Document:

Unassociated Document

 Exhibit
10.17

    Atossa Genetics,
Inc.

    

    Proposal for:

    Prototype
Development

    Confidential

    PR-10-48

    June 30, 2010

    

    Steven C. Quay M.D.,
Ph.D.

    President

    Atossa Genetics, Inc

    4105 E. Madison St. Suite
320

    Seattle, WA 98112

    C: 206-419-4873

    F: 206-325-6087

    steven.c.quay@gmail.com

    

    [GRAPHIC]

    

    

    

    Jeff Martinez

    Director of Sales & Business
Development

    HLB, LLC

    355 N. Canal St

    Chicago, IL 60606

    312-454-1116, ext
326

    Jmartinez@hlb.com

     

     

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    Goal of
Prototype Development

    

    The goal of this proposal is to deliver
20 functional prototypes of the original trigger design and facilitate the
fabrication of 10,000 disposables of the original disposable design that has
already passed the FDA.  Since the disposable will not be changed in
the final design and because of the large quantity being requested a more
permanent tool must be developed.  Atossa is responsible for
developing this one-to-one relationship with the selected supplier. The
estimated cost for the disposables ($114,400) is not part of this
proposal.  The disposables kit quote does not include secondary
packaging and sterilization since this has not been identified as a requirement
to-date.

    

    Phase 1:
Prototype Development

    This phase outlines the steps needed to
have 20 trigger prototypes of the original design developed through the process
of urethane cast molding (and cast silicone for the diaphragm). Cost includes
all urethane molds and the cost for 20 piece parts. Assembly of trigger Units
will be done by HLB.

    

    Notes &
Assumptions:

    
      	
               
      

            	
              ·

            	
              Trigger Prototypes will be
      assembled and checked for proper fit. No performance testing will be done
      due to lack of performance targets (amount of suction required,
      etc.)

            

    

    
      	
               
      

            	
              ·

            	
              HLB will not modify the existing
      design (CAD Data). 2D documentation and part fabrication will be based on
      existing CAD. If modifications are required, it will be quoted
      separately

            

    

    
      	
               
      

            	
              ·

            	
              Disposables are not part of the
      quote

            

    

    
      	
               
      

            	
              ·

            	
              Atossa Genetics will have a direct
      relationship with the supplier that develops the tooling (PTI) for the
      disposables

            

    

    

    Deliverables:

    
      	
               
      

            	
              ·

            	
              20 Trigger Assemblies (hand
      assembled Urethane Cast
Parts)

            

    

    
      	
               
      

            	
              ·

            	
              2D Control drawings (Critical
      dimensions only)

            

    

    
      	
               
      

            	
              ·

            	
              Test
  plan

            

    

    
      	
               
      

            	
              ·

            	
              Test
  results

            

    

    

    Tasks:

    1.1 Create 2D control drawings of all
parts

    1.2 Develop SLA for urethane molding and
evaluate (receive client sign-off)

    1.3 Support development of the urethane
molds

    1.4 Develop urethane molds review FAI
data

    1.5 Assemble and test (fit and basic
function) of 1st prototype

    1.6 Create Test
Document

    1.7 Assemble remaining 19 Trigger
units

    1.8 Test each prototype for
suction

    1.9 Document suction test results and
insights from assembly

    1.8 Ship prototypes to
Atossa

    

    Projected completion
time: 4-6
weeks

    Professional Fees:
$44,800

    

    
      
         

      

      
        Page 2 of 7

        
          

          Atossa
Genetics, Inc – HLB – PR-10-48 (Rev B)

          HLB
Confidential

        

      

      
         

      

    

     

    PROVISIONS

    If
the above proposal is accepted, a
retainer in the amount of $10,000 is due prior to the start of any
work.  This retainer invoice is due
upon receipt. All invoices are due within thirty (30) days of issuance date.
(Please see Payments/Security Interest clause in our Terms and
Conditions.)

    

    This contract is valid for sixty days
from date of issue and will be re-quoted, if required, upon expiration. All
estimates in this proposal are a result of our best judgment at this point in
time. Based upon the developmental nature of this project, we reserve the right
to re-quote as the project progresses and our original assumptions are modified.
Additional work may be required to complete this project. We will alert you to
this possibility. We will progress up to the dollar limits stated in this
proposal and then stop until we review the status of the project and Amendments
or Change Orders are agreed upon and properly authorized in
writing.

