, therefore were classified as current assets.

F - 21

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 4:-

PROPERTY AND EQUIPMENT, NET

	December 31,
	2015		2014
Cost:

Computers and peripheral equipment	$	2,906	$	2,866
Office furniture and equipment		498		492
Motor vehicles		13		13
Leasehold improvements		352		349

		3,769		3,720
Accumulated depreciation		3,381		3,323

Depreciated cost	$	388	$	397

Depreciation expense for the years ended December 31, 2015, 2014 and 2013 was $ 151, $ 190 and $ 241, respectively.

NOTE 5:-

ACCRUED EXPENSES AND OTHER LIABILITIES

	December 31,
	2015		2014

Employees and payroll accruals	$	1,399	$	1,213
Accrued expenses		388		510
Accrued income tax		-		429

	$	1,787	$	2,152

NOTE 6:-

COMMITMENTS AND CONTINGENT LIABILITIES

Lease commitments:

The Company's facilities are leased under various operating lease agreements, which expire on various dates, the latest of which is in 2020. Future minimum lease payments under non-cancelable operating leases as of December 31, 2015 are as follows:

2016	$	404
2017		377
2018		186
2019		149
2020		22

	$	1,138

Total rent expenses for the years ended December 31, 2015, 2014 and 2013 were $ 400, $ 396 and $ 370, respectively.

F - 22

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 7:-

DERIVATIVE FINANCIAL INSTRUMENTS

In order to reduce the impact of changes in foreign currency exchange rates on its results, the Company enters into foreign currency exchange forward contracts and option strategies to purchase and sell foreign currencies to hedge a significant portion of its anticipated New Israeli Shekel ("NIS") payroll payments. The Company designates these contracts for accounting purposes as cash flow hedges. The Company currently hedges its exposure to the variability in future cash flows for a maximum period of one year.

The effective portion of the gain or loss on the derivative instruments is initially recorded as a component of other comprehensive income, a separate component of shareholders' equity, and subsequently reclassified into earnings to the same line item as the related forecasted transaction and in the same period or periods during which the hedged exposure affects earnings. Hedge ineffectiveness, if any, are recognized immediately in financial income (expenses), net.

Gain (loss) on the derivative instruments, which partially offset the foreign currency impact from the underlying exposures, reclassified from other comprehensive income into cost of services, research and development, sales and marketing and general and administrative for the year ended December 31, 2015 were $ (3) $ (73) $ (27) and $(3), respectively. The ineffective portion of the change in fair value of a cash flow hedge for the years ended December 31, 2015, 2014 and 2013 amounted to $10, $ 4 and $ 29, respectively.

The Company's derivatives expose it to credit risks from possible non-performance by counterparties. The Company has limited its credit risk by entering into derivative transactions exclusively with investment-grade rated financial institutions and monitors the creditworthiness of these financial institutions on an ongoing basis. As of December 31, 2015 the credit risk was $10.

The notional amounts of the Company's derivative instruments as of December 31, 2015 amounted to $ 2,794. Gross notional amounts do not quantify risk or represent assets or liabilities of the Company, but are used in the calculation of settlements under the contracts.

As of December 31, 2015, amounts related to derivatives designated as cash flow hedges and recorded in accumulated other comprehensive income totaled $ 10 which will be reclassified into statements of operations within the next 12 months and will partially offset the foreign currency impact from the underlying exposures. The amount ultimately realized in earnings will likely differ due to future changes in foreign exchange rates.

The Company records all derivative instruments on the balance sheet at fair value. The fair value of the open foreign exchange contracts appears on the consolidated balance sheets as of December 31, 2015, as an asset in other current assets, in the amount of $ 10.

F - 23

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 7:-

DERIVATIVE FINANCIAL INSTRUMENTS (Cont.)

The fair value of the Company's outstanding derivative instruments qualified as hedging instruments as of December 31, 2015 and 2014 is summarized below:

		December 31,
	Balance sheet location	2015		2014
Assets:

Foreign exchange forward contracts	Other assets (liabilities)		10		(132	)

Derivatives assets (Liabilities)		$	10	$	(132	)

	Location in	Gains (losses) reclassified from other comprehensive income (loss) into income (expenses)
	statement	Year ended December 31,
	of operations	2015			2014			2013
Derivatives in cash flow hedging relationship

Foreign exchange option contracts	Cost of sales and operating expenses	$	-		$	8		$	35
Foreign exchange forward contracts	Financial expense		(10	)		4			29
Foreign exchange forward contracts	Cost of sales and operating expenses		(124	)		(57	)		107

		$	(134	)	$	(45	)	$	171

NOTE 8:-

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the Company's assets and liabilities measured at fair value on a recurring basis as of December 31, 2015 and 2014:

	December 31, 2015
	Fair value measurements using input type
	Level 1		Level 2		Total

Marketable securities:
US Government treasuries	$	1,898	$	-	$	1,898
Equity		1,161		-		1,161
Foreign currency derivative contracts		-		10		10

	$	3,059	$	10	$	3,069

F - 24

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 8:-

FAIR VALUE OF FINANCIAL INSTRUMENTS (Cont.)

