-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 BC0G0out7WWVkrq/CRRs3IM+dY5yiTpeh6vQDTzFd8tQqjXoBAh95i8rZkm4alYd
 HvN6YMuB0FIWE28SNaPd3Q==

<SEC-DOCUMENT>0001178913-06-002240.txt : 20061130
<SEC-HEADER>0001178913-06-002240.hdr.sgml : 20061130
<ACCEPTANCE-DATETIME>20061130122710
ACCESSION NUMBER:		0001178913-06-002240
CONFORMED SUBMISSION TYPE:	F-3/A
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20061130
DATE AS OF CHANGE:		20061130

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			BOS BETTER ONLINE SOLUTIONS LTD
		CENTRAL INDEX KEY:			0001005516
		STANDARD INDUSTRIAL CLASSIFICATION:	COMPUTER COMMUNICATIONS EQUIPMENT [3576]
		IRS NUMBER:				0000000
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		F-3/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-137153
		FILM NUMBER:		061247498

	BUSINESS ADDRESS:	
		STREET 1:		100 BOS RD
		CITY:			TERADION ISRAEL
		STATE:			L3
		ZIP:			00000

	MAIL ADDRESS:	
		STREET 1:		TERADION INDUSTRIAL PARK
		CITY:			BEIT RABIN
		STATE:			L3
		ZIP:			20179
</SEC-HEADER>
<DOCUMENT>
<TYPE>F-3/A
<SEQUENCE>1
<FILENAME>zk63175.htm
<TEXT>
<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        \\Backup\office\EDGAR Filing\BOS better online solutions Ltd\63175\a63175.eep -->
     <!-- Control Number: 63175                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   F-3/A                                                            -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>F-3/A</TITLE>
</HEAD>
<BODY>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
filed with the Securities and Exchange Commission on November 30, 2006  </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Registration
No. 333-137153  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Scotch Rule Top-TNR2" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">


<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="4"><B>UNITED STATES</B> </FONT> <BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE="4"><B>SECURITIES AND
EXCHANGE COMMISSION</B> </FONT> <BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">Washington, D.C. 20549 </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><HR SIZE="1" NOSHADE WIDTH="15%" ALIGN="CENTER"> </TD>
</TR>
</TABLE>

<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> AMENDMENT NO. 2 <BR>
TO</B> </FONT>
</P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="4"><B>FORM
F-3</B> </FONT> <BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>
REGISTRATION
STATEMENT  <BR>
UNDER
THE SECURITIES ACT OF 1933  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><HR SIZE="1" NOSHADE WIDTH="15%" ALIGN="CENTER"> </TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="5"><B>
B.O.S
BETTER ONLINE SOLUTIONS LTD.</B> </FONT> </TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<I>(Exact
name of Registrant as specified in its charter) </I> </FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Israel</B> </FONT></TD>
     <TD WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Not Applicable</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>(State or other jurisdiction of </I></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>(I.R.S. Employer</I></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>incorporation or organization)</I></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Identification No.)</I></FONT></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Beit Rabin, Teradyon
Industrial Park, <BR>
Misgav, 20179, Israel <BR>
(+972) 4-990-7555 <BR>
<I>(Address and
Telephone Number of Registrant&#146;s principal executive offices) </I></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Corporation Service
Company <BR>
1133 Avenue of the
Americas, Suite 3100 <BR>
New York, NY 10036 <BR>
Tel: (212) 299-9100 <BR>
<I>(Name, address and
telephone number of agent for service) </I></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><HR SIZE="1" NOSHADE WIDTH="15%" ALIGN="CENTER"> </TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Copies
To:  </FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Brian Brodrick, Esq.</B> </FONT></TD>
     <TD WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Shlomo Landress, Adv.</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Phillips Nizer LLP</B> </FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Amit, Pollak, Matalon &amp; Co.</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>666 Fifth Avenue</B> </FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NYP Tower, 17 Yitzhak Sadeh Street</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>New York, New York 10103</B> </FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Tel Aviv 67775, Israel</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(212) 841-0700</B> </FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>972-3-561-5268</B> </FONT></TD></TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Approximate
date of commencement of proposed sale to the public</B>: From time to time after this
registration statement becomes effective. </FONT></P>

<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the only securities being registered on this Form are being offered pursuant to dividend
or interest reinvestment plans, please check the following box. <FONT size="3" face="Wingdings">o</font> </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the
following box. <FONT size="3" face="Wingdings">x</font> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the
same offering. <FONT size="3" face="Wingdings">o
</font> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities
Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. <FONT size="3" face="Wingdings">o
</font> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is a registration statement pursuant to General Instruction I.C. or a
post-effective amendment thereto that shall become effective upon filing with the
Commission pursuant to Rule 462(e) under the Securities Act, check the following
box. <FONT size="3" face="Wingdings">o
</font> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.C. filed to register additional securities or additional classes of
securities pursuant to Rule 413(b) under the Securities Act, check the following box. <FONT size="3" face="Wingdings">o
</font> </FONT></P>




<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Registrant hereby amends this
Registration Statement on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance with Section
8(a) of the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a), may
determine. </FONT></P>

<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>THE INFORMATION IN THIS PROSPECTUS
IS NOT COMPLETE AND MAY BE CHANGED. NO SELLING SHAREHOLDER MAY SELL THESE SECURITIES UNTIL
THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER
TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><HR SIZE="1" noshade color="#000000" style="margin-top: -2px">
<HR SIZE="4" noshade color="#000000" style="margin-top: -10px"> </TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
SUBJECT
TO COMPLETION, DATED November 30, 2006  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PROSPECTUS </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B.O.S BETTER ONLINE
SOLUTIONS LTD. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Up to 645,720 Ordinary
Shares </FONT></H1>

<!-- MARKER FORMAT-SHEET="Footnote Rule-TNR" FSL="Workstation" -->
<HR SIZE="1" NOSHADE WIDTH="15%" ALIGN="CENTER">

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The selling shareholder identified in
this prospectus, may offer to sell up to 645,720 of ordinary shares issuable upon the
conversion of a convertible note due August 16, 2009 and upon the exercise of a warrant,
both of which were issued by B.O.S Better Online Solutions Ltd. (&#147;BOS&#148;) to the
selling shareholder, Laurus Master Fund, in a private placement transaction on August 16,
2006 and shares that are to be issued in lieu of cash interest payments on the convertible
note solely pursuant to the mandatory interest conversion feature of such note. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BOS is filing the registration
statement of which this prospectus is a part at this time to fulfill a contractual
obligation to do so, which the company undertook at the time of the sale of the note and
the warrants. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our ordinary shares are traded on the
Nasdaq Global Market under the symbol &#147;BOSC&#148; and on the Tel-Aviv Stock Exchange
under the symbol &#147;BOSC&#148;. On November 29, 2006, the last reported sale price of
our ordinary shares on the Nasdaq Global Market was $2.58 per share. You are urged to
obtain current market quotations for the ordinary shares. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We will not receive any of the
proceeds from the sale of these ordinary shares other than the exercise price payable to
us upon the exercise of the warrants held by the selling shareholder unless the warrants
are exercised in a &#147;cashless&#148; exercise, in which case we will receive no
proceeds upon such exercise. We have agreed to bear all of the expenses in connection with
the registration and sale of these ordinary shares other than underwriting discounts and
sales commissions. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>You should read both this prospectus
and any prospectus supplement, together with the additional information described under
the heading &#147;Incorporation of Certain Documents by Reference&#148; before you decide
to invest in our ordinary shares. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>INVESTING
IN OUR ORDINARY SHARES INVOLVES A HIGH DEGREE OF RISK. SEE &#147;RISK FACTORS&#148;
BEGINNING ON PAGE <U>4</U> OF THIS PROSPECTUS TO READ ABOUT FACTORS YOU SHOULD CONSIDER
BEFORE PURCHASING OUR ORDINARY SHARES.</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Neither
the Securities and Exchange Commission nor any state securities commission or the Israeli
Securities Authority has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a criminal
offense</B>. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><HR SIZE="1" NOSHADE WIDTH="15%" ALIGN="CENTER"> </TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
date of this prospectus is ________, 2006  </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TABLE OF CONTENTS </FONT></H1>









<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Page</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=90% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk101">Prospectus Summary</a></FONT></TD>
     <TD WIDTH="10%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk102">The Offering</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk103">Risk Factors</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk104">Forward-Looking Statements</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk114">Recent Developments</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk105">Use of Proceeds</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk106">Selling Shareholder</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk107">Description of Ordinary Shares</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk108">Plan of Distribution</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk109">Validity of Securities</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk110">Experts</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk111">Where You Can Find More Information</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk112">Incorporation of Certain Documents by Reference</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#zk113">Enforceability of Civil Liabilities</a></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23</FONT></TD></TR>
</TABLE>
<BR>




