Document:

Unassociated Document

 

Exhibit 10.1

 

 

PRESS RELEASE

 

Magic Software Reports Record-Breaking Operating Results in the First Quarter of 2011

 

Magic Software Reports Strong Results for Q1 2011 with 68% Year-over-Year Net Income Growth

 

Or Yehuda, Israel, April 28, 2011 – Magic Software Enterprises Ltd. (NASDAQ: MGIC), a global provider of cloud and on-premise enabled application platforms and business integration solutions, today announced its financial results for the first quarter of 2011.

 

Financial Highlights for the First Quarter

 

First quarter revenues increased 29% year over year to $25.5 million from $19.7 million.

 

Operating income for the first quarter increased 78% year over year to $3.1 million, compared to $1.8 million in the same period last year.

 

Net income for the first quarter increased 68% year over year to $3.1 million from $1.9 million in the same period last year.

 

Operating cash flow for the quarter amounted to $4.8 million. Total cash and cash equivalents, short-term bank deposits and short-term investments in marketable securities as of March 31, 2011 amounted to $50.2 million.

 

Results

 

For the quarter ended March 31, 2011, total revenues were $25.5 million, with net income of $3.1 million, or $0.08 per fully diluted share. This compares with revenues of $19.7 million and net income of $1.9 million, or $0.06 per fully diluted share, for the same period last year.

 

Operating income for the quarter ended March 31, 2011, was $3.1 million, or $0.08 per fully diluted share. This compares to operating income of $1.8 million, or $0.05 per fully diluted share, for the same period a year ago.

 

Comments of Management

 

Commenting on the results, Guy Bernstein, Chief Executive Officer of Magic Software, said: “These strong results have continued the trend set in the previous quarter, once again breaking company records for revenues and profit, and sustaining double-digit overall growth year over year. Despite the slowdown we are experiencing in Japan due to the current crisis, and the sluggishness of the economic recovery in the US and Europe, Magic has continued to perform well in all centers of activity around the world.”

 

  

  

  

 

“We have expanded our installed base globally by adding new customers. In addition, our existing customers have continued to upgrade their Magic products, migrating to our newest advanced technology offering. Moving forward, we have exciting new product launches for mobile and cloud environments scheduled for the coming months,” concluded Mr. Bernstein.

 

Non-GAAP Financial Measures

 

This release includes non-GAAP operating income, net income, basic and diluted earnings per share and other non-GAAP financial measures. These non-GAAP measures exclude the following items:

 

	
  

	
·

	
Amortization of purchased intangible assets

 

	
  

	
·

	
In-process research and development capitalization and amortization and

 

	
  

	
·

	
Equity-based compensation expense

 

Magic Software’s management believes that the presentation of non-GAAP measures provides useful information to investors and management regarding financial and business trends relating to the Company’s financial condition and results of operations as well as the net amount of cash generated by its business operations after taking into account capital spending required to maintain or expand the business.

 

These non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Magic Software believes that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with Magic Software’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Magic Software’s results of operations in conjunction with the corresponding GAAP measures.

 

Refer to the Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP tables below.

 

About Magic Software

 

Magic Software Enterprises Ltd. (NASDAQ: MGIC) is a global provider of cloud and on-premise application platform and business integration solutions. For more information, visit http://www.magicsoftware.com

 

Except for the historical information contained herein, the matters discussed in this news release include forward-looking statements that may involve a number of risks and uncertainties. Actual results may vary significantly based upon a number of factors including, but not limited to, risks in product and technology development, market acceptance of new products and continuing product conditions, both here and abroad, release and sales of new products by strategic resellers and customers, and other risk factors detailed in the Company's most recent annual report and other filings with the Securities and Exchange Commission.

Magic is the trademark of Magic Software Enterprises Ltd.

 

Press contact:

 

Tania Amar

Magic Software Enterprises

Tel: +972 (0)3 538 9300

Email: tania@magicsoftware.com

  

  

  

 

MAGIC SOFTWARE ENTERPRISES LTD. 

