UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20–F

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20152022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ____________

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report _____________

Commission file number 000-31215

MIND C.T.I. LTD.

(Exact name of Registrant as specified in its charter

and translation of Registrant’s name into English)

ISRAEL

(Jurisdiction of incorporation or organization)

            Industrial Park, Building #7,2 HaCarmel Street, Yoqneam, 2069202,2066724, Israel

(Address of principal executive offices)

Aviram Cohen
Arie Abramovich

c/o MIND C.T.I. Ltd.
Industrial Park, Building #7
Yoqneam, 2069202, Israel
Tel: +972-4-9936666
investor@mindcti.com

2 HaCarmel Street

Yoqneam, 2066724, Israel

Tel: +972-4-9936666

investor@mindcti.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of December 31, 2015,2022, the Registrant had outstanding 19,202,41820,124,326 Ordinary Shares, nominal value NIS 0.01 per share.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨☐ Yesx ☒ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ¨☐ Yesx ☒ No

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x☒ Yes¨ ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x☒ Yes¨ ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.filer or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and large accelerated filer”“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the

registrant has elected to follow. Item 17 ¨☐ Item 18 ¨☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨☐ Yesx ☒ No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No

Unless the context requires otherwise, “MIND”, “us”, “we”, “our company”, “the company”, “the Company” and “our” refer to MIND C.T.I. Ltd. and its subsidiaries.

Table of Contents

FORWARD LOOKING STATEMENTS AND SUMMARY RISK FACTORS

Statements in this Annual Report concerning our business outlook or future economic performance; anticipated revenues, expenses or other financial items; introductions and advancements in development of products, and plans and objectives related thereto; and statements concerning assumptions made or expectations as to any future events, conditions, performance or other matters, are “forward-looking statements” as that term is defined under the United States Federal Securities Laws. Forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those stated in such statements. Factors that could cause or contribute to such differences include, but are not limited to, those set forth under “Risk Factors” in this Annual Report as well as those discussed elsewhere in this Annual Report and in our other filings with the Securities and Exchange Commission. The following is a summary of some of the principal risks we face:

We may be unable to compete effectively in the marketplace;

We may fail to attract and retain qualified personnel;

Our backlog, revenues and operating results may vary significantly from quarter to quarter;

Our acquisition strategy could divert resources and disrupt our business;

We may not be successful in integrating acquisitions;

We may not adequately enhance our products and services and introduce new products and features to retain our customers and attract new ones;

Our products could be affected by cyber security breaches;

Our products may fail to comply with or to enable our customers and channel partners to comply with applicable privacy and other laws and regulations;

We may be unable to manage our international operations effectively;

Our Israeli tax benefits may be discontinued or reduced;

Our business may be negatively affected by exchange rate fluctuations;

We may lose the services of key personnel;

We may become subject to claims of intellectual property infringement;

Our use of “open-source” software tools may be subject to IP infringement claims or subject our derivative works or products to unintended consequences; 

We are subject to ongoing costs and risks associated with being a public company, including potential lawsuits;

System disruptions and failures may result in customer dissatisfaction and customer loss;

The market segment of small to medium size communication service providers may fails to grow;

We may lose existing customers or the use of our products may decline;

Our billing software and the systems into which it is integrated may contain undetected errors;

We may be unable to attract new messaging customers in a cost-effective manner;

We may be unable to increase adoption of our messaging products by enterprises;

We rely on network service providers for our messaging services;

We may have to lower our prices for messaging products;

We may have defects or errors in our messaging products;

We face a risk of litigation resulting from customer misuse of our messaging software to send unauthorized messages;

System disruptions and failures may result in customer dissatisfaction and customer loss;

Changes to regulations or technology vendor rules may prevent us from using some services; and

Our articles of association include forum selection clauses for certain claims brought under the U.S. securities laws or under Israeli law.

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

A.[Reserved]

Except as otherwise indicated, all financial statements

B.  Capitalization and other financial information included in this Annual Report are presented solely under U.S. GAAP.Indebtedness

The following table presents selected consolidated financial data asNot applicable.

C.  Reasons for the Offer and Use of and for each of the five years in the period ended December 31, 2015. The selected consolidated financial data presented below are derived from our audited consolidated financial statements for these periods, and should be read in conjunction with these financial statements and the related notes thereto. Our audited consolidated balance sheets as of December 31, 2014 and 2015 and our audited consolidated statements of operations and cash flows for each of the three years ended December 31, 2015 and the related notes theretoare included elsewhere in this annual report. You should read the selected financial data in conjunction with Item 5 “Operating and Financial Review and Prospects.”

Proceeds

Not applicable.

D. Risk Factors

Not applicable.

We believe that the occurrence of any one or some combination of the following factors would have a material adverse effect on our business, financial condition and results of operations.

Risks Relating to Ourour Business and Industry

If we are unable to compete effectively in the marketplace, we may suffer a decrease in market share, revenues and profitability.

CompetitionAll the markets we operate in are significantly fragmented and highly competitive. The principal competitive factors in our industry is intensemarket include completeness of offering, global reach, ease of integration, product features, platform scalability, reliability, security and performance, brand awareness and reputation, the strength of sales and marketing efforts, customer support, as well as the cost of deploying and using our products.

Some of our competitors are larger and have greater name recognition, longer operating histories, more established customer relationships, larger budgets and significantly greater resources than we do. In addition, they have the operating flexibility to bundle competing products and services at little or no perceived incremental cost, including offering them at a lower price as part of a larger sales transaction. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. In addition, some competitors may offer products or services that address one or a limited number of functions at lower prices, with greater depth than our products or in different geographies. Our current and potential competitors may develop and market new products and services with comparable functionality to our products, and this could lead to us having to decrease prices in order to remain competitive.

With the introduction of new products and technologies and new market entrants, we expect competition to increase. We compete both with established global billing companies such as Amdocs and Oracle as well as with local billing companies.intensify in the future. Some of our competitors have greater financial, technical, sales, marketinglower list prices than ours, which may be attractive to certain customers even if those products have different or lesser functionality. Pricing pressures and other resources and greater name recognition than we do. Someincreased competition could result in reduced revenue, reduced margins, increased losses, any of our competitors, mainly the ones that focus on specific markets, have a lower cost structure and compete with us on pricing. New competitors may emerge and rapidly acquire significant market share. We cannot guarantee that we will be able to compete effectively against current or future competitors or that competitive pressure will notwhich could harm our business, results of operations and financial results.

Our backlog, revenues and operating results may vary significantly from quarter to quarter.

Our backlog, revenues and operating results may vary significantly from quarter to quarter due to a number of factors, including the following:

Due to all of the foregoing, we cannot predict revenues for any future quarter with any significant degree of accuracy. Accordingly, we believe that period-to-period comparisons of our operating results are not necessarily meaningful and you should not rely upon them as indications of future performance. In future quarters, our operating results may be below the expectations of public market analysts and investors, and as a result, the price of our ordinary shares may fall.

condition.

The customer base for our wireline and wireless billing and customer care products is characterized by small to medium size telephony carriers. If this market segment fails to grow, the demand for our billing and customer care software would diminish substantially.

Our traditional wireline and wireless billing and customer care products target small to medium size telephony carriers. Our growth in this field depends on continued growth of these traditional telephony carriers. We cannot be certain that small to medium size telephony carriers will be able to successfully compete with large telephony carriers in existing markets or will successfully develop in new and emerging markets. If this market segment fails to grow, the demand for our billing and customer care software would diminish substantially and our business would suffer. In addition, there may never be significant demand for new billing and customer care software by providers of telecom services.

If we fail to attract and retain qualified personnel, we will not be able to implement our business strategy or operate our business effectively.

Our products require sophisticated software development, sales, professional services and technical customer support. Our success depends on our ability to attract, train, motivate and especially retain highly skilled personnel within each of these areas of expertise. Qualified personnel in these areas are in great demand worldwide and are likely to remain a limited resource. We cannot assure you that we will be able to retain the skilled employees we require. In addition, the resources required to retain such personnel may adversely affect our operating margins. The failure to retain qualified personnel may harm our business. In particular, we maintain a large engineering and support center in Iasi, Romania and have encountered many successful attempts from other technology companies to recruit our employees after we have trained them. If this phenomenon continues and increases, we may not be able to retain the highly skilled personnel we require to implement our business strategy and may be forced tooperate our business effectively. If we significantly raise the salaries of our Romanian employees, and our results of operations will be consequently harmed.

Our backlog, revenues and operating results may vary significantly from quarter to quarter.

Our results of operations, including the levels of our revenues, cost of revenues, gross margins and operating expenses, have fluctuated from quarter to quarter in the past and may continue to vary significantly in the future. These fluctuations are a result of a variety of factors, many of which are outside of our control, may be difficult to predict and may or may not fully reflect the underlying performance of our business. Our operating results may vary significantly from quarter to quarter due to a number of factors, including the following:

Due to all of the foregoing, we cannot predict revenues for any future quarter with any significant degree of accuracy. Accordingly, we believe that period-to-period comparisons of our operating results are not necessarily meaningful, and you should not rely upon them as indications of future performance. Accordingly, in the event of a revenue shortfall, we may not be able to mitigate the negative impact on our operating results and margins in the short term. If we fail to meet or exceed the expectations of investors, we could face costly lawsuits, including securities class action suits.

In future quarters, our operating results may be below the expectations of public market analysts and investors, and as a result, the price of our ordinary shares may fall.

We seek to expand our business through acquisitions, which could result in diversion of resources and extra expenses and which may involve other risks that could disrupt our business and harm our financial condition.

It is part of our strategy to pursue acquisitions of business, products and technologies, or the establishment of joint venture arrangements in order to offer new products or services or otherwise enhance our market position or strategic strengths, and we are actively evaluating potential acquisition opportunities. The negotiation of potential acquisitions or joint ventures, as well as the integration of an acquired or jointly developed business, technology or product, could cause diversion of management’s attention from the day-to-day operation of our business. This could impair our relationships with our employees, customers, distributors, resellers and marketing allies. Future acquisitions could result in:

In addition, we have limited experience with respect to negotiating an acquisition and operating an acquired business. Due to the multiple risks and difficulties associated with any acquisition, there can be no assurance that we will be successful in achieving our expected strategic, operating and financial goals for any such acquisition. If future acquisitions disrupt our operations, our business may suffer.