	December 31, 2014
	Fair value measurements using input type
	Level 1		Level 2			Total

Marketable securities:
US Government treasuries	$	3,349	$	-		$	3,349
Equity		1,185		-			1,185
Foreign currency derivative contracts		-		(132	)		(132	)

	$	4,534	$	(132	)	$	4,402

NOTE 9:-

SHAREHOLDERS' EQUITY

General:

Ordinary shares confer upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right to receive dividends if declared.

The Company’s shares are traded in the over-the-counter market in the OTCQB Marketplace.

Options issued to employees and directors:

As of December 31, 2015, the Company had three Incentive Share Option Plans (the 1999, 2003 and 2012 plans) under which options are outstanding. The 1999 plan has since expired and no future options may be granted under this plan. The 2003 and 2012 plans provide for the grant of options to officers, management, employees and key employees, directors, consultants and others. The options granted generally become fully exercisable after two to four years and expire between 7 to 10 years from the grant date. Any options from the 2003 and 2012 plans that are forfeited or canceled before expiration become available for future grants.

Pursuant to the option plans, the exercise price of options shall be determined by the Company's Board of Directors or the Company's compensation committee but may not be less than the fair value of the Ordinary share on the grant date.

As of December 31, 2015, an aggregate of 932,069 Ordinary shares of the Company were still available for future grant under the Incentive Share Option Plans.

F - 25

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 9:-

SHAREHOLDERS' EQUITY (Cont.)

A summary of the Company's option activity and related information with respect to options granted to employees for the year ended December 31, 2015 is as follows:

	Number of options			Weighted-average exercise price		Weighted- average remaining contractual term (in years)		Aggregate intrinsic value

Outstanding at the beginning of the year		496,298		$	2.19		4.36	$	741
Granted		202,500		$	4.45
Exercised		(25,682	)	$	1.40
Forfeited		(32,027	)	$	5.63

Outstanding at end of year		641,089		$	2.76		4.20	$	718

Exercisable options at end of year		296,607		$	2.28		3.10	$	437

Vested and expected-to-vest at end of year		573,884		$	2.67		4.05	$	685

The total intrinsic value of stock options exercised during 2015 and 2014 was $73 and $3, respectively. No options were exercised during 2013.

The weighted-average estimated grant date fair value of employee stock options granted during the years 2015, 2014 and 2013 was $2.38, $2.17 and $ 0.72, respectively.

Options issued to consultants:

The Company's outstanding options to consultants as of December 31, 2015, were as follows:

Grant date	Options for Ordinary shares		Exercise price per share		Options exercisable		Exercisable through

March, 2015		1,500	$	4.75		-	March, 2022
October, 2015		54,075	$	4.52		-	October, 2022

		55,575				-

F - 26

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 9:-

SHAREHOLDERS' EQUITY (Cont.)

As of December 31, 2015, there was $ 266 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company's stock option plans. That cost is expected to be recognized over a weighted-average period of 1.47 years.

In 2008, the Company purchased a total of 1,111,796 of its Ordinary shares pursuant to a share repurchase program as well as a self-tender offer conducted by the Company. Such shares are held by the Company as treasury shares and are presented at cost. Under the Companies Law for so long as such treasury shares are owned by the Company they have no rights and, accordingly, are neither eligible to participate in or receive any future dividends which may be paid to the Company's shareholders nor are they entitled to participate in, be voted at or be counted as part of the quorum for, any meetings of shareholders.

Stock-based compensation expense:

The following table presents the stock-based compensation included in the line items below in the Company's consolidated statements of operations:

	Year ended December 31,
	2015		2014		2013

Cost of revenues	$	19	$	4	$	6
Research and development		19		3		3
Sales and marketing		45		14		12
General and administrative		61		45		74

Total	$	144	$	66	$	95

F - 27

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 10:- TAXES ON INCOME

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

Various industrial projects of Jacada have been granted "Approved Enterprise" and "Privileged Enterprise" status, which provides certain benefits, including tax exemptions and reduced tax rates. According to the provisions of the Investment Law, the Company's income is tax-exempt for a period of two years commencing with the year it first earns taxable income, and subject to corporate taxes at the reduced rates of 10% to 25%, for an additional period of five to eight years depending upon the level of foreign ownership of the Company. Income not eligible for Approved Enterprise and Privileged Enterprise benefits is taxed at a regular rate.