<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
should rely only on the information contained or incorporated by reference in this
prospectus or any supplement. We have not authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent information,
you should not rely on it. We are not, and any underwriter or agent is not, making an
offer to sell these securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in this prospectus is accurate
only as of the date on the front cover of this prospectus. Our business, financial
condition, results of operations and prospects may have changed since that date. </FONT></P>

<p align=center>
<font size=2>2</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<a name=zk101></a>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PROSPECTUS SUMMARY </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ABOUT THIS PROSPECTUS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
prospectus is part of a registration statement that we filed with the United States
Securities and Exchange Commission, or the SEC, utilizing a &#147;shelf&#148; registration
process. Under this shelf process, the selling shareholder may offer up to a total of
645,720 ordinary shares, from time to time, in one or more offerings in any manner
described under the section in this prospectus entitled &#147;Plan of Distribution.&#148; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
prospectus does not contain all of the information set forth in the registration
statement, certain parts of which are omitted in accordance with the rules and regulations
of the SEC. Accordingly, you should refer to the registration statement and its exhibits
for further information about us and our ordinary shares. Copies of the registration
statement and its exhibits are on file with the SEC. Statements contained in this
prospectus concerning the documents we have filed with the SEC are not intended to be
comprehensive, and in each instance we refer you to a copy of the actual document filed as
an exhibit to the registration statement or otherwise filed with the SEC. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have not authorized anyone to provide you with information different from that contained
or incorporated by reference in this prospectus. The selling shareholder is offering to
sell, and seeking offers to buy, our ordinary shares only in jurisdictions where offers
and sales are permitted. The information contained in this prospectus is accurate only as
of the date of this prospectus, regardless of the time of delivery of this prospectus or
of any sale of ordinary shares. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless
the context otherwise requires, all references in this prospectus to &#147;BOS,&#148;
&#147;we,&#148; &#147;our,&#148; &#147;our company,&#148; &#147;us&#148; and the
&#147;Company&#148; refer to BOS Better Online Solutions Ltd. and its consolidated
subsidiaries. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
references in this prospectus to &#147;ordinary shares&#148; refer to our ordinary shares,
nominal value NIS 4.00 per share. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
references in this prospectus to &#147;dollars&#148; or &#147;$&#148; are to United States
dollars. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
references in this prospectus to &#147;shekels&#148; or &#147;NIS&#148; are to New Israeli
Shekels. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>THE COMPANY </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We were incorporated in Israel in
1990 and are subject to the Israeli Companies Law 1999 &#150; 5759. We design, integrate
and test our products in our facilities in two locations in Israel. Our headquarters and
manufacturing facilities are located at Teradyon Industrial Zone, Misgav 20179 Israel. The
facilities of our subsidiary, Odem Electronic Technologies 1992 Ltd., are located in the
center of Israel. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our telephone number is
972-4-990-7555 and our website address is www.boscorporate.com. The information contained
on, or linked from, our website is not a part of this prospectus. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We currently manage our operation
through our two wholly-owned subsidiaries: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BOScom
Ltd. that is engaged in the connectivity solutions segment of our business; and</FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Odem
Electronic Technologies 1992 Ltd. that is engaged in the supply of electronic components
and          solutions segment of our business.</FONT></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>3</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>




<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our</B> <B>Connectivity solutions
segment, </B>focuses on providing emulation solutions for the popular IBM iSeries,
enabling customers to extend its capabilities and life cycle. Our server and associated
modules empower the iSeries, providing a scaleable solution for transparent expansion and
growth. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our Electronic Components segment,
</B>provides solutions in RFID (radio frequency identification devices), semiconductors,
electronic components, CCD (charge &#150; coupled device), imaging, networking, telecom
and automation. Odem is a major solution provider and distributor of electronic components
and advance technologies in the Israeli market. </FONT></P>

<a name=zk102></a>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>THE OFFERING </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This prospectus relates
to up to 645,720 ordinary shares that may be offered for sale by the selling
shareholder.  The ordinary shares are issuable upon the conversion of a convertible note due August 16,
2009 and upon the exercise of warrants, both of which were issued by BOS to Laurus Master Fund in a
private placement transaction on August 16, 2006, and shares that  are to be issued in lieu of cash
interest payments on the convertible note solely pursuant to the mandatory interest conversion feature
of such note.  The note is secured by a first priority floating charge on all of our company&#146;s assets,
present and future as they may be changing from time to time; and by a first priority fixed charge on
all of our company&#146;s right, title and interest in our wholly-owned subsidiaries, BOScom Ltd. and Quasar
Telecom (2004) Ltd. For additional details see &#147;Selling Shareholder&#148;.</FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BOS
is filing the registration statement of which this prospectus is a part at this time to
fulfill its contractual obligation to do so. Registration of the ordinary shares does not
necessarily mean that all or any portion of such ordinary shares will be offered for sale
by the selling shareholder. </FONT></P>

<a name=zk103></a>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>RISK FACTORS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>You
should carefully consider the risks described below and all the information contained or
incorporated by reference into this prospectus before making an investment decision regarding our
ordinary shares.   Our business, financial condition or results of operations could be materially
adversely affected by any of these risks. The risks described below are not the only risks facing our
company. Additional risks and uncertainties that we are not aware of or that we currently believe are
immaterial may also adversely affect our business, financial condition, results of operation and
liquidity.  The trading price of our ordinary shares could decline due to any of these risks, and you
may lose all or part of your investment.</I> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risks relating to our business: </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>We have had a history of
losses and our future levels of sales and ability to achieve profitability are  unpredictable.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have incurred net losses of $3.6 million in 2005, $2.1 million in 2004 and $21,000 in 2003. As of
December 31, 2005, we had an accumulated deficit of $42.7 million. Only in the fourth quarter of 2005
did we manage to breakeven, and there can be no assurance that this trend will continue. According to
our unaudited financial reports for the six months ended June 30, 2006, we had an operating loss of
$500,000 and a net income of $174,000, which was mainly due to other income in the amount of $867,000,
resulting from the receipt of Qualmax Inc. shares. Our ability to maintain and improve future levels of
sales and profitability depends on many factors. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>These factors include: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
continued demand for our existing products;</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our
ability to develop and sell new products to meet customer needs;</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>management's
ability to control costs and successfully implement our business strategy; and</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our
ability to manufacture and deliver products in a timely manner.</FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>4</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
can be no assurance that we will experience any growth in sales or achieve profitability
in the future or that the levels of historic sales or profitability experienced during
previous years will continue in the future or that our net losses will not increase in the
future. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Fluctuations in our
operating results could result in lowered prices, and we may be unable to maintain our gross
profit margins.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
sales and profitability may vary in any given year, and from quarter to quarter. In order
to increase sales and enter into new markets with new products we may find it necessary to
decrease prices in order to be competitive. Additionally, the gross profit margin of our
subsidiary, Odem, whose sales accounted for 75% of our total sales in 2005, tends to
fluctuate. We may not be able to maintain current gross profit margins in the future,
which would have a material adverse effect on our business. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>We have limited capital
resources and we may encounter difficulties raising capital. </I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Continued
expansion requires additional resources and especially working capital. If our efforts to
raise capital do not succeed, our efforts to increase our business and to compete in the
marketplace may be seriously jeopardized, which would have a materially adverse effect on
our business. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>A
significant part of the revenues of our wholly-owned subsidiary, Odem Electronic Technologies 1992
Ltd. (&#147;Odem&#148;), is from one major customer, Israel Aircraft Industries (&#147;IAI&#148;). Our business relationship
with IAI involves the following risks:</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>An interruption in
our business relationship with IAI would materially adversely impact our
         financial results.</I></B></FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
to IAI accounted for 14% of our revenues in year 2005 and for 20% in the first six months of
2006. An interruption in our business relationship with IAI would result in a significant reduction in
our revenues and in a write-off of inventory, and would have an adverse effect on our business and
results of operations. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Significant appreciation in the cost price of electronic components under a long term sales
         agreement with a fixed sales price with IAI, may materially adversely impact our financial
         results.</I></B></FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In
September 2004, Odem entered into a long term sales agreement with IAI for the supply of
electronic components for two models of business jets. The agreement provides for a fixed sales price of the components during the term
of the agreement through December 2008. Absent the flexibility to increase our prices as a result of
increased costs of the components, significant increased costs may adversely impact our financial
results. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>The relationship with IAI requires us to hold large inventory, in order to meet its short lead
         time and delivery requirements. If we are unable to sell this inventory on a timely basis, we
         could incur charges for excess and obsolete inventory, which would materially adversely affect
         our results of operations.</I></B></FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Under
the agreement with IAI, we are obligated to hold inventory of products necessary for three
months of IAI&#146;s production of two models of business jets. This requires us to incur the costs of purchasing inventory without
having an outstanding purchase order for the products. If we are unable to sell products that are
purchased to hold in inventory, we may incur write-offs and write-downs as a result of slow moving items,
technological obsolescence, excess inventories, discontinued products and products with market prices
lower than cost. Such write-offs and write-downs could adversely affect our operating results and
financial condition. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>We may be unable to maintain
and continue developing marketing and distribution arrangements and expand our reach into
oversea markets. Additionally, we have limited experience in selling in the Far East,
which could have a materially adverse impact on our results of operation.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2005, nearly half of our revenues were generated from sales outside Israel. If we are not
able to maintain our existing distribution channels and expand to new international
markets, our operating results may be materially adversely affected. Additionally, in 2005
and in the first six months of 2006, our sales to the Far East accounted for 22% and 13%
of our total sales, respectively. We have limited sales and marketing experience in the
Far East. Furthermore, in October 2005 the major supplier of products sold by Odem in the
Far East territory, opened a headquarters in China, and began selling in competition with
Odem in this territory. If we are unable to continue to achieve the same Far East sale
levels as were achieved in 2005, our business condition and results of operation may be
materially adversely affected. </FONT></P>