CONSOLIDATED STATEMENTS OF INCOME 

U.S. dollars in thousands (except per share data)

 

 

	  	 	
Three months ended

	 
	  	 	
March 31,

	 
	  	 	
2011

	 	 	
2010

	 
	  	 	
Unaudited

	 
	
Revenues

	 	 	25,488	 	 	 	19,711	 
	
Cost of Revenues

	 	 	15,156	 	 	 	11,247	 
	
Gross profit

	 	 	10,332	 	 	 	8,464	 
	
Research and development, net

	 	 	366	 	 	 	631	 
	
Selling, marketing and general and

	 	 	 	 	 	 	 	 
	
administrative expenses

	 	 	6,835	 	 	 	6,079	 
	
Total operating costs and expenses

	 	 	7,201	 	 	 	6,710	 
	
Operating income

	 	 	3,131	 	 	 	1,754	 
	
Financial income, net

	 	 	102	 	 	 	113	 
	
Other income, net

	 	 	11	 	 	 	61	 
	
Income before taxes on income

	 	 	3,244	 	 	 	1,928	 
	
Taxes on income

	 	 	43	 	 	 	78	 
	
Net income

	 	 	3,201	 	 	 	1,850	 
	
Net income attributable to non-controlling interests

	 	 	(88 	)	 	 	-	 
	
Net income attributable to Magic Shareholders

	 	 	3,113	 	 	 	1,850	 
	 	 	 	 	 	 	 	 	 
	
Net earnings per share attributable to

	 	 	 	 	 	 	 	 
	
Magic:

	 	 	 	 	 	 	 	 
	
Basic

	 	 	0.09	 	 	 	0.06	 
	
Diluted

	 	 	0.08	 	 	 	0.06	 
	 	 	 	 	 	 	 	 	 
	
Weighted average number of shares used in

	 	 	 	 	 	 	 	 
	
computing net earnings per share attributable to

	 	 	 	 	 	 	 	 
	
Magic:

	 	 	 	 	 	 	 	 
	
Basic

	 	 	36,085	 	 	 	31,942	 
	
Diluted

	 	 	37,074	 	 	 	32,351	 
	  	 	 	 	 	 	 	 	 

 

  

  

  

 

MAGIC SOFTWARE ENTERPRISES LTD.

RECONCILIATION BETWEEN GAAP AND NON-GAAP 

STATEMENTS OF INCOME FOR COMPARATIVE PURPOSES 

U.S. dollars in thousands (except per share data)

 

 

	  	 	
Three months ended

	 
	  	 	
March 31,

	 
	  	 	
2011

	 	 	
2010

	 
	  	 	
Unaudited

	 
	
GAAP operating income

	 	 	3,131	 	 	 	1,754	 
	
Amortization of capitalized software and

	 	 	 	 	 	 	 	 
	
other intangible assets

	 	 	883	 	 	 	950	 
	
Capitalization of software development

	 	 	(1,289 	)	 	 	(711 	)
	
Stock-based compensation

	 	 	164	 	 	 	36	 
	
Total adjustments to GAAP

	 	 	(242 	)	 	 	275	 
	
Non-GAAP operating income

	 	 	2,889	 	 	 	2,029	 
	 	 	 	 	 	 	 	 	 
	
GAAP net income attributable to Magic Shareholders

	 	 	3,113	 	 	 	1,850	 
	
Total adjustments to GAAP as above

	 	 	(242 	)	 	 	275	 
	
Non-GAAP net income attributable to Magic

	 	 	 	 	 	 	 	 
	
Shareholders

	 	 	2,871	 	 	 	2,125	 
	 	 	 	 	 	 	 	 	 
	
Non-GAAP basic net earnings per share

	 	 	 	 	 	 	 	 
	
attributable to Magic

	 	 	0.08	 	 	 	0.07	 
	
Weighted average number of shares used in

	 	 	 	 	 	 	 	 
	
computing basic net earnings per share

	 	 	36,085	 	 	 	31,942	 
	 	 	 	 	 	 	 	 	 
	
Non-GAAP diluted net earnings per share

	 	 	 	 	 	 	 	 
	
attributable to Magic

	 	 	0.08	 	 	 	0.07	 
	
Weighted average number of shares used in

	 	 	 	 	 	 	 	 
	
computing diluted net earnings per share

	 	 	37,173	 	 	 	32,401	 

 

  

  

  

 

	
MAGIC SOFTWARE ENTERPRISES LTD.

