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What changed in MAGIC SOFTWARE ENTERPRISES LTD's 20-F — 2022 vs 2023

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Paragraph-level year-over-year comparison of MAGIC SOFTWARE ENTERPRISES LTD's 2022 and 2023 20-F annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+584 added−552 removedSource: 20-F (2024-05-13) vs 20-F (2023-05-11)

Top changes in MAGIC SOFTWARE ENTERPRISES LTD's 2023 20-F

584 paragraphs added · 552 removed · 376 edited across 6 sections

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−4 removed0 unchanged
Biggest changeITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE 1 ITEM 3. KEY INFORMATION 1 A. Selected Financial Data 1 B. Capitalization and Indebtedness 2 C. Reasons for the Offer and Use of Proceeds 2 D. Risk Factors 2 ITEM 4. INFORMATION ON THE COMPANY 27 A. History and Development of the Company 27 B. Business Overview 28 C.
Biggest changeITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE 1 ITEM 3. KEY INFORMATION 1 A. Reserved 1 B. Capitalization and Indebtedness 1 C. Reasons for the Offer and Use of Proceeds 1 D. Risk Factors 1 ITEM 4. INFORMATION ON THE COMPANY 23 A. History and Development of the Company 23 B. Business Overview 24 C. Organizational Structure 45 D.
Removed
Organizational Structure 52 D. Property, Plants and Equipment 53 ITEM 4 A. UNRESOLVED STAFF COMMENTS 53 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS 53 A. Operating Results 53 B. Liquidity and Capital Resources 62 C. Research and Development 65 D. Trend Information 65 E. Critical Accounting Estimates. 65 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 72 A.
Removed
Directors and Senior Management 72 B. Compensation 74 C. Board Practices 75 D. Employees 83 E. Share Ownership 84 F. Disclosure of a registrant’s action to recover erroneously awarded compensation 85 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 86 A. Major Shareholders 86 B. Related Party Transactions 87 C. Interests of Experts and Counsel 87 ITEM 8.
Removed
FINANCIAL INFORMATION 87 A. Consolidated Statements and Other Financial Information 87 B. Significant Changes 88 ITEM 9. THE OFFER AND LISTING 88 A. Offer and Listing Details 88 B. Plan of Distribution 88 C. Markets 88 D. Selling Shareholders 88 E. Dilution 88 F. Expenses of the Issue 88 v ITEM 10. ADDITIONAL INFORMATION 89 A. Share Capital 89 B.
Removed
Memorandum and Articles of Association 89 C. Material Contracts 89 D. Exchange Controls 89 E. Taxation 90 F. Dividends and Paying Agents 100 G. Statement by Experts 100 H. Documents on Display 100 I. Subsidiary Information 100 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS 101 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 101

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

112 edited+91 added−67 removed200 unchanged
Biggest changeRisks Related to Our Business and Our Industry ● The implementation of our M&A growth strategy, which requires the integration of our multiple acquired companies and their respective businesses, operations and employees with our own, involves significant risks. ● Our business depends on generating and maintaining ongoing, profitable client demand for our services and solutions, including through the adaptation and expansion of our services and solutions in response to ongoing changes in technology and offerings. ● We may encounter difficulties in realizing the potential financial or strategic benefits of recent business acquisitions. ● We are dependent on a limited number of core product families and services and a decrease in revenues from these products and services would adversely affect our business, results of operations and financial condition. ● Adapting to evolving technologies can require substantial financial investments, distract management and adversely affect the demand for our existing products and services. ● Our products have a lengthy sales cycle that could adversely affect our revenues. ● If we are unable to keep our supply of skills and resources in balance with client demand around the world, our business, the utilization rate of our professionals and our results of operations may be materially adversely affected. ● Our existing customers may not be satisfied with our solutions and services and might not make subsequent purchases from us. ● If we fail to meet our customers’ performance expectations, our reputation may be harmed, causing us to lose customers or exposing us to legal liability. 2 ● We enter from time to time into fixed-price contracts that could subject us to losses in the event we fail to properly estimate our costs. ● We face intense competition in the markets in which we operate and we might not be able to compete effectively. ● Unfavorable national and global economic conditions could adversely affect our business, operating results and financial condition. ● Geopolitical and other challenges and uncertainties due to the ongoing military conflict between Russia and Ukraine could have a material adverse effect. ● We are exposed to economic and market conditions that impact the communications industry. ● A reduction of government spending in Israel on IT services may reduce our revenues and profitability. ● The increasing amount of identifiable intangible assets and goodwill recorded on our balance sheet may lead to significant impairment charges in the future. ● If we fail to manage our growth, our business could be disrupted and our profitability will likely decline. ● We have a history of quarterly fluctuations in our results of operations and expect these fluctuations to continue. ● Changes in the ratio of our revenues generated from different revenue elements may adversely affect our gross profit margins. ● We may encounter difficulties with our international operations and sales that could adversely affect our business, results of operations and financial condition. ● Our international operations expose us to risks associated with fluctuations in currency exchange rates that could adversely affect our business. ● Breaches of network or information technology security, natural disasters or terrorist attacks could have an adverse effect on our business. ● Regulation of the internet and telecommunications, privacy and data security may adversely affect sales of our products and result in increased compliance costs. ● Errors or defects in our software solutions could inevitably arise and would harm our profitability and our reputation with customers, and could even give rise to claims against us. ● Third parties have in the past, and may in the future, claim that we infringe upon their intellectual property rights and such claims could harm our business. ● Although we apply measures to protect our intellectual property rights and our source code, there can be no assurance that the measures that we employ to do so will be successful. ● We and our customers rely on technology and intellectual property of third-parties, the loss of which could limit the functionality of our products and disrupt our business. ● We could be required to provide the source code of our products to our customers. 3 ● Some of our services and technologies may use “open source” software, which may restrict how we use or distribute our services or require that we release the source code of certain products subject to those licenses. ● Any unauthorized, and potentially improper, actions of our personnel could adversely affect our business, operating results and financial condition. ● Under applicable employment laws, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees. ● Our business may be materially affected by changes to fiscal and tax policies. ● Certain of our credit facility agreements with banks and other financial institutions are subject to a number of restrictive covenants that, if breached, could result in acceleration of our obligation to repay our debt. ● Increasing scrutiny and changing expectations from investors, lenders, customers and other market participants with respect to our Environmental, Social and Governance, or ESG, policies may impose additional costs on us or expose us to additional risks. ● If we are unable to maintain effective internal control over financial reporting in accordance with Sections 302 and 404(a) of the Sarbanes-Oxley Act of 2002, the reliability of our financial statements may be questioned and our share price may suffer. ● Breaches or significant disruptions of our information technology systems may occur. ● Security vulnerabilities in our software solutions could lead to reduced revenue or to liability claims. ● Macroeconomic headwinds caused by inflation, rising interest rates, and currency exchange rates have been adversely impacting, and may continue to adversely impact, our revenues, profitability and cash flows.
Biggest changeThis could adversely affect our business, results of operations and financial condition. ● Unfavorable national and global economic conditions could adversely affect our business, operating results and financial condition. ● We are exposed to economic and market conditions that impact the communications industry. ● A reduction of government spending in Israel on IT services, from which some of our revenues are derived, may reduce our revenues and profitability. ● Intangible assets and goodwill recorded on our balance sheet may lead to significant impairment charges in the future. ● Changes in the ratio of our revenues generated from different revenue elements may adversely affect our gross profit margins. ● We may encounter difficulties with our international operations and sales that could adversely affect our business, results of operations and financial condition. ● Fluctuations in foreign currency exchange rates have in recent past adversely affecting, and could again to adversely affect our business. ● Breaches of network or information technology security, natural disasters or terrorist attacks could have an adverse effect on our business. ● Security vulnerabilities in our software solutions could lead to reduced revenue or to liability claims. ● Changes in privacy regulations may impose additional costs and liabilities on us, limit our use of information, and adversely affect our business. ● Errors or defects in our software solutions could inevitably arise. ● Third parties may assert that we have infringed their intellectual property rights. ● We may be liable to our clients for damages caused by a violation of intellectual property rights, unsatisfactory performance of services, or similar matters and our insurance policies may not be sufficient to cover these damages. ● Our intellectual property rights and our source code insufficiently protected. ● The loss of third-party technology and intellectual property could limit the functionality of our products. ● We could be required to provide the source code of our products to our customers. 2 ● Some of our services and technologies may use “open source” software, which may restrict how we use or distribute our services or require our release of source code. ● Under applicable employment laws, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees. ● Our business may be materially affected by changes to fiscal and tax policies. ● Certain of our credit facility agreements are subject to a number of restrictive covenants. ● Increasing scrutiny and changing expectations from investors, lenders, customers and other market participants with respect to our Environmental, Social and Governance, or ESG, policies may impose additional costs on us or expose us to additional risks. ● We identified a material weakness in our internal control over financial reporting.
Developments in the industries we serve, which may be rapid, also could shift demand to new services and solutions. If, as a result of new technologies or changes in the industries we serve, our clients demand new services and solutions, we may be less competitive in these new areas or need to make significant investment to meet that demand.
Developments in the industries we serve, which may be rapid, could also shift demand to new services and solutions. If, as a result of new technologies or changes in the industries we serve, our clients demand new services and solutions, we may be less competitive in these new areas or need to make significant investment to meet that demand.
Our success in becoming a stronger competitor in the sale of development application platforms, integration solutions, packaged software solutions and professional services is dependent upon our ability to increase our sales in all our markets.
Our success in becoming a stronger competitor in the sale of professional services, development application platforms, integration solutions and packaged software solutions is dependent upon our ability to increase our sales in all our markets.
This may result in litigation and liability or fines, our compliance with costly and time-intensive notice requirements, governmental inquiry or oversight or a loss of customer confidence, any of which could harm our business or damage our brand and reputation, thereby requiring time and resources to mitigate these impacts.
This may result in litigation and liability or fines, our compliance with costly and time-intensive notice requirements, governmental inquiry or oversight or a loss of customer confidence, any of which could harm our business or damage our brand and reputation, thereby requiring time and resources to mitigate these impacts.
To date, these matters have not had any material effect on our business and results of operations; however, the regional security situation and worldwide perceptions of it are outside our control and there can be no assurance that these matters will not negatively affect our business, financial condition and results of operations in the future.
To date, these matters have not had any material effect on our business and results of operations; however, the regional security situation and worldwide perceptions of it are outside of our control and there can be no assurance that these matters will not negatively affect our business, financial condition and results of operations in the future.
We devote significant resources to address security vulnerabilities through engineering more secure solutions, enhancing security and reliability features in our solutions and services, code hardening, conducting rigorous penetration tests, deploying updates to address security vulnerabilities, regularly reviewing our solutions’ security controls, reviewing and auditing our solutions against independent security control frameworks (such as ISO 27001, SOC 2 and PCI), providing resources such as security training for our customers’ workforces and improving our incident response time, but security vulnerabilities cannot be totally eliminated.
We devote significant resources to address security vulnerabilities through engineering more secure solutions, enhancing security and reliability features in our solutions and services, code hardening, conducting rigorous penetration tests, deploying updates to address security vulnerabilities, regularly reviewing our solutions’ security controls, reviewing and auditing our solutions against independent security control frameworks (such as ISO 27001, SOC 2), providing resources such as security training for our customers’ workforces and improving our incident response time, but security vulnerabilities cannot be totally eliminated.
Factors that may contribute to fluctuations in our quarterly results of operations include: ● The size and timing of orders; ● The high level of competition that we encounter; 24 ● The timing of our products introductions or enhancements or those of our competitors or of providers of complementary products; ● Market acceptance of our new products, applications and services; ● The purchasing patterns and budget cycles of our customers and end-users; ● The mix of product sales; ● Fluctuations in currency exchange rates; ● General economic conditions; and ● The integration of newly acquired businesses.
Factors that may contribute to fluctuations in our quarterly results of operations include: ● The size and timing of orders; ● The high level of competition that we encounter; ● The timing of our products introductions or enhancements or those of our competitors or of providers of complementary products; ● Market acceptance of our new products, applications and services; ● The purchasing patterns and budget cycles of our customers and end-users; ● The mix of product sales; ● Fluctuations in currency exchange rates; ● General economic conditions; and ● The integration of newly acquired businesses.
In addition to exerting the foregoing impact, macro-economic headwinds may amplify a number of risks for us, including, but not limited to, the following: ● our ability to increase sales of new, enhanced solutions to existing customers may be hindered due to more cautious purchasing and investment strategies by corporate customers; 21 ● reduced economic activity, which could lead to a prolonged recession, could negatively impact customer discretionary spending on insurance solutions, which in turn could substantially impact our business operations and financial condition in an adverse manner; ● our customer success efforts, our ability to enter into new markets and to acquire new customers may be impeded, in part due to lengthening of our sales cycles; ● there may be an increase in our credit losses reserves as customers face economic hardship and collectability becomes more uncertain, including due to the risk of bankruptcies; ● our ability to retain, attract and recruit employees may be adversely impacted if our growth rate and profitability decrease; ● our ability to complete acquisitions may be hampered if we need to seek financing for such acquisitions; and ● our ability to raise capital may be hurt.
In addition to exerting the foregoing impact, macro-economic headwinds may amplify a number of risks for us, including, but not limited to, the following: ● our ability to increase sales of new, enhanced solutions to existing customers may be hindered due to more cautious purchasing and investment strategies by corporate customers; ● reduced economic activity, which could lead to a recession, could negatively impact customer discretionary spending on insurance solutions, which in turn could substantially impact our business operations and financial condition in an adverse manner; ● our customer success efforts, our ability to enter into new markets and to acquire new customers may be impeded, in part due to lengthening of our sales cycles; ● there may be an increase in our credit losses reserves as customers face economic hardship and collectability becomes more uncertain, including due to the risk of bankruptcies; ● our ability to retain, attract and recruit employees may be adversely impacted if our growth rate and profitability decrease; ● our ability to complete acquisitions may be hampered if we need to seek financing for such acquisitions; and ● our ability to raise capital may be hurt.
In addition, if for any reason exchange or price controls or other restrictions on the conversion of foreign currencies were imposed, our financial position and results of operations could be adversely affected. 14 Breaches of network or information technology security, natural disasters or terrorist attacks could have an adverse effect on our business.
In addition, if for any reason exchange or price controls or other restrictions on the conversion of foreign currencies were imposed, our financial position and results of operations could be adversely affected. Breaches of network or information technology security, natural disasters or terrorist attacks could have an adverse effect on our business.
We operate in a rapidly evolving environment in which there currently are, and we expect will continue to be, new technology entrants. New services or technologies offered by competitors or new entrants may make our offerings less differentiated or less competitive when compared to other alternatives, which may adversely affect our results of operations.
We operate in a rapidly evolving environment in which there currently are, and we expect will continue to be, new technology entrants. New services or technologies offered by competitors or new entrants may make our offerings less differentiated or less competitive when compared to other alternatives, which may adversely affect the results of our operations.
The application of existing laws to cloud-based solutions is particularly uncertain and cloud-based solutions may be subject to further regulation, the impact of which cannot be fully understood at this time. Moreover, these laws may be interpreted and applied in a manner that is inconsistent with our data and privacy practices.
In addition, the application of existing laws to cloud-based solutions is particularly uncertain and cloud-based solutions may be subject to further regulation, the impact of which cannot be fully understood at this time. Moreover, these laws may be interpreted and applied in a manner that is inconsistent with our data and privacy practices.
Such delays in the future could negatively affect our cash flows by delaying the receipt of payments from the government of Israel for services performed. The increasing amount of intangible assets and goodwill recorded on our balance sheet may lead to significant impairment charges in the future.
Such delays in the future could negatively affect our cash flows by delaying the receipt of payments from the government of Israel for services performed. 11 The increasing amount of intangible assets and goodwill recorded on our balance sheet may lead to significant impairment charges in the future.
If global economic and market conditions, or economic conditions in the United States, Europe or Asia or other key markets, remain uncertain or weaken, our business, operating results and financial condition may be adversely affected. 11 We are exposed to economic and market conditions that impact the communications industry.
If global economic and market conditions, or economic conditions in the United States, Europe or Asia or other key markets, remain uncertain or weaken, our business, operating results and financial condition may be adversely affected. We are exposed to economic and market conditions that impact the communications industry.
While we have invested in, and intend to continue to invest in, reasonably necessary resources to comply with these new standards, to the extent that we fail to adequately comply, that failure could have an adverse effect on our business, financial conditions, results of operations and cash flows.
While we have invested in, and intend to continue to invest in, reasonably necessary resources to comply with these standards, to the extent that we fail to adequately comply, that failure could have an adverse effect on our business, financial conditions, results of operations and cash flows.
If we are unable to keep our supply of skills and resources in balance with client demand around the world and attract and retain professionals with strong leadership skills, our business, the utilization rate of our professionals and our results of operations may be materially adversely affected.
If we are unable to keep our supply of skills and resources in balance with client demand around the world and attract, motivate and retain professionals with strong leadership skills, our business, the utilization rate of our professionals and our results of operations may be materially adversely affected.
These more integrated services and solutions may represent more attractive alternatives to clients than some of our services and solutions, which may materially adversely affect our competitive position and our results of operations. Unfavorable national and global economic conditions could adversely affect our business, operating results and financial condition.
These more integrated services and solutions may represent more attractive alternatives to clients than some of our services and solutions, which may materially adversely affect our competitive position and our results of operations. 10 Unfavorable national and global economic conditions could adversely affect our business, operating results and financial condition.
If release dates of any future products or enhancements are delayed our business, financial condition and results of operations could be adversely affected. 8 Our products have a lengthy sales cycle that could adversely affect our revenues.
If release dates of any future products or enhancements are delayed our business, financial condition and results of operations could be adversely affected. Our products have a lengthy sales cycle that could adversely affect our revenues.
As a further result of the limited volume, our Ordinary Shares have experienced significant market price volatility in the past and may experience significant market price and volume fluctuations in the future, in response to factors such as announcements of developments related to our business, announcements by competitors, quarterly fluctuations in our financial results and general conditions in the industry in which we compete.
As a further result of the historically limited volume, our Ordinary Shares have experienced significant market price volatility in the past as in 2023 and may experience significant market price and volume fluctuations in the future, in response to factors such as announcements of developments related to our business, announcements by competitors, quarterly fluctuations in our financial results and general conditions in the industry in which we compete.
While our principal executive offices are located in Israel, 60%, 62% and 64% of our sales in the years ended December 31, 2020, 2021 and 2022, respectively, were generated in other regions and countries including, but not limited to the Americas, Europe, Japan, Asia-Pacific, India, and Africa.
While our principal executive offices are located in Israel, 62%, 64% and 60% of our sales in the years ended December 31, 2021, 2022 and 2023, respectively, were generated in other regions and countries including, but not limited to the Americas, Europe, Japan, Asia-Pacific, India, and Africa.
The cost of these steps could reduce our operating margins. 15 Despite these protective systems and remedial measures, techniques used to obtain unauthorized access are constantly changing, are becoming increasingly more sophisticated and often are not recognized until after an exploitation of information has occurred.
The cost of these steps could reduce our operating margins. 13 Despite these protective systems and remedial measures, techniques used to obtain unauthorized access are constantly changing, are becoming increasingly more sophisticated and often are not recognized until after an exploitation of information has occurred.
It also may be difficult for you to assert U.S. securities law claims in original actions instituted in Israel. Provisions of Israeli law may delay, prevent or make difficult an acquisition of us, which could prevent a change of control and therefore depress the price of our shares.
It also may be difficult to assert U.S. securities law claims in original actions instituted in Israel. Provisions of Israeli law may delay, prevent or make difficult an acquisition of us, which could prevent a change of control and therefore depress the price of our shares.
If we are not successful in these initiatives, our results of operations could be adversely affected 9 Moreover, Our research and development, product delivery, and general and administrative, activities are conducted at locations where the competition for skilled professionals is particularly intense.
If we are not successful in these initiatives, our results of operations could be adversely affected. 8 Moreover, our research and development, product delivery, and general and administrative, activities are conducted at locations where the competition for skilled professionals is particularly intense.
A significant part of our business strategy is to pursue acquisitions and other initiatives based on strategy centered on three key factors: growing our customer base, expanding geographically and adding complementary solutions to our portfolio— all while we seek to ensure our continued high quality of services and product delivery. In the past five years we made numerous acquisitions.
A significant part of our business strategy is to pursue acquisitions and other initiatives based on strategy centered on three key factors: growing our customer base, expanding our geographic footprint and adding complementary solutions to our portfolio—all while we seek to ensure our continued high quality of services and product delivery. In the past five years we made numerous acquisitions.
Because many of these contracts involve new technologies and applications, unforeseen events, such as technological difficulties and other cost overruns, can result in the contract pricing becoming less favorable or even unprofitable to us and have an adverse impact on our financial results.
Because certain of these contracts may involve new technologies and applications, unforeseen events, such as technological difficulties and other cost overruns, can result in the contract pricing becoming less favorable or even unprofitable to us and have an adverse impact on our financial results.
Risks Related to Our Ordinary Shares Our Ordinary Shares are traded on more than one market and this may result in price variations. Our Ordinary Shares are traded primarily on the NASDAQ Global Select Market and on the TASE.
Risks Related to an Investment in Our Ordinary Shares Our Ordinary Shares are traded on more than one market and this may result in price variations. Our Ordinary Shares are traded primarily on the NASDAQ Global Select Market and on the TASE.
If we do not make the appropriate level of investment in our technology systems or if our systems become out-of-date or obsolete and we are not able to deliver the quality of data security that meet our independent security control certification requirements, our business could be adversely affected.
If we do not make a sufficient level of investment in our technology systems or if our systems become out-of-date or obsolete and we are not able to deliver the quality of data security that meet our independent security control certification requirements, our business could be adversely affected.
The full impact of economic headwinds on our business and our future performance may also have the effect of heightening any of our other risk factors described in this annual report, and is difficult to predict how long those trends will continue, so there is some level of risk that any guidance we provide to the market may turn out to be incorrect.
The full impact of economic headwinds on our business and our future performance may also have the effect of heightening any of our other risk factors described in this annual report and is difficult to predict when and whether those trends will continue, so there is some level of risk that any guidance we provide to the market may turn out to be incorrect.
This flurry of growth and activity has caused a sharp increase in job openings in both high-tech companies and research and development centers, as well as the intensification of competition between employers to attract qualified employees in those jurisdictions.
This flurry of growth and activity caused a sharp increase in job openings in both high-tech companies and research and development centers, as well as the intensification of competition between employers to attract qualified employees.
The challenges involved in integrating the acquired companies include: ● Preserving customer, supplier and other important relationships ● Integrating complex, core products and services that we acquire with our existing products and services ● Integrating financial forecasting and controls, procedures and reporting cycles ● Combining and integrating information technology, or IT, systems ● Integrating employees and related HR systems and benefits, maintaining employee morale and retaining key employees ● Potential confusion that we may have in our dealings with customers and prospective customers as to the products we are offering to them and potential overlap among those products ● Investment of significant management time and attention towards the integration process The benefits we expect to realize from these acquisitions are, necessarily, based on projections and assumptions about the combined businesses of our company, and assume, among other things, the successful integration of these acquired entities into our business and operations.
(M.H.) Technologies Communication Computer Ltd and other businesses that we have acquired or may acquire from time to time include: ● Preserving customer, supplier and other important relationships ● Integrating complex, core products and services that we acquire with our existing products and services ● Integrating financial forecasting and controls, procedures and reporting cycles ● Combining and integrating information technology, or IT, systems ● Integrating employees and related HR systems and benefits, maintaining employee morale and retaining key employees ● Potential confusion that we may have in our dealings with customers and prospective customers as to the products we are offering to them and potential overlap among those products ● Investment of significant management time and attention towards the integration process The benefits we expect to realize from these acquisitions are, necessarily, based on projections and assumptions about the combined businesses of our company, and assume, among other things, the successful integration of these acquired entities into our business and operations.