<p align=center>
<font size=2>5</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>We recently sold our
Communication segment to IP Gear Ltd., a subsidiary of Qualmax Inc., in exchange for shares
of Qualmax Inc. Common Stock. If Qualmax is not successful in its business, we may
lose the value of our investment.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
December 31, 2005 we closed a transaction for the sale of our Communications segment to IP
Gear Ltd., a wholly owned subsidiary of Qualmax Inc. The consideration was comprised
mostly of common stock of Qualmax Inc. Qualmax Inc. has a limited operating history on
which to judge whether or not this company will be successful. If Qualmax is not
successful in its business or if Qualmax&#146;s share price is subject to a prolonged
decline, we may lose the value of our investment, and be required to record an impairment
of the investment, which could materially affect our results of operation. Additionally,
we are entitled to certain earn out shares in 2006 based upon revenues that IP Gear will
generate from the sold segment. In June 2006, we received 250,000 ordinary shares, however
there is no assurance that the revenues shall be such that will grant us any additional
earn out shares. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
September 18, 2006, Qualmax announced that it had consummated the transfer of all of its
assets and liabilities to New World Brands, Inc. (&#147;New World&#148;), in exchange for certain
voting preferred stock of New World convertible into common stock with approximately 86%
of the voting power of New World. The shares of common stock of New World are quoted on
the Over the Counter Bulletin Board. Immediately prior to the closing of the transaction,
New World sold all of its former business operations. </FONT></P>





<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>We have limited order backlog.
If revenue levels for any quarter fall below our expectations, our result of operation
will be adversely affected.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have a limited order backlog, which makes revenues in any quarter substantially dependent
on orders received and delivered in that quarter. We base our decisions regarding our
operating expenses on anticipated revenue trends, and our expenses level are relatively
fixed, or require some time for adjustment. Hence, revenue levels below our expectations
will adversely affect our results of operation. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>In 2004 we completed the
acquisition of a controlling stake in Odem. In September 2005, we acquired another 23.9%
of Odem&#146;s shares and in November 2005, we increased our holdings in Odem to 100%. The
integration of this acquisition may interrupt the activities of the combined companies and
could have an adverse effect on our business, results of operations, financial condition
or prospects.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
acquisition of Odem involved the integration of a company that had previously operated
independently. The difficulties of combining Odem&#146;s operations with our other
operations included, and continue to be, but are not limited to: the necessity of
coordinating geographically separate organizations and integrating personnel with diverse
business backgrounds, potential difficulties in retaining employees and the associated
adverse effects on relationships with existing partners. The integration may interrupt the
activities of the combined companies&#146; businesses and may result in the loss of key
personnel. This could have an adverse effect on our business, results of operations,
financial condition or prospects. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>The sales of our Connectivity
products in the US depend on one master distributor. In the event that we cease working
with the master distributor, we may experience an interruption in sales until an
alternative source of distribution can be found, which may have a material adverse effect
on our business.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
market Connectivity products in the USA through one master distributor. In 2005 and in the first
six months of 2006, our sales of Connectivity products in the US market accounted for 9% and 7% of our
total sales, respectively  and for approximately 23% and 20% of our gross profit, respectively. In the
event that we cease working with the master distributor, we may experience an interruption in sales
until an alternative source of distribution can be found, which may have a material adverse effect on
our business. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Our Connectivity division
is engaged in a highly competitive industry, and if we are unable to keep up with or ahead
of the technology our sales could be adversely affected.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
offer our Connectivity solutions to the IBM midrange computer communications market. IBM
sells competing products to our own, and can exercise significant customer influence and
technology control in the IBM host connectivity market. We may experience increased
competition in the future from IBM or other competitors, which may adversely affect our
ability to successfully market our products and services. </FONT></P>

<p align=center>
<font size=2>6</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also compete against various companies that offer computer communications products based
on other technologies that in certain circumstances can be competitive in price and
performance to our products. There can be no assurance that these or other technologies
will not capture a significant part of the existing or potential IBM midrange computer
communications market. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
market for our connectivity products is also characterized by significant price
competition. We may therefore face increasing pricing pressures. There can be no assurance
that competitors will not develop features or functions similar to those of our products,
or that we will be able to maintain a cost advantage or that new companies will not enter
these markets. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some
of our current and potential competitors for connectivity products have longer operating
histories, greater name recognition, access to larger customer bases and significantly
greater financial, technical and marketing resources than ours. As a result, they may be
able to adapt more quickly to new or emerging technologies and changes in customer
requirements or to devote greater resources to the promotion and sale of their products,
than us. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>In late 2002 we decided
to wind up the business of our subsidiary, Pacific Information Systems, Inc. (&#147;PacInfo&#148;),
due to its severe financial situation.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
wind up process was accompanied by settlements with a majority but not all of
PacInfo&#146;s creditors. An action by any of such remaining creditors would result in
additional costs to the Company. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore,
certain actions involving PacInfo, if occurred before the end of 2003, may have triggered
a tax event for PacInfo former owners (the &#147;Sellers&#148;). In such event, we may be
obligated, under the purchase agreement, to grant the Sellers a loan on a full recourse
basis for certain tax payments the Sellers may be liable for, currently estimated at
approximately $2 million. The purchase agreement provides that the Company is to receive a
security interest in shares of the Company that the Sellers hold at the time of the loan
with a fair market value as of the date of the loan of at least 125% of the amount of the
loan as security for the repayment of the loan. In addition, in the event we are required
to loan such sum to the Sellers, we may also be required to reimburse the Sellers for
certain interest on taxes that they may owe. It is possible that the windup of PacInfo
during 2002 and 2003 may have triggered such a tax event for the Sellers, which would
result in our obligation to loan the Sellers such amount and to reimburse them for
interest expenses incidental to the tax event. Such a loan and reimbursement may have a
material adverse effect on our business condition and results of operations. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>If actual market
conditions prove less favorable than those projected by management, additional inventory write-downs
may be required.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories
may be written down for estimated obsolescence based upon assumptions about future demand
and market conditions and such write-downs could adversely affect our business condition
and results of operations. As of December 31, 2005, inventory is presented net of $100,000
general provision for technological obsolescence and slow moving items. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Our acquisitions, to
date, have not always proved successful.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Over
the past years we have pursued the acquisition of businesses, products and technologies
that are complementary to ours. However, our acquisitions have not always proven, in the
aftermath, to be successful. In June 1998, we acquired PacInfo, which was based in
Portland, Oregon, and in 2001 PacInfo acquired Dean Technologies LLC (&#147;Dean
Tech&#148;), which was based in Grapevine, Texas. Both businesses have since ceased
operations. In September 2004, we acquired the majority of the assets of Quasar
Communications Systems Ltd., which we sold, as part of the sale of the Communication
Solutions segment in 2005, as the segment did not fare well. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisitions
involve a number of risks, including the difficulty of assimilating geographically diverse
operations and personnel of the acquired businesses or activities and of maintaining
uniform standards, controls, procedures and policies. There can be no assurance that we
will not encounter these and other problems in connection with any future acquisitions we
may undertake. There can be no assurance that we will ultimately be effective in executing
additional acquisitions. Any failure to effectively execute and integrate future
acquisitions could have an adverse effect on our business, operating results or financial
condition. </FONT></P>

