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Contact:Katharine HanleyPR/IRMagic Software Enterprises, Ltd.(949) 250-1718 ext. 220khanley@magicsoftware.comGuy BernsteinVice President, FinanceMagic Software Enterprises, Ltd.+972-3-538-9292gbernstein@magicsoftware.comMAGIC SOFTWARE ENTERPRISESANNOUNCES THIRD QUARTER 2001 RESULTSSees Slight Improvement in Software Tool and Application SalesOR YEHUDA, ISRAEL (November 12, 2001) ” Magic Software Enterprises, Ltd. (Nasdaq: MGIC), a leading provider of state-of-the-art application development technology and business solutions, announced today results for the third quarter ended September 30, 2001. Despite the continuing economic slowdown, the Company recorded a slight improvement in software tool and application sales over the previous quarter.Third Quarter ResultsTotal revenues for the third quarter 2001 were $18.94 million as compared to the $25.46 million reported for the comparable period in 2000 and the $20.19 million posted for the second quarter of 2001. Pro forma net loss for the third quarter (which excludes amortization of goodwill and intangibles, and any non-recurring expenses) was $1.11 million or $0.04 loss per share compared with the $1.9 million pro forma net loss or $0.07 loss per share posted in the second quarter of 2001 and the $2.25 million pro forma net income or $0.06 earnings per share recorded for the same period a year ago.Actual (or GAAP) net loss for the third quarter of 2001 was $2.58 million or $0.09 loss per share compared with the $1.16 million net income or $0.04 earnings per share recorded one year ago.Software tool sales for the quarter, at $4.93 million, were up slightly from the $4.58 million in software tool sales posted in the second quarter of 2001. Application sales also were slightly improved, totaling $3.21 million for the quarter as compared to $3.07 million for the second quarter of this year. The decrease in consultancy and other services was due primarily to the drop in revenues from CoreTech Consulting Group, Inc., which is being adversely affected by the general slowdown in the U.S. consulting business.For the third quarter 2001, Europe and North America both contributed 36% to sales respectively, while Asia contributed 23% and Israel 5%.Recently, we have been facing significant changes in the software market, with, Project, customers and prospects postponing decisions on software purchases due to the continuing global uncertainty over business and the economy, said Menachem Hasfari, chief executive officer of Magic. At the same time, however, we have seen companies remain committed to investing in those cost-effective technologies like Magic that promise high returns on investment, broad functionality and ease of integration.Given the current state of the economy, I believe our results demonstrate continuing enthusiasm for the quality, value and performance of our offerings. And we remain confident that our strategy for supplying companies with key technology, business solutions and services positions us well for higher levels of growth once the economy recovers.Third Quarter DevelopmentsDuring the quarter, Magic continued to strengthen its relationship with, Project, IBM, to introduce additional state-of-the-art solutions, and to grow its list of international customers.RecognitionIn August, it was announced that both Magic eDeveloper (Magic’s application development environment) and Magic eMerchant (the Company’s e-business solution) had received IBM’s ServerProven certification following a rigorous testing and evaluation process. Only those products that are validated by IBM to install quickly, start up easily and run reliably on IBM servers are awarded this certification, designed by IBM to help its customers easily identify complete solutions for their business-critical e-business needs.New ProductsAlso in August, Magic Americas announced introduction of Magic CRM, a highly affordable customer relationship management solution that enables mid-sized companies a single integrated view of their customers. While most CRM approaches today require companies to assemble CRM solutions in pieces, Magic CRM offers all of the key components of business management (marketing campaign management, sales opportunity management, complete customer service management and accounting/ERP integration) in a single module that can be acquired inexpensively and implemented quickly.New DealsAmong the significant new deals closed during the quarter were:Menzies World Cargo (UK), the cargo handling and transport business arm of Menzies Aviation Group, to deliver a comprehensive air cargo management and tracking system;SAPA Group (France), the international industrial group that develops, manufactures and markets value-added aluminum and aluminum extrusions, to develop an ERP and e-business solution to integrate workflow between the organization’s sales subsidiaries and plants;EXMA CPI (France), a major supplier of steel tubing, to develop a Web-enabled ERP system; andThe Bank of Hapoalim (Israel), Israel’s largest bank, to add several new modules to an existing Magic-based solution. In addition, Magic subsidiary Access Data Corporation, whose Sleuth public safety records management solution is used by more than 400 small- to medium-sized public safety agencies throughout the United States, recently was awarded business from the following agencies:The Russell police in Kansas;The Kerrville police in Texas;The Sheridan and Scottsbluff police in Colorado;The Benson police in Arizona;The Acoma Pueblo police in New Mexico;The University of Central Arkansas police;The Kansas State University police; andThe Dillon, Silverthorne, Frisco, Breckenridge, and Blue River police in Colorado to share a single database system for criminal tracking.Answers on Demand, Magic’s North American subsidiary that markets and supports proprietary integrated software solutions designed specifically for the long-term care industry, also signed deals during the quarter with a new facility in the Dallas, Texas area.About Magic Software EnterprisesMagic Software Enterprises, a member of the Formula Group (Nasdaq: FORTY), develops, markets and supports software development and deployment technology that enables enterprises to accelerate the process of building and deploying applications that can be rapidly customized and integrated with existing systems. Magic technology, applications and professional services are available through a global network of subsidiaries, distributors and Magic solutions partners in approximately 50 countries. The Company’s North American subsidiary is located at 1642 Kaiser Avenue, Irvine, Calif., 92614, telephone (949) 250-1718, fax (949) 250-7404, http://www.magicsoftware.com.The Formula Group is an international information technology company principally engaged, through its subsidiaries and affiliates, in providing software consulting services, developing proprietary software products and producing computer-based solutions.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. NOTE: PLEASE VISIT THE MAGIC WEBSITE AT HTTP://WWW.MAGICSOFTWARE.COM FOR THE COMPLETE FINANCIALS.