As of December 31, 2022, we were in compliance with all of our financial covenants to banks and other financial institutions. See Note 12 to our consolidated financial statements for additional information on liabilities to banks and other financial institutions.
As of December 31, 2023, we were in compliance with all of our financial covenants to banks and other financial institutions. See Note 10 and Note 12 to our consolidated financial statements for additional information on liabilities to banks and other financial institutions.
Unauthorized parties may also attempt to gain physical access to our facilities in order to infiltrate our information systems or attempt to gain logical access to our products, services, or information systems for the purpose of exfiltrating content and data.
Unauthorized parties may also attempt to gain physical access to our facilities to infiltrate our information systems or attempt to gain access to our products, services, or information systems for the purpose of exfiltrating content and data.
These acquisitions are part of our integrated M&A growth strategy, which is centered on three key factors: growing our customer base, expanding geographically and adding complementary solutions and services to our portfolio— all while we seek to ensure our continued high quality of services and product delivery.
All such acquisitions are part of our integrated M&A growth strategy, which is centered on three key factors: growing our customer base, expanding our geographic footprint and adding complementary solutions and services to our portfolio— all while we seek to ensure our continued high quality of services and product delivery.
If we acquire other businesses, we may face difficulties, including: ● Difficulties in integrating the operations, systems, technologies, products, and personnel of the acquired businesses or enterprises; ● Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions; ● Integrating financial forecasting and controls, procedures and reporting cycles; ● Potential difficulties in completing projects associated with in-process research and development; 7 ● Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions; ● Insufficient revenue to offset increased expenses associated with acquisitions; and ● The potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans.
If we acquire other businesses, we may face difficulties, including: ● Difficulties in integrating the operations, systems, technologies, products, and personnel of the acquired businesses or enterprises; ● Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions; ● Integrating financial forecasting and controls, procedures and reporting cycles; ● Potential difficulties in completing projects associated with in-process research and development; ● Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions; ● Insufficient revenue to offset increased expenses associated with acquisitions; and ● The potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans. 7 Rapid technological changes may adversely affect the market acceptance of our products and services, and our business, results of operations and financial condition could be adversely affected.
This required us to make a substantial financial investment to develop and implement cloud computing and enterprise mobility into our software solution models and has required significant attention from our management to refine our business strategies to include the delivery of these solutions.
This required us to make a substantial financial investment to develop and implement cloud computing into our software solution models and has required significant attention from our management to refine our business strategies to include the delivery of such solution.
In addition, adapting to evolving technologies may require us to invest a significant amount of resources, time and attention into the development, integration, support and marketing of those technologies. The acceptance and growth of cloud computing and enterprise mobility are examples of rapidly changing technologies, which we have adapted into our products, packaged software solution and software service offerings.
In addition, adapting to evolving technologies may require us to invest a significant amount of resources, time and attention into the development, integration, support and marketing of those technologies. The acceptance and growth of cloud computing is an example of a rapidly changing technology, which we have adapted into our products, packaged software solution and software service offerings.
Our current international operation and our plans to further expand our international operations subjects us to many risks inherent to international business activities, including: ● Limitations and disruptions resulting from the imposition of government controls; ● Compliance with a wide variety of foreign regulatory standards; ● Compliance with the U.S.
Our current international operation and our plans to further expand our international operations subjects us to many risks inherent to international business activities, including: ● Limitations and disruptions resulting from the imposition of government controls; ● Compliance with the U.S.
Employee attrition— for all fields and professions, and for all levels of management— has accompanied this strong competition, and hi-tech companies such as ours that are based in Israel and these other jurisdictions are currently facing a severe shortage of skilled human capital, including engineering, research and development, sales and customer support personnel.
Employee attrition— for all fields and professions, and for all levels of management—accompanied this strong competition, and high-tech companies such as ours that are based in Israel and other jurisdictions have recently faced a severe shortage of skilled human capital, including engineering, research and development, sales and customer support personnel.
The amount of goodwill and identifiable intangible assets on our consolidated statements of financial position has increased significantly over the last five years from approximately $149 million as of December 31, 2017 to $211 million as of December 31, 2022 because of our acquisitions and may increase further following future acquisitions.
The amount of goodwill and identifiable intangible assets on our consolidated statements of financial position has increased significantly over the last five years from approximately $136 million as of December 31, 2018 to $217 million as of December 31, 2023 because of our acquisitions and may increase further following future acquisitions.
Moreover, development projects can be technically challenging and expensive. The nature of these development cycles may cause us to experience delays between the time we incur expenses associated with research and development and the time we generate revenues, if any, from such expenses.
The nature of these development cycles may cause us to experience delays between the time we incur expenses associated with research and development and the time we generate revenues, if any, from such expenses.
These agreements prohibit our employees from competing directly with us or working for our competitors or clients for a limited period after they cease working for us.
We generally enter into non-competition agreements with our employees. These agreements prohibit our employees from competing directly with us or working for our competitors or clients for a limited period after they cease working for us.
If we are unable to maintain effective internal control over financial reporting in accordance with Sections 302 and 404(a) of the Sarbanes-Oxley Act of 2002, the reliability of our financial statements may be questioned and our share price may suffer. The Sarbanes-Oxley Act of 2002 imposes certain duties on us and on our executives and directors.
We identified a material weakness in our internal control over financial reporting. If we are unable to maintain effective internal control over financial reporting in accordance with Sections 302 and 404(a) of the Sarbanes-Oxley Act of 2002, the reliability of our financial statements may be questioned and our share price may suffer.
Furthermore, there are a number of countries, primarily in the Middle East, as well as Malaysia and Indonesia, that restrict business with Israel or Israeli companies, and we are precluded from marketing our products to these countries.
While Israel and the United Arab Emirates signed a normalization agreement in 2020, there are a number of countries, primarily in the Middle East, as well as Malaysia and Indonesia that restrict business with Israel or Israeli companies, and we are precluded from marketing our products to these countries directly from Israel.
Formula Systems (1985) Ltd., or Formula Systems (symbol: FORTY), an Israeli company whose shares trade on the NASDAQ Global Select Market and the TASE, directly owned 22,710,106 or 46.26%, of our outstanding Ordinary Shares as of April 1, 2023.
Formula Systems (1985) Ltd., or Formula Systems (symbol: FORTY), an Israeli company whose shares trade on the NASDAQ Global Select Market and the TASE, beneficially owned 22,933,809 or 46.71%, of our outstanding Ordinary Shares as of April 1, 2024.
We enter from time to time into fixed-price contracts that could subject us to losses in the event we fail to properly estimate our costs. We enter from time to time into firm fixed-price contracts where our delivery requirements sometimes span more than one year. If our initial cost estimates are incorrect, it may cause losses on these contracts.
We enter from time to time into fixed-price contracts that could subject us to losses in the event we fail to properly estimate our costs. We enter from time to time into firm fixed-price contracts where our delivery requirements sometimes span more than one year.
Integration of these businesses will be complex and time consuming, will involve additional expense and could disrupt our business and divert management’s attention from ongoing business concerns.
Integration of these businesses will be complex and time consuming, will involve additional expense and could disrupt our business and divert management’s attention from ongoing business concerns. The challenges involved in integrating K.M.T.
Adverse economic conditions in those markets, including due to rising inflation, increased interest rates and decreased economic output may reduce overall demand for our insurance software solutions and services.
Uncertain economic conditions in those markets, including due to lingering inflation, current relatively high interest rates and potential decreased economic output may reduce overall demand for our insurance software solutions and services.
Our actual results could materially differ from, and could require adjustments to, those estimates. 5 The implementation of our M&A growth strategy, which requires the integration of multiple acquired companies and their respective businesses, operations and employees with our own, involves significant risks, and the failure to integrate successfully may adversely affect our future results.
Risks Related to Our Business and Our Industry The implementation of our M&A growth strategy, which requires the integration of multiple acquired companies and their respective businesses, operations and employees with our own, involves significant risks, and the failure to integrate successfully may adversely affect our future results.
As the market continues to adopt new technologies, we expect to continue to make substantial investments in our software solutions, system integrations and professional services related to these changing technologies.
As the market continues to adopt new technologies, we expect to continue to make substantial investments in our software solutions, system integrations and professional services related to these changing technologies, and in the future we may not have sufficient funds or other resources to make the required investments.
We currently have the ability to benefit from certain government tax benefits, which may be cancelled or reduced in the future. We are currently eligible to receive certain tax benefits under programs of the Government of Israel. In order to maintain our eligibility for these tax benefits, we must continue to meet specific requirements.
We are currently eligible to receive certain tax benefits under programs of the Government of Israel. In order to maintain our eligibility for these tax benefits, we must continue to meet specific requirements. If we fail to comply with these requirements in the future, such tax benefits may be cancelled.
However, we could incur significant costs in order to investigate and respond to future attacks, to respond to evolving regulatory oversight requirements, to upgrade our cybersecurity systems and controls, and to remediate security compromise or damage.
However, we could incur significant costs in order to investigate and respond to future attacks, to respond to evolving regulatory oversight requirements, to upgrade our cybersecurity systems and controls, and to remediate security compromise or damage. In response to past threats and attacks, we have implemented further controls and planned preventative actions to further strengthen our systems against future attacks.
A few of our customers have the right to use the source code of some of our products based on the license agreements signed with such clients (mostly with respect to older versions of our solutions), although such use is limited for specific matters and cases, these clients are exposed to some of our trade secrets and other proprietary and confidential information which could harm us. 19 Some of our services and technologies may use “open source” software, which may restrict how we use or distribute our services or require that we release the source code of certain products subject to those licenses.
A few of our customers have the right to use the source code of some of our products based on the license agreements signed with such clients (mostly with respect to older versions of our solutions), although such use is limited for specific matters and cases, these clients are exposed to some of our trade secrets and other proprietary and confidential information which could harm us.
In addition, a portion of our projects may be considered critical to the operations of our clients’ businesses. Our exposure to legal liability may be increased in the case of contracts in which we become more involved in our customers’ operations.
Our exposure to legal liability may be increased in the case of contracts in which we become more involved in our customers’ operations.
Any decrease in the trading price of our Ordinary Shares on one of these markets could cause a decrease in the trading price of our Ordinary Shares on the other market. 22 There is a relatively limited trading volume for our shares, which reduces liquidity for our shareholders, and may cause the share price to be volatile, all of which may lead to losses by investors.
There is a relatively limited trading volume for our shares, which reduces liquidity for our shareholders, and may cause the share price to be volatile, all of which may lead to losses by investors.
However, in the years ended December 31, 2020, 2021 and 2022, approximately 52%, 47% and 46% of our revenues, respectively, were derived from sales outside the United States, particularly, Israel, Europe, Japan and Asia-Pacific, and Africa.
Our financial statements are stated in U.S. dollars, our functional currency. However, in the years ended December 31, 2021, 2022 and 2023, approximately 47%, 46% and 53% of our revenues, respectively, were derived from sales outside the United States, particularly, Israel, Europe, Japan and Asia-Pacific, and Africa.
In the event that portions of our proprietary technology are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our technologies, or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our services and technologies and materially and adversely affect our business, results of operations and prospects.
In the event that portions of our proprietary technology are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our technologies, or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our services and technologies and materially and adversely affect our business, results of operations and prospects. 17 Under applicable employment laws, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees.
Two of our largest clients accounted together for 21.2% and 20.6% of our revenues in the years ended December 31, 2021 and 2022, respectively and five of our largest clients accounted for 27.5% and 26.4% of our revenues in the years ended December 31, 2021 and 2022, respectively.
Two of our largest clients accounted together for 20.6% and 16.8% of our revenues in the years ended December 31, 2022 and 2023, respectively and five of our largest clients accounted for 26.4% and 22.9% of our revenues in the years ended December 31, 2022 and 2023, respectively.
In addition, the weakening of European currencies in comparison to the U.S. dollar has been adversely impacting in a material manner, and may continue to adversely impact, our revenues and our results of operations as measured in U.S. dollars.
In addition, the weakening of New Israeli Shekel and the European currencies in comparison to the U.S. dollar adversely impacted in a material manner, our revenues and our results of operations as measured in U.S. dollars in 2023 compared to 2022 and may continue to adversely impact them in the future.
Other companies are also seeking to offer integration solutions, low-code development solutions, enterprise mobility solutions, internet-related solutions, such as cloud computing, and complementary services to generate growth.
We compete in a market that is characterized by rapid technological changes. Other companies are also seeking to offer integration solutions, low-code development solutions, enterprise mobility solutions, internet-related solutions, such as cloud computing, and complementary services to generate growth.
Guy Bernstein, our Chief Executive Officer who is also the Chief Executive Officer of Formula Systems, owns as of April 1, 2023 approximately 11.73% of the outstanding shares of Formula Systems. 23 Although transactions between us and our controlling shareholders are subject to special approvals under Israeli law, Formula and Asseco may exercise their controlling influence over our operations and business strategy and use their sufficient voting power to control the outcome of various matters requiring shareholder approval.
Although transactions between us and our controlling shareholders are subject to special approvals under Israeli law, Formula and Asseco may exercise their controlling influence over our operations and business strategy and use their sufficient voting power to control the outcome of various matters requiring shareholder approval.
If we fail to comply with these requirements in the future, such tax benefits may be cancelled. Service and enforcement of legal process on us and our directors and officers may be difficult to obtain. We are organized in Israel and some of our directors and executive officers reside outside the United States.
Service and enforcement of legal process on us and our directors and officers may be difficult to obtain. We are organized in Israel and some of our directors and executive officers reside outside the United States. Service of process upon them may be difficult to effect within the United States.
In particular, leading companies in the software industry own large numbers of patents, copyrights, trademarks and trade secrets, which they may use to assert claims against us.
The software industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patents and other intellectual property rights. In particular, leading companies in the software industry own large numbers of patents, copyrights, trademarks and trade secrets, which they may use to assert claims against us.
Regardless of whether we prevail, diversion of key employees’ time and attention from our business, the incurrence of substantial expenses and potential damage to our reputation might result.
Liability claims could require us to spend significant time and money in litigation or to pay significant damages. Regardless of whether we prevail, diversion of key employees’ time and attention from our business, the incurrence of substantial expenses and potential damage to our reputation might result.
Additionally, California recently enacted the California Consumer Privacy Act, or CCPA, it creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households.
Additionally, several states, including California, Virginia, Maryland and Utah, have enacted laws creating new individual privacy rights for consumers (as that word is broadly defined in each law) and placing increased privacy and security obligations on entities handling personal data of consumers or households. In California, we are subject to the California Consumer Privacy Act, or CCPA.
Our operations could be disrupted by the absence for a significant period of one or more of our executive officers or key employees or a significant number of other employees due to military service. Any disruption in our operations could adversely affect our business.
If a military conflict or war arises, these individuals could be required to serve in the military for extended periods of time. Our operations could be disrupted by the absence for a significant period of one or more of our executive officers or key employees or a significant number of other employees due to military service.
Any major hostilities involving Israel, a full or partial mobilization of the reserve forces of the Israeli army, the interruption or curtailment of trade between Israel and its present trading partners, or a significant downturn in the economic or financial condition of Israel could adversely affect our business, financial condition and results of operations.
Any major hostilities involving Israel, a full or partial mobilization of the reserve forces of the Israeli army, the interruption or curtailment of trade or air traffic between Israel and its trading partners, or a significant downturn in the economic or financial condition of Israel could adversely affect our business, financial condition and results of operations. 21 In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets.
However, we cannot assure you that such measures will provide absolute security, that we will be able to react in a timely manner, or that our remediation efforts following past or future attacks will be successful. Consequently, our financial performance and results of operations would be materially adversely affected.
However, such measures do not provide absolute security, that we will be able to react in a timely manner, or that our remediation efforts following past or future attacks will be successful.
We have experienced and defended against certain threats to our systems and security (such as phishing attempts), none of which have had a material adverse effect on our business or operations to date.
From time to time we experience cyber-attacks and other security incidents of varying degrees (such as phishing attempts), none of which have had a material adverse effect on our business or operations to date.
Many of our executive officers and employees in Israel are obligated to perform annual reserve duty in the Israeli Defense Forces and may be called for active duty under emergency circumstances at any time. If a military conflict or war arises, these individuals could be required to serve in the military for extended periods of time.
Our results of operations may be adversely affected by the obligation of our personnel to perform military service. Many of our executive officers and employees in Israel are obligated to perform annual reserve duty in the Israeli Defense Forces and may be called for active duty under emergency circumstances at any time.
Additionally, we are subject to transfer pricing rules and regulations, including those relating to the flow of funds between us and our affiliates, which are designed to ensure that appropriate levels of income are reported in each jurisdiction in which we operate. 20 Certain of our credit facility agreements with banks and other financial institutions are subject to a number of restrictive covenants that, if breached, could result in acceleration of our obligation to repay our debt.
Additionally, we are subject to transfer pricing rules and regulations, including those relating to the flow of funds between us and our affiliates, which are designed to ensure that appropriate levels of income are reported in each jurisdiction in which we operate.
However, because PFIC status is based on our income, assets and activities for the entire taxable year, it is not possible to determine whether we will be characterized as a PFIC for our current taxable year or future taxable years until after the close of the applicable taxable year.
Because PFIC status is determined annually based on our income, assets and activities for the entire taxable year, it is not possible to determine whether we will be characterized as a PFIC for the taxable year ending December 31, 2024, or for any subsequent year, until we finalize our financial statements for that year.
Service of process upon them may be difficult to effect within the United States. Furthermore, most of our assets and the assets of some of our executive officers are located outside the United States.
Furthermore, most of our assets and the assets of some of our executive officers are located outside the United States.
We market and sell our software solutions and services primarily in North America and in Israel, as well as, to a smaller extent, in various parts of the rest of the world.
Our business depends on overall demand within the global information technology sector, the economic health of our current and prospective clients, and worldwide economic conditions. We market and sell our software solutions and services primarily in North America and in Israel, as well as, to a smaller extent, in various parts of the rest of the world.
In recent years the decline in our gross margin was mainly affected by the change in proportion of our revenues generated from the sale of each of those elements of our revenues.
We derive our revenues from the sale of software licenses, related professional services, maintenance and technical support as well as from other IT professional services. In recent years the decline in our gross margin was mainly affected by the change in proportion of our revenues generated from the sale of each of those elements of our revenues.
If our existing clients are not satisfied with our solutions and services, they may not enter into new project contracts with us or continue using our services. A significant decline in our revenue stream from existing clients, including due to termination of agreement(s), would have a material adverse effect on our business, results of operations and financial condition.
Accordingly, In accordance, a significant decline in our revenue stream from existing clients, including due to termination of agreement(s), would have a material adverse effect on our business, results of operations and financial condition.
In addition, any lawsuits regarding intellectual property rights, regardless of their success, could be expensive to resolve and divert the time and attention of our management and technical personnel. 18 Although we apply measures to protect our intellectual property rights and our source code, there can be no assurance that the measures that we employ to do so will be successful.
In addition, any lawsuits regarding intellectual property rights, regardless of their success, could be expensive to resolve and divert the time and attention of our management and technical personnel.
Consequently, the trading prices of our Ordinary Shares on these two markets may differ.
Consequently, the trading prices of our Ordinary Shares on these two markets may differ. Any decrease in the trading price of our Ordinary Shares on one of these markets could cause a decrease in the trading price of our Ordinary Shares on the other market.
However, we may not meet those upfront estimates and/or the expectations of our customers, which could lead to a dispute with a client. 10 We face intense competition in the markets in which we operate and we might not be able to compete effectively. This could adversely affect our business, results of operations and financial condition.
We face intense competition in the markets in which we operate and we might not be able to compete effectively. This could adversely affect our business, results of operations and financial condition. The markets in which we offer our services and solutions are highly competitive.
We identified a material weakness in our internal control over financial reporting as of December 31, 2022 with respect to not having adequate trained resources to retain sufficient and precise documentation as evidence for performing business processes controls (including automated and IT-dependent manual), management review controls, and evidence to demonstrate completeness and accuracy of information prepared by entity (“IPE”).
Our efforts to comply with these requirements have resulted in increased general and administrative expenses and a diversion of management time and attention, and we expect these efforts to require the continued commitment of significant resources. 18 We identified a material weakness in our internal control over financial reporting as of December 31, 2023 with respect to not retaining complete documentation as evidence for performing certain (i) business processes controls (including automated and IT-dependent manual) (ii) sufficiently precise management review controls and (iii) evidence to demonstrate completeness and accuracy of information prepared by entity (“IPE”).
Risk Related to Our Ordinary Shares ● Our Ordinary Shares are traded on more than one market and this may result in price variations. ● There is relatively limited trading volume for our shares, which reduces liquidity for our shareholders, and may cause the share price to be volatile, all of which may lead to losses by investors. ● We are a foreign private issuer under the rules and regulations of the SEC and are therefore exempt from a number of rules under the Exchange Act. ● Our controlling shareholder has a controlling influence over matters requiring shareholder approval, which could delay or prevent a change of control that may benefit our public shareholders. ● Our U.S. shareholders may suffer adverse tax consequences if we are classified as a passive foreign investment company or as a “controlled foreign corporation.” 4 Risks Related to Our Location in Israel ● Political, economic and military instability in Israel may disrupt our operations and negatively affect our business condition, harm our results of operations and adversely affect our share price. ● Our results of operations may be adversely affected by the obligation of our personnel to perform military service. ● We currently have the ability to benefit from certain government tax benefits, which may be cancelled or reduced in the future. ● Service and enforcement of legal process on us and our directors and officers may be difficult to obtain. ● Provisions of Israeli law may delay, prevent or make difficult an acquisition of us, which could prevent a change of control and therefore depress the price of our shares. ● The rights and responsibilities of our shareholders are governed by Israeli law and differ in some respects from the rights and responsibilities of shareholders under U.S. law.
Risk Related to Our Ordinary Shares ● Our Ordinary Shares are traded on more than one market, which may result in price variations. ● There is relatively limited trading volume for our shares, which reduces and increases volatility. ● We are a foreign private issuer under the rules and regulations of the SEC and are therefore exempt from a number of rules under the Exchange Act, and are permitted to file less information with the SEC than a domestic U.S. reporting company, which reduces the level and amount of disclosure that you receive. ● As of April 1, 2024, our controlling shareholder, Formula Systems (1985) Ltd., beneficially owns approximately 46.71% of our outstanding Ordinary Shares and therefore has a controlling influence over matters requiring shareholder approval, which could delay or prevent a change of control that may benefit our public shareholders. ● We have a history of quarterly fluctuations in results of operations which contributes and expect these fluctuations to continue. 3 Risks Related to Our Location in Israel ● The ongoing war and hostilities between Israel and terrorist groups— Hamas in Gaza, and Hezbollah in Lebanon— may limit our ability to sell our products and services. ● Our results of operations may be adversely affected by the obligation of our personnel to perform military service. ● We currently have the ability to benefit from certain government tax benefits, which may be cancelled or reduced in the future. ● Service and enforcement of legal process on us and our directors and officers may be difficult to obtain. ● The rights and responsibilities of our shareholders are governed by Israeli law and differ in some respects from the rights and responsibilities of shareholders under U.S. law.
Adapting to evolving technologies can require substantial financial investments, distract management and adversely affect the demand for our existing products and services. Because our software solutions are complex and require rigorous testing, development cycles can be lengthy, taking us up to two years to develop and introduce new, enhanced or modified solutions.
Because our software solutions are complex and require rigorous testing, development cycles can be lengthy, taking us up to two years to develop and introduce new, enhanced or modified solutions. Moreover, development projects can be technically challenging and expensive.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeLtd India 100 % Onyx Magyarorszag Szsoftverhaz (shares held by Magic Software Enterprises Netherlands B.V.) Hungary 100 % Magix Integration (Proprietary) Ltd South Africa 100 % AppBuilder Solutions Ltd United Kingdom 100 % Complete Business Solutions Ltd Israel 100 % Datamind Technologies Ltd (shares held by Complete Business Solutions Ltd) Israel 100 % CommIT Technology Solutions Ltd Israel 77.8 % CommIT Software Ltd (shares held by Comm-IT Technology Solutions Ltd.) Israel 100 % CommIT Embedded Ltd (shares held by Comm-IT Technology Solutions Ltd.) Israel 75 % Valinor Ltd.