    

    This proposal is subject to the Terms
and Conditions attached hereto. In the event of any conflict between the terms
of these Terms and Conditions and the proposal, the terms of the proposal shall
govern.

    

    A written authorization and purchase
order are required in order to commence work. Written authorization may be done
by letter or a signature on this document. Please fax a signed copy of this
proposal or letter and purchase order to us at (312)
454.9019

    

    
      	
              HLB, LLC

              Jeff Martinez

              Director of Sales & Business
      Development

               

              BY:
      /s/
      Jeff
      Martinez                                      
      

               

              DATE:
7-23-2010

               

               

            	
              Atossa Genetics,
      Inc.

              Steven C. Quay, M.D.,
      Ph.D.

              President

               

              BY:
      /s/
      Steven C. Quay, M.D., Ph.D.

               

              DATE: July 22,
      2010

            

    

    

    
      
         

      

      
        Page 3 of 7

        
          

          Atossa
Genetics, Inc – HLB – PR-10-48 (Rev B)

          HLB
Confidential

        

      

      
         

      

    

     

    Terms and Conditions

    

    1.
Services Upon the execution and delivery by
Client of the proposal attached hereto and made a part hereof (the “Proposal”),
HLB shall perform for Client the services (the “Services”) described in the
Proposal and in any Change Orders (as hereinafter defined). The Proposal, these
Terms and Conditions and any Change Orders are collectively referred to as the
“Agreement.”

    

    2.
Compensation [As compensation for the Services,
Client shall pay to HLB the amount set forth in the Proposal, as increased or
decreased pursuant to any fee adjustments set forth in any Change Orders (the
“Fees”). The obligations of HLB pursuant to this Agreement shall not apply in
the event that all Fees and Expenses due to HLB from Client are not timely
paid.]

    

    3.
Scheduling Client understands that the product
design services to be performed by HLB are

    unique, extremely complex and involve a
great degree of Client/HLB interaction and discussion. The schedule for
completion of the Services set forth in the Proposal is an estimate of the time
required to complete the Services. The time actually required to complete the
Services or any portion thereof will be subject to Client availability, timely
delivery of information by Client to HLB, unforeseen design issues, design
changes and modifications requested by Client pursuant to Change Orders and
other matters which generally effect product design services. HLB shall properly
staff all projects and will use its commercially reasonable efforts to meet all
agreed upon schedules.

    

    4.
Change
Orders In the event that Client requests any
modifications to the Services, HLB shall

    prepare and deliver to Client a written
summary describing such modifications and the changes in the Services necessary
to effectuate such modifications (a “Change Order”). The Change Order will also
set forth the additional Fees, if any, and an estimate of the revised schedule
for completion of the Services as a result of such modifications to the
Services. After receipt of a Client request, verbal or written, for
modifications to the Services, HLB may elect not to continue or complete the
Services until HLB receives a signed copy of the Change Order from Client and
the schedule for completion of the Services shall be extended by the number of
days elapsed between the receipt of the modification request from Client and
HLB’s receipt of the signed Change Order. The execution of the Change Order by
Client shall constitute authorization from Client to HLB to proceed with the
Services as modified by the Change Order and Client’s

    consent to the increase or decrease in
the Fees and revised schedule set forth in the Change Order.

    

    5.
Charges
for External Resources To provide the Services HLB may use
external resources to include travel companies; third party vendors with
specialized knowledge or expertise; manufacturers or distributors of materials,
parts and product/part modelers. Client shall pay charges for these external
resources. HLB will notify the Client if charges for these services/items change
due to a Change Order.  HLB shall have the right to require the Client
to pay directly to the vendor any of these charges.

    

    6.
Invoices
and Payments [Unless otherwise provided in the
Proposal, at the end of every month and the completion of a phase, HLB shall
issue an invoice to Client (an “Invoice”) for all work performed to date, plus
all Charges for External Resources in connection with the Services during the
period covered by such Invoice. Client shall pay to HLB the amount set forth in
each Invoice within thirty (30) days of receipt of such Invoice. Any amount
which is not paid when due shall bear interest at the rate of 1.5% per month or
portion thereof from the date such amount became due through the date on which
payment is received by HLB.  All payments shall be made to HLB at 345
North Canal Street, Chicago, Illinois 60606.]