<p align=center>
<font size=2>7</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>We
depend on certain key products for a significant part of our gross profit  and if sales of these
products decline, it would have a material adverse effect on us.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
IBM midrange related products contributed 30% of our gross profit in year 2005 and 29% of our
gross profit in the first six months of the year 2006. If sales of our IBM midrange products were to
decline significantly for any reason, or the profit margins on such products were to decrease
significantly for any reason (including in response to competitive pressures), our financial results
would be adversely affected. Over the past few years there has been a continuous global decrease in
sales and revenues from the connectivity solutions sector (also known as the legacy family products). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
reduce the risk of such a decline or decrease due to competitive pressures or technical
obsolescence, we are continually seeking to reduce costs, upgrade and expand the features
of our IBM related products, expand the applications for which the products can be used
and increase marketing efforts to generate new sales. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
we are developing and introducing new remote data access communication products and
increasing our marketing efforts, there can be no assurance that the planned enhancements or the new
developments will be commercially successful, or that we will be able to increase sales of our IBM
midrange products.
 </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>If we are unsuccessful in
developing and introducing new products, we may be unable to expand our business. </I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
market for some of our products is characterized by rapidly changing technology and
evolving industry standards. The introduction of products embodying new technology and the
emergence of new industry standards can render existing products obsolete and unmarketable
and can exert price pressure on existing products. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
ability to anticipate changes in technology and industry standards and successfully
develop and introduce new and enhanced products as well as additional applications for
existing products, in each case on a timely basis, will be critical in our ability to grow
and remain competitive. Although these products are related to, and even incorporate our
existing products, there can be no assurance that we will be able to successfully develop
and market any such new products. If we are unable to develop products that are
competitive in technology and price and responsive to customer needs, for technological or
other reasons, our business will be materially adversely affected. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>We depend on key
personnel and need to be able to retain them and our other employees. </I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
success depends, to a significant extent, on the continued active participation of our
executive officers, other members of management and key technical and sales and marketing
personnel. In addition, there is significant competition for employees with technical
expertise in our industry. Our success will depend, in part on: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our
ability to retain the employees who have assisted in the development of our products;</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our
ability to attract and retain additional qualified personnel to provide technological
depth and           support to enhance existing products and develop new products; and</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our
ability to attract and retain highly skilled computer operating, marketing and financial
          personnel.</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
cannot make assurances that we will be successful in attracting, integrating, motivating
and retaining key personnel. If we are unable to retain our key personnel and attract
additional qualified personnel as and when needed, our business may be adversely affected. </FONT></P>

<p align=center>
<font size=2>8</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>We may be unable to
successfully defend ourselves against claims brought against us.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are defendants in a number of lawsuits filed against us, and from time to time may receive
written demands for payments from prospective plaintiffs, in the normal course of our
business. Legal proceedings can be expensive, lengthy and disruptive to normal business
operations, and can require extensive management attention and resources regardless of
their merit. Moreover, we cannot predict the result of all proceedings and there can be no
assurance that we will be successful in defending ourselves against them. An unfavorable
resolution of a lawsuit or proceeding could materially adversely affect our business,
results of operations and financial condition. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>We depend on third
parties licenses for the development of our products. </I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Third
party developers or owners of technologies may not be willing to enter into, or renew,
license agreements with us regarding technologies that we may wish to incorporate in our
products, either on acceptable terms or at all. If we cannot obtain licenses to these
technologies, we may be at a disadvantage compared with our competitors who are able to
license these technologies. In addition, when we do obtain licenses to third party
technologies that we did not develop, we may have little or no ability to determine in
advance whether the technology infringes the intellectual property rights of others. Our
suppliers and licensors may not be required or may not be able to indemnify us in the
event that a claim of infringement is asserted against us, or they may be required to
indemnify us only up to a maximum amount, above which we would be responsible for any
further costs or damages. Additionally, from time to time there may arise disputes with
respect to royalties owed to third parties from which we obtained licenses. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Indemnification of
Directors and Officers</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has agreements with its directors and senior officers which provide, subject to
Israeli law, for the Company to indemnify these directors and senior officers for (a)
monetary liability imposed upon them in favor of a third party by a judgment, including a
settlement or an arbitral award confirmed by the court, as a result of an act or omission
of such person in his capacity as a director or officer of the Company, (b) reasonable
litigation expenses, including attorney&#146;s fees, incurred by them pursuant to an
investigation or a proceeding commenced against them by a competent authority and that was
terminated without an indictment and without having a monetary charge imposed on them in
exchange for a criminal procedure (as such terms are defined in the Israeli Companies
Law), or that was terminated without an indictment but with a monetary charge imposed on
them in exchange for a criminal procedure in a crime that does not require proof of
criminal intent, as a result of an act or omission of such person in his capacity as a
director or officer of the Company, and (c) reasonable litigation expenses, including
attorney&#146;s fees, incurred by such a director or officer or imposed on him by a court,
in a proceeding brought against him by or on behalf of the Company or by a third party, or
in a criminal action in which he was acquitted, or in a criminal action which does not
require criminal intent in which he was convicted, in each case relating to acts or
omissions of such person in his capacity as a director or officer of the Company. Such
indemnification may materially adversely affect our financial condition. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>We may be unable to
effectively manage our growth and expansion, and as a result, our business results may be
adversely affected.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
goal is to grow significantly over the next few years. The management of our growth, if
any, will require the continued expansion of our operational and financial control
systems, as well as a significant increase in our manufacturing, testing, quality control,
delivery and service capabilities. These factors could place a significant strain on our
resources. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
inability to meet our manufacturing and delivery commitments in a timely manner (as a
result of unexpected increases in orders, for example) could result in losses of sales,
our exposure to contractual penalties, costs or expenses, as well as damage to our
reputation in the marketplace. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
inability to manage growth effectively could have a material adverse effect on our
business, financial condition and results of operations. </FONT></P>

<p align=center>
<font size=2>9</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>The measures we take in
order to protect our intellectual property may not be effective or sufficient. </I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
success is dependent upon our proprietary rights and technology. We currently rely on a
combination of trade secret, copyright and trademark law, together with non-disclosure and
invention assignment agreements, to establish and protect the proprietary rights and
technology used in our products. Much of our proprietary information is not patentable. We
generally enter into confidentiality agreements with our employees, consultants, customers
and potential customers and limit the access to and the distribution of our proprietary
information. Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use our technology without authorization, or to develop similar
technology independently. We do not believe that our products and proprietary rights
infringe upon the proprietary rights of others. However, there can be no assurance that
any other party will not argue otherwise. The cost of responding and adequately protecting
ourselves against any such assertion may be material, whether or not the assertion is
valid. Further, the laws of certain countries in which we sell our products do not protect
our intellectual property rights to the same extent as do the laws of the United States.
Substantial unauthorized use of our products could have a material adverse effect on our
business. We cannot make assurances that our means of protecting our proprietary rights
will be adequate or that our competitors will not independently develop similar
technology. Additionally, there are risks that arise from the use of intranet networks and
the Internet. Although we utilize firewalls and protection software, we cannot be sure
that our proprietary information is secured against penetration. Such penetration, if
occurs, could have an adverse effect on our business. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>We rely on certain key
suppliers for the supply of components in our products. </I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
purchase certain components and subassemblies used in our existing products from a single
supplier or a limited number of suppliers. In the event that any of our suppliers or
subcontractors becomes unable to fulfill our requirements in a timely manner, we may
experience an interruption in production until an alternative source of supply can be
obtained. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One
of Odem&#146;s major suppliers accounted for 25% of our purchases in the year 2005 and for
15% of our purchases in the first six months of the year 2006. An interruption in our
business relationship with such supplier&nbsp;would have an adverse effect on our business
and results of operations.&nbsp; </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>New industry standards,
the modification of our products to meet additional existing standards or the addition of
features to our products may delay the introduction of our products or increase our costs. </I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
industry standards that apply to our Connectivity segment products are continually
evolving. In addition, since our products are integrated into networks consisting of
elements manufactured by various companies, they must comply with a number of industry
standards and practices established by various international bodies and industry forums.
Should new standards gain broad acceptance, we will be required to adopt those standards
in our products. We may also decide to modify our products to meet additional existing
standards or add features to our products. It may take us a significant amount of time to
develop and design products incorporating these new standards. A prolonged disruption in
supply may force us to redesign and retest our products. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>There can be no assurance
that we will not be classified as a passive foreign investment company (a
&#147;PFIC&#148;).</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
upon our current and projected income, assets and activities, we do not believe that at
this time BOS is a passive foreign investment company (a &#147;PFIC&#148;) for US federal
income tax purposes, but there can be no assurance that we won&#146;t be classified as
such in the future. Such classification may have grave tax consequences for US
shareholders. One method of avoiding such tax consequences is by making a &#147;qualified
electing fund&#148; election for the first taxable year in which the Company is a PFIC.
However, such an election is conditioned upon our furnishing US shareholders annually with
certain tax information. We do not presently prepare or provide such information, and such
information may not be available to US shareholders if we are subsequently determined to
be a PFIC. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>We may be required to pay
stamp taxes on documents executed by us on or after June&nbsp;2003. </I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Stamp Tax on Documents Law, 1961, or the &#147;Stamp Tax Law&#148;, provides that
certain documents signed by Israeli companies are subject to a stamp tax, generally at a
rate of between 0.4% and 1% of the value of the subject matter of the applicable document.
As a result of an amendment to the Stamp Tax Law that came into effect in June&nbsp;2003,
the Israeli tax authorities have commenced enforcement of the provisions of the Stamp Tax
Law. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consequently,
we may be liable to pay stamp taxes on some or all of the documents we have signed since
June&nbsp;2003, which could have a material adverse effect on our results of operations. </FONT></P>