Biggest changeDelaware 100 % Magic Software Enterprises India Pvt. Ltd India 100 % Magic Software Enterprises Netherlands B.V. Netherlands 100 % Magic Software Enterprises Spain Ltd (shares held by Magic Software Enterprises Netherlands B.V.) Spain 100 % Magic Software Japan K.K Japan 100 % Magix Integration (Proprietary) Ltd South Africa 100 % Menarva Ltd. Israel 100 % Mobisoft Ltd.
We have deep relationships with global system integrators, which we partner closely with. We co-create and co-sell solutions to solve customer needs where we combine the power of our innovation and their services to deliver against the customer business objectives.
We have deep relationships with global system integrators, with which we partner closely. We co-create and co-sell solutions to solve customer needs where we combine the power of our innovation and their services to deliver against the customer business objectives.
The platform is connected to each provider clinical, administrative and financial data base system, residing at the provider’s central computer, and allows immediate analysis of complex data with potentially real-time feedback to meet the specific needs of physicians, nurses, laboratory technicians, pharmacists, front- and back-office professionals and consumers. ○ Leap™ – offered by our FTS subsidiary, is a proprietary comprehensive core software solution for BSS, including convergent charging, billing, customer management, policy control, mobile money and payment software solutions for the telecommunications, content, Machine to Machine/Internet of Things or M2M/IoT, payment and other industries. 29 ○ Hermes Cargo – offered by our Hermes Logistics Technologies Ltd. subsidiary, the Hermes Air Cargo Management System is a proprietary, state-of-the-art, packaged software solution for managing air cargo ground handling.
The platform is connected to each provider clinical, administrative and financial data base system, residing at the provider’s central computer, and allows immediate analysis of complex data with potentially real-time feedback to meet the specific needs of physicians, nurses, laboratory technicians, pharmacists, front- and back-office professionals and consumers. ○ Leap™ – offered by our FTS subsidiary, is a proprietary comprehensive core software solution for BSS, including convergent charging, billing, customer management, policy control, mobile money and payment software solutions for the telecommunications, content, Machine to Machine/Internet of Things or M2M/IoT, payment and other industries. ○ Hermes Cargo – offered by our Hermes Logistics Technologies Ltd. subsidiary, the Hermes Air Cargo Management System is a proprietary, state-of-the-art, packaged software solution for managing air cargo ground handling.
FactoryEye’s end-to-end solution incorporates several key features: ● Powered by Magic Software plug and play IIoT Integration platform. ● Incorporates advanced analytics and AI into decision support ● Leverages investments and quick ROI by integrating existing systems ● Centralized visibility across operations ● Access to information necessary to quickly make smart decisions ● Flexible, simplified and incremental digital transformation ● Increased equipment productivity and operational efficiency ● Improved machine uptime and reduced maintenance costs ● Tools and technology to promote continuous improvement In addition to offering a dynamic cloud-based software solution, FactoryEye manufacturing consultants work with customers to harmonize their systems and fit the right tools for their needs.
FactoryEye’s end-to-end solution incorporates several key features: ● Powered by Magic Software plug and play IIoT Integration platform. ● Incorporates advanced analytics and AI into decision support ● Leverages investments and quick ROI by integrating existing systems ● Centralized visibility across operations ● Access to information necessary to quickly make smart decisions ● Flexible, simplified and incremental digital transformation ● Increased equipment productivity and operational efficiency ● Improved machine uptime and reduced maintenance costs ● Tools and technology to promote continuous improvement 35 In addition to offering a dynamic cloud-based software solution, FactoryEye manufacturing consultants work with customers to harmonize their systems and fit the right tools for their needs.
Real-time factory floor visibility and optimization is provided as part of the end-to-end visibility to maximize production performance and ongoing improvement. ○ Magic Data Management and Analytics Platform – a cloud-based pre-packaged but flexible end-to-end data management platform for all verticals enabling smooth digital transformation and full organizational business intelligence Our vertical software packages ○ Clicks™ – offered by our Roshtov subsidiary, is a proprietary comprehensive core software solution for medical record information management systems, used in the design and management of patient-file for managed care and large-scale healthcare providers.
Real-time factory floor visibility and optimization is provided as part of the end-to-end visibility to maximize production performance and ongoing improvement. ○ Magic Data Management and Analytics Platform – a cloud-based pre-packaged but flexible end-to-end data management platform for all verticals enabling smooth digital transformation and full organizational business intelligence. 25 Our vertical software packages ○ Clicks™ – offered by our Roshtov subsidiary, is a proprietary comprehensive core software solution for medical record information management systems, used in the design and management of patient-file for managed care and large-scale healthcare providers.
The courses and course materials are designed to accelerate the learning process, using an intensive technical curriculum in an atmosphere conducive to productive training. 45 IT Services Background The core of our growth strategy is to serve as a one-stop-shop for our clients, helping them accelerate their digital transformation to enhance competitiveness, grow profitability and deliver sustainable stakeholder value.
The courses and course materials are designed to accelerate the learning process, using an intensive technical curriculum in an atmosphere conducive to productive training. IT Services Background The core of our growth strategy is to serve as a one-stop-shop for our clients, helping them accelerate their digital transformation to enhance competitiveness, grow profitability and deliver sustainable stakeholder value.
The principal competitive factors in our market include: ● Platform features, reliability, performance, and effectiveness; ● Ease of use and speed; 49 ● Platform extensibility and ability to integrate with other technology infrastructures; ● Deployment flexibility; ● Robustness of professional services and customer support; ● Price and total cost of ownership; ● Strength of platform security and adherence to industry standards and certifications; ● Strength of sales and marketing efforts; and ● Brand awareness and reputation.
The principal competitive factors in our market include: ● Platform features, reliability, performance, and effectiveness; ● Ease of use and speed; ● Platform extensibility and ability to integrate with other technology infrastructures; ● Deployment flexibility; ● Robustness of professional services and customer support; ● Price and total cost of ownership; ● Strength of platform security and adherence to industry standards and certifications; ● Strength of sales and marketing efforts; and ● Brand awareness and reputation.
Unlike most competing platforms, we offer a coherent and unified toolset based on the same proven metadata driven and rules based declarative technology, resulting in increased cost savings through fast and easy implementation and reduced project risk. 35 Magic xpa enables organizations to differentiate themselves from their competition through software-enabled digital transformation.
Unlike most competing platforms, we offer a coherent and unified toolset based on the same proven metadata driven and rules based declarative technology, resulting in increased cost savings through fast and easy implementation and reduced project risk. Magic xpa enables organizations to differentiate themselves from their competition through software-enabled digital transformation.
(“Soft IT”), an Israel-based services company which specializes in outsourcing of software development services for a total consideration of up to $1.1 million. We paid $0.4 million upon closing, $0.3 million was paid on July 4, 2021, and the remaining amount of $0.4 million constitutes a contingent payment depending on the future operating results of IT Soft.
Soft IT Ltd. (“Soft IT”), an Israel-based services company which specializes in outsourcing of software development services for a total consideration of up to $1.1 million. We paid $0.4 million upon closing, $0.3 million was paid on July 4, 2021, and the remaining amount of $0.4 million constitutes a contingent payment depending on the future operating results of IT Soft.
We will continue to devote a significant portion of our resources to research and development. We believe that internal development of our technology is the most effective means of achieving our strategic objective of providing an extensive, integrated and feature-rich development technology. For significant version release see “Magic’s Software Solutions” discussed above. Product Related Services Professional Services .
We will continue to devote a significant portion of our resources to research and development. We believe that internal development of our technology is the most effective means of achieving our strategic objective of providing an extensive, integrated and feature-rich development technology. For significant version release see “Magic’s Software Solutions” discussed above. 39 Product Related Services Professional Services .
We have developed a strong set of corporate values that inspire ethical behavior throughout their decision-making process and that promote one of our business objectives of bringing together a diverse group with the unique skill sets, knowledge, and talents to effectuate our vision. 51 C.
We have developed a strong set of corporate values that inspire ethical behavior throughout their decision-making process and that promote one of our business objectives of bringing together a diverse group with the unique skill sets, knowledge, and talents to effectuate our vision. C.
Distributors must undergo our program of sales and technical training. Marketing, sales, training, consulting, product and customer support are provided by the local distributor. We are available for backup support for the distributor and for end-users. In coordination with the local subsidiaries and distributors, we also provide sales support for large and multinational accounts. VARs .
Distributors must undergo our program of sales and technical training. Marketing, sales, training, consulting, product and customer support are provided by the local distributor. We are available for backup support for the distributor and for end-users. In coordination with the local subsidiaries and distributors, we also provide sales support for large and multinational accounts. 42 VARs .
FTS’s solutions are delivered via cloud, on-premises or in a fully managed-services mode and are backed by our Israel and Bulgaria-based experienced professional services support team. 42 HR Pulse Now in its 10 th release, HR Pulse is a proprietary platform that creates and customizes software applications for HCM, with the goal to combine technology with effective processes, to facilitate the collection, analysis and interpretation of quality data about people, their jobs and their performance, to enhance HCM decision making, resulting in increased organizational efficiency and effectiveness.
FTS’s solutions are delivered via cloud, on-premises or in a fully managed-services mode and are backed by our Israel and Bulgaria-based experienced professional services support team. 37 HR Pulse Now in its 10 th release, HR Pulse is a proprietary platform that creates and customizes software applications for HCM, with the goal to combine technology with effective processes, to facilitate the collection, analysis and interpretation of quality data about people, their jobs and their performance, to enhance HCM decision making, resulting in increased organizational efficiency and effectiveness.
Achieving AWS SaaS Competency status allows us to expand our business offering and even accompany the organizational change for customers who are in the process of transitioning to SaaS. 31 Industry Overview In recent years, the number of available enterprise applications has grown significantly which has led information system complexity within many organizations to a level that has obstructed business progress and evolution, reduced business agility and led to significantly higher costs.
Achieving AWS SaaS Competency status allows us to expand our business offering and even accompany the organizational change for customers who are in the process of transitioning to SaaS. 27 Industry Overview In recent years, the number of available enterprise applications has grown significantly which has led information system complexity within many organizations to a level that has obstructed business progress and evolution, reduced business agility and led to significantly higher costs.
In addition, FTS offers upper-tiers of service providers with BSS and monetization solutions for specific needs, including policy control and charging solutions, M2M billing, billing for content services, MVNE/MVNO billing, mobile money software solutions, payment and mobile financial services solutions and others. 41 Our Leap™ offering is comprised of: Leap™ BCCF (Business Control and Charging Function) – a proprietary packaged software solution which serves as the underlying foundation of our Leap™ products and solutions.
In addition, FTS offers upper-tiers of service providers with BSS and monetization solutions for specific needs, including policy control and charging solutions, M2M billing, billing for content services, MVNE/MVNO billing, mobile money software solutions, payment and mobile financial services solutions and others. 36 Our Leap™ offering is comprised of: Leap™ BCCF (Business Control and Charging Function) – a proprietary packaged software solution which serves as the underlying foundation of our Leap™ products and solutions.
According to a March 2021 report from IDC, “The amount of digital data created over the next five years will be greater than twice the amount of data created since the advent of digital storage.” This new data creates opportunities to generate greater business insights and pursue new market opportunities, but is overwhelming for organizations to manage, aggregate, and normalize.
According to a March 2022 report from IDC, “The amount of digital data created over the next five years will be greater than twice the amount of data created since the advent of digital storage.” This new data creates opportunities to generate greater business insights and pursue new market opportunities, but is overwhelming for organizations to manage, aggregate, and normalize.
With approximately 3,409 experts, the majority of which are in the U.S, Israel and Europe, and hundreds of projects gone live in a variety of advanced technologies, we have developed significant expertise and accumulated vast experience in integration projects. Such projects are typically more complex and require a high level of industry knowledge and highly skilled professionals.
With approximately 3,000 experts, the majority of which are in the U.S, Israel and Europe, and hundreds of projects gone live in a variety of advanced technologies, we have developed significant expertise and accumulated vast experience in integration projects. Such projects are typically more complex and require a high level of industry knowledge and highly skilled professionals.
The increasing mobility skills gap will force mobile strategists to use a multifaceted application development and delivery approach. 33 Magic’s Software Solutions Our software solutions enable enterprises to accelerate the planning, development, deployment and integration of on-premise, mobile and cloud business applications that can be rapidly customized to meet current and future needs.
The increasing mobility skills gap will force mobile strategists to use a multifaceted application development and delivery approach. 29 Magic’s Software Solutions Our software solutions enable enterprises to accelerate the planning, development, deployment and integration of on-premise, mobile and cloud business applications that can be rapidly customized to meet current and future needs.
Instead of writing the programming language for the development of web-based applications, employees with less development experience can also create sophisticated applications. For those who has relevant experience, this platform can ease out the daily work chores and can even help them create more custom web-based applications by integrating already existing digital ecosystems.
Instead of writing the programming language for the development of web-based applications, employees with less development experience can also create sophisticated applications. For those who have relevant experience, this platform can ease out the daily work chores and can even help them create more custom web-based applications by integrating already existing digital ecosystems.
Over the last 10 years Hermes systems have been implemented in over 70 terminals on five continents, providing efficient and accurate handling of more than 5 million tons of freight annually. Customers benefit through faster processing and more accurate billing, reporting and ultimately enhanced revenue.
Over the last 10 years Hermes systems have been implemented in over 70 terminals on five continents, providing efficient and accurate handling of more than 8 million tons of freight annually. Customers benefit through faster processing and more accurate billing, reporting and ultimately enhanced revenue.
Our main competitors fall into two categories: (1) providers of custom software and customer software solutions that address, or are developed to address, some of the use cases that can be addressed by applications developed on our platform; and (2) providers of low-code development platforms, such as Microsoft, Salesforce.com, ServiceNow, OutSystems, Appien and Mendix.
Our main competitors fall into two categories: (1) providers of custom software and customer software solutions that address, or are developed to address, some of the use cases that can be addressed by applications developed on our platform; and (2) providers of low-code development platforms, such as Microsoft, Salesforce.com, ServiceNow, OutSystems, Appian, Pegasystems and Mendix.
In addition, we configure teams of technical consultants for assigned projects at our customers’ sites. 46 Customers, End-Users and Markets We market and sell our products and services in more than 50 countries worldwide.
In addition, we configure teams of technical consultants for assigned projects at our customers’ sites. 41 Customers, End-Users and Markets We market and sell our products and services in more than 50 countries worldwide.
We are a global provider of: (i) software services and Information Technologies (“IT”) outsourcing software services; (ii) proprietary application development and business process integration platforms; (iii) selected packaged vertical software solutions, as well as (iv) cloud based services for end to end digital transformation.
Together with our subsidiaries we are a global provider of: (i) software services and Information Technologies (“IT”) outsourcing software services; (ii) proprietary application development and business process integration platforms; (iii) selected packaged vertical software solutions, as well as (iv) cloud-based services for end to end digital transformation.
We have approximately 4,161 employees, who serve our clients at any given time and whose skills and specialization are a significant source of competitive differentiation. We operate through a network of over 3,000 independent software vendors, or ISVs, who we refer to as Magic Software Providers, or MSPs, and hundreds of system integrators, distributors, resellers, and consulting and OEM partners.
We have approximately 3,628 employees, who serve our clients at any given time and whose skills and specialization are a significant source of competitive differentiation. We operate through a large network of independent software vendors, or ISVs, who we refer to as Magic Software Providers, or MSPs, and hundreds of system integrators, distributors, resellers, and consulting and OEM partners.
In 2022, we paid $0.6 million in annual rent for the Or Yehuda facilities under a lease agreement expiring in June 2033, with two additional five (5) year options to extend our lease agreement for.
In 2023, we paid $0.7 million in annual rent for the Or Yehuda facilities under a lease agreement expiring in June 2033, with two additional five (5) year options to extend our lease agreement for.
Our development services include development of on-premise, mobile and cloud applications as well as Embedded and real time software development. We are a talent- and innovation-led organization with approximately 4,161 people as of December 31, 2022, who serve our clients at any given time and whose skills and specialization are a significant source of competitive differentiation.
Our development services include development of on-premise, mobile and cloud applications as well as Embedded and real time software development. We are a talent- and innovation-led organization with approximately 3,628 people as of December 31, 2023, who serve our clients at any given time and whose skills and specialization are a significant source of competitive differentiation.
Hermes works with everyone from smaller cargo handlers to large airlines all over the world and counts Menzies Aviation, WFS (FRA), Luxair, Etihad Airport Services and Frankfurt Cargo Services among their customers. Nativ: Offered by our Menarva Ltd subsidiary, Nativ is the leading system for efficient management of all types of rehabilitation centers.
Hermes works with everyone from smaller cargo handlers to large airlines all over the world and counts Menzies Aviation, Frankfurt Cargo Services, Etihad Airport Services, Pactl’ (Shanghai) and dnata Network among their customers. Nativ: Offered by our Menarva Ltd subsidiary, Nativ is the leading system for efficient management of all types of rehabilitation centers.
Our wholly-owned subsidiaries, Fusion Solutions LLC, Xsell Resources Inc., Allstates Consulting Services LLC, Futurewave Systems, Inc., NetEffects, Inc, OnTarget Group, Inc, the Commit Group, Infinigy Solutions LLC., EnableIT LLC, Comblack Ltd. and Shavit Software (2009) Ltd. provide advanced IT consulting and outsourcing services to a wide variety of companies including Fortune 1000 companies.
Our wholly-owned subsidiaries, Fusion Solutions LLC, Xsell Resources Inc., Allstates Consulting Services LLC, Futurewave Systems, Inc., NetEffects, Inc, OnTarget Group, Inc, the Commit Group, Infinigy Solutions LLC., EnableIT LLC, Comblack IT Ltd., Shavit Software (2009) Ltd., and K.M.T. (M.H.) Technologies Communication Computer, provide advanced IT consulting and outsourcing services to a wide variety of companies including Fortune 1000 companies.
As of December 31, 2022, we employed approximately 231 sales and marketing personnel including, a team of sales engineers who provide pre-sale technical support, presentations and demonstrations in order to support our sales force. 48 Indirect Sales .
As of December 31, 2023, we employed approximately 202 sales and marketing personnel including, a team of sales engineers who provide pre-sale technical support, presentations and demonstrations in order to support our sales force. Indirect Sales .
On March 31, 2022, we paid an amount of $1.1 million. On December 2, 2021, we entered into a share purchase agreement to acquire 50.1% of the outstanding share capital of Appush Ltd. (formerly known as Vidstart Ltd.) (“Appush”).
On March 31, 2022, we paid an amount of $1.1 million. On December 2, 2021, we entered into a share purchase agreement to acquire 50.1% of the outstanding share capital of Appush Ltd.
Our professional software and IT services Our software professional services offerings include a vast portfolio of professional services in the areas of infrastructure design and delivery, application development, technology consulting planning and implementation services, support services, DevOps (Development & Operations), Mobile, Big Data and Analytical BI, M/F, cloud computing for deployment of highly available and massively-scalable applications and APIs and supplemental IT outsourcing services to a wide variety of companies, including Fortune 1000 companies, all in accordance with the professional expertise required in each case with our goal to create significant value for our clients in managing, streamlining, accelerating and helping their businesses thrive.
Our professional software and IT services Our global software professional services offerings include a vast portfolio of professional services and IT outsourcing services in the areas of infrastructure design and delivery, application development, technology consulting planning and implementation services, support services, Digital, DevOps (Development & Operations), Mobile, Open source, embedded systems and IoT devices, advanced algorithms for AI, Big Data and Analytical BI, M/F, Security & Cyber, cloud computing for deployment of highly available and massively-scalable applications and APIs and supplemental IT outsourcing services to a wide variety of companies, including Fortune 1000 companies, all in accordance with the professional expertise required in each case with our goal to create significant value for our clients in managing, streamlining, accelerating and helping their businesses thrive.
The following tables present our revenues by revenue type and geographical market for the periods indicated: Year ended December 31, 2020 2021 2022 ( in thousands ) Software sales $ 24,272 $ 30,934 $ 32,930 Maintenance and technical support 33,181 36,149 34,762 Consulting services 313,741 413,242 499,100 Total revenues $ 371,194 $ 480,325 $ 566,792 Year ended December 31, 2020 2021 2022 ( in thousands ) United States $ 177,882 $ 254,342 $ 308,485 Israel 149,094 180,462 205,258 Europe 26,947 30,085 39,247 Japan 12,643 11,443 10,121 Other 4,628 3,993 3,681 Total revenues $ 371,194 $ 480,325 $ 566,792 Our Magic xpa, Magic xpi, Magic’s Data Management and Analytics platform, Magic SmartUX, Magic FactoryEye, and AppBuilder technologies are used by a wide variety of developers, integrators and solution providers, that can generally be divided into two sectors (i) those performing in-house development (corporate IT departments), and (ii) MSPs, including large system integrators and smaller independent developers, and VARs that use our technology to develop or provide solutions to their customers.
The following tables present our revenues by revenue type and geographical market for the periods indicated: Year ended December 31, 2021 2022 2023 ( in thousands ) Software sales $ 30,934 $ 32,930 $ 32,694 Maintenance and technical support 36,149 34,762 33,999 Consulting services 413,242 499,100 468,359 Total revenues $ 480,325 $ 566,792 $ 535,052 Year ended December 31, 2021 2022 2023 ( in thousands ) United States $ 254,342 $ 308,485 $ 250,842 Israel 180,462 205,258 214,129 Europe 30,085 39,247 55,180 Japan 11,443 10,121 10,847 Other 3,993 3,681 4,054 Total revenues $ 480,325 $ 566,792 $ 535,052 Our Magic xpa, Magic xpi, Magic’s Data Management and Analytics platform, Magic SmartUX, Magic FactoryEye, and AppBuilder technologies are used by a wide variety of developers, integrators and solution providers, that can generally be divided into two sectors (i) those performing in-house development (corporate IT departments), and (ii) MSPs, including large system integrators and smaller independent developers, and VARs that use our technology to develop or provide solutions to their customers.
In May 2020, our CommIT Group, achieved Amazon AWS SaaS Competency status. AWS SaaS Competency is designated to help customers find top AWS consulting partners with deep specialization and experience in designing and building software-as-a-service solutions on AWS. Organizations are interested in software that is easy to use, implement, and operate.
AWS SaaS Competency is designated to help customers find top AWS consulting partners with deep specialization and experience in designing and building software-as-a-service solutions on AWS. Organizations are interested in software that is easy to use, implement, and operate.
Environmental, Social & Governance Matters We place emphasis on, and devote considerable time towards, business responsibility, sustainability, and delivering value for our customer base, employees, investors, suppliers, and each of our respective communities.
Our copyrights expire 70 years from date of first publication. 44 Environmental, Social & Governance Matters We place emphasis on, and devote considerable time towards, business responsibility, sustainability, and delivering value for our customer base, employees, investors, suppliers, and each of our respective communities.
AppBuilder contains everything a development environment needs to create any type of simple or complex business application with platform-independent functionality, including: ● System administration security controls for scope and permissions; ● Migration, testing, and deployment functions; ● Architecture-independent development; ● An integrated toolset for designing, developing, and deploying applications; ● Object-based components managed from host, server, or client repositories; ● Support for Java/J2EE, COBOL, C#, and C programming languages; ● An efficient, cross-platform code generation facility; ● Ready-to-use business logic and libraries; ● A remote prepare facility for mainframe development; ● Multiple language user interface support; and ● DBCS support. 37 Magic xpi Integration Platform We believe data is the most valuable competitive asset today as companies increasingly pursue digital transformation initiatives to modernize their businesses.