We may not be successful in the integration of our acquisitions.

We cannot assure you that we have identified, or will be able to identify, all material adverse issues related to the integration of our acquisitions, such as significant defects in the internal control policies of companies that we have acquired. In addition, our acquisitions could lead to difficulties in integrating acquired personnel and operations and in retaining and motivating key personnel from these businesses, while maintaining our corporate culture. In some instances, we may need to depend on the seller of an acquired business to provide us with certain transition services in order to meet the needs of our customers. Any failure to properly integrate and retain personnel, to recognize significant defects in the internal control policies of acquired companies or to scale and adapt our internal control policies and our reporting systems and procedures, and any interruptions of transition services, may require a significant amount of time and resources to address and may harm our company.

If we do not continually enhance our products and service offerings, introduce new products and features and adopt and monetize new technologies and methodologies in the marketplace, we may have difficulty retaining existing customers and attracting new customers.

We believe that our future success will depend, to a significant extent, upon our ability to enhance our existing products and services, to introduce new products, services and features to meet the requirements of our customers, and to adopt and leverage new technologies and methodologies such as cloud, microservices-based architecture in a rapidly developing and evolving market. We devote significant resources to refining and expanding our base software modules and to developing our products, services and development methodologies and tools. In some instances, we rely on cooperative relationships with third parties to assist us in delivering certain products and services to our customers. Our present or future products, services and technology may not satisfy the evolving needs of the communications industry or of other industries that we serve. If we are unable to anticipate or respond adequately to such needs, due to resource, technological or other constraints, our business and results of operations could be harmed.

If our security measures for our software, hardware, services or cloud offerings are compromised and as a result, our data, our customers’ data or our IT systems are accessed improperly, made unavailable, or improperly modified, our products and services may be perceived as vulnerable, which may materially affect our business and result in potential legal liability.

Our products and services, including our cloud offerings, store, retrieve, and manage our customers’ information and data, as well as our own data. We have a reputation for secure and reliable product offerings and related services, and we have invested a great deal of time and resources in protecting the integrity and security of our products, services and the internal and external data that we manage. Despite our efforts to implement network security measures, we cannot guarantee that our systems are fully protected from vulnerabilities related to IT-related viruses, worms and other malicious software programs, attacks, break-ins and similar disruptions from unauthorized tampering by computer hackers and others. Such cybersecurity incident could include an attempt to gain unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Security measures in our products and services may be penetrated or bypassed by computer hackers and others who may gain unauthorized access to our or our customers’ or partners’ software, hardware, cloud offerings, networks, data or systems. They may use a wide variety of methods, which may include developing and deploying malicious software to attack our products third-party data, products or services incorporated into our own. Data may also be accessed or modified improperly as a result of customer, partner or employee error or malfeasance and third parties may attempt to fraudulently induce customers, partners, employees or suppliers into disclosing sensitive information such as usernames, passwords or other information in order to gain access to our data or IT systems or our customers’ or partners’ data or IT systems. Any of the foregoing occurrences could create system disruptions and cause shutdowns or denials of service or compromise data, including personal or confidential information, of us, our partners or our customers.

If a cyber-attack or other security incident (for example phishing, advanced persistent threats, or social engineering) were to result in unauthorized access to, or deletion of, and/or modification and/or exfiltration of our customers’ data, other external data or our own data or our IT systems or if the services we provide to our customers were disrupted, customers could lose confidence in the security and reliability of our products and services, including our cloud offerings, and perceive them not to be secure. This in turn could lead to fewer customers using our products and services and result in reduced revenue and earnings. The costs we would incur to address and fix these security incidents would increase our expenses. These risks will increase as we continue to grow our cloud and network offerings and store and process increasingly large amounts of data, including personal information and our customers’ confidential information and data and other external data, and host or manage parts of our customers’ businesses in cloud-based IT environments.

Any of the events described above could cause our customers to make claims against us for damages allegedly resulting from a security breach or service disruption, which could adversely affect our business, results of operation and financial condition.

Our products and platform and our business are subject to a variety of European and international laws and regulations, including those regarding privacy, data protection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive and confidential information. Any failure of our products to comply with or enable our customers and channel partners to comply with applicable laws and regulations would harm our business, results of operations and financial condition.

We and our customers that use our products may be subject to privacy and data protection-related laws and regulations that impose obligations in connection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreign governments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiable information of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws to impose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.

Similarly, many foreign countries and governmental bodies, including the European Union, or the EU, member states, have laws and regulations concerning the collection and use of personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often more restrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of personally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in some jurisdictions, IP addresses and other online identifiers.

For example, the General Data Protection Regulation, or GDPR, took effect in the European Union on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal data on behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations (and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR or other applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability to conduct business in the EU could be significantly impaired.

As well, we continue to see jurisdictions imposing data localization laws, which require personal information, or certain subcategories of personal information to be stored in the jurisdiction of origin. These regulations may inhibit our ability to expand into those markets or prohibit us from continuing to offer services in those markets without significant additional costs.

The uncertainty and changes in the requirements of multiple jurisdictions may increase the cost of compliance, delay or reduce demand for our services, restrict our ability to offer services in certain locations, impact our customers’ ability to deploy our solutions in certain jurisdictions, or subject us to sanctions, by national data protection regulators, all of which could harm our business, financial condition and results of operations.

Additionally, although we endeavor to have our products and platform comply with applicable laws and regulations, these and other obligations may be modified, they may be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements, contractual commitments or our internal practices.

We also may be bound by contractual obligations relating to our collection, use and disclosure of personal, financial and other data or may find it necessary or desirable to join industry or other self-regulatory bodies or other privacy or data protection-related organizations that require compliance with their rules pertaining to privacy and data protection.

We expect that there will continue to be new proposed laws, rules of self-regulatory bodies, regulations and industry standards concerning privacy, data protection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws, rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protection-related laws and regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new laws and regulations regarding privacy and data protection-related matters. Because global laws, regulations and industry standards concerning privacy and data security have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with each such applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices, require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adversely affect our business, results of operations and financial condition.

Any failure or perceived failure by us, our products or our platform to comply with new or existing U.S., EU or other foreign privacy or data security laws, regulations, policies, industry standards or legal obligations, or any security incident that results in the unauthorized access to, or acquisition, release or transfer of, personally identifiable information or other customer data may result in governmental investigations, inquiries, enforcement actions and prosecutions, private litigation, fines and penalties, adverse publicity or potential loss of business.

Because our revenues are generated in numerous countries, our results of operations could suffer if we are unable to manage international operations effectively.

Our sales are made in many countries, with different legislation and complex taxation rules and in many states in the United States. Managing our existing international operations and additional international markets requires significant management attention and financial resources. Our ability to penetrate some international markets may be limited due to different technical standards, protocols and requirements for our products in different markets. In addition, conducting our business internationally subjects us to a number of risks, including:

We currently benefit from localIsraeli tax benefits that may be discontinued or reduced.

We derive and expect to continue to derivehave derived benefits from various programs, including Israeli tax benefits relating to our “Approved and Preferred Enterprise” programs.

programs, and the “Preferred Technological Enterprise” program under the Israel Law for the Encouragement of Capital Investment, 1959.

To be eligible for tax benefits as an “Approved and Preferreda “Preferred Technological Enterprise,” we must continue to meet certain conditions. While we believe that we meet the statutory conditions to entitle us to Israeli tax benefits, there can be no assurance that the tax authorities in Israel will concur. Should it be determined that our Approved or Preferred Technological Enterprise programs have not met, or do not meet, the statutory conditions, our income taxes will increase materially.increase.

Additional tax liabilities could materially adversely affect our results of operations and financial condition.

As a global corporation, we are subject to income and other taxes both in Israel and in various foreign jurisdictions. Our domestic and international tax liabilities are subject to the allocation of revenues and expenses in different jurisdictions and the timing of recognizing revenues and expenses. Additionally, the amount of income taxes paid or accrued is subject to our interpretation of applicable laws in the jurisdictions in which we do business. From time to time, we are subject to income and other tax audits in various jurisdictions, the timings of which are unpredictable. While we believe we comply with applicable tax laws, there can be no assurance that a governing tax authority will not have a different interpretation of the law and assess us with additional taxes. Should we be assessed additional taxes, there could be a material adverse effect on our results of operations and financial condition.

If we experience loss of one or more existing customers, we may suffer a decrease in revenues, reputation and profitability.

A significant part of our revenues is derived from maintenance agreements and managed services agreements. We have through the years sold niche solutions to large customers that may decide to unify the various solutions they have into one platform and dismantle niche solutions in the process, ours included, as occurred with respect to a few of our customers in 2011 and 2012. Small service providers may be acquired by larger carriers and replace our solutions with the buyer’s existing billing platform or cease operations due to lack of funding, as occurred with customers of ours over the years. If one or more customers cease using our solutions or services due to replacements or any other reason, our profitability would be seriously harmed and our business and results of operations would suffer.

Because some of our customers require highly complex implementations and we sell fixed price projects, we may underestimate the effort and time required to implement such projects, resulting in a lower or negative profit margin for such projects and the incurrence of contractual penalties for late performance. This could materially harm our results of operations.

In 2015, we derived 79% of our revenues from the sale of software and related services to telecommunications service providers. As the deal size increases, our projects become more complex and the risk of on-time and on-budget implementation increases. Each such contract includes penalties and potential liability for damages arising from our late performance. These customers conduct a lengthy and complex approval and purchasing process, and the pricing for each project needs to be competitive in order to win. Our cost of sales increases as the length of the approval process increases because we need to support each opportunity during the time required for the customer to determine their specifications and the time required for the customer to receive internal approval to commit significant resources towards acquisition of the billing solution. The project implementation may be delayed due to delays in the build-up of the customer's network infrastructure. Our estimate for the cost includes the effort required to release new versions comprising enhanced functionality specifically requested by the customer.