<p align=center>
<font size=2>10</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recently
promulgated regulations provide for the cancellation of the stamp tax with respect to
documents signed from January 1, 2006 onwards. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>We have significant sales
worldwide and could encounter problems if conditions change in the places where we market
our products.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have sold and intend to continue to sell our products in markets through distributors in
North America, Europe and Asia. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
number of risks are inherent in engaging in international transactions, including &#150; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>international
sales and operations being limited or disrupted by longer sales and payment cycles,</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>possible
problems in collecting receivables,</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>imposition
of governmental controls, or export license requirements,</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>political
and economic instability in foreign countries,</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>trade
restrictions or changes in tariffs being imposed, and</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>laws
and legal issues concerning foreign countries.</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we should encounter such difficulties in conducting our international operations, it may
adversely affect our business condition and results of operations. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>The slow down in
technology markets and technology-focused corporations in prior years has had an adverse impact
on us and on the value of our shares.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
Company, like other technology companies, has been significantly impacted by the market
slowdown in the technology industry in prior years. There can be no assurance that the
technology market will fully recover or that our operating results will not continue to
suffer as a consequence. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Inflation and foreign
currency fluctuations significantly impact on our business results. </I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
vast majority of our sales are made in US Dollars and most of our expenses are in US
Dollars and New Israel Shekels (&#147;NIS&#148;). The Dollar cost of our operations in
Israel is influenced by the extent to which any increase in the rate of inflation in
Israel over the rate of inflation in the United States is offset by the devaluation of the
NIS in relation to the Dollar. Our Dollar costs in Israel will increase if inflation in
Israel exceeds the devaluation of the NIS against the Dollar or if the timing of such
devaluations lags behind inflation rate increases in Israel. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>If we are forced to repay
our secured convertible notes in cash, we may not have enough cash to fund our operations
and may not be able to obtain additional financing.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
secured convertible term notes issued in September 2005 and in August 2006, contain
certain provisions and restrictions, which if violated, could result in the full principal
amounts together with interest and other amounts becoming immediately due and payable in
cash. If such an event occurred and if the holder of such notes demanded repayment, we
might not have the cash resources to repay such indebtedness when due.<BR><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of the notes
is repayable in monthly installments commencing January 1, 2006 for the September 2005
note and December 1, 2006 for the August 2006 note, with principal payments which start at
$15,000 and increase to $55,200. Subject to certain conditions, the monthly principal and
interest payment on the notes may be paid in cash or ordinary shares. If we are required
to pay the note in cash rather than in ordinary shares, it would reduce the amount of cash
available to fund operations. Also, in connection with the issuance of the notes, we
agreed to certain restrictions upon incurring additional indebtedness such as in case of
certain mergers and acquisitions. The existence of debt service obligations and the terms
and anti-dilution provisions of the notes may limit our ability to obtain additional
financing on favorable terms, or at all.</FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the investor in our convertible notes financing converts or exercises its warrants, or if
we elect to pay principal and/or interest on the notes with our ordinary shares, our
existing shareholders will be diluted. In addition, sales of substantial amounts of our
ordinary shares could cause the market price to go down. </FONT></P>

<p align=center>
<font size=2>11</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the extent that the notes are converted and/or the warrants that were issued with the
notes are exercised, a significantly greater number of our ordinary shares will be
outstanding and the interests of our existing shareholders will be diluted. If these
additional shares are sold into the market, it could decrease the market price of our
ordinary shares and encourage short sales although the purchaser of the notes has agreed
to not engage in short sales of our ordinary shares. Short sales and other hedging
transactions could place further downward pressure on the price of our ordinary shares. We
cannot predict whether or how many of our ordinary shares will become issuable as a result
of these provisions. </FONT></P>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Our assets are subject to security
interests in favor of holders of our secured convertible notes. Our failure to repay the
secured convertible notes, if required, could result in legal action against us, which
could require the sale of all of our assets.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
repayment of our convertible notes is secured by a first priority floating charge on all
of our company&#146;s assets, present and future as they may be changing from time to time,
and by a first priority fixed charge on all of our company&#146;s right, title and interest in
our wholly-owned subsidiaries, BOScom Ltd. and Quasar Telecom (2004) Ltd.  If we are
unable to repay the secured notes when required, the holders of the notes could commence
legal action against us and foreclose on all of our assets to recover the amounts due.
Any such action would require us to curtail or cease operations. </FONT></P>




<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>If we are forced to
immediately pay our short term bank loans, we may not have sufficient resources to fund our
operations and may not be able to obtain additional financing.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our bank loans contain certain
provisions and restrictions, which if violated, could result in the full principal amounts
together with interest becoming immediately due and payable, in cash. If such an event
occurred, we might not have sufficient cash resources to repay such indebtedness and to
continue funding our operations. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risks related to our location in
Israel: </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Political, economic, and
security conditions in Israel affect our operations and may limit our ability to produce
and sell our products or provide our services.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are incorporated under the laws of the State of Israel, where we also maintain our
headquarters and our principal manufacturing, research and development facilities.
Political, economic, security and military conditions in Israel directly influence us. We
could be adversely affected by any major hostilities involving Israel, the interruption or
curtailment of trade between Israel and its trading partners or a significant downturn in
the economic or financial condition of Israel. . In July 2006, Israel became involved in a
major military conflict with the Hizbullah organization in Lebanon, which subjected the
north of Israel to missile attacks. Certain of our facilities are located in the north of
Israel near the City of Haifa. Israel&#146;s military operations required the drafting of
a substantial number of reserve soldiers. In addition, the future of the &#147;peace
process&#148; with the Palestinians is uncertain and has deteriorated due to Palestinian
violence, with the threat of a large-scale attack by Palestinians on Israeli civilians and
key infrastructure remaining a constant concern. The past few years of renewed terrorist
attacks by the Palestinians has severely affected the Israeli economy in many ways. In
January 2006, Hamas, an Islamic movement responsible for many attacks against Israelis,
won the majority of the seats in the Parliament of the Palestinian Authority. The election
of a majority of Hamas-supported candidates is expected to be a major obstacle to
relations between Israel and the Palestinian Authority, as well as to the stability in the
Middle East as a whole. In addition, several countries still restrict business with Israel
and with companies doing business in Israel. We could be adversely affected by adverse
developments in the &#147;peace process&#148; or by restrictive laws or policies directed
towards Israel or Israeli businesses. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally,
all nonexempt male adult citizens and permanent residents of Israel, including some of the
our officers and employees, are obligated to perform military reserve duty annually, and
are subject to being called to active duty at any time under emergency circumstances.
While we have operated effectively under these requirements since its incorporation, we
cannot predict the full impact of such conditions on us in the future, particularly if
emergency circumstances occur. If many of our employees are called for active duty, our
business may be adversely affected. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
in recent years Israel has been going through a period of recession in economic activity,
resulting in low growth rates and growing unemployment. Our operations could be adversely
affected if the economic conditions in Israel continue to deteriorate. Also, due to
significant economic reforms proposed by the Israeli government, there have been several
general strikes and work stoppages in 2003 and 2004, affecting all banks, airports and
ports. These strikes have had an adverse effect on the Israeli economy and on business.
Following the passing of laws to implement economic measures, the Israeli trade unions
have threatened further strikes or work stoppages, and these may have an adverse effect on
the Israeli economy and our business. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore,
Israel is a party to certain trade agreements with other countries, and material changes
to these agreements could have an adverse effect on our business. </FONT></P>