     

    
      
         

      

      
        Page 4 of 7

        
          

          Atossa
Genetics, Inc – HLB – PR-10-48 (Rev B)

          HLB
Confidential

        

      

      
         

      

    

    
 

    7.
Inspections Client shall have the right, upon
reasonable prior notice to HLB and during HLB’s normal business hours, to
inspect and review HLB’s facilities and pertinent technical, project and
financial records with respect to the Services; provided, however, that Client
shall execute such confidentiality agreements as are required by HLB. All such
inspections and reviews shall be subject to HLB’s security and safety
requirements.

    

    8.
Termination Client or HLB may, by written 30 day
advance notice to each other (a “Termination Notice”), terminate the Services at
any time. No Termination Notice shall be effective until actual written receipt
thereof by the non-terminating party. HLB shall cease performance of the
Services as soon as is reasonably possible following the non-terminating party’s
receipt of a Termination Notice. Following termination of the Services, HLB
shall provide to Client an Invoice for all work performed through the
termination date plus all Expenses in connection with the termination of the
Services (collectively, the “Termination Payment”). HLB shall prepare a final
Invoice with respect to the Termination Payment as soon as is practicable
following its receipt or delivery of a Termination Notice. HLB will use
reasonable efforts to

    minimize continuing charges and expenses
associated with any termination of this Agreement and the Services; provided,
however, that HLB shall have the right to disassemble, organize and return all
materials and equipment in connection with the Services.

    

    9.
Technical
Data Client shall promptly furnish to HLB all
necessary technical and other data

    necessary to perform the Services.
Client represents that it has the right to use all such information and hereby
grants to HLB the right to use such information as contemplated by the Proposal.
All reports, designs, information, inventions and materials (“Project
Information”) developed for Client by HLB shall be the property of HLB until the
completion or termination of the Services and payment in full of all amounts due
to HLB, at which time, all Project Information shall be provided to and shall
become the property of Client. HLB shall have the right to retain for its
records copies of all such Project Information, data, drawings, specifications,
reports, estimates, summaries, and other information and materials. HLB
shall

    maintain as confidential all Project
Information for a period of five (5) years following completion of the Services
by HLB or termination of the Services by Client unless such Project Information:
(i) was available to the public prior to the HLB’s receipt thereof, (ii) becomes
available to the public following HLB’s receipt thereof through no fault of HLB,
(iii) was in the possession of HLB prior to the date hereof, or (iv) has been
developed by HLB as a result of activities carried out independently of the
Services and without access to technical information made in connection with the
Services.

    

    10.
Inventions/Patent
Rights At Client’s cost and expense, HLB will
perform all lawful and necessary acts, sign all patent, trademark and copyright
applications, oaths, assignments and other papers necessary to apply for, obtain
and assign to Client the Letters Patent trademarks and copyrights for any and
all such inventions and discoveries. Client shall conduct and pay for all
searches and other aspects of the patent, trademark or copyright application
processes and the assignment thereof to Client and costs and expenses incident
thereto (including attorneys’ fees and expenses).

    

    11.
Proprietary
Technology In the event that the Services require
use of proprietary technology (patents, confidential information or know-how)
which belongs to HLB, then HLB will negotiate, under reasonable terms, a license
to Client of the rights to such technology. Any use of HLB’s proprietary
technology which is anticipated by HLB prior to the commencement of the Services
shall be disclosed to Client prior to the commencement of the
Services.

     

    
      
         

      

      
        Page 5 of 7

        
          

          Atossa
Genetics, Inc – HLB – PR-10-48 (Rev B)

          HLB
Confidential

        

      

      
         

      

    

    
 

    12.
Disclaimers HLB makes no representations or
warranties (i) regarding the intellectual property rights of Client in any
invention, discovery, design or product produced pursuant to the Services
(collectively, the “Products”), (ii) regarding any actual or potential
infringement of the Products on any intellectual property or other rights of any
person or entity and (iii) regarding the prior development or current existence
of any invention, discovery, design or product similar to the Products. HLB
expressly disclaims all liability and responsibility regarding safety testing or
warnings necessary or desirable in connection with any of the Products. HLB
shall have no liability or responsibility to conduct any investigation or
inquiry with respect to the foregoing; provided, however, that HLB shall
disclose to Client all infringements upon the rights or patents of others and
all violations of federal, state or local laws of which HLB has actual
knowledge. HLB will make reasonable efforts to comply with any federal, state or
local laws with respect to

    the Products.