All the delays, either by us or by a third party, increase the cost of supplying the project and expose us to potential claims from customers and may decrease our revenues and could materially harm our profitability, business and results of operations.

Our business may be negatively affected by exchange rate fluctuations.

Although the majorityApproximately 52% of our revenues are denominated in Euro, and approximately 44% in U.S. dollars, approximately 38%or dollar. Approximately 22% of our expenses are incurred in New Israeli Shekel, or NIS, and approximately 46%69% in Euro or linked to the Euro. At the same time, the majority of our expensescash reserves and investments are incurreddenominated in Euro.dollars, and our financial statements are denominated in dollars. As a result, we may be negatively affected by fluctuations in the exchange rates between the Euro or the NIS and the U.S. dollar. We cannot predict any future trends in the rate of inflation in Israel or the rate of devaluation or appreciation of the NIS or of the Euro against the U.S. dollar. If the U.S. dollar cost of our operations in Israel and/or Romania increases, our U.S. dollar-measured results of operations will be adversely affected. In addition, some of our revenues are denominated in Euro, some are denominated in Canadian dollar, or CAD and some are denominated in Great Britain Pound, or GBP. As a result, our U.S. dollar-measured results of operations will be adversely affected by devaluation in the GBP, CAD or Euro relative to the U.S. dollar. We may choose to limit these exposures by entering into hedging transactions. However, hedging transactions may not enable us to avoid exchange-related losses, and our business may be harmed by exchange rate fluctuations.

We depend on a limited number of key personnel who would be difficult to replace. If we lose the services of these individuals, our business may be harmed.

The success of our business depends in large part upon the continuing contributions of our senior management, specifically on the managerial and technical skills of our founder, President and Chief Executive Officer, Ms. Monica Iancu, and other members of our senior management. If either Ms. Iancu or other members of the senior management team are unable or unwilling to continue their employment with us, our business may be harmed.

If we become subject to a claim of intellectual property infringement, our business may be materially adversely affected.

If anyone asserts a claim against us relating to proprietary technology or information, we might seek to license the claimant’s intellectual property or to develop non-infringing technology. We might not be able to obtain a license on commercially reasonable terms or on any terms. Alternatively, our efforts to develop non-infringing technology could be unsuccessful. Our failure to obtain the necessary licenses or other right or to develop non-infringing technology could prevent us from selling our software and could therefore seriously harm our business.

We use certain “open-source” software tools that may be subject to intellectual property infringement claims or that may subject our derivative works or products to unintended consequences, possibly impairing our product development plans, interfering with our ability to support our clients or requiring us to allow access to the source code of our products or necessitating that we pay licensing fees. 

Certain of our products contain open-source code and we may use more open-source code in the future. In addition, certain third-party software that we embed in our products contains open-source code. Open-source code is code that is covered by a license agreement that permits the user to liberally use, copy, modify and distribute the software without cost, provided that users and modifiers abide by certain licensing requirements. The original developers of the open-source code provide no warranties on such code. 

As a result of the use of open-source software, we could be subject to suits by parties claiming ownership of what they believe to be their proprietary code or we may incur expenses in defending claims alleging non-compliance with certain open-source code license terms. In addition, third-party licensors do not provide intellectual property protection with respect to the open-source components of their products, and we may be unable to be indemnified by such third-party licensors in the event that we or our customers are held liable in respect of the open-source software contained in such third-party software. If we are not successful in defending against any such claims that may arise, we may be subject to injunctions and/or monetary damages or be required to remove the open-source code from our products. Such events could disrupt our operations and the sales of our products, which would negatively impact our revenues and cash flow. 

Moreover, under certain conditions, the use of open-source code to create derivative code may obligate us to make the resulting derivative code available to others at no cost. The circumstances under which our use of open-source code would compel us to offer derivative code at no cost are subject to varying interpretations. If we are required to publicly disclose the source code for such derivative products or to license our derivative products that use an open-source license, our previously proprietary software products may be available to others without charge. If this happens, our customers and our competitors may have access to our products without cost to them, which could harm our business. Certain open-source licenses require as a condition to use, modification or distribution of such open-source that proprietary software incorporated into, derived from or distributed with such open-source be disclosed or distributed in source code form, be licensed for the purpose of making derivative works or be redistributable at no charge. The foregoing may under certain conditions be interpreted to apply to our software, depending upon the use of the open-source and the interpretation of the applicable open-source licenses.

We monitor our use of open-source code to avoid subjecting our products to conditions we do not intend. The use of open-source code, however, may ultimately subject some of our products to unintended conditions so that we are required to take remedial action that may divert resources away from our development efforts.

We are subject to ongoing costs and risks associated with being a public company, including potential lawsuits.

As an Israeli company subject to U.S. federal securities laws, we spend a significant amount of management time and resources to comply with laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, Securities and Exchange Commission, or SEC, regulations, Nasdaq listing rules and the Israeli Companies Law, 1999, or the Companies Law, or the Israeli Companies Law”. In connection with our compliance with Section 404 and the other applicable provisions of the Sarbanes-Oxley Act of 2002, our management and other personnel devote a substantial amount of time to assure that we continue to comply with these requirements. There is no guarantee that these efforts will result in management assurance that our internal control over financial reporting is adequate in future periods. If our internal controls are found to be ineffective in future periods, it could harm our operations, financial reporting or financial results.

Since we are a public company in the United States, the cost of our directors’ and officers’ liability insurance has significantly increased over recent years, as a result of which we have decided to purchase minimal coverage insurance. Our directors and officers rely on indemnification agreements provided by us. Accordingly, any lawsuits against our directors and officers could result in expensive legal expenses, settlements and judgments that we would be required to bear, which would harm our financial condition.

Risks Relating to our Billing and Related Services Business

System disruptions and failures may result in customer dissatisfaction, customer loss or both, which could materially and adversely affect our reputation and business.

Our billing systems are an integral part of our customers’ business operations. The continued and uninterrupted performance of these systems for our customers is critical to our success. Customers may become dissatisfied by any system failure that interrupts our ability to provide services to them.

Our ability to serve our customers depends on our ability to protect our systems and infrastructure against damages and unexpected adverse events. We also depend on various cloud providers and co-location datacenter providers which provide us environments, tools and applications on which we provide our products. Although we maintain insurance that we believe is appropriate for our business and industry, such coverage may not be sufficient to compensate for any significant losses that may occur as a result of any of these events. In addition, we have experienced systems outages and service interruptions in the past, none of which has had a material adverse effect on us. However, a prolonged system-wide outage or frequent outages could cause harm to our customers and to our reputation and reduce the attractiveness of our services significantly, which could result in decreased demand for our products and services and could cause our customers to make claims against us for damages allegedly resulting from an outage or interruption. Any damage or failure that interrupts or delays our operations could result in material harm to our business and expose us to material liabilities.

The customer base for our billing and customer care products is characterized by small to medium size communication service providers, or CSPs. If this market segment fails to grow, the demand for our billing and customer care software would diminish substantially.

Our billing and customer care products target small to medium size carriers. Our growth in this field depends on continued growth of carriers of this size. We cannot be certain that carriers of this size will be able to successfully compete with large CSPs. If this market segment fails to grow, the demand for our billing and customer care software would diminish substantially and our business would suffer. In addition, there may never be significant demand for new billing and customer care software by providers of telecom services.

If we experience loss of one or more existing billing customers, we may suffer a decrease in revenues, reputation and profitability.

A significant part of our revenues is derived from our existing customer base, maintenance agreements, customizations and additional professional services. Small service providers may be acquired by larger carriers and replace our solutions with the buyer’s existing billing platform, cease operations due to lack of funding, or terminate their relationship with us due to their financial condition, loss of market share and competitive pricing, as occurred with customers of ours over the years. If one or more customers cease using our solutions or services due to replacements or any other reason, our business and results of operations would suffer.

From time to time, our billing software and the systems into which it is integrated contain undetected errors. This may cause us to experience a significant decrease in market acceptance and use of our software products and we may be subject to warranty and other liability claims.

From time to time, our billing software, as well as the systems into which it is integrated, contains undetected errors. Because of this integration, it can be difficult to determine the source of the errors. Also, from time to time, hardware systems we resell contain certain defects or errors. As a result, and regardless of the source of the errors, we could experience one or more of the following adverse results:

In addition, we may be subject to claims based on errors in our software or mistakes in performing our services. Our licenses and agreements generally contain provisions such as disclaimers of warranties and limitations on liability for special, consequential and incidental damages, designed to limit our exposure to potential claims. However, not all of our contracts contain these provisions and we cannot assure you that the provisions that exist will be enforceable. In addition, while we maintain product liability and professional indemnity insurance, we cannot assure you that this insurance will provide sufficient, or any, coverage for these claims. A product liability or professional indemnity claim, whether or not successful, could adversely affect our business by damaging our reputation, increasing our costs, and diverting the attention of our management team.

We may expandRisks Relating to our Messaging Business

Our messaging business depends on customers increasing their use of our messaging products, and any loss of customers or decline in their use of our products could materially and adversely affect our business, through acquisitions that could result in diversionresults of resourcesoperations and extra expenses, and which may involve other risks that could disruptfinancial condition.

Our ability to grow our mobile messaging business and harm our financial condition.

We may pursue acquisitions of business, products and technologies, or the establishment of joint venture arrangements, that could expand our business. The negotiation of potential acquisitions or joint ventures as well as the integration of an acquired or jointly developed business, technology or product could cause diversion of management's attention from the day-to-day operation of our business. This could impair our relationships with our employees, customers, distributors, resellers and marketing allies. Future acquisitions could result in:

In addition, we have limited experience with respect to negotiating an acquisition and operating an acquired business. If future acquisitions disrupt our operations, our business may suffer.

We depend on a limited number of key personnel who would be difficult to replace. If we lose the services of these individuals, our business will be harmed.

Because our markets are constantly changing, the success of our businessgenerate incremental revenue depends, in large part, upon the continuing contributions of our senior management. Specifically, continued growth and success largely depend on the managerial and technical skills of our founder and CEO, Monica Iancu, and other members of senior management. Because the demand for highly qualified senior personnel exceeds the supply of this type of personnel, it will be difficult to replace members of our management if one or more of them were to leave us. If either Mrs. Iancu or other members of the senior management team are unable or unwilling to continue their employment with us, our business will be harmed.