	 	 	 	 	 	 
	
CONSOLIDATED BALANCE SHEETS

	 	 	 	 	 	 
	
U.S. dollars in thousands

	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	  	 	
March 31,

	 	 	
December 31,

	 
	  	 	
2011

	 	 	
2010

	 
	  	 	
(Unaudited)

	 	 	 	 
	 	 	 	 	 	 	 
	
ASSETS

	 	 	 	 	 	 
	
CURRENT ASSETS:

	 	 	 	 	 	 
	
Cash and cash equivalents

	 	 	41,309	 	 	 	43,661	 
	
Short-term bank deposits

	 	 	5,965	 	 	 	24	 
	
Available-for-sale marketable securities

	 	 	2,881	 	 	 	2,857	 
	
Trade receivables, net

	 	 	19,956	 	 	 	17,801	 
	
Other accounts receivable and prepaid expenses

	 	 	3,490	 	 	 	4,029	 
	
Total current assets

	 	 	73,601	 	 	 	68,372	 
	 	 	 	 	 	 	 	 	 
	
LONG-TERM RECEIVABLES:

	 	 	 	 	 	 	 	 
	
Severance pay fund

	 	 	328	 	 	 	325	 
	
Other long-term receivables

	 	 	2,474	 	 	 	2,141	 
	
Total other long-term receivables

	 	 	2,802	 	 	 	2,466	 
	 	 	 	 	 	 	 	 	 
	
PROPERTY AND EQUIPMENT, NET

	 	 	1,811	 	 	 	1,827	 
	
IDENTIFIABLE INTANGIBLE ASSETS AND

	 	 	 	 	 	 	 	 
	
GOODWILL, NET

	 	 	42,725	 	 	 	39,285	 
	 	 	 	 	 	 	 	 	 
	
TOTAL ASSETS

	 	 	120,939	 	 	 	111,950	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
LIABILITIES AND EQUITY

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
CURRENT LIABILITIES:

	 	 	 	 	 	 	 	 
	
Short-term credit and current maturities

	 	 	 	 	 	 	 	 
	
of long term loans

	 	 	7	 	 	 	9	 
	
Trade payables

	 	 	3,068	 	 	 	2,994	 
	
Accrued expenses and other accounts payable

	 	 	14,472	 	 	 	15,028	 
	
Deferred revenues

	 	 	6,586	 	 	 	1,526	 
	
Total current liabilities

	 	 	24,133	 	 	 	19,557	 
	 	 	 	 	 	 	 	 	 
	
NON-CURRENT LIABILITIES:

	 	 	 	 	 	 	 	 
	
Long-term loans

	 	 	2	 	 	 	2	 
	
Liability due to acquisition activities

	 	 	1,315	 	 	 	2,990	 
	
Accrued severance pay

	 	 	549	 	 	 	536	 
	
Total non-current liabilities

	 	 	1,866	 	 	 	3,528	 
	 	 	 	 	 	 	 	 	 
	
EQUITY

	 	 	 	 	 	 	 	 
	
Magic Shareholders' equity

	 	 	93,353	 	 	 	88,865	 
	
Non-controlling interests

	 	 	1,587	 	 	 	-	 
	
Total equity

	 	 	94,940	 	 	 	88,865	 
	 	 	 	 	 	 	 	 	 
	
TOTAL LIABILITIES AND EQUITY

	 	 	120,939	 	 	 	111,950Unassociated Document

 

Exhibit 10.3

 

Summary of Oral Loan Agreement

 

Triglobal Investments Ltd., a company 100% owned by Victor Chang, and Keeler Global Investments Ltd, a company majority owned by Mr. Hoffman Chong, agreed to advance all the costs and expenses incurred by the Company until the successful completion of a business combination. The loan is non-interest bearing and payable upon the closing of an initial business combination.

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