AppBuilder contains everything a development environment needs to create any type of simple or complex business application with platform-independent functionality, including: ● System administration security controls for scope and permissions; ● Migration, testing, and deployment functions; ● Architecture-independent development; ● An integrated toolset for designing, developing, and deploying applications; ● Object-based components managed from host, server, or client repositories; ● Support for Java/J2EE, COBOL, C#, and C programming languages; ● An efficient, cross-platform code generation facility; ● Ready-to-use business logic and libraries; ● A remote prepare facility for mainframe development; ● Multiple language user interface support; and ● DBCS support.
In the aggregate, these core capabilities enable Magic to automate and govern end-to-end processes. Magic complements these automation technologies with related features like process reporting, analytics and management, which make it simple for organizations to quickly improve and upgrade their automations as business needs change.
Magic complements these automation technologies with related features like process reporting, analytics and management, which make it simple for organizations to quickly improve and upgrade their automations as business needs change.
On April 1, 2021, we acquired EnableIT, LLC and its subsidiary (“EnableIT”), a U.S.-based services company, specializing in IT staffing and recruiting, for a total consideration of $6.0 million, of which $4.0 million was paid upon closing and the remaining $2.0 million was paid in two equal installments on April 1, 2022 and April 1, 2023. 27 Also on April 1, 2021, we acquired Menarva Ltd.
We and Soft IT minority shareholder hold mutual call and put options for the remaining 40% interest. 23 On April 1, 2021, we acquired EnableIT, LLC and its subsidiary (“EnableIT”), a U.S.-based services company, specializing in IT staffing and recruiting, for a total consideration of $6.0 million, of which $4.0 million was paid upon closing and the remaining $2.0 million was paid in two equal installments on April 1, 2022 and April 1, 2023.
We enable organizations to differentiate themselves from their competition through software-enabled digital transformation. 28 Throughout our history, we have traditionally maintained two major lines of products, one is our application development platform, which today is known as Magic xpa Application Platform, an evolution of our original metadata-based development platform; and the second is our application integration platform, Magic xpi Integration Platform, originally introduced in 2003 under the name iBOLT.
Throughout our history, we have traditionally maintained two major lines of products, one is our application development platform, which today is known as Magic xpa Application Platform, an evolution of our original metadata-based development platform; and the second is our application integration platform, Magic xpi Integration Platform, originally introduced in 2003 under the name iBOLT.
As such, we enjoy a well-diversified client base across geographies and industries including oil & gas companies, telecommunications groups, financial institutions, healthcare providers, industrial companies, public institutions, and international agencies. 34 The underlying principles and purpose of our technology are to provide: ● Simplicity – the use of code-free/low code development tools instead of hard coding and multiple programming languages to solve critical and complex challenges; ● Business focus – the use of pre-compiled business logic and components eliminates repetitive, low level technical and coding tasks; ● Comprehensiveness – the use of a comprehensive development and deployment platform offers a full end-to-end development, deployment and integration capability; ● Automation of mundane tasks – to accelerate development and maintenance and reduce risk; and ● Interoperability – to support business logic across multiple hardware and software platforms, operating systems and geographies.
The underlying principles and purpose of our technology are to provide: ● Simplicity – the use of code-free/low code development tools instead of hard coding and multiple programming languages to solve critical and complex challenges; ● Business focus – the use of pre-compiled business logic and components eliminates repetitive, low level technical and coding tasks; ● Comprehensiveness – the use of a comprehensive development and deployment platform offers a full end-to-end development, deployment and integration capability; ● Automation of mundane tasks – to accelerate development and maintenance and reduce risk; and ● Interoperability – to support business logic across multiple hardware and software platforms, operating systems and geographies.
Nativ offers maximum survivability, due to the need for high reliability and comprehensive information security, all infrastructure is owned by Menarva and the system complies with all standards and guidelines of Israel’s Privacy Protection Authority, including ISO standards: Standard 9001 for information systems development, Standard 27001.
Nativ offers maximum survivability, due to the need for high reliability and comprehensive information security, all infrastructure is owned by Menarva and the system complies with all standards and guidelines of Israel’s Privacy Protection Authority, including ISO standards: Standard 9001 for information systems development, Standard 27001. 38 Strategy Our goal is to continue our profitable and cash generative growth within our software solutions and professional services markets.
Cloud Manager interface hides all the complexities of cloud deployment and clustering and performs all the heavy lifting through easy to use and intuitive set of Rest API’s. These APIs also bring agility and efficiency to organizations CI/CD practices via “Continuous Deployment” capabilities.
Cloud Manager interface hides all the complexities of cloud deployment and clustering and performs all the heavy lifting through easy to use and intuitive set of Rest API’s. These APIs also bring agility and efficiency to organizations CI/CD practices via “Continuous Deployment” capabilities. In 2024, we plan to continue to expand our product offering with additional features, per customer requests.
In 2023, we plan to continue to expand our product offering with additional features, per customer requests. 39 Magic SmartUX Magic SmartUX, a platform we acquired in April 2019, is a low-code development platform for mobilizing and modernizing enterprise business application designed for citizen to professional developers to rapidly design, build, analyze, and run cross-platform mobile business applications.
Magic SmartUX Magic SmartUX, a platform we acquired in April 2019, is a low-code development platform for mobilizing and modernizing enterprise business application designed for citizen to professional developers to rapidly design, build, analyze, and run cross-platform mobile business applications.
Packaged software often fails to address unique use cases or to enable differentiation. It also requires organizations to adapt their business (processes, systems of record, etc.) to the software package, as opposed to adapting the software to their unique business needs.
It also requires organizations to adapt their business (processes, systems of record, etc.) to the software package, as opposed to adapting the software to their unique business needs.
The Magic SmartUX platform addresses the three biggest challenges enterprises are facing in the road to Digital Transformation: ● Multi-platform: end client devices are abundant and diverse, we provide an omni-channel solution. ● Many Systems of Record: over the years enterprise adopted (home grown and third party) solutions that scattered the business flow over many different system, Magic SmartUX enable the enterprise to expose complex business flows to modern technology with now changes and overhead to the existing working applications. ● Talent Gap: Mobile and integration are the hardest skillsets for IT orgs to find, with the Magic SmartUX platform addressing Citizens Developers, we allow any intern tech savvy individual to deliver complex and robust Mobile business application.
The Magic SmartUX platform addresses the three biggest challenges enterprises are facing in the road to Digital Transformation: ● Multi-platform: end client devices are abundant and diverse, we provide an omni-channel solution. ● Many Systems of Record: over the years enterprise adopted (home grown and third party) solutions that scattered the business flow over many different system, Magic SmartUX enable the enterprise to expose complex business flows to modern technology with now changes and overhead to the existing working applications. ● Talent Gap: Mobile and integration are the hardest skillsets for IT orgs to find, with the Magic SmartUX platform addressing Citizens Developers, we allow any intern tech savvy individual to deliver complex and robust Mobile business application. 34 FactoryEye On May 2019, Magic Software launched the release of FactoryEye, a proprietary high performance, low-code, flexible, cloud platform built specially for manufacturers based on a modern architecture enabling advanced manufacturing and organizational intelligence, real-time virtualizations and actionable insights for cross- organizational effectiveness and increased bottom line.
Our fixed assets capital expenditures for the years ended December 31, 2020, 2021 and 2022 were approximately $2.8 million, $1.4 million, and $4.4 million, respectively. These expenditures were principally for network equipment and computer hardware, as well as for vehicles, furniture, office equipment and leasehold improvements. B.
Subsequent to the share purchase, the Company holds 98.52% of Mobisoft. Our fixed assets capital expenditures for the years ended December 31, 2021, 2022 and 2023 were approximately $1.4 million, $4.4 million, and $1.6 million, respectively. These expenditures were principally for network equipment and computer hardware, as well as for vehicles, furniture, office equipment and leasehold improvements. B.
We help our clients use technology to build their digital core to drive enterprise-wide transformation—such as moving them to the cloud, leveraging data and artificial intelligence, and embedding security and sustainability across the enterprise; by transforming their operations; and by accelerating their revenue growth.
The growth rate of Cloud computing is the fastest growing area in IT between five and six times the average growth of IT expenses. 40 We help our clients use technology to build their digital core to drive enterprise-wide transformation—such as moving them to the cloud, leveraging data and artificial intelligence, and embedding security and sustainability across the enterprise; by transforming their operations; and by accelerating their revenue growth.
Magic xpa Application Platform Magic xpa Application Platform, our metadata driven application platform, provides a simple, low code and cost-effective development and deployment environment that lets organizations and MSPs quickly create user-friendly, enterprise-grade, multi-channel mobile and desktop business app that employ the latest advanced functionalities and technologies.
Our customers operate in a wide variety of industries, including financial services, life sciences, government, telecommunications, energy and manufacturing. 30 Magic xpa Application Platform Magic xpa Application Platform, our metadata driven application platform, provides a simple and unified, low code and cost-effective development and deployment environment that lets organizations and MSPs quickly create user-friendly, enterprise-grade, multi-channel mobile and desktop business app that employ the latest advanced functionalities and technologies.
Our heritage as a veteran player in the integration market provides us with a differentiated understanding and ability to automate complex processes, and we have incorporated that expertise into our platform to enable the development of powerful business software.
Our heritage as a veteran player in the integration market provides us with a differentiated understanding and ability to automate complex processes, and we have incorporated that expertise into our platform to enable the development of powerful business software. Magic xpi can leverage a complete stack of automation technologies, applying the right automation approach for each specific use case.
Low-code development is a natural evolution of rising abstraction levels in application development, which will eventually lead to viable cross-enterprise, highly scalable citizen development and composition of applications. According to market analysts spending on low-code development technologies (excluding RPA) is expected to grow from $9.6 billion in 2020 to $24.7 billion by 2025, at a CAGR of 21%.
Low-code development is a natural evolution of rising abstraction levels in application development, which will eventually lead to viable cross-enterprise, highly scalable citizen development and composition of applications. According to market analysts spending on low-code development technologies (excluding RPA) is expected to expand to more than $18 billion in 2026, with a CAGR of more than 20%.
According to IDC, “82% of organizations are currently using multiple clouds - or plan to within the next 12 months.” As a result, we expect enterprises will require new technologies purpose-built to connect, analyze, manage, and normalize data anywhere it resides using modern, cloud-native architectures that can seamlessly be deployed in any IT environment.
As a result, we expect enterprises will require new technologies purpose-built to connect, analyze, manage, and normalize data anywhere it resides using modern, cloud-native architectures that can seamlessly be deployed in any IT environment.
We believe that the principal competitive factors affecting the market for our products include developer productivity, rapid results, product functionality, performance, reliability, scalability, portability, interoperability, ease-of-use, demonstrable economic benefits for developers and users relative to cost, quality of customer support and documentation, ease of installation, vendor reputation and experience, financial stability as well as intuitive and out-of-the-box solutions to extend the capabilities of ERP, CRM and other application vendors for enterprise integration. 50 Intellectual Property In accordance with industry practice, since we have no registered patents on our software solution technologies, we rely upon a combination of copyright, trademark, trade secret laws and contractual restrictions to protect our rights in our software products.
We believe that the principal competitive factors affecting the market for our products include developer productivity, rapid results, product functionality, performance, reliability, scalability, portability, interoperability, ease-of-use, demonstrable economic benefits for developers and users relative to cost, quality of customer support and documentation, ease of installation, vendor reputation and experience, financial stability as well as intuitive and out-of-the-box solutions to extend the capabilities of ERP, CRM and other application vendors for enterprise integration.
We have identified the following trends that are relevant to the markets we operate in: ● Increasingly complex business integration : In recent years, enterprises operate multiple applications and platforms, using various programming languages, resulting in complex enterprise information systems.
Information technology service buyers are increasingly looking at outcome-driven managed services with a tighter integration between software, service and infrastructure. 28 We have identified the following trends that are relevant to the markets we operate in: ● Increasingly complex business integration : In recent years, enterprises operate multiple applications and platforms, using various programming languages, resulting in complex enterprise information systems.
We have registered a copyright for our software in the United States and Japan. In addition, we have registered copyrights for some of our manuals in the United States and have acquired an International Standard Book Number (ISBN) for some of our manuals. Our copyrights expire 70 years from date of first publication.
In addition, we have registered copyrights for some of our manuals in the United States and have acquired an International Standard Book Number (ISBN) for some of our manuals.
Thousands of enterprises in approximately 50 countries use our products and services. Our software technology platforms Organizations across all industries are digitally transforming by leveraging software to automate and optimize mission critical operations, enhance customer experiences, and drive competitive differentiation. Historically, organizations have principally relied on off-the-shelf packaged software and custom software solutions to operationalize and automate their businesses.
Thousands of enterprises in approximately 50 countries use our products and services. 24 Our software technology platforms Organizations across all industries are digitally transforming by leveraging software to automate and optimize mission critical business processes, enhance customer experiences, and drive competitive differentiation.
We have a scaled and well-defined alliances program where we partner with value-added resellers and distributors across the world to expand our reach in international markets.
We have a scaled and well-defined alliances program where we partner with value-added resellers and distributors across the world to expand our reach in international markets. Our relationship with these channel partners ranges from fulfilment services to co-sell or independent resell in some markets.
Technology is the single biggest driver of change in companies today. Despite the potential impacts of the Omicron variant, we expect an economic recovery with high expectations for increased technology investments. Gartner forecasts global IT spending in insurance will increase by 7.8% in 2023 to reach $207.7 billion in constant U.S. dollars.
Technology is the single biggest driver of change in companies today. Despite the potential impacts of the Omicron variant, we expect an economic recovery with high expectations for increased technology investments. According to Gartner, 2023 should have ended with a 3.3% increase in global IT spending.
Since November 16, 2000, our Ordinary Shares have also traded on the Tel Aviv Stock Exchange, or the TASE, and since December 15, 2011, our shares have been included in the TASE TA-125 Index.
Since November 16, 2000, our Ordinary Shares have also traded on the Tel Aviv Stock Exchange, or the TASE, and since December 15, 2011, our shares have been included in the TASE TA-125 Index. Capital Transactions since January 1, 2021 On January 1, 2021, we, through one of our Israeli subsidiaries, acquired 60% of the shares of 9540 Y.G.
Consultants analyze business processes for what is working, formulate a plan to add what is missing from existing systems and create sprints to deliver immediate results.
Consultants analyze business processes for what is working, formulate a plan to add what is missing from existing systems and create sprints to deliver immediate results. A dynamic cycle of data collection and analysis allows for continuous improvement and flexibility in the optimization process.
The market for this type of platform is highly competitive. Companies such as CA and IBM have tools that compete directly with AppBuilder. Furthermore, new development paradigms have become very popular in IT software development and developers today have many alternatives.
The market for this type of platform is highly competitive. Companies such as CA and IBM have tools that compete directly with AppBuilder.
As our market grows, we expect that it will attract more highly specialized vendors as well as larger vendors that may continue to acquire or bundle their products more effectively.
Furthermore, new development paradigms have become very popular in IT software development and developers today have many alternatives. 43 As our market grows, we expect that it will attract more highly specialized vendors as well as larger vendors that may continue to acquire or bundle their products more effectively.
The initial terms of the registration of our trademarks range from 10 to 20 years and are renewable thereafter. Our use and registration of our trademarks do not ensure that we have superior rights to others that may have registered or used identical or related marks on related goods or services.
Our use and registration of our trademarks do not ensure that we have superior rights to others that may have registered or used identical or related marks on related goods or services. We have registered a copyright for our software in the United States and Japan.
Our goal is to position FactoryEye as a solution that offers more than mere factory floor visibility through IIoT connectivity, while remaining more cost effective and customizable than offerings from “Tier 1” companies.
Since its launch, Magic Software made a targeted effort to reach mid-sized manufacturers who are looking to improve the efficiency of their factories. Our goal is to position FactoryEye as a solution that offers more than mere factory floor visibility through IIoT connectivity, while remaining more cost effective and customizable than offerings from “Tier 1” companies.
MSPs who are packaged software publishers use our technology to write standard packaged software products that are sold to multiple customers, typically within a vertical industry sector or a horizontal business function. 47 Among the thousands of customers running their business systems with our technology are the following: ABB Group Fukushima Bank PGG Wrightson Able B.V.
MSPs who are packaged software publishers use our technology to write standard packaged software products that are sold to multiple customers, typically within a vertical industry sector or a horizontal business function.
While traditional custom software solutions can be differentiated and tailored to meet strategic objectives, development requires a long, iterative, and cumbersome process, as well as costly integration that relies on scarce developer talent.
While traditional custom software solutions can be differentiated and tailored to meet strategic objectives, development requires a long, iterative, and cumbersome process, as well as costly integration that relies on scarce developer talent. Through our unified platform we enable organizations to differentiate themselves from their competition using a low-code approach, creating applications and workflows tailored to their unique business requirements.
To qualify for the AWS SaaS Competency designation, organizations have undergone rigorous technical validation by AWS Partner Solutions Architects and demonstrated proven customer success. In recent years, Commit has successfully led, developed and produced many SaaS solutions on AWS for companies across many business sectors, including high-tech and startups, industrial and retail, and insurance and finance.
In recent years, Commit has successfully led, developed and produced many SaaS solutions on AWS, Azure and GCP, for companies across many business sectors, including high-tech and startups, industrial and retail, and insurance and finance.
In 2020, Magic Software significantly enhanced its new Angular based web client capabilities, provided GIT version control capability as an integral part of expanding its CI/CD overall capabilities, as well as enhanced compare and merge functionality under its xpa 4.7 release.
Because we make application development easy, organizations can build specific and competitively differentiated functionality into applications to deliver enhanced user experiences and streamlined business operations. 31 In 2020, we significantly enhanced our new Angular based web client capabilities, provided GIT version control capability as an integral part of expanding its CI/CD overall capabilities, as well as enhanced compare and merge functionality under its xpa 4.7 release.
We empower decision makers to reimagine their products, services, processes and customer interactions with software by removing much of the complexity and many of the challenges associated with traditional approaches to software development. Because we make application development easy, organizations can build specific and competitively differentiated functionality into applications to deliver enhanced user experiences and streamlined business operations.
We empower decision makers to reimagine their products, services, processes and customer interactions with software by removing much of the complexity and many of the challenges associated with traditional approaches to software development.
We sell our integration solutions to customers using specific popular software applications, such as SAP, Salesforce.com, IBM i (AS/400), Oracle JD Edwards, Microsoft SharePoint, Microsoft Dynamics, SugarCRM and other eco-systems.
We sell our integration solutions to customers using specific popular software applications, such as SAP, Salesforce.com, IBM i (AS/400), Oracle JD Edwards, Microsoft SharePoint, Microsoft Dynamics, SugarCRM and other eco-systems. As such, we enjoy a well-diversified client base across geographies and industries including oil & gas companies, telecommunications groups, financial institutions, healthcare providers, industrial companies, public institutions, and international agencies.
Enormous amounts of data are being generated by people, applications, and devices worldwide. Enterprises are seeking to connect data across their various applications, systems, and IT environments in order to become data-driven businesses.
Magic xpi Integration Platform We believe data is the most valuable competitive asset today as companies increasingly pursue digital transformation initiatives to modernize their businesses. Enormous amounts of data are being generated by people, applications, and devices worldwide. Enterprises are seeking to connect data across their various applications, systems, and IT environments in order to become data-driven businesses.
We believe there are significant cross-sell and upsell opportunities within our existing customer base by adding new products, addressing new areas of expertise, and growing with our customers’ overall business footprint. We intend to capitalize on the opportunity to more effectively cross-sell solutions and services across our existing customer base.
We plan to achieve this goal by focusing on the following principles: ● Expand sales to existing customers. We have a strong track-record of expanding within our existing customers. We believe there are significant cross-sell and upsell opportunities within our existing customer base by adding new products, addressing new areas of expertise, and growing with our customers’ overall business footprint.
With On-Site programs and sourcing models the Company solutions includes functions which differs from standard staffing companies. TGG provides assistance in the areas of compensation design and development, employee opinion surveys, employment policies and practices, performance management, regulatory and compliance issues and succession planning, for a total consideration of $11.6 million, subject to net working capital adjustments.
TGG provides assistance in the areas of compensation design and development, employee opinion surveys, employment policies and practices, performance management, regulatory and compliance issues and succession planning, for a total consideration of $11.6 million, subject to net working capital adjustments. $8 million of the consideration was paid upon closing. The remainder constitutes a deferred payment, payable in 2023 and 2024.
Understanding and connecting these data assets as well as migrating workloads to the cloud, enables superior insights across the business organization, better service of customers, automation of supply chains, and the democratization of secure, governed data access for all employees.
Understanding and connecting these data assets as well as migrating workloads to the cloud, enables superior insights across the business organization, better service of customers, automation of supply chains, and the democratization of secure, governed data access for all employees. 32 The rise of cloud computing, low-cost data storage and the proliferation of applications that generate and access data, combined with the increasing volume of data from mobile, social and IoT, is resulting in an explosion of the volume, variety, and velocity of data.
This functionality greatly reduces the iterative development process, allowing for real-time optimization and ultimately shortening the time it takes to design, build, and deploy applications. Our customers leverage our technologies to apply the right automation approach for their specific use case. We believe our unified low-code platforms are a differentiator in the marketplace.
Our customers leverage our technologies to apply the right automation approach for their specific use case. We believe our unified low-code platforms are a differentiator in the marketplace.
By enabling our customers to aggregate, consolidate and normalize their data to build a single source of truth, we empower them to deliver highly engaging and personalized customer experiences. This allows our customers to embrace a digital-first business strategy, build better connections and relationships with their end users, and modernize their supply chains by intelligently matching supply with demand patterns.
By enabling our customers to aggregate, consolidate and normalize their data to build a single source of truth, we empower them to deliver highly engaging and personalized customer experiences.
Our relationship with these channel partners ranges from fulfilment services to co-sell or independent resell in some markets. 44 Product Development We place considerable emphasis on research and development in order to improve and expand the functionality of our technologies and to develop new applications.
Product Development We place considerable emphasis on research and development in order to improve and expand the functionality of our technologies and to develop new applications.
(shares held by Magic Beheer B.V.) Netherlands 100 % Magic Software Enterprises GMBH (shares held by Magic Software Enterprises Netherlands B.V.) Germany 100 % Magic Software Enterprises India Pvt.
(shares held by Magic Beheer B.V.) Netherlands 100 % Magic Hands B.V.
On August 23, 2022, the Company acquired The Goodkind Group, LLC (“TGG”). TGG provides permanent and temporary staffing needs in verious sectors including: Information Technology, Accounting & Finance, Digital Media, Marketing, Human Resource, Financial Services. TGG specializes in customizing solutions and programs to their clients.
TGG provides permanent and temporary staffing needs in various sectors including: Information Technology, Accounting & Finance, Digital Media, Marketing, Human Resource, Financial Services. TGG specializes in customizing solutions and programs to their clients. With On-Site programs and sourcing models TGG solutions include functions which differ from standard staffing companies.
Commit’s unique, flexible R&D model, which provides complete flexibility in determining the mix of experts, allows for full control of budgets and schedules throughout the development project.
CommIT concluded 2023 with a 50% growth in cloud customers and a 150% increase in the number of cloud experts it employs, which amounts to over 200. Its unique, flexible R&D model, which provides complete flexibility in determining the mix of experts, allows for full control of budgets and schedules throughout the development project.
Growing demand for mobile and cloud-based applications as well as Big Data solutions also entails more complex IT development and integration projects which management and implementation require a higher level of expertise, In addition, the typical software-based projects of IT consulting have been gradually shifting towards software and technology-driven solutions that can be embedded into clients’ systems, providing ongoing engagement services.
In addition, the typical software-based projects of IT consulting have been gradually shifting towards software and technology-driven solutions that can be embedded into clients’ systems, providing ongoing engagement services.
The system produces a wide range of reports, including a receipt report from Israel’s Ministry of Health, Welfare, Economy and Security, comprehensive and detailed information divided into units and services, a detailed living allowance report, patient report, condition report, emergency report and more. 43 Menarva has extensive experience gained in its work over the past 10 years with dozens of clients in Israel, an experience that has given rise to in-depth insights into the field of rehabilitation.