Our success depends on our ability to continually developmaintain and market newgrow our relationships with existing messaging customers and more technologically advancedto have them increase their usage of our messaging platform. If our customers do not increase their use of our messaging products, then our revenue may decline and enhancements.

The market for our products and the services they are used to support is characterized by:

We believe that our future success will largely depend upon our ability to continue to enhance our existing products and successfully develop and market new products on a cost-effective and timely basis. We cannot assure you that we will be successful in developing and marketing new products that respond adequately to technological change. Our failure to do so would have a material adverse effect on our ability to market our own products.

If we are unable to adequately protect our intellectual property or become subject to a claimresults of infringement, our businessoperations may be materially adversely affected.

Our success and ability to compete depend substantially upon our internally developed or acquired technology. Any misappropriationharmed. Messaging customers are charged based on the usage of our technology could seriously harm our business. In orderproducts. Most of these customers do not have long-term contractual financial commitments to protect our technologyus and, products, we rely on a combination of trade secret, copyright and trademark law. Despite our efforts to protect our intellectual property rights, unauthorized partiestherefore, they may attempt to copyreduce or otherwise obtain and use our software or technology or to develop software with the same functionality. Policing unauthorizedcease their use of our products is difficultat any time without penalty or termination charges. Messaging customers may terminate or reduce their use of our products for any number of reasons, including if they are not satisfied with our products, the value proposition of our products or our ability to meet their needs and weexpectations. We cannot be certain thataccurately predict customers’ usage levels, and the steps we have taken will prevent misappropriation, particularlyloss of customers or reductions in foreign countries where the laws may not protecttheir usage levels of our intellectual property rights as fully as in the United States.

If anyone asserts a claim against us relating to proprietary technology or information, we might seek to license his intellectual property or to develop non-infringing technology. We might not be able to obtain a license on commercially reasonable terms or on any terms. Alternatively, our efforts to develop non-infringing technology could be unsuccessful. Our failure to obtain the necessary licenses or other right or to develop non-infringing technology could prevent us from selling our software and could therefore seriously harm our business.

Breaches in the security of the data collected by our systems could adversely affect our reputation and hurt our business.

Customers rely on third-party security features to protect privacy and integrity of customer data. Our products may be vulnerable to breaches in security due to failures in the security mechanisms, the operating system, the hardware platformeach have a negative impact on our business, results of operations and financial condition. If a significant number of messaging customers cease using, or the networks linked to the platform. All our solutions provide web access to information, presenting additional security issues for our customers. Security vulnerabilities could jeopardize the security of information stored in and transmitted through the computer systemsreduce their usage of our customers. A party that is able to circumvent our security mechanisms could misappropriate proprietary information or cause interruptions in the operations of our customers. Security breaches could damage our reputation and product acceptance would be significantly harmed, which would cause our business to suffer.

We are subject to ongoing costs and risks associated with complying with extensive corporate governance and disclosure requirements.

As an Israeli company subject to U.S. federal securities laws, we spend a significant amount of management time and resources to comply with laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, SEC regulations, Nasdaq listing rules and the Israeli Companies Law. In connection with our compliance with Section 404 and the other applicable provisions of the Sarbanes-Oxley Act, our management and other personnel devote a substantial amount of time, and we may need to hire additional accounting and financial staff, to assure that we continue to comply with these requirements. There is no guarantee that these efforts will result in management assurance that our internal control over financial reporting is adequate in future periods. If our internal controls are found to be ineffective in future periods,products, it could harm our operations, financial reporting or financial results.

If we are unable to attract new messaging customers in a cost-effective manner, then our business, results of operations and financial condition would be adversely affected.

In order to grow our messaging business, we must continue to attract new customers in a cost-effective manner. We use a variety of marketing channels to promote our messaging products and platform, such as regional customer events and telemarketing campaigns. We will incur marketing expenses before we are able to recognize any revenue that the marketing initiatives may generate, and these expenses may not result in increased revenue or brand awareness. We may make significant expenditures and investments in new marketing campaigns, and we cannot guarantee that any such investments will lead to the cost-effective acquisition of additional customers. If we are unable to maintain effective marketing programs, then our ability to attract new customers could be materially and adversely affected, our marketing expenses could increase substantially and our results of operations may suffer.

If we are unable to increase adoption of our messaging products by enterprises, our business, results of operations and financial condition may be adversely affected.

Our ability to increase the customer base of our messaging business, especially among enterprises, and achieve broader market acceptance of our messaging products will depend, in part, on our ability to effectively organize, focus and train our sales and marketing personnel.

As we seek to increase the adoption of our messaging products by enterprises, we expect to incur higher costs and longer sales cycles. In the enterprise market segment, the decision to adopt our products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. In addition, while enterprise customers may quickly deploy our products on a limited basis before they will commit to deploying our products at scale, they often require extensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily available development resources. In addition, sales cycles for enterprises are inherently more complex and less predictable, and some enterprise customers may not use our products enough to generate revenue amounts that justify our cost to acquire such customers. In addition, these complex and resource intensive sales efforts could place additional strain on our product and engineering resources. Further, enterprises, including some of our customers, may choose to develop their own messaging solutions that do not include our products. They also may demand reductions in pricing as their usage of our products increases, which could have an adverse impact on our gross margin. As a result of our limited experience selling and marketing messaging products to enterprises, our efforts to sell to these potential customers may not be successful. If we are unable to increase the messaging revenue that we derive from enterprises, then our business, results of operations and financial condition may be adversely affected.

To deliver our messaging products, we rely on network service providers for our messaging services.

We currently interconnect with network service providers around the world to enable the use by our customers of our messaging products over their networks. We expect that we will continue to rely heavily on network service providers for these services going forward. Our reliance on network service providers has reduced our operating flexibility, ability to make timely service changes and control quality of service. In addition, the fees that we are charged by network service providers may change daily or weekly, while we do not typically change our customers’ pricing as rapidly.

Furthermore, many of these network service providers do not have long-term committed contracts with us and may terminate their agreements with us without notice or restriction. If a significant portion of our network service providers stop providing us with access to their infrastructure, fail to provide these services to us on a cost-effective basis, cease operations or otherwise terminate these services, the delay caused by qualifying and switching to other network service providers could be time consuming and costly and could adversely affect our business, results of operations and financial condition. Further, if problems occur with our network service providers, it may cause errors or poor-quality communications with our products, and we could encounter difficulty identifying the source of the problem. The occurrence of errors or poor quality communications on our messaging products, whether caused by our platform or a network service provider, may result in the loss of our existing customers or the delay of adoption of our products by potential customers and may adversely affect our business, results of operations and financial condition.

We may have to lower our prices for messaging products or change our pricing model from time to time.

We charge our customers based on their use of our messaging products. We expect that we may need to change our pricing from time to time. In the past we have sometimes reduced our prices either for individual customers in connection with long-term agreements or for a particular product. One of the challenges to our pricing is that the fees that we pay to network service providers over whose networks we transmit communications can vary daily or weekly and are affected by volume and other factors that may be outside of our control and difficult to predict. This can result in us incurring increased costs that we may be unable or unwilling to pass through to our customers, which could adversely impact our business, results of operations and financial condition.

Further, as competitors introduce new messaging products or services that compete with ours or reduce their prices, we may be unable to attract new customers or retain existing customers based on our historical pricing. As we expand internationally, we also must determine the appropriate price to enable us to compete effectively internationally. Moreover, enterprises, which are a primary focus for our direct sales efforts for our messaging products, may demand substantial price concessions. In addition, if the mix of products sold changes, including for a shift to IP-based products, then we may need to, or choose to, revise our pricing. As a result, in the future we may be required or choose to reduce our prices or change our pricing model, which could adversely affect our business, results of operations and financial condition.

Defects or errors in our messaging products could diminish demand for these products, harm our business and results of operations and subject us to liability.

Our customers use our messaging products for important aspects of their businesses, and any errors, defects or disruptions to our products and any other performance problems with our products could damage our customers’ businesses and, in turn, hurt our brand and reputation. We provide regular updates to our messaging products, which may contain undetected errors, failures, vulnerabilities and bugs when first introduced or released. Real or perceived errors, failures or bugs in our products could result in negative publicity, loss of or delay in market acceptance of our messaging platform, loss of competitive position, lower customer retention or claims by customers for losses sustained by them. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct the problem. In addition, we may not carry insurance sufficient to compensate us for any losses that may result from claims arising from defects or disruptions in our products. As a result, our reputation and our brand could be harmed, and our business, results of operations and financial condition may be adversely affected.

We face a risk of litigation resulting from customer misuse of our messaging software to send unauthorized messages in violation of applicable laws.

The actual or perceived improper sending of messages with our messaging software may subject us to potential risks, including liabilities or claims relating to consumer protection laws. For example, the U.S. Telephone Consumer Protection Act of 1991 restricts telemarketing and the use of automatic SMS text messages without proper consent. The scope and interpretation of the laws that are or may be applicable to the delivery of messages are continually evolving and developing. If we do not comply with these laws or regulations or if we become liable under these laws or regulations due to the failure of our customers to comply with these laws by obtaining proper consent, we could face direct liability.

In addition, if our customers’ use of our messaging products will not adhere to privacy regulations and messaging rules, they and us may be blocked from sending more messages through specific channels and may be fined for such conduct. Our failure to prevent such infringements could have a material adverse effect on our business.

System disruptions and failures may result in customer dissatisfaction, customer loss or both, which could materially and adversely affect our reputation and business.

We provide real time messaging services to our customers. The continued and uninterrupted performance of these services for our customers is critical to our success. Customers may become dissatisfied by any service failure that interrupts their business, which could lead them to stop using our messaging services. This could materially and adversely affect our reputation and business.

Changes to regulations or technology vendor rules could materially and adversely affect our business.

We use messaging technologies and products, such as SMS and WhatsApp, to deliver messages from our customers to consumers. Changes in rules and regulations may prevent us from using some services, which may block our ability to grow our services and have a material adverse effect on our business.