In the event of distribution of dividends from the said tax-exempt income, the amount distributed will be subject to corporate tax at the rate ordinarily applicable to the Approved Enterprise's and Privileged Enterprise income. The tax-exempt income attributable to the Approved Enterprise programs mentioned above can be distributed to shareholders without subjecting the Company to taxes only upon the complete liquidation of Jacada. Tax-exempt income generated under the Company's Privileged Enterprise program will be subject to taxes upon dividend distribution (which includes the repurchase of the Company's shares) or complete liquidation.

The entitlement to the above benefits is conditional upon the Company's fulfilling the conditions stipulated by the Law and regulations published thereunder. Should the Company fail to meet such requirements in the future, income attributable to its Approved Enterprise and Privileged Enterprise programs could be subject to the statutory Israeli corporate tax rate and the Company could be required to refund a portion of the tax benefits already received, with respect to such programs.

As the Company currently has no taxable income, these benefits have not yet commenced for all programs since inception.

In January 2011, the Law for Economic Policy for 2011 and 2012 (Amended Legislation) was passed, and among other things, amended the Law, ("the Amendment") effective January 1, 2011. According to the Amendment, the benefit tracks in the Investment Law were modified and a flat tax rate applies to the Company's entire preferred income. The Company will be able to opt to apply (the waiver is non-recourse) the Amendment and from then on it will be subject to the amended tax rates of 16%.

F - 28

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 10:- TAXES ON INCOME (CONT.)

Tax benefits under the Law for the Encouragement of Industry (Taxation), 1969:

The Company believes it meets all the criteria to be classified as "industrial company", as defined by this law and, as such, is entitled to certain tax benefits, mainly accelerated depreciation of machinery and equipment, as prescribed by regulations published under the Inflationary Adjustments Law, the right to claim public issuance expenses and amortization of intangible property rights as a deduction for tax purposes.

Net operating losses carryforward:

As of December 31, 2015, the Company had an Israeli net operating loss carryforward of approximately $ 46,620 which can be carried forward and offset against taxable income with no expiration date.

As of December 31, 2015, the U.S subsidiary had used all of its U.S. net operating loss carryforwards for income tax purposes and therefore no net operating loss carryforwards are available for future use.

As of December 31, 2015, the European subsidiaries had net operating losses carryforward for income tax purposes, of approximately $ 2,195 which can be carried forward and offset against taxable income with no expiration date.

Theoretical tax:

In 2015, the main reconciling items between the statutory tax rate of the Company and the effective tax rate are the losses outside of the U.S, mainly in Israel, in the amount of $1,931 for which valuation allowance was provided.

In 2014, the main reconciling items between the statutory tax rate of the Company and the effective tax rate are the losses outside of the U.S, mainly in Israel, in the amount of $2,258 for which valuation allowance was provided.

In 2013, the main reconciling item between the statutory tax rate of the Company and the effective tax rate is a decrease in the valuation allowance on certain deferred tax assets in the US, resulting in the recognition of tax benefit in the statements of operations in the amount of $ 345.

F - 29

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 10:- TAXES ON INCOME (CONT.)

Deferred income taxes:

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

	December 31,
	2015			2014

Deferred tax assets:

Operating loss carryforward	$	12,309		$	12,791
Reserves and allowances		1,216			1,434

Total deferred tax asset before valuation allowance		13,525			14,225
Valuation allowance		(13,272	)		(13,588	)

Deferred tax assets		253			637
Deferred tax liabilities		(181	)		(194	)

Deferred taxes, net	$	72		$	442

The Company has provided a valuation allowance in respect of deferred tax assets resulting from tax loss carryforward and temporary differences.

Income (loss) before taxes is comprised as follows:

	Year ended December 31,
	2015			2014			2013

Domestic (Israel)	$	(1,931	)	$	(2,258	)	$	(1,307	)
Foreign		774			2,557			1,043

	$	(1,157	)	$	299		$	(264	)

F - 30

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 10:- TAXES ON INCOME (CONT.)

Corporate tax rates in Israel:

Taxable income of Israeli companies is subject to tax at the rate of 25% in 2013 and 26.5% in 2014 and 2015.