The system produces a wide range of reports, including a receipt report from Israel’s Ministry of Health, Welfare, Economy and Security, comprehensive and detailed information divided into units and services, a detailed living allowance report, patient report, condition report, emergency report and more.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

95 edited+67 added−61 removed53 unchanged
Biggest changeNet cash provided by operations in 2022 consisted primarily of $46.3 million of net income adjusted for non-cash activities, including $19.8 million of depreciation and amortization expenses, $2.1 million of stock-based compensation expenses, a $1.9 million decrease in other long term and short term accounts receivable and prepaid expenses, a $0.1 million increase in trade payables, a $1.0 million decrease in accrued expenses and other accounts payable, payments in connection with contingent considerations arising from acquisitions in the amount of $3.9 million. and a $0. 5 million decrease in deferred revenues, offset by a $3.9 million change in deferred taxes, net and a $2.6 million increase in trade receivables.
Biggest changeThe material upwards adjustments in cash flow reflecting non-cash activity included adjustments due to $20.5 million of depreciation and amortization of capitalized research and development assets, other intangible assets, property, plants and equipment and operating right-of-use assets, $3.8 million of stock-based compensation expenses, a $18.4 million increase in trade receivables, offset in part by a $7.2 million decrease in accrued expenses and other accounts payable, payments in connection with contingent considerations arising from acquisitions in the amount of $6.6 million and a $3.2 million change in deferred taxes. 55 Net cash provided by operations in 2022 consisted primarily of $46.3 million of net income adjusted for non-cash activities, including $19.8 million of depreciation and amortization of capitalized research and development assets, other intangible assets, property, plants and equipment and operating right-of-use assets, $2.1 million of stock-based compensation expenses, a $1.9 million decrease in other long term and short term accounts receivable and prepaid expenses, a $0.1 million increase in trade payables, a $1.0 million decrease in accrued expenses and other accounts payable, payments in connection with contingent considerations arising from acquisitions in the amount of $3.9 million. and a $0.5 million decrease in deferred revenues, offset by a $3.9 million change in deferred taxes, net and a $2.6 million increase in trade receivables.
Transactions and balances in currencies other than the U.S. dollar are converted into dollars in accordance with the the International Accounting Standard 21 (IAS 21) “The Effects of Changes in Foreign Exchange Rates.” The majority of our sales are made outside of Israel and a substantial part of them is in dollars.
Transactions and balances in currencies other than the U.S. dollar are converted into dollars in accordance with the International Accounting Standard 21 (IAS 21) “The Effects of Changes in Foreign Exchange Rates.” The majority of our sales are made outside of Israel and a substantial part of them is in dollars.
In addition, a substantial portion of our costs is incurred in dollars.
In addition, a substantial portion of our costs is incurred in dollars.
Since the dollar is the primary currency of the economic environment in which we and certain of our subsidiaries operate, the dollar is our functional and reporting currency and accordingly, monetary accounts maintained in currencies other than the dollar are remeasured into dollars using the foreign exchange rate in effect at each balance sheet date.
Since the dollar is the primary currency of the economic environment in which we and certain of our subsidiaries operate, the dollar is our functional and reporting currency and accordingly, monetary accounts maintained in currencies other than the dollar are remeasured into dollars using the foreign exchange rate in effect at each balance sheet date.
Operational accounts and non-monetary balance sheet accounts are measured and recorded at the exchange rate in effect at the date of the transaction. For certain foreign subsidiaries whose functional currency is other than the U.S. dollar, all balance sheet accounts have been translated using the exchange rates in effect at each balance sheet date.
Operational accounts and non-monetary balance sheet accounts are measured and recorded at the exchange rate in effect at the date of the transaction. For certain foreign subsidiaries whose functional currency is other than the U.S. dollar, all balance sheet accounts have been translated using the exchange rates in effect at each balance sheet date.
When the Company grants to non-controlling interests a put option to sell part or all of their interests in a subsidiary, during a certain period, even if such purchase obligation is conditional on the counterparty’s exercise of its contractual right to cause such redemption, if the put option agreement does not transfer to the Company any benefits incidental to ownership of the equity instrument (i.e. the Company does not have a present ownership in the shares concerned) then at the end of each reporting period the non-controlling interests (to which a portion of net profit attributable to non-controlling interests is allocated) are classified as a financial liability, as if such put-able equity instrument was redeemed on that date.
Put option granted to non-controlling interests When the Company grants to non-controlling interests a put option to sell part or all of their interests in a subsidiary, during a certain period, even if such purchase obligation is conditional on the counterparty’s exercise of its contractual right to cause such redemption, if the put option agreement does not transfer to the Company any benefits incidental to ownership of the equity instrument (i.e. the Company does not have a present ownership in the shares concerned) then at the end of each reporting period the non-controlling interests (to which a portion of net profit attributable to non-controlling interests is allocated) are classified as a financial liability, as if such put-able equity instrument was redeemed on that date.
Net cash used in financing activities was approximately $18.3 million for the year ended December 31, 2022, primarily attributable to dividend distributions of $24.8 million, dividends paid to non-controlling interests of $4.2 million and repayment of short-term and long-term loans of $14.3 million, which were offset by proceeds from short-term and long-term loans received in the amount of $30.7 million.
Net cash used in financing activities was $18.3 million for the year ended December 31, 2022, primarily attributable to dividend distributions of $24.8 million, dividends paid to non-controlling interests of $4.2 million and repayment of short-term and long-term loans of $14.3 million, which were offset by proceeds from short-term and long-term loans received in the amount of $30.7 million.
As an IT technology innovator, we have many years of experience in assisting software companies and enterprises worldwide to produce and integrate their business applications. Our application platforms, Magic xpa and AppBuilder, are used by thousands of enterprises and MSPs to develop solutions for their users and customers in approximately 50 countries.
As an IT technology innovator, we have many years of experience in assisting software companies and enterprises worldwide to produce and integrate their business applications. Our application platforms, Magic xpa, Magic SmartUX and AppBuilder, are used by thousands of enterprises and MSPs to develop solutions for their users and customers in approximately 50 countries.
Operational accounts have been translated using the average exchange rate prevailing during each year. The resulting translation adjustments are reported as a component of accumulated other comprehensive income (loss) in equity. C.
Operational accounts have been translated using the average exchange rate prevailing during each year. The resulting translation adjustments are reported as a component of accumulated other comprehensive income (loss) in equity. 56 C.
Operational accounts have been translated using the average exchange rate prevailing during each year. The resulting translation adjustments are reported as a component of accumulated other comprehensive income (loss) in equity. 54 Vision and Focus Areas Our vision of how the industry will evolve is being driven by the change in enterprise mobility, cloud computing and Big Data.
Operational accounts have been translated using the average exchange rate prevailing during each year. The resulting translation adjustments are reported as a component of accumulated other comprehensive income (loss) in equity. Vision and Focus Areas Our vision of how the industry will evolve is being driven by the change in enterprise mobility, cloud computing , Big Data and AI.
Our actual results may differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this annual report. 53 Background We were organized under the laws of Israel on February 10, 1983 and began operations in 1986.
Our actual results may differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this annual report. 46 Background We were organized under the laws of Israel on February 10, 1983 and began operations in 1986.
Capitalized software costs are amortized on a product by product basis by the straight-line method over the estimated useful life of the software product (approximately 5 years, due to their high rates of acceptance, the continued reliance on these products by existing customers, and the demand for such products from prospective customers, all of which validate our expectations) which provides greater amortization expense compared to the revenue-curve method.
Capitalized software costs are amortized on a product by product basis by the straight-line method over the estimated useful life of the software product (between 3-5 years, due to their high rates of acceptance, the continued reliance on these products by existing customers, and the demand for such products from prospective customers, all of which validate our expectations) which provides greater amortization expense compared to the revenue-curve method.
Set forth below is segment information for the years ended December 31, 2021 and 2022.
Set forth below is segment information for the years ended December 31, 2021, 2022 and 2023.
We recognize revenue of such contracts over time using cost inputs, which recognize revenue and gross profit as work is performed based on a ratio between actual costs incurred compared to the total estimated costs for the contract, to measure progress toward completion of its performance obligations.
The Company recognizes revenue of such contracts over time using cost inputs, which recognize revenue and gross profit as work is performed based on a ratio between actual costs incurred compared to the total estimated costs for the contract, to measure progress toward completion of its performance obligations.
Our revenues from post contract support are derived from annual maintenance contracts providing for unspecified upgrades for new versions and enhancements on a when-and-if-available basis for an annual fee, as well as technical support for software licenses previously sold.
The Company’s revenues from post contract support are derived from annual maintenance contracts providing for unspecified upgrades for new versions and enhancements on a when-and-if-available basis for an annual fee, as well as technical support for software licenses previously sold.
Revenue from professional services both related to software and IT professional services businesses consists of either fixed price or time and materials (T&M), and are considered performance obligations that are satisfied over time, and revenues are recognized as the services are provided. 66 The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis.
Revenues from professional services, both related to software and IT professional services businesses consists of either fixed price or time and materials, are considered performance obligations that are satisfied over time and revenues are recognized as the services are provided. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis.
Of such subsidiaries, 30 are engaged in developing, marketing and supporting vertical applications, as well as in selling and supporting our products, and 37 subsidiaries specialize in providing broad range of IT consulting and outsourcing services in the areas of infrastructure design and delivery, application development, technology planning and implementation services, as well as supplemental outsourcing services.
Of such subsidiaries, 31 are engaged in developing, marketing and supporting vertical applications, as well as in selling and supporting our products, and 41 subsidiaries specialize in providing broad range of IT consulting and outsourcing services in the areas of infrastructure design and delivery, application development, technology planning and implementation services, as well as supplemental outsourcing services.
The underlying deliverable is owned and controlled by the customer and does not create an asset with an alternative use to us.
The underlying deliverable is owned and controlled by the customer and does not create an asset with an alternative use to the Company.
Liquidity and Capital Resources To date, we have financed our operations through income generated by operations, proceeds from our public offerings in 1991 (approximately $8.5 million), 1996 (approximately $5.0 million), 2000 (approximately $79.6 million) and 2014 (approximately $54.7 million), private equity investments in 1998 (approximately $12.2 million), 2010 (approximately $20.3 million), and in 2018 (approximately $34.6 million).
Liquidity and Capital Resources Historically, we have financed our operations through cashflow generated by our operations, proceeds from our public offerings in 1991 (approximately $8.5 million), 1996 (approximately $5.0 million), 2000 (approximately $79.6 million) and 2014 (approximately $54.7 million), private equity investments in 1998 (approximately $12.2 million), 2010 (approximately $20.3 million), and in 2018 (approximately $34.6 million).
In addition, we have also financed our operations through short-term loans, long-term loans and borrowings under available credit facilities from financial institutions. In November 2016, we obtained a NIS 120 million loan linked to the New Israel Shekel from an Israeli financial institution.
In addition, we have also financed our operations through short-term and long-term loans from financial institutions. In November 2016, we obtained a NIS 120 million loan linked to the New Israel Shekel from an Israeli financial institution.
The ratio of our total financial debts less cash to total assets will not exceed 30%; c. The ratio of our total financial debts less cash, short-term deposits and short-term marketable securities to the annual EBITDA will not exceed 3.25 to 1; To date, we are in full compliance with the financial covenants of the loan.
The ratio of our total financial debts less cash, short-term deposits and short-term marketable securities to the annual EBITDA will not exceed 3.25 to 1; To date, we are in full compliance with the financial covenants of Loans B and C.
Year Ended December 31, 2021 Compared with Year Ended December 31, 2020 Please see Item 5A of our Form 20-F for the Year ended December 31, 2021 filed on May 12, 2022 for this comparison. B.
Year Ended December 31, 2022 Compared with Year Ended December 31, 2021 Please see Item 5A of our Form 20-F for the Year ended December 31, 2022 filed on May 11, 2023 for this comparison. B.
We refer to these vendor-centered market sectors as ecosystems. Our consolidated financial statements for the year ended December 31, 2022 are our first consolidated financial statements prepared in accordance with IFRS. For all periods up to and including the year ended December 31, 2021, we have prepared our financial statements in accordance with U.S GAAP.
We refer to these vendor-centered market sectors as ecosystems. Our consolidated financial statements for the years ended December 31, 2022 and 2023 are prepared in accordance with IFRS. For all periods up to and including the year ended December 31, 2021, we had historically prepared our financial statements in accordance with U.S GAAP.
If we acquire another business, we may face difficulties, including: ● Difficulties in integrating the operations, systems, technologies, products, and personnel of the acquired businesses or enterprises; ● Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions; ● Potential difficulties in completing projects associated with in-process research and development; ● Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions; ● Insufficient revenue to offset increased expenses associated with acquisitions; and ● The potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans.
If we acquire another business, we may face difficulties, including: ● Difficulties in integrating the operations, systems, technologies, products, and personnel of the acquired businesses or enterprises; ● Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions; ● Potential difficulties in completing projects associated with in-process research and development; ● Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions; ● Insufficient revenue to offset increased expenses associated with acquisitions; and ● The potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans. 49 Impact of Currency Fluctuations and of Inflation Our financial statements are stated in U.S. dollars, our functional currency.
Failure to do so could adversely affect our business, financial condition and results of operations. Dependence on key customers We depend on repeat product and professional services revenues from a certain base of existing customers.
Failure to do so could adversely affect our business, financial condition and results of operations. Dependence on key customers We depend heavily on repeat software and professional services revenues from our base of existing customers.
We enter into contracts that can include various combinations of products, software and professional services, as detailed below, which are generally distinct from each other and accounted for as separate performance obligations.
The Company enters into contracts that can include various combinations of products, software and professional services, as detailed below, which are generally distinct from each other and accounted for as separate performance obligations.
We consider the post contract support performance obligation as a distinct performance obligation that is satisfied over time, and recognized on a straight-line basis over the contractual period.
The Company considers the post contract support performance obligation as a distinct performance obligation that is satisfied over time and recognized on a straight-line basis over the contractual period.
In the years ended December 31, 2020, 2021 and 2022, we invested $12.1 million, $12.2 million and $13.2 million in research and development, respectively. Research and development activities take place in our facilities in Israel, India, Russia and Japan .
In the years ended December 31, 2021, 2022 and 2023, we invested $12.2 million, $13.2 million and $13.5 million in research and development, respectively. Research and development activities take place in our facilities in Israel, India, and Japan .
On March 27, 2023, the Company entered into a loan agreement with an Israeli bank, pursuant to which , the Company borrowed $20,000 for a four-year term (the “Bank Loan”). The Bank Loan will mature on March 27, 2027, and will be repaid in four (4) equal annual instalments of $6,052 (including interest) starting March 27, 2024.
On March 27, 2023, we entered into a loan agreement (“Loan B”) with an Israeli bank, pursuant to which we borrowed $20,000 for a four-year term. Loan B will mature on March 27, 2027, and will be repaid in four (4) equal annual instalments of $6,052 (including interest) starting March 27, 2024.
To facilitate the understanding of our business activities, certain of our accounting policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s subjective judgments are described below.
To facilitate the understanding of our business activities, certain of our accounting policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s subjective judgments are described below. We base our judgments on our experience and various assumptions that we believe are reasonable.
For contracts that do not involve significant customization to customer-specific specifications (typically staffing or consulting services) revenue is recognized as the services are performed, either on a straight-line basis or based on the hours of services that were provided to the customer, in accordance with the terms of the contracts.
In addition, the Company provides professional services that do not involve significant customization to customer-specific specifications (typically staffing or consulting services). The revenue is recognized as the services are performed, either on a straight-line basis or based on the hours of services (time and material) that were provided to the customer, in accordance with the terms of the contracts.
Once a product is considered available for general release to customers, the capitalization of costs ceases and amortization of such costs to “cost of sales” begins.
Subsequently, the release is made generally available to customers. Once a product is considered available for use, the capitalization of costs ceases and amortization of such costs to “cost of sales” begins.
As of December 31, 2022, we employed 257 employees in research and development activities, of which 90 persons were located in Israel, 141 persons in India, 20 persons in Russia, 5 persons in Japan (when measured on a full time basis) and 1 person in the US.
As of December 31, 2023, we employed 256 employees in research and development activities, of which 99 persons were located in Israel, 131 persons in India, 20 persons in Russia, 5 persons in Japan (when measured on a full time basis) and 1 person in the US.
We, through eight of our subsidiaries in the United States and five of our subsidiaries in Israel, compete for potential customers with providers of outsourcing services, systems integrators, computer systems consultants, other providers of technical IT consulting services and, to a lesser extent, temporary personnel agencies.
We, through eight of our subsidiaries in the United States and five of our subsidiaries in Israel, compete for potential customers with providers of outsourcing services, systems integrators, computer systems consultants, other providers of technical IT consulting services and, to a lesser extent, temporary personnel agencies. We expect competition to increase, and we may not be able to remain competitive.
We cannot assure you that in the future our results of operations may not be adversely affected by currency fluctuations. 57 The following table sets forth for the periods indicated (depreciation) or appreciation of the U.S. dollar against the most important currencies for our business and the Israeli consumer price index: Year Ended December 31, 2018 2019 2020 2021 2022 New Israeli Shekel 8.1 % (7.8 )% (7.0 )% (3.3 )% 13.2 % Euro 4.6 % 2.0 % (8.5 )% 8.4 % 6.1 % Japanese Yen (2.4 )% (1.2 )% (5.0 )% (11.7 )% (14.6 )% British Pound 5.6 % (3.1 )% (3.4 )% (1.1 )% 12.2 % Israeli Consumer Price Index 0.8 % 0.6 % (0.7 )% 2.8 % 5.3 % Segments We report our results on the basis of two reportable business segments: software services (which include proprietary and non-proprietary software technology and complementary services) and IT professional services.
The following table sets forth for the periods indicated (depreciation) or appreciation of the U.S. dollar against the most important currencies for our business and the Israeli consumer price index: Year Ended December 31, 2019 2020 2021 2022 2023 New Israeli Shekel (7.8 )% (7.0 )% (3.3 )% 13.2 % 3.1 % Euro 2.0 % (8.5 )% 8.4 % 6.1 % (3.6 )% Japanese Yen (1.2 )% (5.0 )% (11.7 )% 14.6 % 7.2 % British Pound (3.1 )% (3.4 )% 1.1 % 12.2 % (5.5 )% Israeli Consumer Price Index 0.6 % (0.7 )% 2.8 % 5.3 % 3.0 % Segments We report our results on the basis of two reportable business segments: software services (which include proprietary and non-proprietary software technology and complementary services) and IT professional services.
On August 2017, our board of directors amended our dividend distribution policy, whereas, each year we distribute a dividend of up to 75% of our annual net income attributable to our shareholders (previously 50%), subject to applicable law.
Dividends We have paid dividends since September 2012 consistent with our Board of Directors’ dividend policy. On August 2017, our board of directors amended our dividend distribution policy, whereas, each year we distribute a dividend of up to 75% of our annual net income attributable to our shareholders (previously 50%), subject to applicable law.
Software services IT professional services Unallocated expense Total (U.S. dollars in thousands) 2022 Total revenues $ 99,374 $ 467,418 $ - $ 566,792 Expenses 72,115 427,446 5,469 505,030 Operating income (loss) $ 27,259 $ 39,972 $ (5,469 ) $ 61,762 Depreciation, amortization and stock-based compensation expenses 10,321 9,102 372 19,795 Capitalized software development costs (3,059 ) - - (3,059 ) EBITDA $ 34,521 $ 49,074 $ (5,097 ) $ 78,498 Software services IT professional services Unallocated expense Total (U.S. dollars in thousands) 2021 Total revenues $ 95,589 $ 384,736 $ - $ 480,325 Expenses 74,863 347,712 5,627 428,202 Operating income (loss) $ 20,726 $ 37,024 $ (5,627 ) $ 52,123 Depreciation, amortization and stock-based compensation expenses 10,619 8,846 372 19,837 Capitalized software development costs (3,193 ) - - (3,193 ) EBITDA $ 28,152 $ 45,870 $ (5,255 ) $ 68,767 58 Explanation of Key Income Statement Items Revenues .
Software services IT professional services Unallocated expense Total (U.S. dollars in thousands) 2023 Total revenues $ 92,906 $ 442,146 $ - $ 535,052 Expenses 71,863 400,949 5,132 477,944 Operating income (loss) $ 21,043 $ 41,197 $ (5,132 ) $ 57,108 Depreciation, amortization and stock-based compensation expenses 9,614 14,333 404 24,351 Capitalized software development costs (3,183 ) (3,183 ) EBITDA $ 27,474 $ 55,530 $ (4,728 ) $ 78,276 50 Software services IT professional services Unallocated expense Total (U.S. dollars in thousands) 2022 Total revenues $ 99,374 $ 467,418 $ - $ 566,792 Expenses 72,115 427,446 5,469 505,030 Operating income (loss) $ 27,259 $ 39,972 $ (5,469 ) $ 61,762 Depreciation, amortization and stock-based compensation expenses 10,321 9,102 372 19,795 Capitalized software development costs (3,059 ) - - (3,059 ) EBITDA $ 34,521 $ 49,074 $ (5,097 ) $ 78,498 Software services IT professional services Unallocated expense Total (U.S. dollars in thousands) 2021 Total revenues $ 95,589 $ 384,736 $ - $ 480,325 Expenses 74,863 347,712 5,627 428,202 Operating income (loss) $ 20,726 $ 37,024 $ (5,627 ) $ 52,123 Depreciation, amortization and stock-based compensation expenses 10,619 8,846 372 19,837 Capitalized software development costs (3,193 ) (3,193 ) EBITDA $ 28,152 $ 45,870 $ (5,255 ) $ 68,767 Explanation of Key Income Statement Items Revenues .
Net cash used in investing activities was approximately $34.5 million for the year ended December 31, 2022, compared to net cash used in investing activities of approximately $22.2 million for the year ended December 31, 2021.
Net cash used in investing activities was $27.6 million for the year ended December 31, 2023, compared to net cash used in investing activities of $34.5 million for the year ended December 31, 2022.
We have 67 active wholly-owned subsidiaries in the United States, Israel, Europe, Asia and South Africa.
We have 72 active subsidiaries and affiliate in the United States, Israel, Europe, Asia and South Africa.
Net financial income (expenses) consists primarily of interest earned on cash equivalents deposits and marketable securities, bank fees and interest paid on loans received, interest expenses related to liabilities in connection with acquisitions and impact of foreign currency exchange rates fluctuations. 59 Results of Operations The following table presents selected consolidated statement of operations data for the periods indicated as a percentage of total revenues: Year ended December 31, 2021 2022 Revenues: Software 6.5 % 5.8 % Maintenance and technical support 7.5 % 6.1 % Consulting services 86.0 % 88.1 % Total revenues 100.0 % 100.0 % Cost of revenues: Software 2.5 % 1.9 % Maintenance and technical support 0.9 % 0.6 % Consulting services 68.9 % 70.1 % Total cost of revenues 72.3 % 72.6 % Gross profit 27.7 % 27.4 % Operating costs and expenses: Research and development, net 1.9 % 1.8 % Selling and marketing, 7.9 % 8.3 % General and administrative 6.5 % 6.6 % Change in valuation of contingent consideration related to acquisitions 0.5 % (0.2 )% Total operating expenses, net 16.8 % 16.5 % Operating income 10.9 % 10.9 % Financial income (expenses), net (0.8 )% (0.6 )% Increase in valuation of contingent consideration related to acquisitions (0.6 )% (0.1 )% Income before taxes on income 9.5 % 10.2 % Tax on income (2.1 )% (2.0 )% Net income attributable to redeemable non-controlling interests (0.7 )% (0.6 )% Net income attributable to non-controlling interests (0.4 )% (0.4 )% Net income attributable to Magic’s shareholders 6.3 % 7.2 % Year Ended December 31, 2022 Compared with Year Ended December 31, 2021 Revenues .