Risks Relating to the Market of our Ordinary Shares

Our share price has fluctuated and could continue to fluctuate significantly.

The market for our ordinary shares, as well as the prices of shares of other technology companies, has been volatile. The price of our ordinary shares has fluctuated significantly since our initial public offering in August 2000. A number of factors, many of which are beyond our control, may causeover the market price of our ordinary shares to fluctuate significantly, such as:years.

We do not control these matters and any of them may adversely affect our share price. In addition, trading in shares of companies listed on the Nasdaq Global Market in general and trading in shares of technology companies in particular has been subjected to extreme price and volume fluctuations that have been unrelated or disproportionate to operating performance. These broad market and industry factors may depress our share price, regardless of our actual operating results. Given the likely volatility that exists for our ordinary shares, sales of a substantial number of our ordinary shares could cause the market price of our ordinary shares to decline.

If we are characterized as a passive foreign investment company, our U.S. shareholders will be subject to adverse tax consequences.

If, for any taxable year, either (1)(i) 75% or more of our gross income is passive incomeincome; or (2)(ii) 50% or more of our assets, averaged over the year and generally determined based upon value, including cash (even if held as working capital), produce or are held to produce passive income, we may be characterized as a "passive“passive foreign investment company"company”, or PFIC for United States federal income tax purposes. For this determination, passive income includes dividends, interest, royalties, rents, annuities and the excess of gain over losses from the disposition of assets that produce passive income.

As a result of our cash position and the value of our assets, we may be deemed to be a PFIC for U.S. federal income tax purposes.

If we are characterized as a PFIC, our shareholders who are residents of the United States will be subject to adverse U.S. tax consequences. Our treatment as a PFIC could result in a reduction in the after-tax return to shareholders resident in the United States and may cause a reduction in the value of our shares. If we were to be treated as a PFIC, our shareholders will be required, absent certain elections, to pay an interest charge together with tax calculated at the then prevailing highest tax rates on ordinary income on certain "excess distributions"“excess distributions” including any gain on the sale of Ordinary Shares. The consequences of holding shares in a PFIC are described below under "Additional“Additional Information - United States Federal Income Tax Consequences - Passive Foreign Investment Companies."” Prospective investors should consult with their own tax advisors with respect to the tax consequences applicable to them of investing in our Ordinary Shares.

Our articles of association provide that unless we consent to an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any claims arising under the Securities Act of 1933, as amended, or the Securities Act, which may limit the ability of our shareholders to initiate litigation against us or increase the cost thereof.

Our articles of association provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any claims arising under the Securities Act. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions, and accordingly, both state and federal courts have jurisdiction to entertain such claims. While the federal forum provision in our amended and restated articles does not restrict the ability of our shareholders to bring claims under the Securities Act, we recognize that it may limit shareholders’ ability to bring a claim in the judicial forum that they find favorable and may increase certain litigation costs, which may discourage the filing of claims under the Securities Act against the Company, its directors and officers. However, the enforceability of similar forum provisions (including exclusive federal forum provisions for actions, suits or proceedings asserting a cause of action arising under the Securities Act) in other companies’ organizational documents has been challenged in legal proceedings, and there is uncertainty as to whether courts would enforce the exclusive forum provision that we propose to add to our articles of association. If a court were to find the choice of forum provision contained in our articles of association to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition and results of operations.

Risks Relating to Our Location in Israel

Potential political, economic and military instability inconditions concerning Israel may harm our operating results.

We are organized under the laws of the State of Israel and mostMost of our senior management is located in Israel. Accordingly, our operating results are directly influenced by economic, political and military conditions in and relating to Israel. Since the establishment of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors, Hamas (an Islamist militia and political group in the Gaza Strip) and Hezbollah (an Islamist militia and political group in Lebanon). Recent political uprisings, social unrest and violence in various countries in the Middle East and North Africa, including Israel’s neighbor Syria, are affecting the political stability of those countries and have enabled the development of extremist groups. This instability may lead to deterioration of the political relationships that exist between Israel and these countries and has raised concerns regarding security in the region and the potential for armed conflict. In addition, Iran has threatened to attack Israel and is believed to be developing nuclear weapons. Iran is also believed to have a strong influence among parties hostile to Israel in areas that neighbor Israel, such as the Syrian government, Hamas in Gaza and Hezbollah in Lebanon. Any armed conflicts or political instability in the region, including an increase in the degree of violence between Israel and the Palestinians, could negatively affect business conditions and harm our results of operations. We cannot predict the effect on the region of the increase in the degree of violence between Israel and the Palestinians. Furthermore, several countries, companies and trade groups restrict business with Israel and Israeli companies, and additional countries, companies and trade groups may restrict doing business with Israel and Israeli companies for political reasons. These restrictive laws and policies may seriously harm our operating results, financial condition or the expansion of our business. In addition, critics of the currentproposed judicial reforms in Israel warn that such reforms, if not moderated prior to enactment, may weaken Israel’s democratic institutions and therefore harm its economy. The situation in Israel or the region could adversely affect our operations if our customers and/or strategic alliespartners believe that instability in the region could affect our ability to fulfill our commitments.

It may be difficult to enforce a U.S. judgment against us, our officers and directors or to assert U.S. securities laws claims in Israel.

We are incorporated in the State of Israel. Substantially most of our executive officers and directors are nonresidents of the United States, and a substantial portion of our assets and the assets of these persons are located outside the United States. Therefore, it may be difficult for a shareholder, or any other person or entity, to collect a judgment obtained in the United States against us or any of these persons, or to effect service of process upon these persons in the United States.

We have been informed by our legal counsel in Israel that it may be difficult to bring original actions in Israel to enforce civil liabilities under the Securities Act and the Securities Exchange Act of 1934, as amended, or the Exchange Act. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws because Israel is not the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing these matters.

Subject to specified time limitations and legal procedures, under the rules of private international law currently prevailing in Israel, Israeli courts may enforce a U.S. judgment in a civil matter, including judgments based upon the civil liability provisions of the U.S. securities laws and including a monetary or compensatory judgment in a non-civil matter, provided that the following key conditions are met:

Provisions of Israeli law and our articles of association may delay, prevent or make difficult a change of control and therefore may depress the price of our stock.

Some of the provisions of our articles of association and Israeli law could, together or separately:

In particular, our articles of association provide that our board of directors will be divided into three classes that serve staggered three-year terms and authorize our board of directors to adopt protective measures to prevent or delay a coercive takeover, including without limitation the adoption of a “Shareholder Rights Plan.” In addition, Israeli corporate law regulates mergers and acquisitions of shares through tender offers, requires approvals for transactions involving significant shareholders and regulates other matters that may be relevant to these types of transactions. See Item 10.B “Memorandum and Articles of Associations - Mergers and Acquisitions under Israeli Law.” Furthermore, Israeli tax law treats stock-for-stock acquisitions between an Israeli company and a foreign company less favorably than does U.S. tax law. For example, Israeli tax law may subject a shareholder who exchanges his ordinary shares for shares in another corporation to taxation prior to the sale of the shares received in such stock-for stock swap.

Our articles of association provide that the competent courts of Tel Aviv, Israel are the exclusive forum for substantially all disputes between us and our shareholders under the Companies Law and the Securities Law, which could limit our shareholders’ ability to bring claims and proceedings against us, our directors, officers and other employees.

Our articles of association provide that the competent courts of Tel Aviv, Israel are the exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to the Company or to our shareholders, or (iii) any action asserting a claim arising pursuant to any provision of the Companies Law or the Israeli Securities Law, 1968, or the Securities Law. This exclusive forum provision applies to claims arising under Israeli law and would not apply to claims brought pursuant to the Securities Act or the Exchange Act or any other claim for which federal courts would have exclusive jurisdiction. Such exclusive forum provision does not relieve us of our duties to comply with federal securities laws and the rules and regulations thereunder, and our shareholders will not be deemed to have waived our compliance with these laws, rules and regulations. This exclusive forum provision may limit a shareholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us, our directors, officers and employees.

Item 4. Information on the Company

A. History and Development of the Company.

General

Our name is MIND C.T.I. Ltd. for both legal as well as commercial purposes. We were incorporated under the laws of the State of Israel on April 6, 1995 as a company with limited liability, and we are subject to the Israeli Companies Law 1999 and the regulations promulgated thereunder. Our principal executive offices are located at Industrial Park, Building 7,2 HaCarmel Street, Yoqneam 2069202,2066724, Israel. Our telephone number is +972 4 993 6666. Our agent in the United States is MIND Software, Inc. and its principal offices are located at 12520 Prosperity Drive,10306 Eaton Pl., Suite 220, Silver Spring, MD 20904,300, Fairfax, VA 22030, USA.

Principal Capital Expenditures

During 2013, 20142022, 2021 and 2015,2020, the aggregate cash amount of our capital expenditures were $240,000, $201,000was $130 thousand, $82 thousand, and $146,000,$68 thousand, respectively. These expenditures were mainly for the purchase of equipment and licenses for software tools to be used by our engineering teams. We currently have no material commitments for capital expenditures.

B.  Business Overview

Overview

We develop, manufacture, market and implement real-time and off-line convergent billing and customer care software solutions for various types of communication service providers, including traditional wireline and wireless, voice over IP, or VoIP, and broadband IP network operators, wireless internet service providers, or WISPs, LTE operators, cable operators and mobile virtual network operators, or MVNOs.

Our convergent billing and customer care solution supports multiple services, including voice, data and content services as well as prepaid, postpaid and pay-in-advance payment models in a single platform. Prepaid subscribers can enjoy the full range of services offered by the provider, with their special bundles, rating plans and limits. The prepaid solution authorizes each service and controls each session in real time, taking care that the balance is not exceeded. Postpaid subscribers, including credit-limited and non-limited, retail or business customers, represent the loyal and the higher average revenue per user, or ARPU, market. All services used by a postpaid subscriber appear in a single bill, which includes all charges, including one-time, recurring and usage-related charges. Our billing solution (MINDBill) is unique as it is truly convergent and it includes our own integrated real-time mediation product that provides interfaces with IP, Intelligent Networks, or IN, and traditional telecommunication equipment, as well as our own point-of-sale solution.