On January 4, 2016, the Israeli Parliament's Plenum approved by a second and third reading the Bill for Amending the Income Tax Ordinance (No. 217) (Reduction of Corporate Tax Rate), 2015, which consists of the reduction of the corporate tax rate from 26.5% to 25%. The Company does not expect that the change in tax rates will have an impact on the Company's financial statements.

Income tax expense (benefit) is comprised as follows:

	Year ended December 31,
	2015		2014		2013

Current tax expenses (benefit)	$	35	$	737	$	(37	)
Deferred tax expenses (benefit)		49		230		(345	)

	$	84	$	967	$	(382	)

Domestic	$	-	$	-	$	-
Foreign		84		967		(382	)

	$	84	$	967	$	(382	)

Uncertain tax positions:

The amount of unrecognized tax benefits with respect to uncertain tax positions as of December 31, 2015 and 2014 was $418 and $0, respectively. The entire balance of unrecognized tax benefits, if recognized, would reduce the Company's annual effective tax rate.

As of December 31, 2015 and 2014, accrued interest related to uncertain tax positions amounted to $30 and $0, respectively.

As of December 31, 2015, Jacada's 2011 tax filling has received final tax assessments.

F - 31

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 11:- GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA

Summary information about geographical areas:

The Company manages its business on a basis of one reportable segment (see Note 1a for a brief description of the Company's business) and follows the requirements of ASC 280 "Segment Reporting".

The following is a summary of revenues within geographic areas based on the end-customer's location:

	Year ended December 31,
	2015		2014		2013

United States	$	8,536	$	9,929	$	7,837
Netherlands		1,577		1,668		1,633
United Kingdom		1,518		1,513		1,878
South Africa		1,479		613		142
Germany		1,316		1,976		2,185
Ireland		1,230		-		-
Other		1,667		674		1,951

	$	17,323	$	16,373	$	15,626

	December 31,
	2015		2014
Property and equipment:

Israel	$	202	$	168
North America		186		228
Other		-		1

	$	388	$	397

Major customers' data as a percentage of total revenues:

	Year ended December 31,
	2015			2014			2013

Customer A		9	%		10	%		10	%
Customer B		8	%		9	%		13	%
Customer C		8	%		12	%		14	%
Customer D		7	%		8	%		11	%
Customer E		3	%		23	%		5	%

F - 32

JACADA LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 12:- SUPPLEMENTARY DATA ON SELECTED STATEMENTS OF OPERATIONS

Financial income (expenses), net:

	Year ended December 31,
	2015			2014			2013
Financial income:

Foreign currency translation adjustments	$	-		$	12		$	10
Realized gain on marketable securities		1			1,862			326
Interest income and amortization/accretion of premium/discount on marketable securities		1			2			5
Dividend on equity marketable securities		30			85			160

		32			1,961			501
Financial expenses:

Bank charges		(25	)		(20	)		(28	)
Foreign currency translation adjustments		(45	)		-			-

		(70	)		(20	)		(28	)

	$	(38	)	$	1,941		$	473

Allowance for doubtful accounts:

The balance of the allowance for doubtful accounts for the years ended December 31, 2015 and 2014 was $0 and $44, respectively.

F - 33

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

	JACADA LTD.

	/s/ Caroline Cronin
	By:	Caroline Cronin
		Chief Financial Officer

	Date: April 21, 2016

EXHIBIT INDEX

Exhibit Number Description of Document

1.1	Memorandum of Association of Jacada Ltd. (incorporated by reference to Exhibit 3.1 to the registrant’s Registration Statement on Form F-1 (SEC File No. 333-10882)).

1.2	Articles of Association of Jacada Ltd. (incorporated by reference to Exhibit 3.2 to the registrant’s Registration Statement on Form F-1 (SEC File No. 333-10882)).

1.3	Amendments to Jacada Ltd.’s Articles of Association, dated August 24, 2003 (incorporated by reference to Exhibit 1.3 to the registrant’s Annual Report on Form 20-F for the year ended December 31, 2003).

1.4	Amendments to Jacada Ltd.’s Articles of Association, dated August 25, 2004 (incorporated by reference to Exhibit 1.3 to the registrant’s Annual Report on Form 20-F for the year ended December 31, 2004).

1.5	Amendment to Jacada Ltd.’s Articles of Association, dated October 25, 2010 (incorporated by reference to Exhibit 1.5 to the registrant’s Annual Report on Form 20-F for the year ended December 31, 2010).