    

    13.
Limits
of Liability EXCEPT AS SET FORTH IN THIS AGREEMENT,
HLB HEREBY DISCLAIMS ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED, WITH RESPECT TO
THE SERVICES AND/OR PRODUCTS, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND/OR TITLE AND,
EXCEPT AS SET FORTH IN THIS AGREEMENT, THE SERVICES AND/OR PRODUCTS ARE PROVIDED
“AS IS”. HLB will not be liable for any indirect, direct, special, or
consequential losses or damages, including, without limitation, loss of business
or lost profits, regardless of the form of action, whether in contract, tort or
otherwise, and regardless of whether the cause of action arises from the
Services and/or Products or any component

    thereof, or from performance by HLB
under this Agreement or any action or failure to act by HLB. In no event shall
HLB’s liability hereunder exceed the amount of Fees paid by Client to HLB
pursuant to this Agreement.

    

    14.
Deliveries All deliveries from HLB to Client shall
be F.O.B. shipping point and title and risk of loss with respect to such
deliveries shall pass to Client at the shipping point.

    

    15.
Personnel Each of HLB and Client agrees that
neither HLB nor Client, respectively, shall solicit or employ the employees of
Client or HLB, respectively, during the performance of the Services and for a
period of twelve (12) months following the completion of the
Services.

    

    16.
Waiver Any waiver by any party of its rights
under the Agreement shall be in writing and signed by the party waiving such
right. The failure of either party to enforce any of the provisions of this
Agreement or any rights in respect thereto, or to exercise any election herein
provided, shall not waive such provisions, rights or elections or subsequent
breaches thereof.

    

    17.
Force
Majeure HLB shall not be liable for delays in or
non-performance of the Services as a result of strikes, lockouts, fires, war
conditions, accidents, foreign or domestic governmental controls or other
actions, embargoes or other causes beyond such HLB’s
control.

    

    18.
Relationship
of Parties The relationship of the parties shall be
that of independent contractors and not as partners or joint venturers. Each
party is, and is intended to be, engaged in its own and entirely separate
business.

    

    19.
Assignment/Benefit This Agreement and the rights and
obligations in connection herewith and therewith to Client may only be assigned
with the prior written consent of HLB. Any assignment in contravention hereof
shall be null and void. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective representatives, successors and
assigns.

     

    
      
         

      

      
        Page 6 of 7

        
          

          Atossa
Genetics, Inc – HLB – PR-10-48 (Rev B)

          HLB
Confidential

        

      

      
         

      

    

     

    20.
Notices All notices and other communications
given hereunder shall be in writing and deemed to have been given when (i)
personally delivered, (ii) one (1) business day after delivery to a nationally
recognized overnight courier service for next business day delivery, (iii) upon
the written confirmation of receipt following the transmission of a facsimile or
(iv) three (3) days after being mailed by certified mail, postage prepaid, to
the addresses of HLB or Client as set forth in the Proposal or to such other
addresses as either party hereto may request by notice given as
aforesaid.

    

    21.
Governing
Law This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois. In the event of
any dispute, action or proceeding in connection with this Agreement, the
Services or any documents, instruments or transactions in connection therewith,
the non-prevailing party shall pay all costs and expenses (including reasonable
attorneys’ and paralegals’ fees and expenses) incurred by the prevailing party
in connection with such dispute, action or proceeding.

    

    22.
Jurisdiction
and Venue HLB AND CLIENT IRREVOCABLY AGREE THAT
ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM
OR RELATED TO THIS AGREEMENT, THE SERVICES OR ANY DOCUMENTS, INSTRUMENT OR
TRANSACTION IN CONNECTION HEREWITH OR THEREWITH SHALL BE HEARD OR LITIGATED
EXCLUSIVELY IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, COOK COUNTY,
STATE OF ILLINOIS. HLB AND CLIENT CONSENT AND SUBMIT TO THE JURISDICTION OF ANY
LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY, COUNTY AND STATE AND
IRREVOCABLY WAIVE ANY RIGHT TO TRANSFER OR CHANGE VENUE OF ANY SUCH ACTION OR
PROCEEDING OR OBJECT TO THE

    JURISDICTION OF ANY SUCH COURT OVER THE
PARTIES HERETO.