Our billing and customer care solutionIt includes a powerful workflow engine to support the implementation of business processes, such as subscriber registration, order management, trouble ticket and debt collection. collection, providing a high level of customization to our customer operation flows.

It also includes an integral point of sale (POS) solution that coversextends our offering to cover all dealer, store and cashier management and sales processes. We base ourcycle related activities. Our solution onis built upon a multi-layered architecture supporting real-time distributed processing, achieving high performance, scalability and high availability. It uses an open architecture, including Service Oriented Architecture (SOA) and robust Application Programming Interfaces (API’s) thus enabling fast and seamless integration with other systems and third party applications. The MIND solution is built using standardized best-of-breed object-oriented technologies such as Java and XML, and it is J2EE compatible as it is powered by

MINDBill can be installed on-premises or in a commercial application server.

cloud environment.

We alsoAs part of our offering, we provide professional services, primarily to our billing and customer care customers, consisting of installation, turnkey project implementation services,delivery, customer support training and maintenance services, software and process customizationintegration, customizations and project management. Our professional services also include enhanced support options, known as managed services, which are mainly offered to customers in the United States and Europe and are performed from our offices. These managed services include performing day to day billing operational tasks.

In addition to our billing and customer care solutions, we offer unified communications analytics solutions and call managementaccounting systems, which we call PhonEX ONE. PhonEX ONE is used by organizations around the world for call accounting, telecom expense management, traffic analysis and fraud detection. Our enterprise software product has been installed on about 20,000 switches around the world,PhonEX ONE delivers a full-management solution including real-time and historical data dashboards, providing in-depth analysis of every session type specific to unified communications as well as traditional/VoIP PBXs, for traditionalmonitoring and optimizing telephony for IP switchescommunication networks and hybrid networks. Our latest product, PhonEX-ONE, delivers one unified solution for all voice communication expenses including traditional, IP and mobile telephony.communications platforms. The flexible and scalable architecture of PhonEX-ONEPhonEX ONE meets the needs of large enterprises, supporting an unlimited number of extensions, users and sites, it provides full functionality through a web browser, based on Microsoft SQL database and the advanced ASP.NET technology.

In addition, from 2019, following the acquisitions of Message Mobile GmbH, or Message Mobile and GTX GmbH, or GTX, we offer enterprise messaging services and wholesale messaging services.

Our enterprise mobile messaging platform enables enterprises to easily communicate with clients and partners via text / SMS, instant messaging or voice. The platform may be integrated with the customers’ CRM or marketing automation platforms. The messaging services are used by businesses for direct communication with their customers for several reasons, such as customer care, notifications, appointments, OTPs (one-time passwords) and marketing.

Our wholesale mobile messaging business offers wholesale messaging services and messaging termination services on our software platform. The software is designed to provide advanced routing functionality enabling us to offer competitive wholesale and termination prices to other aggregators and service providers. The payment for the wholesale and termination services is based on volume (number of messages) and is being calculated and paid every month. In most cases, there are long-term contracts with other aggregators for the wholesale and termination services, but the prices are being negotiated ad-hoc based on demand.

Our Market Opportunity

Billing and Customer Care Industry

Billing and customer care are critical to telecommunications service providers as they enable them to manage customer relations, track and bill for usage, and launch, deploy and charge new services and bundles, marketing programs and rate plans. The need for comprehensive billing solutions is driven by the market trend that requires service providers to introduce new services, to be innovative in creating new product offerings and to optimize business processes for maximum efficiency. We provide tier 2 and tier 3 service providers with flexible, easy to deploy, truly convergent and scalable billing solutions.

From time to time, telecommunications service providers initiate searches for billing solutions to replace existing ones in order to offer additional services, reduce costs and improve service. In addition, our existing customers occasionally consider adding new modules that we developed to their existing platform, replacing other vendors or migrating to a newer version with up-to-date technology and enhanced functionality.

Also, from time to time, new providers surface and introduce new offering to the market or try to attract a specific targeted customer base. They build new infrastructure or resell traffic and initiate searches for billing solutions.

An additionalMobile Messaging

The global messaging market, opportunityvia SMS and IP messaging, is growing, with new use cases added every year and enterprises moving their operation and marketing activities from traditional mail and email channels to mobile messaging technologies. Application to person, or A2P, messaging continues to grow as the trend towards all-IP networks, offering multiple next generation services. New billing solutions are requiredmost effective way for businesses to enableengage with consumers and is also believed to be the new services, and we are well positionedmost trusted form of communication. Our Communications Platform as a Service, or CPaaS, provides simple APIs with well-defined ways to support this need. As a pioneer in VoIP billing since 1997, we haveeasily integrate messaging into the experienceenterprise’s legacy systems (such as CRM) or our own applications. Our platform helps our customers to reduce costly in-house development and the solution portfolio that is provenneed to be capable of delivering these technically demanding projects for all-IP networks.

Convergence

Implementation of convergent solutions has become a common demand and we encounter opportunities as carriers seek to replace multiple existing solutionsnegotiate complex commercial agreements with one convergent platform.service providers.

The convergent billing solution in the telecommunications industry enables operators to manage efficiently, on one platform, all subscribers and all services. It includes convergence of payment methods like prepaid and postpaid, as well as services like fixed telephony, mobile telephony, broadband, cable and IPTV.

Mobile Market and IP Services Industry

The two niches in the mobile market in which we see opportunities are the rural mobile carriers market in the United States and the new generation operators that offer high-speed mobile internet services over 4G LTE networks. We have a number of such carriers as customers and we are focused on delivering solutions that address these particular markets.

Providers of multiple services typically require billing and customer care products that can handle authentication, authorization and accounting needs in real-time in order to determine the types of services to which the subscriber is entitled, as well as any applicable limits to the availability of the services. This real-time functionality is particularly important for prepaid billing plans. Our proven solutions cover all these needs, as described below.

Our Billing and Customer Care Solution

We develop, market and support real-time and off-line, scalable billing and customer care software, including mediation and rating, for providers of voice, data and content services that are designed to meet their complex, mission-critical provisioning, authentication, authorization, accounting and reporting needs. Our billing and customer care software provides our customers with the following benefits:

Our Strategy

Our objective is to be a leader in the market for convergent billing and customer care software for tier 2 and tier 3 service providers, to increase our presence in mobile messaging and to maintainremain as profitable as possible in an increasingly competitive environment.

We introduced our billing and increase profitability.

As we increasecustomer care software in 1997. We believe that our focus on end-to-end billing solutionscustomer base, high customer satisfaction and our reputation for tier 2offering high quality, reliable platform provide us with brand name recognition. We continually invest in research and tier 3 service providers, projects are now generally more complex in nature,development to enhance our products with revenue recognized over longer periods. These factors typically extendadditional modules to address the recognition perioddigitalization of both license and service revenue streams and have some balance sheet impacts. We consider this a normal and expected development for our business as it grows and matures. We continue to build the professional services team required to support the growth in services offered to customers. Our long-term business model contemplates that licenses, maintenance and services will each represent approximately 30-40% of revenues and gross margins will be around 60%. telecom industry.

The key elements of our strategy to become a leaderincrease our presence in the market for convergent billing and customer care software for tier 2 and tier 3 service providersmobile messaging include:

Our Products and Services

Billing and Customer Care Solutions

The key functionalities of our billing and customer care solutions are as follows:

It offers a flexible open API for payments interfaces to banks and credit card clearing houses and has pre-integrated interfaces with major financial institutions, banks, clearinghouses and credit bureaus. The A/R module supports deposits life cycle management, including payments and refunds, dispute management and resolution, resulting in the appropriate adjustments. MINDBill identifies the ageing debt for every open invoice according to the company classification policy (30-60-90 days) and initiates the built-in debt collection process;

Enterprise Software

Our enterprise products,product, known as PhonEX MEIPS, PhonEX-Ten and PhonEX-ONE, areONE, is used by corporations for telecom expense management, call accounting, traffic analysis and fraud detection. It allows organizations to more effectively manage their telecommunications resources. PhonEX and MEIPS areONE is a call management systemssystem that collect, recordcollects, records and storestores all call information in a customized database. The systems:and enables:

These functions allow organizations to more effectively manage their telecommunications resources. The systems are easy to install and configure, user-friendly and compatible with any switchboard system, traditional or IP. The systems perform call management and traffic analysis as well as fraud management in the same manner as our billing solutions. In addition, the systems are multi-lingual and multi-currency, which means that reportsPhonEX ONE can be generated in any currency defined in the system,installed on-premises or in two currencies simultaneously.a cloud environment.

PhonEX-ONE, delivers one unified solution for management of all telecom expenses, including traditional voice, IP voice and data, and mobile telephony. The flexible and scalable architecture of PhonEX-ONE meets the needs of large enterprises, supporting an unlimited number of extensions and sites. PhonEX-ONE provides tools to monitor, budget and manage voice traffic in order to achieve maximum control over telecommunication expenses.

Some of its major advantages are:

Mobile Messaging

Following the acquisition of Message Mobile and GTX in 2019, we offer messaging solutions to enterprise and wholesale customers. We intendplan to further developexpand the range of services we offer and market these products as the market for Voice over IP systems for enterprises grows.

Professional Services

We provide professional servicestechnological vehicles used to deliver them to our customers, consisting primarilyand to increase the rate of project management, customization, installations,new customer support, trainingacquisition by facilitating self-registration and maintenanceon-boarding for new customers, and by offering competitive pricing and quality services. As our projects become more complex, more customers require customization services to add specialized features to their systems. We also offer enhanced support options, called managed services, which are mainly offered to customers in the United States and are performed from our offices. The managed services include performing day to day billing operational tasks. The managed services contracts are usually for a term of three to five years and are paid on a monthly basis. We also have the ability to implement Software-as-a-Service (SaaS) models in a similar way.