<p align=center>
<font size=2>12</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>If
the Israeli Government programs that we benefit from are reduced or terminated, our taxes may
increase.</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Israeli Law for Encouragement of Capital Investments, 1959, facilities that meet
certain conditions can apply for &#147;Approved Enterprise&#148; status (or be a
&#147;Benefited Enterprise&#148;, if qualified, without prior application and approval).
This status confers certain benefits including tax benefits. The existing facilities of
our wholly owned subsidiary, BOScom, have been designated as Approved Enterprises. If we
attain taxable income in Israel, these tax benefits will help reduce BOScom&#146;s tax
burden. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
order to maintain our eligibility for the tax benefits BOScom receives, BOScom must continue to
satisfy certain conditions, including making certain investments in fixed assets and operations and
achieving certain levels of exports. If BOScom fails to satisfy such conditions in the future, BOScom
could be required to refund tax benefits which may have been received, with interest and linkage
differences to the Israeli Consumer Price Index. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Government authorities have indicated that the government may reduce or eliminate
these benefits in the future. A termination or reduction of certain programs and tax
benefits (particularly benefits available to BOScom as a result of the Approved Enterprise
status of the BOScom&#146;s facilities and programs) would have a material adverse effect
on the Company&#146;s business, operating results and financial condition. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>The anti-takeover effects
of Israeli laws may delay or deter a change of control of the Company. </I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Israeli Companies Law, a merger is generally required to be approved by the
shareholders and Board of Directors of each of the merging companies. Shareholder approval
isn&#146;t required if the company that will not survive is controlled by the surviving
company. Additionally, the law provides some exceptions to the shareholder approval
requirement in the surviving company. Shares held by a party to the merger and certain of
its affiliates are not counted towards the required approval. If the share capital of the
company that will not be the surviving company is divided into different classes of
shares, the approval of each class is also required. A merger may not be approved if the
surviving company will not be able to satisfy its obligations. At the request of a
creditor, a court may block a merger on this ground. In addition, a merger can be
completed only after all approvals have been submitted to the Israeli Registrar of
Companies, provided that 30 days have elapsed since shareholder approval was received and
50 days have passed from the time that a proposal for approval of the merger was filed
with the Registrar. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Companies Law provides that an acquisition of shares in a public company must be
made by means of a tender offer, if as a result of the acquisition, the purchaser would
become a holder of 25% or more of the voting power at general meetings, and no other
shareholder owns a 25% stake in the Company. Similarly, the Israeli Companies Law provides
that an acquisition of shares in a public company must be made by means of a tender offer
if, as a result of the acquisition, the purchaser would become a holder of 45% or more of
the voting power at general meetings, unless someone else already holds 45% of the voting
power. An acquisition from a 25% or 45% holder, which turns the purchaser into a 25% or
45% holder respectively, does not require a tender offer. An exception to the tender offer
requirement may also apply when the additional voting power is obtained by means of a
private placement approved by the general meeting of shareholders. These rules also do not
apply if the acquisition is made by way of a merger. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Companies Law also provides specific rules and procedures for the acquisition of
shares held by minority shareholders, if the majority shareholder shall hold more than 90%
of the outstanding shares. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
laws may have the effect of delaying or deterring a change in control of the Company,
thereby limiting the opportunity for shareholders to receive a premium for their shares
and possible affecting the price that some investors are willing to pay for the
Company&#146;s securities. </FONT></P>

<p align=center>
<font size=2>13</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>All of our directors and
officers are non-U.S. residents and enforceability of civil liabilities against them is
uncertain.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
of our directors and officers reside outside of the United States. Service of process upon
them may be difficult to effect within the United States. Furthermore, because the
majority of our assets are located in Israel, any judgment obtained in the United States
against us or any of our directors and officers may not be collectible within the United
States. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risks related to our ordinary shares: </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Our share price has been
and may continue to be volatile, which could result in substantial losses for individual
shareholders.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
market price of our ordinary shares has been and may continue to be highly volatile and
subject to wide fluctuations. Since January 2005 through August 2006, the daily closing
price of our ordinary shares has ranged from $2.15 to $3.74 per share. We believe that
these fluctuations have been in response to a number of factors including the following,
some of which are beyond our control: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>actual
or anticipated variations in our quarterly operating results;</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>announcements
of technological innovations or new products or services or new pricing practices by
         us or our competitors;</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>increased
market share penetration by our competitors;</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>announcements
by us or our competitors of significant acquisitions, strategic partnerships, joint
         ventures or capital commitments;</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>additions
or departures of key personnel; and</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>sales
of additional ordinary shares.</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the stock market in general, and stocks of technology companies in particular,
have from time to time experienced extreme price and volume fluctuations. This volatility
is often unrelated or disproportionate to the operating performance of these companies.
These broad market fluctuations may adversely affect the market price of our ordinary
shares, regardless of our actual operating performance. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>The Company&#146;s shares
may be delisted from the Nasdaq Global Market if it does not meet Nasdaq&#146;s continued listing
requirements.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
late 2002 and early 2003 the Company received notice from the Nasdaq Stock Market that its
ordinary shares were subject to delisting from the Nasdaq National Market (recently
renamed the Nasdaq Global Market) for failure to meet Nasdaq&#146;s minimum bid price and
shareholders&#146; equity requirements ($10 million) for continued listing on the National
Market. As a result of the hearing requested by the Company and supplemental information
presented by the Company to the Nasdaq Listing Qualifications Panel by the Company, the
Panel determined to continue the listing of the Company&#146;s securities on the Nasdaq
National Market pursuant to a detailed exception to the Nasdaq National Market Rules, and
the Company successfully met all the conditions set forth in the exception. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
August 30, 2004, we received notice from the Nasdaq Stock Market that our ordinary shares
are subject to delisting from the Nasdaq National Market for failure to meet Nasdaq&#146;s
minimum market value of publicly held shares requirement ($5 million) for continued
listing on the National Market. On November 4, 2004, we were notified by Nasdaq that we
have regained compliance with this requirement. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
January 25, 2005, we received notice from the Nasdaq Stock Market that we were not in
compliance with the minimum $10 million shareholders&#146; equity requirement for
continued listing on the National Market. Following that notice, on January 28, 2005, we
received an additional notice indicating that based on further review of our financial
statements as they appeared in our filing on Form 6-K dated January 10, 2005, it was
determined that the shareholders&#146; equity was $10,601,000 on a pro forma basis as of
September 30, 2004. Therefore we were in compliance with the stockholders&#146; equity
requirement for continued listing on the National Market and the matter had been closed. </FONT></P>

<p align=center>
<font size=2>14</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
June 2, 2005, the Company again received notice from the Nasdaq Stock Market indicating
that based on the results for the period ended March 31, 2005, the shareholders&#146;
equity was $9,425,000, and accordingly not in compliance with the minimum $10,000,000
shareholders&#146; equity requirement for continued listing on the National Market. The
Company was requested to provide by June 17, 2005, its specific plan to achieve and
sustain compliance with the listing requirements. The Company subsequently submitted a
proposed plan of compliance to Nasdaq based upon completing a previously announced private
placement offering of its ordinary shares. On July 11, 2005, the Company was advised by
the Nasdaq Staff that contingent upon completion of the private placement by August 11,
2005, the Staff believed that the Company had provided a definitive plan evidencing its
ability to achieve and sustain compliance with the listing requirements. The private
placement took place in June 2005, and consequently the Company regained compliance with
Nasdaq&#146;s minimum $10,000,000 shareholders&#146; equity requirement for continued
listing on the National Market. However, the Company has been advised by Nasdaq Staff that
the Staff will continue to monitor its ongoing compliance with the stockholder&#146;s
equity requirement and, if at the time of the Company&#146;s next periodic report, the
Company does not evidence compliance, it may be subject to delisting. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
can be no assurance that we will be able to meet and continue to meet these or other
Nasdaq requirements to maintain our Nasdaq Global Market listing, in which case we will
have the right to apply for a transfer of our ordinary shares to the Nasdaq Capital
Market. </FONT></P>

<a name=zk104></a>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FORWARD-LOOKING
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
prospectus contains forward-looking statements that are intended to be, and are hereby
identified as, forward looking statements for the purposes of the safe harbor provisions
of the Private Securities Reform Act of 1995. These statements address, among other
things: our strategy; the anticipated development of our products; our anticipated use of
proceeds; our projected capital expenditures and liquidity; our development of additional
revenue sources; our development and expansion of relationships; the market acceptance of
our products; and our technological advancement. Actual results could differ materially
from those anticipated in these forward-looking statements as a result of various factors,
including all the risks discussed above and elsewhere in this prospectus. You should
therefore not rely on these forward-looking statements, which are applicable only as of
the date hereof. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
urge you to consider that statements which use the terms &#147;believe&#148;, &#147;do not
believe&#148;, &#147;expect&#148;, &#147;plan&#148;, &#147;intend&#148;,
&#147;estimate&#148;, &#147;anticipate&#148;, &#147;projections&#148;,
&#147;forecast&#148; and similar expressions are intended to identify forward-looking
statements. These statements reflect our current views with respect to future events and
are based on assumptions and are subject to risks and uncertainties. Except as required by
applicable law, including the federal securities laws of the United States, we do not
intend to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. We disclaim any obligation to publicly revise any
such statements to reflect any change in expectations or in events, conditions, or
circumstances on which any such statements may be based. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Market
data and forecasts used in this prospectus have been obtained from independent industry
sources. We have not independently verified the data obtained from these sources and we
cannot assure you of the accuracy or completeness of the data. Forecasts and other
forward-looking information obtained from these sources are subject to the same
qualifications and additional uncertainties accompanying any estimates of future market
size. </FONT></P>

