{"url_path":"/sec/forty/10-k/2026/item-4","section_key":"item-4","section_title":"Item 4 INFORMATION ON THE COMPANY**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-13","source_url":"https://www.sec.gov/Archives/edgar/data/1045986/0001213900-26-055948-index.html","accession_number":"0001213900-26-055948","cik":"0001045986","ticker":"FORTY","issuer_name":"FORMULA SYSTEMS (1985) LTD","edgar_url":"https://www.sec.gov/Archives/edgar/data/1045986/0001213900-26-055948-index.html","primary_entity_key":"0001045986","primary_entity_name":"FORMULA SYSTEMS (1985) LTD"},"word_count":1336,"has_tables":true,"body_markdown":"** **\n\n**ITEM 4. INFORMATION ON THE COMPANY**\n\n \n\n**A.**\n**History and Development of the Company**\n\n \n\nBoth our legal name and our\ncommercial name are Formula Systems (1985) Ltd. We were incorporated under the laws of the State of Israel on April 2, 1985, and are subject\nto the Israeli Companies Law, 5759-1999. We maintain our principal executive offices at Terminal Center, 1 Yahadut Canada Street, Or Yehuda,\n6037501, Israel and our telephone number is +972-3-5389305. Our agent in the United States is Corporation Service Company and its address\nis 2711 Centerville Road, Suite 400, Wilmington, DE 19808. Our Internet address is www.formulasystems.com. The information contained on\nthat site is not a part of this annual report and is not incorporated by reference herein. The SEC maintains an Internet site, http://www.sec.gov,\nwhich contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.\nThe information on that website is not part of this annual report and is not incorporated by reference herein. Except as described elsewhere\nin this annual report, we have not had any important events in the development of our business since January 1, 2024.\n\n \n\n**Capital Expenditures and Divestitures**\n\n \n\nSince our inception, we have\nprimarily acquired effective controlling interests in companies engaged in the IT solutions and services industry and, in certain cases,\nhave made investments in companies over which we exercise significant influence, generally through ownership interests of 20% or more.\nWe, together with our investees, are known as the Formula Systems Group.\n\n \n\nWe have adopted a strategy\nfocused on creating long-term value for our shareholders and the companies in which we invest. This strategy includes supporting the growth\nand development of our existing subsidiaries, while also pursuing acquisitions of, and investments in, businesses that complement our\ncurrent portfolio of software solutions, products, technologies and services and are suitable for integration into our business, thereby\nincreasing value for our shareholders (and ADS holders). In addition, we seek to identify and invest in new areas of activity that we\nbelieve present attractive growth opportunities, including areas that are not currently part of our existing portfolio. These investments\nmay involve entering new markets, technologies or service offerings, which may enhance our long-term growth prospects.\n\n \n\nOur principal investment and\ndivestiture activities since the start of our 2023 fiscal year are described below. For additional information concerning our related\nfinancing activities since the start of our 2023 fiscal year, see “*Item 5. Operating and Financial Review and Prospects—\nB. Liquidity and Capital Resources— Sources of Financing*.”\n\n \n\n35\n\n \n\n \n\n*Investments by Formula in Subsidiaries:*\n\n* *\n\n*Changes in our percentage\nownership of Sapiens*. As of January 1, 2023, our equity interest in our former subsidiary Sapiens was 44.1%, which was subsequently\ndiluted slightly during 2023, 2024 and 2025 as a result of exercises of options by Sapiens’ employees. In connection with, and following,\nSapiens’ acquisition by Advent in December 2025, our direct equity interest in Sapiens was replaced by an indirect equity interest,\nheld through SI Swan, the ultimate parent company of Sapiens, in which we hold an approximate 18.68% equity interest. The transaction\nresulted in the recognition of a significant capital gain, reflecting both the disposal of a majority of our holdings and the remeasurement\nof the retained investment to fair value. Following the completion of the transaction, we ceased to have a controlling interest in Sapiens\nand, accordingly, present the results of Sapiens as discontinued operations in our consolidated financial statements for the year ended\nDecember 31, 2025 in this annual report, in accordance with IFRS 5. The total contribution from Sapiens, including this gain and our share\nin Sapiens’ results up to the date of the transaction, amounted to approximately $570 million.