Technology

Our software products are based on an open architecture, which was developed using industry standard application server programming interfaces (API)API that enables it to readily integrate with other software applications. These application program interfaces create an object-oriented, multi-layered architecture that support a distributed environment. Our object-oriented technology enables the design and implementation of software utilizing reusable business objects rather than complex procedural codes. Our layered architecture organizes these business objects to optimize the interface between the user and the application. We implement our software in a distributed configuration. This allows variousfurther customization and solution adjustment based on modules to be installed on different servers to support the system’s scalability and security. We utilize a business processes workflow environment that facilitates the implementation of tailored and automated business processes to fit our customers’ unique business rules.

We believe that our technology allows us to offer products with the following benefits:

Our software productsmessaging services are based on multiple-tier architecture, consisting of the following tiers:our modern, cloud-based messaging platforms developed by our subsidiaries in Germany.

Sales and Marketing

Sales

Billing and Customer Care Solutions

We conduct our sales and marketing activities primarily directly as well as through our marketing alliances with network equipment vendors and systems integrators. These marketing allies and resellers provide us with a global extension of our direct sales force.directly. We also engage in joint marketing activitieswork with our allies, including joint responses to requests for proposals. We believe that these relationships also help validate our technology and facilitate broad market acceptance of our software.

Our agreements with our marketing allies, distributors and resellers are non-exclusive, do not contain minimum sales or marketing performance requirements and may be terminated at any time with notice.

Enterprise Software

We conduct our sales and marketing activities primarily directly, by our sales force located in the MIND offices in the United States and Israel, as well as through appointed distributors and resellers throughout the world. We engage with our system integrators and equipment vendors for global marketing activities and responses to tenders.

Marketing

Our marketing programs are focused on creating awareness, interest and preference for our products and services. We engage in a variety of marketing activities, including:

Principal Markets

The following table shows our revenues for each of the past three years classified by activitytype of revenue and geographic region.

Customers

Customers

Billing and Customer Care Solutions

Our billing and customer care solutions have been installed for a large base of customers worldwide, including:

Enterprise Software

Our enterprise software hasproducts have been installed on about 20,000 switches around the world, for a large base of customers that includeworldwide, including international banking firms, global technology leaders, government agencies and other thousands of small to very large organizations.

Messaging Services

Our messaging solutions are used by more than 100 enterprise customers, mostly in Germany.

Competition

Billing and Customer Care Solutions

Competition in the market for billing and customer care software is intense and we expect competition to continue to be strong. We compete with many local companies and worldwide companies such as Amdocs, Redknee and Oracle.

We believe that our competitive advantage is based on:

Some of our competitors have greater financial, technical, sales, marketing and other resources and greater name recognition than we do. Some of our competitors have lower cost structure and compete with us on pricing. Current and potential competitors have established, and may establish in the future, cooperative relationships among themselves or with third parties to increase their ability to address the needs of prospective customers. Accordingly, new competitors or alliances among competitors may emerge and rapidly acquire significant market share and their solutions could achieve greater market acceptance than our solutions.

Enterprise Software

Our competitors in the market for enterprise software products are mainly local companies. To compete effectively, companies must be able to offer adequate technical support and ongoing product development and customization services.development. In addition, multinational companies prefer call accounting systems that can be installed at their various offices throughout the world, and therefore require call accounting products that are multilingual and support the local telecommunication requirements. The principal factors upon which we compete are scalability, ease of use, being certified by major IP switch vendors and the multi-lingual and multi-currency nature of our system.

Our competition in the messaging market comes from a few international companies, such as Sinch AB and CM.com, and from many small, local service providers in Germany. Our competitive advantage is based on a combination of technology and service – our ability and will to tailor our services to the needs of enterprise customers.

C.  Organizational Structure

Set forth below is a list of our significant subsidiaries:

D.  Property, Plant and Equipment

Our headquarters are located in Yoqneam, Israel, approximately 50 miles north of Tel Aviv. We lease approximately 10,0005,800 square feet at our Yoqneam headquarters.headquarters and approximately 3,000 square feet in Luneburg, Germany. We also lease approximately 2,100 square feet of office space in Silver Spring, Maryland, approximately 32,0007,900 square feet in Iasi, Romania and approximately 7,400 square feet in Suceava, Romania. The office in Maryland is used primarily for supporting our customers in the United States, while the offices in Iasi and Suceava are used primarily for software development and for customer support. The office in Maryland is the group’s headquarters in the Americas.

Item 4A. Unresolved Staff Comments

Not applicable.

Item 5. Operating and Financial Review and Prospects

The following discussion and analysis of our financial condition and results of operations should be read together with our audited consolidated financial statements and the related notes which appearincluded elsewhere in this annual report. The following discussion contains forward-looking statements that reflectare based upon our current plans, estimatesexpectations and beliefsare subject to uncertainty and involve risks and uncertainties. Our actualchanges in certain circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed belowidentified under “Forward-Looking Statements and Summary Risk Factors” and under “Risk Factors” elsewhere in this annual report.

Overview

We were incorporated in Israel in 1995 and started providing our enterprise software products in that year. In 1997, we introduced our billing and customer care software for Voice over IP. We have enhanced our billing solutions since then to support multiple IP services, wireless and wireline carriers and triple play (voice, data and content) service providers. Following the acquisitions completed during 2019 (see below), we, together with our subsidiaries, also provide enterprise and wholesale messaging, communication solutions.

On March 25, 2019, we acquired Message Mobile GmbH, a leading provider of enterprise messaging, communication and payment solutions, based in Germany, with more than 15 years’ experience in the mobile industry. Its messaging platform enables enterprises to easily communicate with clients and partners via text / SMS, voice and instant messaging services like WhatsApp, Facebook Messenger and Telegram.

On September 25, 2019, we acquired GTX GmbH, a company based in Germany offering global SMS services for B-2-B customers, providing business partners a robust and easy-to-use system to send SMS messages to end-users at the best possible quality and attractive pricing, acting as a one-stop-platform for clients aiming to extend their messaging activities on different channels, e.g., WhatsApp, Chatbot on Messenger and Rich Communication Services (RCS).

In 2015, 79%2022, 54% of our total revenues were derived from providing our billing and customer care software, 35% of our total revenues were derived from enterprise messaging and 21%payment solutions and 11% of our total revenues were derived from providing our enterprise software. In 2015,2022, services represented 97% of our total revenues and license fees represented 19%3% of our revenues and services represented 81%. total revenues.

In 2015, two customers2022, one customer accounted for approximately 10% and 13%12% of our total revenues. In 2014, two customers accounted for approximately 11% and 13% of total revenues. In 20132021and 2020, no customer accounted for more than 10% or more of our total revenues. We expect to continue to derive sizeable revenues from a small number of changing customers.

While the markets appear to be very active, showing ongoing demand for our products and services, extensive pre-sales efforts are required and many processes are extended or constantly delayed. Consolidation in the telecom markets was not favorable to us in the last two years, and we closed fewer deals than in previous years. Accordingly, we expect lowerchallenges in maintaining our revenues and our profitability levels in the near term. We plan to continue investing in technology and seeking to enter new markets, as we continue to focus on our profitability targets.

In August 2005, we acquired Sentori Inc., a leading provider of billing and customer care solutions to tier 3 and tier 2 wireless carriers and mobile virtual network operators, or MVNO's, mainly in the United States and the Caribbean. In October 2007, we acquired the U.K.-based Omni Consulting Company Limited, which provides billing and customer care software solutions in a service bureau mode, mainly to European carriers.

In July 2003, we adopted aOur dividend policy accordingis to which we declare subject to specific board approval and applicable law, a dividend distribution once per year, in the approximate amount of our net income fromEBITDA for the previous year. In October 2010, our board of directors updated this policy slightly. The new policy changes only the amount to be distributed, the new amount being equal to our EBITDApreceding year plus net financial income (expenses) minus taxes on income. Additionally, the board approved dividend distributions in 2003, 2007, 2008, 2009, 2010, 2011 and 2014 that wereincome, subject to approvals from an Israeli Court in accordance with Section 303specific board of the Israeli Companies Law due to the fact that we did not have sufficient retained earnings, which court approvals were received.directors’ approval and applicable law. Since 2003, we have distributed aggregateour cash dividends ofamount to approximately $3.66$5.54 per share to our shareholders.(including the dividend declared in March 2023 in respect of 2022). The amount per share that we distributed in 2013, 2014,each of 2022 and 20152021 was $0.24, $0.24$0.26, and $0.30, respectively, and $0.27a dividend of $0.24 per share was declared in March 2016.2023. The board of directors’ decision to approve the annual distribution is based, among other factors, on our cash position at that time, potential acquisitions and future cash needs. TheOur board of directors may decide to discontinue the dividend distribution in whole or in part at any time.

Revenues. WeIn the billing and related services segment, we are paid license fees by our customers for the right to use our products, based on (1)(i) traffic volume, which is measured by factors such as number of subscribers, and (2)(ii) the functionality of the system, based on application modules that are added to the software. In relation to our professional services, other than maintenance services and managed services, we mainly quote a fixed price based on the type of service offered, estimated direct labor costs and the expenses that we will incur to provide these services. We also provide Agile development teams that perform solution enhancements, each dedicated for a period of time to a specific customer, for a fixed cost per person per month. Fees for maintenance services are based on a percentage of the solution fee and are paid annually, quarterly or monthly. Fees for managed services are primarily based on the number of subscribers or customers business volume and are paid monthly.

We primarily use two business models when we sell our solutions in the billing and related services segment, the license model and the managed services model. In the license model, the customer pays a one-time implementation fee, a one-time license fee for a perpetual license limited by the traffic metrics chosen by the customer, and additional fees to expand the chosen traffic metrics limitation. In addition, we are paid maintenance fees to renew periodically the maintenance agreement at the customer discretion. In the managed services model, the customer pays a one-time implementation fee, a monthly fee that includes a periodic license (right to use), maintenance and services fees, calculated by the metrics chosen by the customer (mainly, number of subscribers).

In the messaging segment, revenues are derived from customers using our messaging software platform, when the messaging service has been rendered, i.e., the messages are delivered to recipient.

We provide a revenue breakdown for our billing and customer care software, our messaging solutions and our enterprise call management software. We believe that this information provides a better understanding of our performance and allows investors to make a more informed judgment about our business.