Results of Operations The following table presents selected consolidated statement of operations data for the periods indicated as a percentage of total revenues: Year ended December 31, 2022 2023 Revenues: Software 5.8 % 6.1 % Maintenance and technical support 6.1 % 6.4 % Consulting services 88.1 % 87.5 % Total revenues 100.0 % 100.0 % Cost of revenues: Software 1.9 % 2.2 % Maintenance and technical support 0.6 % 0.6 % Consulting services 70.1 % 68.6 % Total cost of revenues 72.6 % 71.4 % Gross profit 27.4 % 28.6 % Operating costs and expenses: Research and development, net 1.8 % 1.9 % Selling and marketing, 8.3 % 8.3 % General and administrative 6.6 % 7.6 % Change in valuation of contingent consideration related to acquisitions (0.2 )% 0.1 % Total operating expenses, net 16.5 % 17.9 % Operating income 10.9 % 10.7 % Financial income (expenses), net (0.6 )% (0.8 )% Increase in valuation of contingent consideration related to acquisitions (0.1 )% (0.1 )% Income before taxes on income 10.2 % 9.8 % Tax on income (2.0 )% (1.9 )% Net income attributable to non-controlling interests (1.0 )% (1.0 )% Net income attributable to Magic’s shareholders 7.1 % 6.9 % 52 Year Ended December 31, 2023 Compared with Year Ended December 31, 2022 Revenues .
The principal amount of the loan is payable in eight equal semi-annual installments with the final payment due on December 1, 2025 and bears a fixed interest rate of SOFR + 2.1% per annum, payable in two semi-annual payments.
The principal amount of Loan A is payable in eight equal semi-annual installments with the final payment due on December 1, 2025 and bears a fixed interest rate of SOFR + 2.1% per annum, payable in two semi-annual payments. On March 31, 2022, we entered into a secured credit agreement, or the Credit Agreement, with an Israeli bank.
The following table sets forth the gross research and development costs, capitalized software development costs, and the net research and development expenses for the periods indicated: Year ended December 31, 2020 2021 2022 (U.S. dollars in thousands) Gross research and development costs $ 12,091 $ 12,188 $ 13,149 Less capitalized software development costs (3,302 ) (3,193 ) (3,059 ) Research and development expenses, net $ 8,789 $ 8,995 $ 10,090 Selling and Marketing Expenses .
The capitalization of software development costs is applied as reductions to gross research and development costs to calculate net research and development expenses. 51 The following table sets forth the gross research and development costs, capitalized software development costs, and the net research and development expenses for the periods indicated: Year ended December 31, 2021 2022 2023 (U.S. dollars in thousands) Gross research and development costs $ 12,188 $ 13,149 $ 13,511 Less capitalized software development costs (3,193 ) (3,059 ) (3,183 ) Research and development expenses, net $ 8,995 $ 10,090 $ 10,328 Selling and Marketing Expenses .
These accruals are reviewed and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries.
These accruals are reviewed and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter.
Because exchange rates between the NIS, euro, Japanese Yen and the British pound and the U.S. dollar fluctuate continuously, exchange rate fluctuations and especially larger periodic devaluations will have an impact on our profitability and period-to-period comparisons of our results.
Because exchange rates between the NIS, euro, Japanese Yen and the British pound and the U.S. dollar fluctuate continuously, exchange rate fluctuations and especially larger periodic devaluations will have an impact on our profitability and period-to-period comparisons of our results. We cannot assure you that in the future our results of operations may not be adversely affected by currency fluctuations.
The Bank Loan will mature on March 31, 2027, and will be repaid in 5 equal annual installments, whereas the interest will be paid and calculated on a quarterly basis. The Bank Loan bears interest at the rate of SOFR + 2.25%.
Pursuant to the Credit Agreement, we borrowed $25 million for a five-year term. This loan will mature on March 31, 2027, and will be repaid in 5 equal annual installments, whereas the interest will be paid and calculated on a quarterly basis. This loan bears interest at the rate of SOFR + 2.25%.
In certain instances, we enter into a short pre-release stage, during which the product is made available to a selected number of customers as a beta program for their own review and familiarization. Subsequently, the release is made generally available to customers from our download area.
The internal validation of the product takes place a few weeks before the product is made available to the market. In certain instances, we enter into a short pre-release stage, during which the product is made available to a selected number of customers as a beta program for their own review and familiarization.
As of December 31, 2022, we had $87.0 million in cash and cash equivalents, with net working capital of approximately $93.0 million and long term debts to banks and others of approximately $30.4 million compared to $94.8 million in cash and cash equivalents and available-for-sale marketable securities, with net working capital of approximately $116.0 million and long term debts to banks and others of approximately $20.2 million, as of December 31, 2021.
As of December 31, 2023, we had $109 million in cash and cash equivalents, short-term bank deposits and available-for-sale marketable securities with net working capital of approximately $114.9 million and long term debts to banks and others of approximately $52.3 million compared to $87.0 million in cash and cash equivalents and available-for-sale marketable securities, with net working capital of approximately $93.0 million and long term debts to banks and others of approximately $30.4 million, as of December 31, 2022.
We expect competition to increase, and we may not be able to remain competitive. 55 Some of our existing and potential competitors are larger companies, have substantially greater resources than us, including financial, technological, marketing, skilled human resources and distribution capabilities, and enjoy greater market recognition than us.
Some of our existing and potential competitors are larger companies, have substantially greater resources than us, including financial, technological, marketing, skilled human resources and distribution capabilities, and enjoy greater market recognition than us.
Our two largest customers accounted for 21.2% and 20.6% of our revenues in the years ended December 31, 2021 and 2022, respectively, and our five largest customers accounted for 27.5% and 26.4% of our revenues in the years ended December 31, 2021 and 2022, respectively.
Our two largest customers accounted for 20.6% and 16.8% of our revenues in the years ended December 31, 2022 and 2023, respectively, and our five largest customers accounted for 26.4% and 22.9% of our revenues in the years ended December 31, 2022 and 2023, respectively.
Net cash used in financing activities was approximately $21.3 million for the year ended December 31, 2021, primarily attributable to dividend distributions of $21.8 million, dividends paid to non-controlling interests of $4.2 million and repayment of short-term and long-term loans of $14.5 million, which were offset by proceeds from short-term and long-term loans received in the amount of $25.6 million. 64 Dividends We have paid dividends since September 2012 consistent with our Board of Directors’ dividend policy.
Net cash used in financing activities was $17.3 million for the year ended December 31, 2023, primarily attributable to dividend distributions of $30.8 million, dividends paid to non-controlling interests of $4.1 million and repayment of short-term and long-term loans of $21 million, which were offset by proceeds from short-term and long-term loans received in the amount of $49.5 million.
Cost of revenues increased by approximately 18.5% from $347.3 million in 2021 to $411.4 million in 2022. Cost of revenues from the software services business segment increased by 0.2% from $37.6 million in 2021 to $37.7 million in 2022.
Cost of revenues decreased by approximately 7.1% from $411.4 million in 2022 to $382.1 million in 2023. Cost of revenues from the software services business segment decreased by 0.1% from $37.7 million in 2022 to $37.6 million in 2023.
As of December 31, 2021, and 2022, our long-term and short-term debt amounted to $37.3 million and $51.1 million, respectively and our redeemable non-controlling interests as of December 31, 2021 and 2022 amounted to $29.3 million and $28.3 million, respectively.
As of December 31, 2022, and 2023, our long-term and short-term debt amounted to $51.1 million and $81.2 million, respectively and our put options for non-controlling interests as of December 31, 2022 and 2023 amounted to $28.3 million and $18.9 million, respectively.
Research and development costs consist primarily of personnel expenses of employees engaged in on-going research and development activities, subcontracting, development tools and other related expenses. The capitalization of software development costs is applied as reductions to gross research and development costs to calculate net research and development expenses.
Research and development costs consist primarily of personnel expenses of employees engaged in on-going research and development activities, subcontracting, development tools and other related expenses.
We derive our revenues from licensing the rights to use our software (proprietary and non-proprietary), provision of related professional services, maintenance and technical support as well as from other software and IT professional services (either fixed price or based on time and materials). We sell our products primarily through direct sales force and indirectly through distributors and value added resellers.
The Company derives its revenues from licensing the rights to use its software (proprietary and non-proprietary), provision of related professional services, maintenance and technical support as well as from other software and IT professional services (either fixed price or based on time and materials).
We also maintain substantial non-U.S. dollar balances of assets, including cash, accounts receivable, and liabilities, including accounts payable and debts to banks and financial institutions. Therefore, fluctuations in the value of the currencies in which we do business relative to the U.S. dollar may adversely affect our business, results of operations and financial condition.
Therefore, fluctuations in the value of the currencies in which we do business relative to the U.S. dollar may adversely affect our business, results of operations and financial condition.
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.
Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The breakdown of our revenue mix for the twelve-month period of 2022 was approximately 18% related to our software solutions and 82% related to our professional services, compared to 20% related to our software and 80% related to our professional services in 2021 as a whole.
The breakdown of our revenue mix for the twelve-month period of 2023 remained stable as approximately 17.4% related to our software solutions and 82.6% related to our professional services, compared to 17.5% related to our software and 82.5% related to our professional services in 2022.
IAS 38 requires that a product be amortized when the product is available for general release to customers. We consider a product to be available for general release to customers when we complete the internal validation of the product that is necessary to establish that the product meets its design specifications including functions, features, and technical performance requirements.
We consider a product to be available for use when we complete its internal validation of the product that is necessary to establish that the product meets its design specifications including functions, features, and technical performance requirements. Internal validation includes the completion of coding, documentation and testing that ensure bugs are reduced to a minimum.
The Bank Loan bears interest at the rate SOFR + 3.38%. The loan, which may be prepaid under certain circumstances, is subject to various financial covenants which mainly consist of the following: a. Our equity will not be lower than $150 million (one hundred million U.S. Dollars at all times; c.
The Bank Loan bears an interest rate of prime + 0.92% per annum, payable in two semi-annual payments. 54 Loans B and C which may be prepaid under certain circumstances, is subject to various financial covenants which mainly consist of the following: a. Our equity will not be lower than $150 million (one hundred million U.S.
Net research and development costs increased by 12.2% from $9.0 million in 2021 to $10.1 million in 2022. In 2022, we capitalized $3.1 million of software development costs compared to $3.2 million in 2021. Net research and development costs as a percentage of revenues was 1.8% in 2022 compared to 1.9% in 2021.
Gross (Net) research and development costs as a percentage of revenues was 2.5% (1.9%) in 2023 compared to 2.3% (1.8%) in 2022. Selling and Marketing Expenses . Selling and marketing expenses decreased by 5.0% from $46.9 million in 2022 to $44.5 million in 2023.
We intended to use the proceeds from this loan for our general corporate purposes, which may include the funding of our working capital needs and the funding of potential acquisitions.
We intended to use the proceeds from this loan for our general corporate purposes, which may include the funding of our working capital needs and the funding of potential acquisitions. The principal amount of the loan is payable in seven equal annual payments and the final payment was paid on November 2, 2023.
During the years ended December 31, 2021 and 2022, we recognized stock-based compensation expenses related to employee stock options of $1.0 million, and $2.1 million, respectively. 69 Contingencies From time to time, we are subject to legal, administrative and regulatory proceedings, claims, demands and investigations in the ordinary course of business, including claims with respect to intellectual property, contracts, employment and other matters.
Contingencies From time to time, we are subject to legal, administrative and regulatory proceedings, claims, demands and investigations in the ordinary course of business, including claims with respect to intellectual property, contracts, employment and other matters.
During the year ended December 31, 2022, no costs have been capitalized. We do not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.
The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less. 58 Research and development costs Research expenditures incurred in the process of software development are recognized in profit or loss when incurred.
Revenues in 2022 increased by 18.0% from $480.3 million in 2021 to $566.8 million in 2022. Revenues from the software services business segment increased by 4.0% from $95.6 million in 2021 to $99.4 million in 2022.
Revenues in 2023 decreased by 5.6% from $566.8 million in 2022 to $535.1 million in 2023. Revenues from the software services business segment decreased by 6.5% from $99.4 million in 2022 to $92.9 million in 2023.
Cost of revenues from the IT professional services business segment increased by approximately 20.7% from $309.7 million in 2021 to $373.7 million in 2022. As percentage of revenues, cost of revenues from the IT professional services business segment remained stable at approximately 80% in 2022 and 2021.
As percentage of revenues, cost of revenues from the software services business segment increased from 38% in 2022 to 40.5% in 2023. Cost of revenues from the IT professional services business segment decreased by 7.8% from $373.7 million in 2022 to $344.5 million in 2023.
We believe that our strategy and our ability to innovate and execute may enable us to improve our competitive position in difficult business conditions and may continue to provide us with long-term growth opportunities.
We believe that our strategy and our ability to innovate and execute may enable us to improve our competitive position in difficult business conditions and may continue to provide us with long-term growth opportunities. 47 Key Factors Affecting Our Business Our operations and the operating metrics discussed below have been and will likely continue to be affected by certain key factors as well as certain historical events and actions.
We recorded taxes on income of $10.3 million in 2021 compared to $11.1 million in 2022. The rest of the increase is in line with the increase in our taxable income. Net Income Attributable to Our Shareholders .
We recorded taxes on income of $11.1 million in 2022 compared to $9.9 million in 2023. The decrease in our tax expenses is in line with the decrease in our taxable income. As a percentage of pre-tax income, tax expenses amounted to approximately 19.4% in 2022, compared to 18.9% in 2023. Net Income Attributable to Our Shareholders .
Goodwill is tested for impairment by assessing the recoverable amount of the cash-generating unit (or group of cash-generating units) to which the goodwill has been allocated.
The Company reviews goodwill for impairment once a year, on December 31, or more frequently if events or changes in circumstances indicate that there is an impairment. Goodwill is tested for impairment by assessing the recoverable amount of the cash-generating unit (or group of cash-generating units) to which the goodwill has been allocated.
During the years ended December 31, 2021 and 2022, no such unrecoverable amounts were identified.
During the years ended December 31, 2021, 2022 and 2023, no such unrecoverable amounts were identified. Consolidated financial statements The consolidated financial statements comprise the financial statements of companies that are controlled by the Company (subsidiaries).
We generally expense sales commissions as they are incurred when the amortization period would have been less than one year. In addition, generally, sales commissions which are paid upon contract renewal are commensurate with the initial commissions as the renewal amounts are substantially identical to the initial commission costs.
In addition, generally, sales commissions which are paid upon contract renewal are commensurate with the initial commissions as the renewal amounts are substantially identical to the initial commission costs. During the years ended December 31, 2023 and 2022, no costs have been capitalized.
Dollars at all times; b. Our cash and cash equivalent and marketable securities available for sales will not be less than $10 million (ten million U.S. Dollars); c. The ratio of our total financial debts to total assets will not exceed 50%; d.
Dollars at all times); c. The ratio of our total financial debts less cash to total assets will not exceed 30%; c.
The application of these indicators for gross and net reporting of revenue depends on the relative facts and circumstances of each sale. We pay commissions to sales and marketing and certain management personnel based on their attainment of certain predetermined sales or profit goals.
Revenue from third-party sales is recorded at a gross or net amount according to certain indicators. The application of these indicators for gross and net reporting of revenue depends on the relative facts and circumstances of each sale.
Impact of Currency Fluctuations and of Inflation Our financial statements are stated in U.S. dollars, our functional currency. However, a substantial portion of our revenues and costs are incurred in other currencies, particularly NIS, Euros, Japanese yen, and the British pound.
However, a substantial portion of our revenues and costs are incurred in other currencies, particularly NIS, Euros, Japanese yen, and the British pound. We also maintain substantial non-U.S. dollar balances of assets, including cash, accounts receivable, and liabilities, including accounts payable and debts to banks and financial institutions.
Revenues from the IT professional services business segment increased by 21.5% from $384.7 million in 2021 to $467.4 million in 2022, primarily attributable to i) increase of $3.7 million due to the inclusion of Enable IT revenues, acquired on April 1, 2021 respectively on a full year basis, ii) increase of $21.0 million due to the acquisition of Appush and TGG acquired on January 1, 2022 and August 15, 2022 respectively, with the remaining increase resulted primarily from increased demand for our IT software services across most of our business units. 60 The following table summarizes our revenues by geographical market for the years ended December 31, 2021 and 2022: Year ended December 31, 2021 2022 (U.S. dollars in thousands) United States $ 254,342 $ 308,485 Israel 180,462 205,258 Europe 30,085 39,247 Japan 11,443 10,121 Other 3,993 3,681 Total revenues $ 480,325 $ 566,792 Cost of Revenues .
The following table summarizes our revenues by geographical market for the years ended December 31, 2022 and 2023: Year ended December 31, 2021 2022 2023 (U.S. dollars in thousands) United States $ 254,342 $ 308,485 $ 250,842 Israel 180,462 205,258 214,129 Europe 30,085 39,247 55,180 Japan 11,443 10,121 10,847 Other 3,993 3,681 4,055 Total revenues $ 480,325 $ 566,792 $ 535,052 Cost of Revenues .
Our fixed income and publicly traded equity securities are classified as Level 2 investments, as measured under IFRS 13, “Fair Value Measurements,” as these vendors either provide a quoted market price in an active market or use observable inputs. 63 Cash Flows The following table summarizes our cash flows for the periods presented: Year ended December 31, 2021 2022 ( U.S. dollars in thousands ) Net income from operations $ 35,339 $ 46,279 Adjustments to reconcile net income to net cash provided by operating activities 8,335 10,336 Net cash provided by operating activities 43,674 56,615 Net cash used in investing activities (22,197 ) (34,458 ) Net cash used in financing activities (21,266 ) (18,276 ) Effect of exchange rate changes on cash and cash equivalents (248 ) (8,909 ) Decrease in cash and cash equivalents $ (38 ) $ (5,028 ) Net cash provided by operating activities was $56.6 million for the year ended December 31, 2022, compared to $43.7 million for the years ended December 31, 2021.
Cash Flows The following table summarizes our cash flows for the periods presented: Year ended December 31, 2022 2023 ( U.S. dollars in thousands ) Net income from operations $ 46,279 $ 42,502 Adjustments to reconcile net income to net cash provided by operating activities 10,336 26,490 Net cash provided by operating activities 56,615 68,992 Net cash used in investing activities (34,458 ) (27,616 ) Net cash used in financing activities (18,276 ) (17,293 ) Effect of exchange rate changes on cash and cash equivalents (8,909 ) (1,202 ) Increase (decrease) in cash and cash equivalents $ (5,028 ) $ 22,881 Net cash provided by operating activities was $89.0 million for the year ended December 31, 2023, compared to $56.6 million for the years ended December 31, 2022.
Despite the significant change in mix of our revenues between software solutions and professional services, the breakdown of our gross profit mix for the twelve-month period of 2022 remained stable as approximately 40% of our gross profit related to our software solutions and 60% related to our professional services in 2022 as a whole, compared to 44% related to our software and 56% related to our professional services in 2021 as a whole. 56 We may encounter difficulties in realizing the potential financial or strategic benefits of recent and future business acquisitions.
The breakdown of our gross profit mix for the twelve-month period of 2023 changed to approximately 36% of our gross profit related to our software solutions and 64% related to our professional services in 2023 as a whole, compared to 40% related to our software and 60% related to our professional services in 2022 as a whole.
Under IFRS 15, an entity recognizes revenue when or as it satisfies a performance obligation by transferring software license or software related services to the customer, either at a point in time or over time. We recognize our revenues from software sales at a point in time upon delivery of a software license.
The Company sells its products primarily through direct sales force and indirectly through distributors and value-added resellers. The Company recognizes revenue when or as it satisfies a performance obligation by transferring software license or software related services to the customer, either at a point in time or over time.
We recognize compensation expenses for the value of our awards, which have graded vesting based on the accelerated method over the requisite service period of each of the awards, net of estimated forfeitures. To measure and recognize compensation expense for share-based awards we use the Binomial option-pricing model.
The Company recognizes compensation expenses for the value of its awards, which have graded vesting based on the accelerated method over the requisite service period of each of the awards. The Company accounts for forfeitures as they occur.
The increase in cost of revenues from the IT professional services business segment in absolute numbers is in line with the increase in revenues from the IT professional services business segment. Gross Margin . Gross margin declined mildly by 0.3% from 27.7% in 2021 to 27.4% in 2022.
As percentage of revenues, cost of revenues from the IT professional services business segment decreased by 210 basis points from 80.0% in 2022 to 77.9% in 2023. The decrease in cost of revenues from the IT professional services business segment in absolute numbers is in line with the decrease in revenues from the IT professional services business segment.
The software license is considered a distinct performance obligation, as the customer can benefit from the software on its own. Revenues from contracts that involve significant customization to customer-specific specifications are performance obligations that we generally account for as performance obligations satisfied over time.
The software license is considered a distinct performance obligation recognized at a point-in-time, as the customer can benefit from the software on its own or together with other readily available resources. 57 Revenue from long-term contracts which involve significant implementation, customization, or integration of the Company’s software license to customer-specific requirements are considered as one performance obligation satisfied over-time.

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Biggest changeThe Israeli Companies Law provides that a company may, if permitted by its articles of association, indemnify an office holder for acts or omissions performed by the office holder in such capacity for: ● A financial liability imposed on the office holder in favor of another person by any judgment, including a settlement or an arbitrator’s award approved by a court; ● Reasonable litigation expenses, including attorney’s fees, actually incurred by the office holder as a result of an investigation or proceeding instituted against him or her by a competent authority, provided that such investigation or proceeding concluded without the filing of an indictment against the office holder or the imposition of any financial liability instead of criminal proceedings, or concluded without the filing of an indictment against the office holder and a financial liability was imposed on the officer holder instead of criminal proceedings with respect to a criminal offense that does not require proof of criminal intent; ● Reasonable litigation expenses, including attorneys’ fees, incurred by such office holder or which were imposed on him by a court, in proceedings the company instituted against the office holder or that were instituted on the company’s behalf or by another 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 of a crime which does not require proof of criminal intent; and 80 ● Expenses, including reasonable litigation expenses and legal fees, incurred by such office holder as a result of a proceeding instituted against him in relation to (A) infringements that may result in imposition of financial sanction pursuant to the provisions of Chapter H’3 under the Israeli Securities Law or (B) administrative infringements pursuant to the provisions of Chapter H’4 under the Israeli Securities Law or (C) infringements pursuant to the provisions of Chapter I’1 under the Israeli Securities Law; and (e) payments to an injured party of infringement under Section 52ND(a)(1)(a) of the Israeli Securities Law.
Biggest changeThe Israeli Companies Law provides that a company may, if permitted by its articles of association, indemnify an office holder for acts or omissions performed by the office holder in such capacity for: ● A financial liability imposed on the office holder in favor of another person by any judgment, including a settlement or an arbitrator’s award approved by a court; ● Reasonable litigation expenses, including attorney’s fees, actually incurred by the office holder as a result of an investigation or proceeding instituted against him or her by a competent authority, provided that such investigation or proceeding concluded without the filing of an indictment against the office holder or the imposition of any financial liability instead of criminal proceedings, or concluded without the filing of an indictment against the office holder and a financial liability was imposed on the officer holder instead of criminal proceedings with respect to a criminal offense that does not require proof of criminal intent; ● Reasonable litigation expenses, including attorneys’ fees, incurred by such office holder or which were imposed on him by a court, in proceedings the company instituted against the office holder or that were instituted on the company’s behalf or by another 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 of a crime which does not require proof of criminal intent; and ● Expenses, including reasonable litigation expenses and legal fees, incurred by such office holder as a result of a proceeding instituted against him in relation to (A) infringements that may result in imposition of financial sanction pursuant to the provisions of Chapter H’3 under the Israeli Securities Law or (B) administrative infringements pursuant to the provisions of Chapter H’4 under the Israeli Securities Law or (C) infringements pursuant to the provisions of Chapter I’1 under the Israeli Securities Law; and (e) payments to an injured party of infringement under Section 52ND(a)(1)(a) of the Israeli Securities Law. 74 In accordance with the Israeli Companies Law, a company’s articles of association may permit the company to: ● Undertake in advance to indemnify an office holder, except that with respect to a financial liability imposed on the office holder by any judgment, settlement or court-approved arbitration award, the undertaking must be limited to types of occurrences, which, in the opinion of the company’s board of directors, are, at the time of the undertaking, foreseeable due to the company’s activities and to an amount or standard that the board of directors has determined is reasonable under the circumstances; and ● Retroactively indemnify an office holder of the company.