4.1.1

Jacada Ltd. 1999 Share Option and Incentive Plan (incorporated by reference to Exhibit 10.3 to the registrant’s Registration Statement on Form F-1 (file no. 333-10882)).

4.1.2

Amendment to Jacada Ltd. 1999 Share Option and Incentive Plan (incorporated by reference to Exhibit 10.2 to the registrant’s Registration Statement on Form S-8 (file no. 333-73650)).

4.1.3

Amendment No. 2 to the Jacada Ltd. Form of 1999 Share Option and Incentive Plan. (incorporated by reference to Exhibit 4.8 to the registrant’s Annual Report on Form 20-F for the year ended December 31, 2009).

4.2.1

Jacada Ltd. 2003 Share Option Plan (incorporated by reference to Exhibit 99.1 to the registrant’s Registration Statement on Form S-8 (file no. 333-111303)).

4.2.2

Amendment No. 1 to the Jacada Ltd. 2003 Share Option and Incentive Plan (incorporated by reference to Exhibit 4.9 to the registrant’s Annual Report on Form 20-F for the year ended December 31, 2009).

4.3	2012 Share Option and Incentive Plan (incorporated by reference to Exhibit 4.6 to the registrant’s Annual Report on Form 20-F for the year ended December 31, 2012)

4.4

Jacada Ltd. Office Holder Compensation Policy (incorporated by reference to Appendix A to the registrant’s proxy statement for its 2013 annual general meeting of shareholders, annexed as Exhibit 99.1 to the registrant’s Report of Foreign Private Issuer on Form 6-K, furnished to the SEC on November 27, 2013)

8	List of Jacada Ltd.’s Subsidiaries (incorporated by reference to Exhibit 8 to the registrant’s Annual Report on Form 20-F for the year ended December 31, 2012)

11	Code of Ethics of Jacada Ltd. (incorporated by reference to Exhibit 11 to the registrant’s Annual Report on Form 20-F for the year ended December 31, 2003).

12.1	Certificate of Co-Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)/Rule 15d-14(a).

12.2	Certificate of Co-Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)/Rule 15d-14(a).

12.3	Certificate of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)/Rule 15d-14(a).

13.1	Certification of Co-Chief Executive Officers and Chief Financial Officer pursuant to Rule 13a-14(b)/Rule 15d-14(b) under the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

15.1	Consent of Kost, Forer, Gabbay and Kasierer, a member of EY Global.

101

The following financial information from Jacada Ltd. Annual Report on Form 20-F for the year ended December 31, 2015, filed with the SEC on April 21, 2016, formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets as of December 31, 2014 and 2015, (ii) Consolidated Balance Sheets (Parenthetical) as of December 31, 2014 and 2015, (iii) Consolidated Statements of Operations for the years ended December 31, 2013, 2014 and 2015, (iv) Consolidated Statements of Operations (Parenthetical) for the years ended December 31, 2013, 2014 and 2015, (v) Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2014 and 2015, (vi) Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2013, 2014 and 2015, (vii) Consolidated Statements of Changes in Shareholders’ Equity (Parenthetical) for the years ended December 31, 2013, 2014 and 2015, (viii) Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2014 and 2015, and (ix) Notes to Consolidated Financial Statements.

ITEM 1:	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	1
ITEM 2:	OFFER STATISTICS AND EXPECTED TIMETABLE	1
ITEM 3:	KEY INFORMATION	1
ITEM 4:	INFORMATION ON THE COMPANY	16
ITEM 4A:	UNRESOLVED STAFF COMMENTS	28
ITEM 5:	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	28
ITEM 6:	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	51
ITEM 7:	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	62
ITEM 8:	FINANCIAL INFORMATION	65
ITEM 9:	THE OFFER AND LISTING	66
ITEM 10:	ADDITIONAL INFORMATION	67
ITEM 11:	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	84
ITEM 12:	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	86
ITEM 13:	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	86
ITEM 14:	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	86
ITEM 15:	CONTROLS AND PROCEDURES	86
ITEM 16A:	AUDIT COMMITTEE FINANCIAL EXPERT	87
ITEM 16B:	CODE OF ETHICS	87
ITEM 16C:	PRINCIPAL ACCOUNTANT FEES AND SERVICES	87
ITEM 16D:	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	88
ITEM 16E:	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	88
ITEM 16F:	CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT	88
ITEM 16G:	CORPORATE GOVERNANCE	88
ITEM 16H:	MINE SAFETY DISCLOSURE	88
ITEM 17:	FINANCIAL STATEMENTS	89
ITEM 18:	FINANCIAL STATEMENTS	89
ITEM 19:	EXHIBITS	89