<a name=zk114></a>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>RECENT DEVELOPMENTS</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
October 29, 2006, the Company&#146;s Board of Directors approved the raise by the Company of
equity of at least $3 million by way of a Rights Offering, the terms and conditions of
which shall be negotiated by management and subject to further Board approval.  In a
special general shareholders meeting, held on October 19, 2006, the Company&#146;s
shareholders resolved, that if the Company shall not be able to raise at least $3 million
via the Rights Offering, then the raise of equity by way of a public offering in Israel,
or alternatively, at management&#146;s discretion, by way of a private placement, is approved. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
October 4, 2006 the Company filed a draft prospectus with the Israeli Securities
Authority and the Tel Aviv Stock Exchange in connection with an underwritten offering to
the public in Israel of Ordinary Shares and Warrants.  This contemplated offering will
now be stayed pending the outcome of the abovementioned Rights Offering. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; On
September 27, 2006 the Company announced that Mr. Adiv Baruch, President and CEO of the
Company, has notified the Board that he shall be leaving the Company at the end of 2006.
The Company further announced that the new President and CEO will be Mr. Shmuel Koren. Mr.
Koren assumed his position on November 1, 2006. Mr. Baruch will continue to serve the
Company and support the incoming CEO, as well as serve on the Company&#146;s Board of
Directors, until the end of 2006, ensuring a smooth transition. </FONT></P>




<a name=zk105></a>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>USE OF PROCEEDS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
of the proceeds from the sale of the ordinary shares offered under this prospectus are for
the account of the selling shareholder. Accordingly, we will not receive any proceeds from
the sales of these shares other than the exercise price payable to us upon the exercise of
warrants held by the selling shareholder, unless the warrants are exercised in a
&#147;cashless&#148; exercise, in which case we will receive no proceeds upon such
exercise. </FONT></P>

<p align=center>
<font size=2>15</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<a name=zk106></a>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SELLING SHAREHOLDER </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This prospectus relates to up to
645,720 ordinary shares that may be offered for sale by the selling shareholder. The
ordinary shares are issuable upon the conversion of a convertible note due August 16, 2009
and upon the exercise of warrants to purchase up to 73,052 ordinary shares, both of which
were issued by BOS to Laurus Master Fund in a private placement transaction on August 16,
2006, and shares that are to be issued in lieu of cash interest payments on the
convertible note solely pursuant to the mandatory interest conversion feature of such
note. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
convertible note has an aggregate principal amount of $1.5 million and a conversion price
of $3.08 per share for the first $500,000 of principal amount payable thereunder (and any
related interest shares) and of $4.08 for any additional amount payable thereunder. The
principal amount of the note is repayable in monthly installments commencing as of
December 1, 2006, in the initial amount of $15,000 eventually increasing to $55,200. The
interest on the note is payable in monthly installments, together with the principal
monthly repayment. The principal and the interest may be paid in cash or, under certain
conditions described below, in ordinary shares. </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
note conversion price is subject to proportional adjustment in the event of stock splits,
combinations, subdivisions of the ordinary shares or if dividend is paid on the ordinary
shares in ordinary shares. In addition, if BOS issues stock in certain types of
transactions at a price lower than the initial conversion price, then the conversion price
will be adjusted to a lower price based on a weighted average formula. </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
convertible note bears interest at a fluctuating interest rate equal at all times to the
prime rate plus 1.5%, subject to reduction in any particular month, if the average closing
price of our ordinary shares for any five consecutive trading days during the fifteen days
immediately prior to the last business day of the previous month, exceeded the conversion
price by at least 25%. The interest reduction rate is 100 basis points (1.0%) for each
incremental twenty five percent increase, or 200 basis points (2.0%) for such increase, if
the ordinary shares shall have already been, at that time, registered pursuant to an
effective registration statement. </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
month, the note holder may elect to convert all or a portion of the convertible note
monthly payments (comprised of principal amortization and interest) into ordinary shares.
If the market price of the ordinary shares at the time of payment is at least 10% greater
than the conversion price per ordinary share, the monthly payment shall be made in the
form of ordinary shares, and the ordinary shares issuable upon such mandatory interest
conversion are registered hereunder for sale by Laurus. </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
our registration rights agreement with Laurus, a delay in the effectiveness of the
registration of our ordinary shares beyond a certain date subjects us to payment to Laurus
of liquidated damages equal to 1.0% of the outstanding principal amount of the note for
each thirty day period of delay (prorated for partial periods). </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
note is secured by a first priority floating charge on all of our company&#146;s assets, present and
future as they may be changing from time to time; and by a first priority fixed charge on all of our
company&#146;s right, title and interest in our wholly-owned subsidiaries, BOScom Ltd. and Quasar Telecom
(2004) Ltd. </FONT>
</TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
floating charge allows the company to carry on its business in the ordinary way. Upon an
event of default, the floating charge would attach to our assets at that time, granting
Laurus a security interest in these assets. The fixed charge is a security interest over
specific assets. A first priority charge takes priority over all other charges and over
unsecured creditors.  The creditor is able to realize the  charge by seizing and usually
selling the asset to discharge the debt that the charge secures. Any such action would
require us to curtail or cease operations. </FONT></P>




<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
warrants are exercisable at an exercise price of $4.04 for the first 24,350 shares
acquirable thereunder and at $5.30 per share for any additional shares acquirable under
the warrants The warrants may be exercised in whole or in part, and payment of the
exercise price may be made either in cash or in a &#147;cashless&#148; exercise (or in a
combination of both methods). The warrant exercise price is also subject to proportional
adjustment in the event of combinations, subdivisions of the ordinary shares or if
dividend is paid on the ordinary shares in ordinary shares. </FONT>
</TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>16</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conversion
of the note and exercise of the warrants are limited as follows: at no time shall the note
be convertible (or the warrants be exercised) into that number of ordinary shares which,
when added to the number of ordinary shares otherwise beneficially owned by the note (or
warrants) holder, exceed (i) 4.99% of our outstanding ordinary shares, or (ii) 25% of the
aggregate dollar trading volume of the ordinary shares for the 30-day trading period
immediately preceding the conversion or exercise notice. These limitations expire,
however, in an event of default under the note or with 75 days prior notice by the holder,
provided that in no time shall the holder&#146;s beneficial ownership of ordinary shares
exceed 19.9% of our ordinary shares. In addition, the number of ordinary shares issuable
under the note and/or the warrants, together with the number of ordinary shares issuable
under the note and/or warrants which were purchased by the Selling Shareholder on
September 29, 2005, shall not exceed an aggregate of 1,270,720 ordinary shares. </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
exercise price of the warrant is subject to proportional adjustment in the event of
combinations, subdivisions of the ordinary shares or if dividend is paid on the ordinary
shares in ordinary shares. Exercise of the warrant is limited as follows: at no time shall
the warrant be exercised into that number of ordinary shares which, when added to the
number of ordinary shares otherwise beneficially owned by the holder, exceed (i) 4.99% of
our outstanding ordinary shares, or (ii) 25% of the aggregate dollar trading volume of the
ordinary shares for the 30-day trading period immediately preceding the exercise notice.
These limitations expire, however, with 75 days prior notice by the holder, provided that
in no time shall the holder&#146;s beneficial ownership of ordinary shares exceed 19.9% of
our ordinary shares. </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
table below sets forth certain information concerning the number of ordinary shares and
warrants owned by the selling shareholder as of August 31, 2006, and the number of
ordinary shares and warrants that may be offered from time to time by the selling
shareholder under this prospectus. Because the selling shareholder may offer all or some
portion of the ordinary shares, BOS has assumed for the purposes of the table below that
the selling shareholder will sell all of the ordinary shares it has acquired from us. </FONT></P>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Shares Owned or Underlying<BR>
Convertible Securities<BR>
Prior to Offering</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Shares Being<BR>
Offered</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Shares Beneficially Owned<BR>
After the Offering</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Number(1)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Percent (1)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Number</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Percent</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=27% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Laurus Master Fund,</B> </FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Ltd. (2)</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>825 Third Avenue,</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14th Floor</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>New York, NY 10022</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,400,720</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20.89</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>645,720</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Calculated
based upon 6,702,534 ordinary shares outstanding as of June 30, 2006. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Laurus
Capital Management, LLC is the investment manager of Laurus Master Fund           Ltd.,
and in accordance with Rule 13d-3 under the Securities Exchange Act of           1934, as
amended, may be deemed a control person of the ordinary shares owned by           Laurus
Master Fund Ltd. Messrs. David Grin and Eugene Grin are the managing           members of
Laurus Capital Management, LLC and as such share sole voting and           investment
control over the ordinary shares owned by Laurus Master Fund Ltd.,           and each
disclaims beneficial ownership of such shares. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Number
of shares represents the maximum number of shares receivable by Laurus           Master
Fund, Ltd. upon th full conversion of notes and exercise of warrants it           holds
into ordinary shares. However, the terms of the notes and the warrants
          expressly limit the number of shares into which Laurus can convert or exercise,
          ane beneficially own at any one time pursuant to such conversion or exercises
          (as defined in Rule 13d-3 of thd Securities Exchange Act of 1934, as amended)
to           4.99% of the total outstanding ordinary shares. These limitations expire,
          however, with 75 days prior notice by Laurus, provided that in no time shall
          Lauruse beneficial ownership of ordinary shares exceed 19.9% of our ordinary
          shares. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>17</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<a name=zk107></a>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>DESCRIPTION OF
ORDINARY SHARES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following is a summary
description of our Ordinary Shares under our Articles of Association. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Dividend and Liquidation Rights.
</I> All holders of paid-up Ordinary Shares of the Company have an equal right to
participate in a distribution of (i) dividends, whether by cash or by bonus shares; (ii)
Company assets; and (iii) the Company&#146;s surplus assets upon winding up, all pro rata
to the nominal value of the shares held by them. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors may issue shares and other securities, which are convertible or
exercisable into shares, up to the limit of the Company&#146;s authorized share capital. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company&#146;s Board of Directors is the organ authorized to decide upon the distribution
of dividends or bonus shares. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Voting, Shareholders&#146;
Meetings, Notices and Resolutions. </I> Holders of paid-up Ordinary Shares have one vote
for each share held on all matters submitted to a vote of shareholders. Such voting rights
may be affected in the future by the grant of any special voting rights to the holders of
a class of shares with preferential rights. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
quorum required for a general meeting of shareholders (whether annual or special) consists
of at least two shareholders present in person or by proxy/voting instrument and holding,
or representing, at least 33?% of the voting rights of the issued share capital. A meeting
adjourned for lack of quorum shall be postponed by one week, to the same day, time and
place, or to a later time if stated in the invitation to the meeting or in the notice of
the meeting. The quorum for the commencement of the adjourned meeting shall be any number
of participants. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless
otherwise determined by the Israeli Companies Law 1999 or the Company&#146;s Articles of
Association, a resolution requires approval by the holders of a majority of the shares
represented at the meeting, in person or by proxy, and voting thereon. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Companies Law 1999 requires that certain transactions, actions and arrangements be
approved by shareholders, including (i) arrangements with a director as to the terms of
his office and compensation and arrangements for insurance, exemption and indemnity of
directors; (ii) certain Extraordinary Transactions (as defined in the Companies Law) of
the Company with its controlling shareholders or any Extraordinary Transaction in which a
controlling shareholder has a personal interest; (iii) certain private placements; and
(iv) any action or Extraordinary Transaction in which the majority of the members of the
Board of Directors have a personal interest. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
shareholder of record is entitled to receive at least a 21 day prior notice of
shareholders&#146; meetings. The accidental omission to give notice of a meeting to any
member, or the non receipt of notice sent to such member, shall not invalidate the
proceedings at such meeting. For purposes of determining the shareholders entitled to
notice and to vote, the Board of Directors may fix a record date subject to the provisions
of the law. Currently, Israeli law provides that the record date not be any earlier than
40 days prior to the meeting. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Transfer of Shares. </I> Fully
paid Ordinary Shares may be transferred freely. The transfer of Ordinary Shares not fully
paid up requires the approval of the Board of Directors. </FONT></P>