Mr. Shahaf was one of Roshtov’s founders in 1989 and has served as its Chief Executive Officer and a director since its inception. He also served as a director and chairman on several board of private companies. Mr.
Shahaf was one of Roshtov’s founders in 1989 and has served as its Chief Executive Officer and a director since its inception. He also served as a director and chairman on several board of private companies. Mr.
Pursuant to Israeli regulations adopted in January 2011, directors who comply with the independence requirements of NASDAQ and the SEC are deemed to comply with the independence requirements of the Israeli Companies Law. Our board of directors has determined that Mr. Sagi Schliesser and Mr.
Pursuant to Israeli regulations adopted in January 2011, directors who comply with the independence requirements of NASDAQ and the SEC are deemed to comply with the independence requirements of the Israeli Companies Law. Our board of directors has determined that Mr. Sagi Schliesser, Mr.
In the event the company’s shareholders do not approve the compensation of the office holder, the compensation committee and board of directors may still approve the transaction, in special cases and with detailed reasons and after discussion and examining the rejection of the company’s shareholders. ● With respect to a company’s general manager (generally the equivalent of a CEO): ● In the event the transaction is in accordance with the compensation policy - approval (in the following order) by the: (i) compensation committee, (ii) board of directors and (iii) company’s shareholders with the “Special Majority” described above. ● In the event the transaction is not in accordance with the compensation policy – the approval process and requirements are the same as the approval process for such a transaction with an office holder who is not the general manager, a controlling shareholder or a relative of the controlling shareholder. ● The Israeli Companies Law includes an exception from the shareholder approval requirement in connection with the approval of a transaction with a general manager candidate, subject to certain conditions.
In the event the company’s shareholders do not approve the compensation of the office holder, the compensation committee and board of directors may still approve the transaction, in special cases and with detailed reasons and after discussion and examining the rejection of the company’s shareholders. ● With respect to a company’s general manager (generally the equivalent of a CEO): ● In the event the transaction is in accordance with the compensation policy - approval (in the following order) by the: (i) compensation committee, (ii) board of directors and (iii) company’s shareholders with the “Special Majority” described above. 72 ● In the event the transaction is not in accordance with the compensation policy – the approval process and requirements are the same as the approval process for such a transaction with an office holder who is not the general manager, a controlling shareholder or a relative of the controlling shareholder. ● The Israeli Companies Law includes an exception from the shareholder approval requirement in connection with the approval of a transaction with a general manager candidate, subject to certain conditions.
In September 2013, our shareholders approved a 1,000,000 share increase in the number of Ordinary Shares available for issuance under the 2007 Stock Option Plan. On December 31, 2015 our board of directors increased the amount of Ordinary Shares reserved for issuance by an additional 250,000 Ordinary Shares and extended the plan by 10 years until August 1, 2027.
In September 2013, our shareholders approved a 1,000,000 share increase in the number of Ordinary Shares available for issuance under the 2007 Stock Option Plan. 78 On December 31, 2015 our board of directors increased the amount of Ordinary Shares reserved for issuance by an additional 250,000 Ordinary Shares and extended the plan by 10 years until August 1, 2027.
The disclosure requirements which apply to an office holder also apply to such transaction with respect to his or her personal interest in the transaction. The Companies Law provides for certain procedural constraints on a public company entering into a transaction in which a controlling shareholder and other interested parties have a personal interest.
The disclosure requirements which apply to an office holder also apply to such transaction with respect to his or her personal interest in the transaction. 71 The Companies Law provides for certain procedural constraints on a public company entering into a transaction in which a controlling shareholder and other interested parties have a personal interest.
Schliesser holds a B.Sc. degree with honors in Computer Science and Psychology from Tel Aviv University, as well as a Master’s degree in Computer Science from the Interdisciplinary Center in Herzliya and an M.B.A. degree with honors in Business Psychology from Hamaslool Ha’akademi Shel Hamichlala Leminhal. 72 Ron Ettlinger has served as an external director of our company since December 2014 and is a member of our audit committee.
Schliesser holds a B.Sc. degree with honors in Computer Science and Psychology from Tel Aviv University, as well as a Master’s degree in Computer Science from the Interdisciplinary Center in Herzliya and an M.B.A. degree with honors in Business Psychology from Hamaslool Ha’akademi Shel Hamichlala Leminhal. 64 Ron Ettlinger has served as an external director of our company since December 2014 and is a member of our audit committee.
We have established a compensation committee that is currently composed of Messrs. Ettlinger, Schliesser and Zakay. Internal Auditor The Israeli Companies Law also requires the board of directors of a public company to appoint an internal auditor proposed by the audit committee.
We have established a compensation committee that is currently composed of Messrs. Ettlinger, Schliesser, Zakay and Totah. 70 Internal Auditor The Israeli Companies Law also requires the board of directors of a public company to appoint an internal auditor proposed by the audit committee.
In accordance with the Israeli Companies Law, the audit committee is responsible to determine that Controlling Party Transactions shall be subject to a competitive procedure or other similar procedure before such transactions are approved. Our latest amended compensation policy was adopted on February 25, 2022. 79 Provisions Restricting Change in Control of Our Company Tender Offer .
In accordance with the Israeli Companies Law, the audit committee is responsible to determine that Controlling Party Transactions shall be subject to a competitive procedure or other similar procedure before such transactions are approved. Our latest amended compensation policy was adopted on February 25, 2021. Provisions Restricting Change in Control of Our Company Tender Offer .
Because of that disclosure requirement under Israeli law, we are also including such information in this annual report, pursuant to the disclosure requirements of Form 20-F. The table below reflects the compensation granted to our five most highly compensated officers during or with respect to the year ended December 31, 2022.
Because of that disclosure requirement under Israeli law, we are also including such information in this annual report, pursuant to the disclosure requirements of Form 20-F. 66 The table below reflects the compensation granted to our five most highly compensated officers during or with respect to the year ended December 31, 2023.
Compensation The following table sets forth all compensation we paid with respect to all of our directors and executive officers as a group for the year ended December 31, 2022.
Compensation The following table sets forth all compensation we paid with respect to all of our directors and executive officers as a group for the year ended December 31, 2023.
Share Ownership Beneficial Ownership of Executive Officers and Directors The following table sets forth certain information as of April 1, 2023 regarding the beneficial ownership by each of our directors and executive officers: Name Number of Ordinary Shares Beneficially Owned (1) Percentage of Ownership (2) Guy Bernstein 150,000 * Asaf Berenstin 38,225 * Ron Ettlinger -- -- Naamit Salomon -- -- Sagi Schliesser -- -- Avi Zakay -- -- Arik Faingold -- -- Yuval Baruch -- -- Arik Kilman -- -- Yakov Tsaroya 2,500 * Yuval Lavi -- -- Yael Ilan -- -- Hanan Shahaf -- -- * Less than 1% (1) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.
Share Ownership Beneficial Ownership of Executive Officers and Directors The following table sets forth certain information as of May 1, 2024 regarding the beneficial ownership by each of our directors and executive officers: Name Number of Ordinary Shares Beneficially Owned (1) Percentage of Ownership (2) Guy Bernstein 150,000 * Asaf Berenstin 38,225 * Ron Ettlinger -- -- Naamit Salomon -- -- Sagi Schliesser -- -- Avi Zakay -- -- Sami Totah -- -- Arik Faingold -- -- Yuval Baruch -- -- Arik Kilman -- -- Yakov Tsaroya 2,500 * Yuval Lavi -- -- Yael Ilan -- -- Hanan Shahaf -- -- * Less than 1% (1) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.
Tsaroya holds a B.A. degree in Accounting and Finance from the College of Administration in Israel and is a certified public accountant (CPA) in Israel. Yael Ilan joined Complete Business Solutions as CEO in 2022 after spending six years as CEO at Formula Telecom Solution.
Tsaroya holds a B.A. degree in Accounting and Finance from the College of Administration in Israel and is a certified public accountant (CPA) in Israel. 65 Yael Ilan joined Complete Business Solutions as CEO in 2023 after spending six years as CEO at Formula Telecom Solution.
As of December 31, 2022, an aggregate of 952,500 Ordinary Shares are available for future grants under the Plan.
As of December 31, 2023, an aggregate of 952,500 Ordinary Shares are available for future grants under the Plan.
(As of 12/31/2022) Country of Principal Executive Offices Israel Foreign Private Issuer Yes Disclosure Prohibited Under Home Country Law No Total Number of Directors 5 Female Male Non-Binary Did Not Disclose Gender Part I: Gender Identity Directors 1 4 - - Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 82 D.
(As of 12/31/2023) Country of Principal Executive Offices Israel Foreign Private Issuer Yes Disclosure Prohibited Under Home Country Law No Total Number of Directors 6 Female Male Non-Binary Did Not Disclose Gender Part I: Gender Identity Directors 1 5 - - Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 76 D.
In accordance with the Israeli Companies law the audit committee is responsible to determine that Controlling Party Transactions shall be subject to a competitive procedure or other similar procedure before such transactions are approved. During the year ended December 31, 2022, we sold approximately $6.9 million of services to affiliated companies of Formula Systems.
In accordance with the Israeli Companies law the audit committee is responsible to determine that Controlling Party Transactions shall be subject to a competitive procedure or other similar procedure before such transactions are approved. During the year ended December 31, 2023, we sold approximately $3.7 million of services to affiliated companies of Formula Systems.
Pursuant to our articles of association, all of our directors are elected at our annual general meeting of shareholders, which are required to be held at least once during every calendar year and not more than 15 months after the last preceding meeting.
Our board of directors is currently composed of five directors. Pursuant to our articles of association, all of our directors are elected at our annual general meeting of shareholders, which are required to be held at least once during every calendar year and not more than 15 months after the last preceding meeting.
Salaries, fees, commissions and bonuses Pension, retirement and similar benefits All directors and executive officers as a group (12 persons) $ 5,900,000 $ 178,000 For so long as we qualify as a foreign private issuer, we are not required to comply with the proxy rules applicable to U.S. domestic companies, including the requirement to disclose information concerning the amount and type of compensation paid to our chief executive officer, chief financial officer and the three other most highly compensated executive officers, rather than on an aggregate basis.
Salaries, fees, commissions, stock-based compensation and bonuses Pension, retirement and similar benefits All directors and executive officers as a group (16 persons) $ 8,369,000 $ 223,000 For so long as we qualify as a foreign private issuer, we are not required to comply with the proxy rules applicable to U.S. domestic companies, including the requirement to disclose information concerning the amount and type of compensation paid to our chief executive officer, chief financial officer and the three other most highly compensated executive officers, rather than on an aggregate basis.
Baruch launched, managed and divested a chain of fitness centers in Israel. Mr. Baruch holds a B.A. degree in Marketing and Finance from The College of Management in Israel and an M.B.A. degree from the Stanford Graduate School of Business. Hanan Shahaf became an officer of our company in July 2016, as part of the Roshtov Software Industries Ltd. acquisition.
Baruch holds a B.A. degree in Marketing and Finance from The College of Management in Israel and an M.B.A. degree from the Stanford Graduate School of Business. Hanan Shahaf became an officer of our company in July 2016, as part of the Roshtov Software Industries Ltd. acquisition. Mr.
Although there are many other factors, the Board seeks individuals with experience in our industry, sales and marketing, legal and accounting skills and board experience. Board Diversity Matrix (as of March 31, 2023) Board Diversity Matrix for Magic Software Enterprises Ltd.
Although there are many other factors, the Board seeks individuals with experience in our industry, sales and marketing, legal and accounting skills and board experience. Board Diversity Matrix Board Diversity Matrix for Magic Software Enterprises Ltd.
We also provided Formula Systems cash management, accounting and bookkeeping services for total consideration of $0.2 million. 78 Approval Process of Terms of Service and Employment of Office Holders Under the Israeli Companies Law, the method of approval of Terms of Service and Employment of office holders must be approved as follows: ● With respect to an office holder who is not the general manager, a director, a controlling shareholder or a relative of the controlling shareholder: ● In the event the transaction is in accordance with the compensation policy of the company – approval (in the following order) of: (i) compensation committee and (ii) board of directors. ● In the event the transaction is not in accordance with the compensation policy of the company – approval, in special cases (in the following order), by the (i) compensation committee, (ii) board of directors and (iii) company’s shareholders, by a simple majority, provided that such majority shall include (i) at least one half of the votes of shareholders who are participating in the vote and are not controlling shareholders or do not have a personal interest regarding the approval of the compensation policy, or (ii) the aggregate number of the opposing votes, voted by shareholders who do not have such personal interest or are not controlling shareholders, do not exceed two percent (2%) of the entire voting rights in the company (the “ Special Majority ”).
Approval Process of Terms of Service and Employment of Office Holders Under the Israeli Companies Law, the method of approval of Terms of Service and Employment of office holders must be approved as follows: ● With respect to an office holder who is not the general manager, a director, a controlling shareholder or a relative of the controlling shareholder: ● In the event the transaction is in accordance with the compensation policy of the company – approval (in the following order) of: (i) compensation committee and (ii) board of directors. ● In the event the transaction is not in accordance with the compensation policy of the company – approval, in special cases (in the following order), by the (i) compensation committee, (ii) board of directors and (iii) company’s shareholders, by a simple majority, provided that such majority shall include (i) at least one half of the votes of shareholders who are participating in the vote and are not controlling shareholders or do not have a personal interest regarding the approval of the compensation policy, or (ii) the aggregate number of the opposing votes, voted by shareholders who do not have such personal interest or are not controlling shareholders, do not exceed two percent (2%) of the entire voting rights in the company (the “Special Majority”).
Berenstin was appointed as Chief Financial Officer of our parent company Formula Systems (1985) Ltd. in addition to his position as chief financial officer of our company. Prior to that and from August 2008, Mr. Berenstin served as our corporate controller. Mr.
Asaf Berenstin has served as our chief financial officer since April 2010. In November 2011, Mr. Berenstin was appointed as Chief Financial Officer of our parent company Formula Systems (1985) Ltd. in addition to his position as chief financial officer of our company. Prior to that and from August 2008, Mr. Berenstin served as our corporate controller. Mr.
The election of the nominee for external director requires the affirmative vote of (i) the majority of the votes actually cast with respect to such proposal including at least a majority of the voting power of the non-controlling shareholders (as such term is defined in the Israel Securities Law, 1968) or those shareholders who do not have a personal interest in approval of the nomination except for a personal interest that is not as a result of the shareholder’s connections with the controlling shareholder, who are present in person or by proxy and vote on such proposal, or (ii) the majority of the votes cast on such proposal at the meeting, provided that the total votes cast in opposition to such proposal by the non-controlling shareholders or those shareholders who do not have a personal interest in approval of the nomination except for a personal interest that is not as a result of the shareholder’s connections with the controlling shareholder (as such term is defined in the Israel Securities Law, 1968) does not exceed 2% of all the voting power in the Company.
At least one of the external directors must have “accounting and financial expertise” and the other external directors must have “professional expertise,” as such terms are defined by regulations promulgated under the Israeli Companies Law. 68 The election of the nominee for external director requires the affirmative vote of (i) the majority of the votes actually cast with respect to such proposal including at least a majority of the voting power of the non-controlling shareholders (as such term is defined in the Israel Securities Law, 1968) or those shareholders who do not have a personal interest in approval of the nomination except for a personal interest that is not as a result of the shareholder’s connections with the controlling shareholder, who are present in person or by proxy and vote on such proposal, or (ii) the majority of the votes cast on such proposal at the meeting, provided that the total votes cast in opposition to such proposal by the non-controlling shareholders or those shareholders who do not have a personal interest in approval of the nomination except for a personal interest that is not as a result of the shareholder’s connections with the controlling shareholder (as such term is defined in the Israel Securities Law, 1968) does not exceed 2% of all the voting power in the Company.
Limitations on Exculpation, Insurance and Indemnification The Israeli Companies Law provides that neither a provision of the articles of association permitting the company to enter into a contract to insure the liability of an office holder, nor a provision in the articles of association or a resolution of the board of directors permitting the indemnification of an office holder, nor a provision in the articles of association exempting an office holder from duty to the company shall be valid, where such insurance, indemnification or exemption relates to any of the following: ● A breach by the office holder of his duty of loyalty, except with respect to insurance coverage or indemnification if the office holder acted in good faith and had reasonable grounds to assume that the act would not prejudice the company; ● A breach by the office holder of his duty of care if such breach was committed intentionally or recklessly, unless the breach was committed only negligently; ● Any act or omission committed with intent to derive an unlawful personal gain; and ● Any fine, civil fine, financial sanction or forfeiture imposed on the office holder. 81 In addition, pursuant to the Israeli Companies Law, exemption of, procurement of insurance coverage for, an undertaking to indemnify or indemnification of an office holder must be approved by the compensation committee and the board of directors and, if such office holder is a director or a controlling shareholder or a relative of the controlling shareholder, also by the shareholders general meeting.
Limitations on Exculpation, Insurance and Indemnification The Israeli Companies Law provides that neither a provision of the articles of association permitting the company to enter into a contract to insure the liability of an office holder, nor a provision in the articles of association or a resolution of the board of directors permitting the indemnification of an office holder, nor a provision in the articles of association exempting an office holder from duty to the company shall be valid, where such insurance, indemnification or exemption relates to any of the following: ● A breach by the office holder of his duty of loyalty, except with respect to insurance coverage or indemnification if the office holder acted in good faith and had reasonable grounds to assume that the act would not prejudice the company; ● A breach by the office holder of his duty of care if such breach was committed intentionally or recklessly, unless the breach was committed only negligently; 75 ● Any act or omission committed with intent to derive an unlawful personal gain; and ● Any fine, civil fine, financial sanction or forfeiture imposed on the office holder.
Guy Bernstein and Asaf Berenstin are first cousins. Mr. Arik Faingold is the brother of Mr. Idan Faingold who is an executive officer of the Commit Group and the two brothers are the owners of the 13.6% minority interest in that company. Other than such relationships, there are no family relationships among our directors and senior executives.
Idan Faingold who is an executive officer of the Commit Group and the two brothers are the owners of the 13.6% minority interest in that company. Other than such relationships, there are no family relationships among our directors and senior executives.
Our audit committee is currently composed of Messrs. Ettlinger, Schliesser and Zakay, each of whom satisfies the “independence” requirements of both the SEC and NASDAQ. We also comply with Israeli law requirements for audit committee members. Our board of directors has determined that Mr. Ettlinger qualifies as a financial expert. The audit committee meets at least once each quarter.
Our audit committee is currently composed of Messrs. Ettlinger, Schliesser, Zakay and Totah, each of whom satisfies the “independence” requirements of both the SEC and NASDAQ. We also comply with Israeli law requirements for audit committee members. Our board of directors has determined that Mr. Ettlinger and Mr. Totah both qualify as a financial experts.
See Item 6E “Directors, Senior Management and Employees - Share Ownership - Stock-Based Compensation Plans.” C. Board Practices Introduction According to the Israeli Companies Law and our Articles of Association, the management of our business is vested in our board of directors.
All such options were granted under our 2007 Incentive Compensation Plan. See Item 6E “Directors, Senior Management and Employees - Share Ownership - Stock-Based Compensation Plans.” C. Board Practices Introduction According to the Israeli Companies Law and our Articles of Association, the management of our business is vested in our board of directors.
All amounts reported in the table represent incremental cost to our company. 74 During the year ended December 31, 2022, we paid to each of our outside and independent directors an annual fee of $21,467 and a per-meeting attendance fee of $800.
All amounts reported in the table represent incremental cost to our company. During the year ended December 31, 2023, we paid to each of our outside and independent directors an annual fee of $20,660 and a per-meeting attendance fee of $768.
Directors and Senior Management Set forth below are the name, age, principal position and a biographical description of each of our directors and executive officers: Name Age Position Guy Bernstein 55 Chief Executive Officer and Director Sagi Schliesser (1) 51 External Director Ron Ettlinger (1) 56 External Director Naamit Salomon 58 Director Avi Zakay (1) 44 Director Asaf Berenstin 45 Chief Financial Officer Arik Kilman 70 Chairman, Software Solutions division Yakov Tsaroya 53 Chief Executive Officer of Coretech Consulting Services and Fusion Solutions Yael Ilan 54 Chief Executive Officer of Complete Business Solutions Arik Faingold 46 President, Integration Solutions division Yuval Baruch 56 Chief Executive Officer of Hermes Logistics Hanan Shahaf 71 Chief Executive Officer of Roshtov Software Industries Ltd Yuval Lavi 54 Vice President Technology and innovation of Software Solutions division (1) Member of our Audit and Compensation Committees Messr.
Directors and Senior Management Set forth below are the name, age, principal position and a biographical description of each of our directors and executive officers: Name Age Position Guy Bernstein 56 Chief Executive Officer and Director Sagi Schliesser (1) 52 External Director Ron Ettlinger (1) 57 External Director Naamit Salomon 59 Director Avi Zakay (1) 45 Director Sami Totah 66 Director Asaf Berenstin 46 Chief Financial Officer Arik Kilman 71 Chairman, Software Solutions division Yakov Tsaroya 54 Chief Executive Officer of Coretech Consulting Services Yael Ilan 55 Chief Executive Officer of Complete Business Solutions Arik Faingold 47 President, Integration Solutions division Idan Faingold 46 Chief Executive Officer of CommIT Technology Solutions Ltd Eli Schwartz 41 Chief Executive Officer of Comblack IT Ltd Yuval Baruch 57 Chief Executive Officer of Hermes Logistics Hanan Shahaf 72 Chief Executive Officer of Roshtov Software Industries Ltd Yuval Lavi 55 Vice President Technology and innovation of Software Solutions division (1) Member of our Audit and Compensation Committees Messrs.
Employees The following table presents the number of our employees categorized by geographic location as of December 31, 2020, 2021 and 2022: Year ended December 31, 2020 2021 2022 Israel $ 1,184 $ 1,268 $ 1,415 Asia 204 190 216 North America 1,513 1,709 1,965 South Africa 12 12 8 Europe 126 498 557 Total $ 3,039 $ 3,677 $ 4,161 The following table presents the number of our employees categorized by activity as of December 31, 2020, 2021 and 2022: Year ended December 31, 2020 2021 2022 Technical support and consulting $ 2,506 $ 3,137 $ 3,513 Research and development 233 228 257 Marketing and sales 161 166 231 Operations and administrations 139 146 160 Total $ 3,039 $ 3,677 $ 4,161 We consider our employees the most valuable asset of our company.
Employees The following table presents the number of our employees categorized by geographic location as of December 31, 2021, 2022 and 2023: Year ended December 31, 2021 2022 2023 Israel 1,268 1,415 1,554 Asia 190 216 226 North America 1,709 1,965 1,321 South Africa 12 8 11 Europe 498 557 516 Total 3,677 4,161 3,628 The following table presents the number of our employees categorized by activity as of December 31, 2021, 2022 and 2023: Year ended December 31, 2021 2022 2023 Technical support and consulting 3,137 3,513 3,001 Research and development 228 257 256 Marketing and sales 166 231 202 Operations and administrations 146 160 169 Total 3,677 4,161 3,628 We consider our employees the most valuable asset of our company.
Ron Ettlinger both qualify as independent directors under the SEC and NASDAQ requirements and as external directors under the Israeli Companies Law requirements. Our board of directors has further determined that Mr. Avi Zakay qualifies as an independent director under the SEC, NASDAQ and Israeli Companies Law requirements. 76 Committees of the Board of Directors Audit Committee .
Ron Ettlinger both qualify as independent directors under the SEC and NASDAQ requirements and as external directors under the Israeli Companies Law requirements. Our board of directors has further determined that Mr. Avi Zakay and Mr. Sami Totah both qualify as independent directors under the SEC, NASDAQ and Israeli Companies Law requirements.
Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.
Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them. (2) The percentages shown are based on 49,099,305 Ordinary Shares issued and outstanding as of April 1, 2024.
(2) The percentages shown are based on 49,093,055 Ordinary Shares issued and outstanding as of April 1, 2023. 84 Stock-Based Compensation Plans 2007 Incentive Compensation Plan In 2007, we adopted our 2007 Incentive Compensation Plan, or the 2007 Plan, under which we may grant options, restricted shares, restricted share units and performance awards to employees, officers, directors and consultants of our company and its subsidiaries.
Stock-Based Compensation Plans 2007 Incentive Compensation Plan In 2007, we adopted our 2007 Incentive Compensation Plan, or the 2007 Plan, under which we may grant options, restricted shares, restricted share units and performance awards to employees, officers, directors and consultants of our company and its subsidiaries.
All amounts reported in the table reflect the cost to our company, as recognized in our financial statements for the year ended December 31, 2022. 2022 Summary Compensation Table Name and Position Salary Bonus (1) Equity Based Compensation (2) All Other Compensation (3) Total Yakov Tsaroya, President, Coretech Consulting Group LLC $ 400,000 $ 1,372,000 $ - $ 45,000 $ 1,817,000 Arik Faingold, President, Integration Solutions Division $ 433,000 $ 189,000 $ 796,000 $ - $ 1,418,000 Eli Schwartz, Chief Executive Officer of Comblack I.T.
All amounts reported in the table reflect the cost to our company, as recognized in our financial statements for the year ended December 31, 2023. 2023 Summary Compensation Table Name and Position Salary Bonus (1) Equity Based Compensation (2) All Other Compensation (3) Total Idan Faingold, Chief Executive Officer of CommIT Technology Solutions Ltd $ 281,000 $ 145,000 $ 1,430,000 $ 98,000 $ 1,954,000 Arik Faingold, President, Integration Solutions Division $ 411,000 $ 145,000 $ 1,428,000 $ - $ 1,984,000 Yakov Tsaroya Chief Executive Officer of Coretech Consulting Services $ 400,000 $ 1,142,000 $ - $ 9,000 $ 1,551,000 Eli Schwartz, Chief Executive Officer of Comblack I.T.
Election of Directors Our articles of association provide for a board of directors consisting of no less than three and no more than eleven members or such other number as may be determined from time to time at a general meeting of shareholders. Our board of directors is currently composed of five directors.
Executive officers are appointed by and serve at the discretion of the board of directors, subject to any applicable agreements. 67 Election of Directors Our articles of association provide for a board of directors consisting of no less than three and no more than eleven members or such other number as may be determined from time to time at a general meeting of shareholders.
Pursuant to the Israeli Companies Law, a director may be qualified as an independent director if such director is either (i) an external director; or (ii) a director that serves as a board member less than nine years and the audit committee has approved that he or she meets the independence requirements of an external director.
NASDAQ Stock Market Rules require us to establish an audit committee comprised of at least three members and only of independent directors each of whom satisfies the respective “independence” requirements of the SEC and NASDAQ. 69 Pursuant to the Israeli Companies Law, a director may be qualified as an independent director if such director is either (i) an external director; or (ii) a director that serves as a board member less than nine years and the audit committee has approved that he or she meets the independence requirements of an external director.
Ltd. 411,000 $ 235,000 $ - $ - $ 646,000 Arik Kilman, Chairman, Software Group $ - $ 581,000 $ - $ - $ 581,000 Asaf Berenstin, Chief Financial Officer $ 228,000 $ 250,000 $ - $ 70,000 $ 548,000 (1) Amounts reported in this column represent annual incentive bonuses granted to the covered executives based on performance-metric based formulas set forth in their respective employment agreements.
Ltd. $ 423,000 $ 233,000 $ - $ - $ 656,000 Arik Kilman, Chairman, Software Group $ - $ 611,000 $ - $ - $ 611,000 (1) Amounts reported in this column represent annual incentive bonuses granted to the covered executives based on performance-metric based formulas set forth in their respective employment agreements.
Exculpation, Indemnification and Insurance of Directors and Officers Exculpation and Indemnification of Office Holders The Israeli Companies Law and our Articles of Association authorize us, subject to the receipt of requisite corporate approvals, to indemnify and exempt our directors and officers, subject to certain conditions and limitations.
The approval of merger by the company is also subject to additional approval requirements as specified in the Israeli Companies Law and regulations promulgated thereunder. 73 Exculpation, Indemnification and Insurance of Directors and Officers Exculpation and Indemnification of Office Holders The Israeli Companies Law and our Articles of Association authorize us, subject to the receipt of requisite corporate approvals, to indemnify and exempt our directors and officers, subject to certain conditions and limitations.
Such fees are paid based on the fees detailed in a schedule published semi-annually by the Committee for Public Directors under the Israeli Securities Law. The above compensation excludes stock-based compensation costs in accordance with IFRS 2.
Such fees are paid based on the fees detailed in a schedule published semi-annually by the Committee for Public Directors under the Israeli Securities Law. The above compensation excludes stock-based compensation costs in accordance with IFRS 2. As of April 1, 2024, our directors and executive officers as a group, then consisting of 16 persons, held 190,725.
Guy Bernstein, Avi Zakay and Ms. Naamit Salomon were re-elected as directors at our 2022 annual general meeting of shareholders to serve as directors until our 2023 annual general meeting of shareholders. Messrs. Sagi Schliesser and Ron Ettlinger are serving as external directors pursuant to the provisions of the Israeli Companies Law for their second three-year terms. Messrs.
Guy Bernstein, Avi Zakay, Sami Totah and Ms. Naamit Salomon were re-elected as directors at our May 13, 2024 annual general meeting of shareholders to serve as directors until our next annual general meeting of shareholders. Mr. Sagi Schliesser is serving as external director pursuant to the provisions of the Israeli Companies Law for his third three-year term. Mr.
Faingold was General Manager of Open TV Israel, part of OpenTV Global, from 2003 to 2009. Mr. Faingold served as Co-founder and CTO of Betting Corp from 1999 to 2003. Mr.
Faingold was General Manager of Open TV Israel, part of OpenTV Global, from 2003 to 2009. Mr. Faingold served as Co-founder and CTO of Betting Corp from 1999 to 2003. Mr. Faingold holds a B.A. degree in Computer Science from the Interdisciplinary Center in Herzliya and an M.B.A. degree from Tel Aviv University.
If, at the time external directors are to be appointed, all current members of the board of directors which are not the controlling shareholders of the company or their relatives are of the same gender, then at least one external director must be of the other gender. 75 At least one of the external directors must have “accounting and financial expertise” and the other external directors must have “professional expertise,” as such terms are defined by regulations promulgated under the Israeli Companies Law.
If, at the time external directors are to be appointed, all current members of the board of directors which are not the controlling shareholders of the company or their relatives are of the same gender, then at least one external director must be of the other gender.
Baruch has also served as the chief executive officer of Pilat HR solutions since April 2013. Mr. Baruch was chief executive officer of J.R. Holdings & Development from November 2007 to January 2012. Mr. Baruch has served as an external director of Matrix IT, a publicly traded company in Israel, since 2011. Between 2004 and 2008 Mr.
Yuval Baruch has served as an officer of our company since his appointment in September 2012 as the chief executive officer of Hermes Logistics Technologies (HLT). Mr. Baruch has also served as the chief executive officer of Pilat HR solutions since April 2013. Mr. Baruch was chief executive officer of J.R. Holdings & Development from November 2007 to January 2012.
Israeli labor laws and regulations are applicable to all of our employees in Israel. The laws concern various matters, including severance pay rights at termination, notice period for termination, retirement or death, length of workday and workweek, minimum wage, overtime payments and insurance for work-related accidents.
The laws concern various matters, including severance pay rights at termination, notice period for termination, retirement or death, length of workday and workweek, minimum wage, overtime payments and insurance for work-related accidents. We currently fund our ongoing legal severance pay obligations by paying monthly premiums for our employees’ insurance policies and or pension funds.
As of April 1, 2023, our directors and executive officers as a group, then consisting of 12 persons, held 190,725 Ordinary Shares and options to purchase an aggregate of 20,000 ordinary shares, at exercise prices of $0 per share. All such options were granted under our 2007 Incentive Compensation Plan.
During 2023, options to purchase an aggregate of 6,250 Ordinary Shares were exercised under the 2007 Plan at an average exercise price of $3.81 per share, and 20,000 options were forfeited. As of December 31, 2023, our executive officers and directors as a group, consisting of 16 persons, held 190,725 Ordinary Shares. F.
We currently fund our ongoing legal severance pay obligations by paying monthly premiums for our employees’ insurance policies and or pension funds. At the time of commencement of employment, our employees generally sign written employment agreements specifying basic terms and conditions of employment as well as non-disclosure, confidentiality and non-compete provisions. E.
At the time of commencement of employment, our employees generally sign written employment agreements specifying basic terms and conditions of employment as well as non-disclosure, confidentiality and non-compete provisions. 77 E.
Directors’ Service Contracts There are no arrangements or understandings between us and any of our subsidiaries, on the one hand, and any of our directors, on the other hand, providing for benefits upon termination of their employment or service as directors of our company or any of our subsidiaries. 77 Approval of Related Party Transactions Under Israeli Law Fiduciary Duties of Office Holders The Israeli Companies Law codifies the fiduciary duties that “office holders,” including directors and executive officers, owe to a company.
Alkalay Monarov currently serves as our internal auditor. Directors’ Service Contracts There are no arrangements or understandings between us and any of our subsidiaries, on the one hand, and any of our directors, on the other hand, providing for benefits upon termination of their employment or service as directors of our company or any of our subsidiaries.
We offer learning opportunities and training programs including workshops, guest speakers and various conferences to enable our employees to advance in their chosen professional paths. 83 Our relationships with our employees in Israel are governed by Israeli labor legislation and regulations, extension orders of the Israeli Ministry of Labor and personal employment agreements.
Our relationships with our employees in Israel are governed by Israeli labor legislation and regulations, extension orders of the Israeli Ministry of Labor and personal employment agreements. Israeli labor laws and regulations are applicable to all of our employees in Israel.
In 2022, we also purchased from those affiliated companies approximately $3.1 million of hardware, software and services.
In 2023, we also purchased from those affiliated companies approximately $3.4 million of hardware, software and services. We also provided Formula Systems cash management, accounting and bookkeeping services for total consideration of $0.2 million.
Investing in our employees’ career growth and development is an important focus for us.
Investing in our employees’ career growth and development is an important focus for us. We offer learning opportunities and training programs including workshops, guest speakers and various conferences to enable our employees to advance in their chosen professional paths.
Zakay holds a B.A. degree in Business Administration and studied for an M.B.A. degree, both from College of Management in Tel-Aviv. Asaf Berenstin has served as our chief financial officer since April 2010. In November 2011, Mr.
Zakay holds a B.A. degree in Business Administration and studied for an M.B.A. degree, both from College of Management in Tel-Aviv. Sami Totah (66) has been a General Partner at Viola Growth, a private equity firm investing in the hi-tech arena, for the last 15 years.
As of December 31, 2022, our executive officers and directors as a group, consisting of 13 persons, held 190,725 Ordinary Shares. F. Disclosure of a registrant’s action to recover erroneously awarded compensation Not applicable. 85
Disclosure of a registrant’s action to recover erroneously awarded compensation Not applicable. 79
Faingold holds a B.A. degree in Computer Science from the Interdisciplinary Center in Herzliya and an M.B.A. degree from Tel Aviv University. 73 Yuval Baruch has served as an officer of our company since his appointment in September 2012 as the chief executive officer of Hermes Logistics Technologies (HLT). Mr.
During his tenure in the army, he also held numerous senior management positions, leading large, cutting-edge technology projects. Mr. Faingold holds a B.A. degree in Computer Science from the Academic College of Tel Aviv-Yaffo. Eli Schwartz has served as chief executive officer of Comblack IT since September 2009. Mr.
Removed
Executive officers are appointed by and serve at the discretion of the board of directors, subject to any applicable agreements.
Added
Ron Ettlinger was re-elected at our May 13, 2024 annual general meeting of shareholders to serve as external director for a one-year term pursuant to the provisions of the Israeli Companies Law. Messrs. Guy Bernstein and Asaf Berenstin are first cousins. Mr. Arik Faingold is the brother of Mr.
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NASDAQ Stock Market Rules require us to establish an audit committee comprised of at least three members and only of independent directors each of whom satisfies the respective “independence” requirements of the SEC and NASDAQ.
Added
He is a seasoned executive with over 25 years of international management leadership in the IT industry. He has extensive knowledge and execution experience in overseeing very large IT projects, and has built an extensive global network with customers, partners, investors and executives.
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Alkalay Monarov currently serves as our internal auditor.
Added
From 2002 to 2008, he served as an active chairman in several leading startup companies, defining long-term strategy and assisting in company scale-up. He has served as a board member in ECtel (NASDAQ: ECTX) and Pilat Media (AIM: PGB). Mr. Totah formerly served as Senior Vice President of Operations (COO) at Amdocs (NYSE:DOX), Israel’s largest software company.
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The approval of merger by the company is also subject to additional approval requirements as specified in the Israeli Companies Law and regulations promulgated thereunder.
Added
Idan Faingold has served as chief executive officer of CommIT Technology Solutions since September 2005. Mr. Faingold brings extensive experience from the IT and Communication arena after serving close to a decade in the software unit of the Israeli Air Force where he managed Security and Data Communication.
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In accordance with the Israeli Companies Law, a company’s articles of association may permit the company to: ● Undertake in advance to indemnify an office holder, except that with respect to a financial liability imposed on the office holder by any judgment, settlement or court-approved arbitration award, the undertaking must be limited to types of occurrences, which, in the opinion of the company’s board of directors, are, at the time of the undertaking, foreseeable due to the company’s activities and to an amount or standard that the board of directors has determined is reasonable under the circumstances; and ● Retroactively indemnify an office holder of the company.
Added
Schwartz brings extensive experience from the IT and main frame arena after serving close to a decade at Mamram (Israel Defense Force Center of Computing and Information Systems). Mr. Schwartz holds a B.A. degree in Management and Computer Science from the Open University of Israel.
Removed
During 2022, options to purchase an aggregate of 20,000 Ordinary Shares were exercised under the 2007 Plan at an average exercise price of $0 per share, and 20,000 options were forfeited. Moreover, 26,250 options to purchase Ordinary Shares remained outstanding.
Added
Mr. Baruch has served as an external director of Matrix IT, a publicly traded company in Israel, since 2011. Between 2004 and 2008 Mr. Baruch launched, managed and divested a chain of fitness centers in Israel. Mr.
Added
Committees of the Board of Directors Audit Committee .
Added
The audit committee meets at least once each quarter. Compensation Committee .
Added
Approval of Related Party Transactions Under Israeli Law Fiduciary Duties of Office Holders The Israeli Companies Law codifies the fiduciary duties that “office holders,” including directors and executive officers, owe to a company.
Added
In addition, pursuant to the Israeli Companies Law, exemption of, procurement of insurance coverage for, an undertaking to indemnify or indemnification of an office holder must be approved by the compensation committee and the board of directors and, if such office holder is a director or a controlling shareholder or a relative of the controlling shareholder, also by the shareholders general meeting.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

14 edited+4 added−1 removed3 unchanged
Biggest changeSignificant Changes in the Ownership of Major Shareholders Formula filed a Schedule 13D amendment on May 23, 2022 reflecting that it had purchased an aggregate of 629,638 Ordinary Shares in open market transactions, for an aggregate purchase price of $8,978,481, as a result of which Formula’s beneficial ownership percentage of the outstanding Ordinary Shares has increased from 45.3% to 46.3%.
Biggest changeAll 3,420,060 ordinary shares beneficially owned by Clal are held for members of the public through, among others, provident funds and/or mutual funds and/or pension funds and/or insurance policies and/or exchange traded funds, which are managed by subsidiaries of Clal, each of which subsidiaries operates under independent management and makes independent voting and investment decisions. 80 Significant Changes in the Ownership of Major Shareholders Formula filed a Schedule 13D amendment on May 23, 2022 reflecting that it had purchased an aggregate of 629,638 Ordinary Shares in open market transactions, for an aggregate purchase price of $8,978,481, as a result of which Formula’s beneficial ownership percentage of the outstanding Ordinary Shares has increased from 45.3% to 46.3%.
Based on a Schedule 13G amendment filed on , on January 23, 2020, Harel Insurance Investments & Financial Services Ltd. held 3,622,378or 7.4% of our Ordinary Shares. A Schedule 13G amendment filed with the SEC on January 27, 2021, reflected ownership of 4,835,262, or 9.86% of our Ordinary Shares.
Based on a Schedule 13G amendment filed on January 23, 2020, Harel Insurance Investments & Financial Services Ltd. held 3,622,378or 7.4% of our Ordinary Shares. A Schedule 13G amendment filed with the SEC on January 27, 2021, reflected ownership of 4,835,262, or 9.86% of our Ordinary Shares.
B. Related Party Transactions For information about related party transactions see “Item 6C. Directors, Senior Management and Employees – Board Practices - Approval of Related Party Transactions Under Israeli Law.” C. Interests of Experts and Counsel Not applicable.
B. Related Party Transactions For information about related party transactions see “Item 6C. Directors, Senior Management and Employees – Board Practices - Approval of Related Party Transactions Under Israeli Law.” C. Interests of Experts and Counsel Not applicable. 81
Formula Systems is controlled by Asseco, a Polish company listed on the Warsaw Stock Exchange, which held as of April 1, 2023 approximately 25.82% of the Ordinary Shares of Formula Systems. Based on the foregoing beneficial ownership by each of Formula and Asseco, each of Formula and Asseco may be deemed to directly or indirectly (as appropriate) control us.
Formula Systems is controlled by Asseco, a Polish company listed on the Warsaw Stock Exchange, which held as of April 1, 2024 approximately 25.82% of the Ordinary Shares of Formula Systems. Based on the foregoing beneficial ownership by each of Formula and Asseco, each of Formula and Asseco may be deemed to directly or indirectly (as appropriate) control us.
The following table sets forth as of December 31, 2022 certain information regarding the beneficial ownership by all shareholders known to us to own beneficially 5.0% or more of our ordinary shares: Name Number of Ordinary Shares Beneficially Owned (1) Percentage of Ownership (2) Formula Systems (1985) Ltd.
The following table sets forth as of December 31, 2023 certain information regarding the beneficial ownership by all shareholders known to us to own beneficially 5.0% or more of our ordinary shares: Name Number of Ordinary Shares Beneficially Owned (1) Percentage of Ownership (2) Formula Systems (1985) Ltd.
Record Holders Based on a review of the information provided to us by our U.S. transfer agent, as of May 10, 2023, there were 48 record holders, of which 37 record holders holding approximately 96.6% of our Ordinary Shares had registered addresses in the United States.
Record Holders Based on a review of the information provided to us by our U.S. transfer agent, as of May 10, 2024, there were 48 record holders, of which 37 record holders holding approximately 96.6% of our Ordinary Shares had registered addresses in the United States.
A Schedule 13G/A filed with the SEC on February 13, 2023, reflected a decrease in ownership to 3,420,060, or 7% of our Ordinary Shares. Major Shareholders Voting Rights Our major shareholders do not have different voting rights.
A Schedule 13G/A filed with the SEC on February 13, 2023, reflected a decrease in ownership to 3,420,060, or 6.97% of our Ordinary Shares. Major Shareholders Voting Rights Our major shareholders do not have different voting rights.
Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them. (2) The percentages shown are based on 49,093,055 Ordinary Shares issued and outstanding as of December 31, 2022.
Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them. (2) The percentages shown are based on 49,099,305 Ordinary Shares issued and outstanding as of December 31, 2023.
A Schedule 13G amendment filed with the SEC on January 31, 2022, reflected ownership of 4,595,281, or 9.37% of our Ordinary Shares.
A Schedule 13G amendment filed with the SEC on January 31, 2022, reflected ownership of 4,595,281, or 9.37% of our Ordinary Shares. A Schedule 13G amendment filed with the SEC on January 17, 2023, reflected ownership of 4,627,166, or 9.4% of our Ordinary Shares.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A. Major Shareholders As of April 1, 2023, Formula Systems, an Israeli company traded on the NASDAQ Global Select Market and the TASE, held 22,710,106 or 46.26% of our outstanding Ordinary Shares.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A. Major Shareholders As of April 1, 2024, Formula Systems, an Israeli company traded on the NASDAQ Global Select Market and the TASE, held 22,933,809 or 46.71% of our outstanding Ordinary Shares.
A Schedule 13G amendment filed with the SEC on January 17, 2023, reflected ownership of 4,627,166, or 9.4% of our Ordinary Shares. 86 Clal filed a Schedule 13G/A filed with the SEC on February 10, 2020, reflected an ownership of 4,144,717, or 8.5% of our Ordinary Shares.
A Schedule 13G amendment filed with the SEC on January 30, 2024, reflected ownership of 5,255,936, or 10.71% of our Ordinary Shares. Clal filed a Schedule 13G/A filed with the SEC on February 10, 2020, reflected an ownership of 4,144,717, or 8.5% of our Ordinary Shares.
(3) 22,710,106 46.30 % Harel Insurance (4) 4,627,166 9.40 % Clal Insurance Enterprises Holdings Ltd. (5) 3,420,060 7.00 % (1) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.
(3) 22,933,809 46.71 % Harel Insurance (4) 5,255,936 10.70 % Clal Insurance Enterprises Holdings Ltd. (5) 3,420,060 6.97 % (1) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.
(3) As of April 1, 2023, Asseco owns 25.82% of the outstanding shares of Formula. As such, Asseco may be deemed to be the beneficial owner of the aggregate 22,710,106 Ordinary Shares held directly by Formula Systems. The address of Asseco is 35-322 Rzeszow, ul. Olchowa 14, Poland.
Asseco may therefore. be deemed to be the indirect beneficial owner of the aggregate 22,933,809 ordinary shares of our company held directly by Formula Systems. The address of Formula Systems is 1 Yahadut Canada Street, Or-Yehuda, Israel. The address of Asseco is 35-322 Rzeszow, ul.Olchowa 14, Poland.
(4) Based on a Schedule 13G amendment filed on January 17, 2023, Harel Insurance Investments & Financial Services Ltd., an Israeli public company, with a principal business address at Harel House; 3 Aba Hillel Street; Ramat Gan 52118, Israel (or “Harel”). (5) Based on a Schedule 13G amendment filed on February 17, 2023, by Clal Insurance Enterprises Holdings Ltd.
(4) Based on Amendment No. 5 to the beneficial ownership report on Schedule 13G filed by Harel Insurance Investments & Financial Services Ltd., or Harel Insurance, on January 30, 2024. Harel Insurance is a publicly held Israeli company.
Removed
(or “Clal”). Clal is an Israeli public company, with a principal business address at 36 Raul Wallenberg St., Tel Aviv 66180, Israel.
Added
(3) Based on Amendment No. 19 to Schedule 13D filed by Formula Systems (1985) Ltd., or Formula Systems, with the SEC on May 23, 2022.
Added
Asseco Poland S.A., or Asseco, holds 3,915,601 ordinary shares, representing 25.6% of the outstanding ordinary shares, of Formula Systems, as reported in Asseco’s Amendment No. 5 to its beneficial ownership statement on Schedule 13D filed with the SEC on December 7, 2022.
Added
All of the 5,255,936 ordinary shares beneficially owned by Harel Insurance are held for members of the public through, among others, provident funds and/or mutual funds and/or pension funds and/or insurance policies and/or exchange traded funds, which are managed by subsidiaries of Harel Insurance, each of which subsidiaries operates under independent management and makes independent voting and investment decisions.
Added
(5) Based on Amendment No. 5 to the beneficial ownership report on Schedule 13G filed by Clal Insurance Enterprises Holdings Ltd., or Clal, on February 13, 2023, reflecting its holdings as of December 31, 2022. Clal is a publicly held Israeli company.