Cost of Revenues. TheIn the billing and related services segment, the cost of revenues consists primarily of direct labor costs and overhead expenses related to software installation and maintenance. Cost of revenues also includes, among other things, software license fees to third parties, primarily Oracle, hardware, travel expenses packaging and shipping costs.

In the messaging segment, the cost of revenues consists primarily of fees paid to network providers. Our arrangements with the network service providers require us to pay fees based on the volume of text messages sent, as well as telephone numbers acquired by us to service our customers.

Research and Development Expenses. Our research and development expenses consist primarily of compensation, overhead and related costs for research and development personnel and depreciation of testing and other equipment. Research and development costs related to software products are expensed as incurred until the “technological feasibility” of the product has been established. Because of the relatively short time period between “technological feasibility” and product release, no software development costs have been capitalized. We expect to continue to make investments in research and development.

Selling and Marketing Expenses.Our. Our selling and marketing expenses consist primarily of compensation, overhead and related costs, for sales and marketing personnel, the operation of international sales offices, sales commissions, marketing programs, public relations, promotional materials, travel expenses, trade shows and exhibition expenses.

General and Administrative Expenses.Our. Our general and administrative expenses consist primarily of compensation, overhead and related costs for executives and administrative personnel, professional fees, directors’ fees, insurance, provisions for doubtful accounts and other general corporate expenses.

Financial Income, (Expenses), Net. Our financial income, (expenses), net consists mainly of interest earned on bank deposits and short-term investments, gains and losses from the change in value and realization of marketable securities, gains and losses from the conversion of monetary balance sheet items denominated in non-dollar currencies into U.S. dollars, net of financing costs, and bank charges.

Taxes on Income.See "—Corporate“Corporate Tax Rate"Rate” below.

A. Operating Results

The following discussion of our results of operations for 2013, 2014the years ended December 31, 2022 and 20152021, including the percentage data in the following table, is based upon our statements of operations contained in our consolidated financial statements for those periods,years, and the related notes thereto,contained included in Item 18:

Comparison of 2013, 2014the Year Ended December 31, 2022 to the Year Ended December 31, 2021

Revenues

Total revenues decreased from $26.3 million in 2021 to $21.5 million in 2022, mainly attributable to a decrease in revenues in our messaging segment, from $12.0 million in 2021 to $7.7 million in 2022. This decrease is mainly due to unusual higher revenues in 2021 that was primarily attributed to the high messages volumes in Q2 and 2015Q3 of 2021, related to specific COVID-19 regulations in Germany that were temporary in nature and did not represent a trend.

Revenues

Revenues from our billing and customer care solutions for service providers decreased from $12.1 million in 20142021 to $11.5 million in 2022. The decrease was primarily attributed to the loss of one large customer and the lower revenues from our new customers. We expect a future trend of market decline due to shrinking relevant telecom markets and strong competition.

Revenues from our enterprise products increased slightly from $2.2 million in comparison2021 to 2013 by 35.1%.$2.3 million in 2022. The increase was primarily attributed to three newa few major upgrades to the latest version at existing customers. Nevertheless, we continue to expect that this market will generally decline.

Revenues from licenses decreased from $1.5 million in 2021 to $0.6 million in 2022. The decrease was mainly attributed to the fact that in 2021 we received a one-time large deals signedincrease in 2013 for whichlicense revenues, based on an increase in the number of subscribers at two customers. Revenues from services decreased from $24.8 million in 2021 to $ 20.9 million in 2022, primarily as a result of the decrease in revenues were recognized mainly in 2014. Revenuesour messaging segment discussed above.

The following table presents the geographic distribution of our revenues:

Our revenues in 2015the Americas decreased from $9.4 million in comparison2021 to 2014$8.5 million in 2022. The decrease was primarily due to the reduced budgets allocated by 16.4%.CSPs to replace or upgrade their billing solutions and the loss of a few customers in this area. We expect this trend to continue.

Our revenues in Europe significantly decreased from $14.7 million in 2021 to $11.3 million in 2022. The decrease was primarily attributed to the decrease in both the number of the new deals and the size of new deals we signed, in comparison to the three new large deals in 2013, as well as to a significant decreaserevenues in our volume of salesmessaging segment, offset by an increase in North America. Revenuesrevenues from our billing and customer care product solutions for service providers increasedsegment resulting mainly from $14.2 million in 2013 to $21.0 million in 2014 and decreased to $16.6 million in 2015 for reasons similar to those for the changes in total revenues.

Revenues from our enterprise products decreased from $4.3 million in 2013 to $4.0 million in 2014. The decrease was primarily attributedsales of upgrades to the decline in interest we encountered in the United States and the Israeli markets for call accounting solutions, slightly offset by stronger sales in Europe. Revenues from our enterprise products increased from $4.0 million in 2014latest version to $4.4 million in 2015.two existing customers. The increase was primarily attributed to continuing stronger sales in Europe.

Revenues from professional services increased from $13.9 million in 2013 to $19.6 in 2014 and decreased to $17.0 in 2015. The increase in 2014 was due to the large multiple milestone deployments completed in 2014 and increased revenue from our managed services agreements. The decrease in 2015 was due to the aforementioned significant decrease in our volume of sales in North America.

The following table presents the geographic distribution of our revenues:

Our revenues in the Americas increased from $11.8 million in 2013 to $14.4 million in 2014 but as a percentage of total revenues in Europe decreased from 63.9%55.8% in 20132021 to 57.6%52.8% in 2014,2022, due to the same reason.

Our revenues in Israel decreased from $1.4 million in 2021 to $0.8 million in 2022, mainly due to the aforementioned large deals signedone-time sale of licenses to one of our customers in the United States and Europe. OurIsrael during 2021.

Cost of Revenues

Total cost of revenues in 2022 decreased by $2.4 million, or 19.3%, compared with 2021, primarily due to the Americas decreased from $14.4decrease in revenues in our messaging segment, which generated cost of revenues of approximately $6.6 million during 2022 and cost of revenues of approximately $9.0 million in 2014 to $11.3 million in 2015 and as a percentage of total revenues decreased from 57.6% in 2014 to 54.0% in 2015. Our revenues in Europe2021.

Gross profit as a percentage of total revenues increased from 20.3%52.7% in 20132021 to 28.6%53.4% in 2014 and to 32.0% in 2015, mainly due2022. The increase was primarily attributed to the large deal we signed in Europe in December 2013. Our revenues in Israel increased from $1.8 million in 2013 to $2.3 million in 2014, mainly due to a large win for a billing solution in Israel, offset by thesignificant decrease in call accounting revenues, but as a percentage of total revenues decreased from 9.6% in 2013 to 9.0% in 2014, due to significantly higher overall revenues. Our revenues in Israel decreased from $2.3 million in 2014 to $1.4 million in 2015 and as a percentage of total revenues decreased from 9.0% in 2014 to 6.7% in 2015, mainly due to completion of the aforementioned largeour messaging segment, which operates with lower gross margins than our billing project in Israel during the second quarter of 2015.

Cost of Revenues

The total cost of revenues in 2014 increased by $2.1 million compared with 2013 due to an increase in labor-related costs of $1.6 million and increases in sub-contracting costs, purchases of equipment and licenses of $0.4 million in the aggregate. The decrease in total cost of revenues in 2015 by $1.4 million compared with 2014 was mainly due to a decrease in purchases of equipment and licenses and deferred charges of $0.9 million, a decrease in labor-related costs of $0.3 million and a decrease in travel expenses of $0.2 million.

segment.

Operating Expenses

Gross profit as a percentage of revenues increased from 57.4% in 2013 to 60.2% in 2014 mainly due to increased efficiency in project implementation and managed services operations in 2014. Gross profit as a percentage of revenues decreased from 60.2% in 2014 to 58.8% in 2015 mainly due to a decrease in sales of licenses. We expect gross margins to decrease even further as we perform significantly more professional services for our existing customer base.

Operating Expenses

Research and Development.We have made substantial investment in research and development to maintain our advanced technology and add functionality to our products.. The decrease in our research and development expenses by 10%13.6% in 2014,2022 compared to 2013, was primarily due to the decrease in research and development related payroll expenses as a result of the appreciation of the U.S. dollar in relation to the Euro that fully offset the increased average salary that is nominated in Euro. The decrease in our research and development expenses by 35.6% in 2015, compared to 2014,2021 was primarily due to a decrease in research and development related payroll expenses as a result of a decrease in the total number of employees engaged in research and development and the appreciation of the U.S. dollar in relation to the Euro and to the NIS.personnel expenses. Research and development expenses as a percentage of total revenues decreasedincreased from 27.2%15.4% in 20132021 to 18.1%16.2 % in 2014 primarily2022, due to the increasedsignificant decrease in total revenues, andoffset by the decrease in research and development related payroll expenses as mentioned above. Research and development expenses as a percentage of revenues decreased from 18.1% in 2014 to 14.1% in 2015 primarily due to the decrease in research and development related payroll expenses mentioned above. We expect cost of employment per employee to be significantly higher in the future, as the global need for software engineers constantly grows and more European companies adopt near-shore outsourcing. The cost of employment may also be negatively affected by fluctuations in the exchange rates between the Euro or the NIS and the U.S. dollar.

expenses.

Selling and Marketing Expenses. Selling and marketing expenses decreased from $1.7$1.4 million in 20132021 to $1.1$1.0 million in 20142022, mainly dueattributable to a decrease in sales commission expenses, a decrease in the total number of employees engaged in sellingcommissions and marketing and the appreciation of the U.S. dollar in relation to the NIS. Selling and marketing expenses increased from $1.1 million in 2014 to $1.2 million in 2015 mainly due to an increase in travel expenses and an increase in participating in conventions.personnel expenses. Selling and marketing expenses as a percentage of total revenues decreased from 9.2%5.3% in 20132021 to 4.6%4.5% in 2014 for similar reasons, due to increased overall revenues and due to a decrease in the total number of employees engaged in selling and marketing. Selling and marketing expenses as a percentage of revenues increased from 4.6% in 2014 to 5.6% in 20152022, mainly due to the decrease in total revenues.above-mentioned decrease.