    

    23. Entire
Agreement/Conflict This Agreement constitutes the entire agreement and
understanding between the parties with respect to the Services and supersede all
previous negotiations, agreements and representations between the parties,
written or oral, all of which shall be deemed to be merged into this Agreement.
In the event of any conflict between the terms of these Terms and Conditions and
the Proposal, the terms of the Proposal shall govern.

     

     

    
      
         

      

      
        Page 7 of 7

        
          

          Atossa
Genetics, Inc – HLB – PR-10-48 (Rev B)

          HLB
ConfidentialExhibit 10.1

 

 

PRESS RELEASE

 

Magic Reports Record-Breaking Annual Results for 2011 with
Revenues of $113 Million and Net Income of $15 Million, an Increase of 60% Year over Year

 

Company Reports Double-Digit Overall Growth for the Ninth Consecutive
Quarter

 

Or Yehuda, Israel, February 14,
2012 – Magic Software Enterprises Ltd. (NASDAQ: MGIC), a
global provider of mobile and cloud-enabled application and business
integration platforms, announced today its financial results for the fourth quarter and full year ended December 31,
2011.

 

Financial Highlights for the Fourth Quarter,
2011

 

		·	Fourth quarter revenues increased 22% year over year to $30.5 million from $25.0 million.

 

		·	Operating income for the fourth quarter increased 40% to $4.2 million, compared to $3.0 million
in the same period last year; Non-GAAP operating income increased 45% to $4.5 million, compared to $3.1 million in the
same period last year.

 

		·	Net income for the fourth quarter increased 42% to $4.4 million compared to $3.1 million
in the same period last year; Non-GAAP net income increased 47% to $4.7 million, compared to $3.2 million in the same
period last year.

 

Financial Highlights for the Full Year
Ended December 31, 2011

 

		·	Revenues for the year ended December 31, 2011, reached $113.3 million, an increase of
28%, compared to $88.6 million in 2010.

 

		·	Operating income for the year ended December 31, 2011, increased 58% to $14.7 million
compared to $9.3 million in the same period last year; Non-GAAP operating income for the year increased 45% to $14.5 million,
compared to $10.0 million in the same period last year.

 

		·	Net income for the year ended December 31, 2011, increased 60% to $15.0 million compared
to $9.4 million in the same period last year; Non-GAAP net income for the year increased 48% to $14.8 million, compared
to $10.0 million in the same period last year.

 

		·	Total cash, cash equivalents and short-term investments as of December 31, 2011, amounted
to $32.1 million (after full payment for the purchase of BluePhoenix’s AppBuilder activity).

 

Results

 

		·	For the fourth quarter ended December 31, 2011, total revenues were $30.5 million, with
net income of $4.4 million, or $0.12 per fully diluted share. This compares with revenues of $25 million and net income
of $3.1 million, or $0.09 per fully diluted share for the same period last year.

 

		·	For the fourth quarter of 2011, operating income was $4.2 million. This compares to operating
income of $3 million for the same period a year ago.

 

    	 

    	 

    

 

 

		·	For the year ended December 31, 2011, total revenues were $113.3 million, with net income
of $15.0 million, or $0.41 per fully diluted share. This compares with revenues of $88.6 million and net income of $9.4 million,
or $0.29 per fully diluted share, for the same period last year.

 

		·	Operating income for the year ended December 31, 2011, was $14.7 million. This compares
to operating income of $9.3 million for the same period a year ago.

 

Comments of Management

 

Commenting on the results, Guy Bernstein, Chief
Executive Officer of Magic Software Enterprises, said: “I am pleased to report that 2011 was Magic’s most successful
year ever. Our record-breaking financial results have been consistently
impressive, with unprecedented double-digit growth for the ninth consecutive quarter, reflecting excellent growth in all our regional
centers of activity.

 

2011 saw further enhancement of our product
portfolio, including the launch of our new mobile offering and the addition of .NET development capabilities to our core application
platform. As a result, we continue to be recognized throughout the industry for our quality and innovation.