\n\n \n\n*Changes in our percentage\nownership of Magic Software*. Over the course of 2023, we invested an aggregate of $2.1 million in Magic Software via purchases of\nits ordinary shares (there were no such purchases in 2024 or 2025). Our interest in Magic Software’s ordinary shares as of December\n31, 2025 stood at approximately 46.71%. As a result of Magic Software’s merger with Matrix in February 2026, we no longer hold a\ndirect equity interest in Magic Software, as it has become a wholly-owned subsidiary of Matrix, and our interest now takes the form of\nan indirect equity interest, reflected in our interest in Matrix (described below).\n\n \n\n*Changes in our percentage\nownership of Matrix*. As of January 1, 2023, our percentage interest in Matrix was 48.7%. During the last three years, solely due to\nexercises of options by employees of Matrix, our direct interest in Matrix’s outstanding share capital was diluted to 48.2%, 48.2%\nand 48.1% as of December 31, 2023, 2024 and 2025, respectively. Our interest in Matrix’s ordinary shares as of March 31, 2026 stands\nat 47.7%. We did not purchase any Matrix shares in any of the years 2023, 2024 or 2025.\n\n \n\n*Changes in our percentage\nownership of TSG Systems*. As of January 1, 2023, our equity interest in TSG Systems was 50.0%. During the period from January 1, 2023\nthrough March 31, 2026, our ownership interest in TSG Systems was diluted as a result of several events, including TSG Systems’\ninitial public offering completed on August 1, 2024, subsequent exercises of options by TSG Systems’ employees, and capital raises\nconducted by TSG Systems in October 2025 and January 2026. As a result of those transactions, our direct interest in TSG Systems’\noutstanding share capital decreased to 42.71% as of December 31, 2024, to 37.33% as of December 31, 2025 and to 32.87% as of March 31,\n2026. We did not acquire any additional shares of TSG Systems during the period from January 1, 2023 through March 31, 2026.\n\n \n\n*Acquisitions and Divestitures by Formula:*\n\n \n\n*Disposition of Direct Interest in Sapiens and\nReplacement with Indirect Interest in Sapiens (via SI Swan)*.\n\n \n\nOn December 17, 2025, we completed\nthe disposition of our direct equity interest in Sapiens as part of its acquisition by Advent. Immediately prior to the transaction, we\nheld approximately 43.5% of the outstanding share capital of Sapiens. In connection with the transaction, we sold 17,418,214 of Sapiens\ncommon shares for aggregate cash consideration of $757,692,309. In addition, we contributed 6,896,552 Sapiens common shares to the new\nholding structure in exchange for equity in SI Swan, the ultimate parent company of Sapiens following the transaction. The contributed\nshares were valued at $300 million for purposes of the transaction. As a result, our direct equity interest in Sapiens was replaced with\nan indirect equity interest of approximately 18.68% in SI Swan, and we ceased to have a controlling interest in Sapiens.\n\n* *\n\n36\n\n \n\n* *\n\n*Acquisition of Hashahar\nTelecom and Electricity Ltd.,, or Hashahar.*On October 1, 2024 we acquired 51% of the outstanding share capital of Hashahar, an Israeli\nprivately held company established in 2018, specializing in the planning, deployment, and installation of fiber optics, structured cabling\n(CAT 6/7), coaxial and telephony systems for both enterprise and residential sectors, including intercity infrastructure and public sector\nprojects. Total consideration paid amounted to $1.3 million. Hashahar delivers end-to-end project execution through in-house engineering,\ndedicated project managers, and stringent safety and data security protocols. Its clients include Bezeq, HOT, Cellcom, YES, Israel Railways,\nand multiple government bodies. With VPN-enabled IT infrastructure, automated triple-backup systems, and Priority ERP for operational\noversight, the company maintains a high standard of execution in complex fiber deployment and communication infrastructure projects. For\nfurther information, please see Note 3(b) to our consolidated financial statements included in Item 18 of this annual report.\n\n* *\n\n*Investments in a private\ncompany accounted for at equity.* In September 2024, we completed the acquisition of a 21.45% equity interest in an Israel-based private\ntechnology company specializing in artificial intelligence-powered product comparison and e-commerce guidance platforms. The investee\noperates a global portfolio of consumer-oriented websites that provide comprehensive product reviews, side-by-side comparisons, and price\ntracking functionalities, collectively serving over 40 million monthly users across more than 20 countries. Total consideration for the\ninvestment amounted to $15.3 million. For further information, please see Note 9 to our consolidated financial statements included in"}