 

In recognition of our outstanding business
achievements and our long-term growth potential, in 2011, Magic was elevated to the NASDAQ Global Select Market top-tier listing
and the prestigious TASE TA-100 Index of the Tel-Aviv Stock Exchange.

 

Moving forward, we plan to expand our product
offering, especially our mobile and cloud-based solutions, to provide new and exciting opportunities for our company and greater
added value for our customers,” 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 Enterprises

 

Magic Software Enterprises Ltd. (NASDAQ: MGIC)
is a global provider of mobile and cloud-enabled application and business integration platforms.

 

For more information, visit 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.

 

Press Contact:

 

Tania Amar, VP Global Marketing

Magic Software Enterprises

Tel: +972 (0)3 538 9300

tania@magicsoftware.com

 

    	 

    	 

    

 

MAGIC SOFTWARE ENTERPRISES LTD.

CONSOLIDATED STATEMENTS OF INCOME

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

  

 

	 	 	Three months ended	 	 	Year ended	 
	 	 	December 31,	 	 	December 31,	 
	 	 	2011	 	 	2010	 	 	2011	 	 	2010	 
	 	 	 Unaudited	 	 	 Unaudited	 	 	 	 
	Revenues	 	 	30,483	 	 	 	25,027	 	 	 	113,328	 	 	 	88,578	 
	Cost of Revenues	 	 	17,968	 	 	 	14,344	 	 	 	67,258	 	 	 	51,448	 
	Gross profit	 	 	12,515	 	 	 	10,683	 	 	 	46,070	 	 	 	37,130	 
	Research and development, net	 	 	469	 	 	 	506	 	 	 	2,047	 	 	 	2,072	 
	Selling, marketing and general and	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	   administrative expenses	 	 	7,870	 	 	 	7,165	 	 	 	29,306	 	 	 	25,720	 
	Total operating costs and expenses	 	 	8,339	 	 	 	7,671	 	 	 	31,353	 	 	 	27,792	 
	Operating income	 	 	4,176	 	 	 	3,012	 	 	 	14,717	 	 	 	9,338	 
	Financial income (expenses), net	 	 	(90	)	 	 	60	 	 	 	221	 	 	 	(224	)
	Other income, net	 	 	33	 	 	 	11	 	 	 	125	 	 	 	159	 
	Income before taxes on income	 	 	4,119	 	 	 	3,083	 	 	 	15,063	 	 	 	9,273	 
	Taxes on income	 	 	(270	)	 	 	—  	 	 	 	(203	)	 	 	(102	)
	Net income	 	 	4,389	 	 	 	3,083	 	 	 	15,266	 	 	 	9,375	 
	Net income attributable to non-controlling interests	 	 	(24	)	 	 	—  	 	 	 	(222	)	 	 	—  	 
	Net income attributable to Magic Shareholders	 	 	4,365	 	 	 	3,083	 	 	 	15,044	 	 	 	9,375	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net earnings per share attributable to	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  Magic Software:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic	 	 	0.12	 	 	 	0.10	 	 	 	0.41	 	 	 	0.29	 
	Diluted	 	 	0.12	 	 	 	0.09	 	 	 	0.41	 	 	 	0.29	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Weighted average number of shares in thousands	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	    used in computing net earnings per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	       Basic	 	 	36,348	 	 	 	32,578	 	 	 	36,268	 	 	 	32,139	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	       Diluted	 	 	37,010	 	 	 	33,470	 	 	 	37,046	 	 	 	32,731	 

 

    	 

    	 

    

 

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	 	 	Year ended	 
	 	 	December 31,	 	 	December 31,	 
	 	 	2011	 	 	2010	 	 	2011	 	 	2010	 
	 	 	Unaudited	 	 	Unaudited	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	GAAP operating income	 	 	4,176	 	 	 	3,012	 	 	 	14,717	 	 	 	9,338	 
	Amortization of capitalized software and other intangible assets	 	 	1,506	 	 	 	1,224	 	 	 	4,335	 	 	 	3,940	 
	Capitalization of software development	 	 	(1,376	)	 	 	(1,245	)	 	 	(5,222	)	 	 	(3,595	)
	Stock-based compensation	 	 	186	 	 	 	135	 	 	 	633	 	 	 	300	 
	Total adjustments to GAAP	 	 	316	 	 	 	114	 	 	 	(254	)	 	 	645	 
	Non-GAAP operating income	 	 	4,492	 	 	 	3,126	 	 	 	14,463	 	 	 	9,983	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	GAAP net income	 	 	4,365	 	 	 	3,083	 	 	 	15,044	 	 	 	9,375	 
	Total adjustments to GAAP as above	 	 	316	 	 	 	114	 	 	 	(254	)	 	 	645	 
	Non-GAAP net income	 	 	4,681	 	 	 	3,197	 	 	 	14,790	 	 	 	10,020	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Non-GAAP basic net earnings per share	 	 	0.13	 	 	 	0.10	 	 	 	0.41	 	 	 	0.31	 
	Weighted average number of shares used in computing net earnings per share in thousand	 	 	36,348	 	 	 	32,578	 	 	 	36,268	 	 	 	32,139	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Non-GAAP diluted net earnings per share	 	 	0.13	 	 	 	0.10	 	 	 	0.40	 	 	 	0.31	 
	Weighted average number of shares in thousands used in computing net earnings per share	 	 	37,084	 	 	 	33,625	 	 	 	37,137	 	 	 	32,806	 

 

    	 

    	 

    

 

MAGIC SOFTWARE ENTERPRISES LTD.

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

  

	 	 	December 31,	 
	 	 	2011	 	 	2010	 
	 	 	(Unaudited)	 	 	 	 
	ASSETS	 	 	 	 	 	 	 	 
	CURRENT ASSETS:	 	 	 	 	 	 	 	 
	Cash and cash equivalents	 	 	28,711	 	 	 	43,661	 
	Short-term bank deposits	 	 	2,170	 	 	 	24	 
	Available-for-sale marketable securities	 	 	1,241	 	 	 	2,857	 
	Trade receivables, net	 	 	24,946	 	 	 	17,801	 
	Other accounts receivable and  prepaid expenses	 	 	6,373	 	 	 	4,029	 
	Total current Assets	 	 	63,441	 	 	 	68,372	 
	 	 	 	 	 	 	 	 	 
	LONG-TERM RECEIVABLES:	 	 	 	 	 	 	 	 
	Severance pay fund	 	 	351	 	 	 	325	 
	Other Long-term receivables	 	 	3,941	 	 	 	2,141	 
	Total other long-term receivables	 	 	4,292	 	 	 	2,466	 
	 	 	 	 	 	 	 	 	 
	PROPERTY AND EQUIPMENT, NET	 	 	2,029	 	 	 	1,827	 
	IDENTIFIABLE INTANGIBLE ASSETS AND GOODWILL, NET	 	 	63,630	 	 	 	39,285	 
	 	 	 	 	 	 	 	 	 
	TOTAL ASSETS	 	 	133,392	 	 	 	111,950	 
	 	 	 	 	 	 	 	 	 
	LIABILITIES AND EQUITY	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	CURRENT LIABILITIES:	 	 	 	 	 	 	 	 
	Short-term credit and current maturities of long term  loans	 	 	-	 	 	 	9	 
	Trade payables	 	 	3,545	 	 	 	2,994	 
	Accrued expenses and other accounts payable	 	 	18,055	 	 	 	15,028	 
	Deferred revenues	 	 	4,011	 	 	 	1,526	 
	Total current liabilities	 	 	25,611	 	 	 	19,557	 
	 	 	 	 	 	 	 	 	 
	NON CURRENT LIABILITIES:	 	 	 	 	 	 	 	 
	Long-term loans	 	 	13	 	 	 	2	 
	Liability due to acquisition activities	 	 	1,350	 	 	 	2,990	 
	Accrued severance pay	 	 	1,087	 	 	 	536	 
	Total non-current Liabilities	 	 	2,450	 	 	 	3,528	 
	 	 	 	 	 	 	 	 	 
	EQUITY:	 	 	 	 	 	 	 	 
	Magic Shareholders' equity	 	 	104,841	 	 	 	88,865	 
	Non-controlling interests	 	 	490	 	 	 	-	 
	Total equity	 	 	105,331	 	 	 	88,865	 
	 	 	 	 	 	 	 	 	 
	TOTAL LIABILITIES AND EQUITY	 	 	133,392	 	 	 	111,950

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