<p align=center>
<font size=2>18</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Modification of Class Rights. </I>
Subject to the provisions of any law, the rights attached to any class (unless otherwise
provided by the terms of issue of such class), such as voting, rights to dividends and the
like, may be altered after a resolution is passed by the Company, with the approval of a
resolution passed by a majority of the voting power present by person or proxy and voting
hereon at a general meeting of the holders of the shares of such class, or the written
agreement of all the class holders. The rights vested in the holders of shares of a
particular class that were issued with special rights shall not be deemed to have been
altered by the creation or issue of further shares ranking equally with them, unless
otherwise provided in such shares&#146; issue terms. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Election of Directors</I>. The
Company&#146;s directors are elected by the shareholders at a shareholders&#146; meeting.
The Ordinary Shares do not have cumulative voting rights in the election of directors. The
holders of Ordinary Shares conferring more than 50% of the voting power present by person
or by proxy at the shareholders&#146; meeting, have the power to elect the directors. The
directors elected shall hold office until the next annual meeting, or sooner if they cease
to hold office pursuant to the provisions of the Company&#146;s Articles. In addition, the
Board of Directors may appoint a director (to fill a vacancy or otherwise) between
shareholder meetings, and such appointment shall be valid until the next annual meeting or
until such appointee ceases to hold office pursuant to the provisions of the
Company&#146;s Articles. In compliance with the Companies Law, the Company has two
external directors. The external directors are also appointed by the shareholders and
their term of office is three years. </FONT></P>


<a name=zk108></a>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PLAN OF DISTRIBUTION </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
selling shareholder and any of its pledgees, donees, assignees, transferees, and
successors in interest, may sell any or all of their securities from time to time on any
stock exchange or automated interdealer quotation system on which the securities are
listed, in the over-the-counter market, in privately negotiated transactions or otherwise,
at fixed prices that may be changed, at market prices prevailing at the time of sale, at
prices related to prevailing market prices or at prices otherwise negotiated. The selling
shareholder may sell the securities by one or more of the following methods, without
limitation: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>block
trades in which the broker or dealer so engaged will attempt to sell the securities as
agent but may position and resell a portion of the block as principal to facilitate the
transaction; </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>purchases
by a broker or dealer as principal and resale by the broker or dealer for its own account
         pursuant to this prospectus;</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>an
exchange distribution in accordance with the rules of any stock exchange on which the
securities          are listed;</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchases,
which may include long sales or short sales effected after the effective date of the
prospectus of which this registration statement is part; </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>privately
negotiated transactions;</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>"at
the market" or through market makers or into an existing market for the shares;</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>through
the writing or settlement of options or other hedging transactions on the securities,
         whether through an options exchange or otherwise;</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>through
the distribution of the securities by the selling shareholder to its partners, members or
         shareholders;</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>one
or more underwritten offerings on a firm commitment or best efforts basis;</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>any
combination of any of these methods of sale; and</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>any
other method permitted pursuant to applicable law.</FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>19</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
selling shareholder may also transfer the securities by gift. We do not know of any
arrangements by the selling shareholder for the sale of any of the securities. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
selling shareholder may engage brokers and dealers, and any brokers or dealers may arrange
for other brokers or dealers to participate in effecting sales of the securities. These
brokers, dealers or underwriters may act as principals, or as an agent of the selling
shareholder. Broker-dealers may agree with the selling shareholder to sell a specified
number of the securities at a stipulated price per security. If the broker-dealer is
unable to sell securities acting as agent for the selling shareholder, it may purchase as
principal any unsold securities at the stipulated price. Broker-dealers who acquire
securities as principals may thereafter resell the securities from time to time in
transactions in any stock exchange or automated interdealer quotation system on which the
securities are then listed, at prices and on terms then prevailing at the time of sale, at
prices related to the then-current market price or in negotiated transactions.
Broker-dealers may use block transactions and sales to and through broker-dealers,
including transactions of the nature described above. The selling shareholder may also
sell the securities in accordance with Rule 144 under the Securities Act, rather than
pursuant to this prospectus, regardless of whether the securities are covered by this
prospectus. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
time to time, the selling shareholder may pledge, hypothecate or grant a security interest
in some or all of the securities owned by it. The pledgees, secured parties or persons to
whom the securities have been hypothecated will, upon foreclosure in the event of default,
be deemed to be selling shareholders. The number of the selling shareholder&#146;s
securities offered under this prospectus will decrease as and when it takes such actions.
The plan of distribution for a selling shareholder&#146;s securities will otherwise remain
unchanged. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the extent required under the Securities Act, the aggregate amount of the selling
shareholder&#146;s securities being offered and the terms of the offering, the names of
any agents, brokers, dealers or underwriters and any applicable commission with respect to
a particular offer will be set forth in an accompanying prospectus supplement. Any
underwriters, dealers, brokers or agents participating in the distribution of the
securities may receive compensation in the form of underwriting discounts, concessions,
commissions or fees from the selling shareholder and/or purchasers of selling
shareholders&#146; securities, for whom they may act (which compensation as to a
particular broker-dealer might be in excess of customary commissions). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
selling shareholder and any underwriters, brokers, dealers or agents that participate in
the distribution of the securities may be deemed to be &#147;underwriters&#148; within the
meaning of the Securities Act, and any discounts, concessions, commissions or fees
received by them and any profit on the resale of the securities sold by them may be deemed
to be underwriting discounts and commissions. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
selling shareholder may enter into hedging transactions with broker-dealers and the
broker-dealers may engage in short sales of the securities in the course of hedging the
positions they assume with the selling shareholder, including, without limitation, in
connection with distributions of the securities by those broker-dealers. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
anti-manipulation provisions of Regulation M under the Exchange Act will apply to
purchases and sales of ordinary shares by the selling shareholder. Under Regulation M, the
selling shareholder or its agents may not bid for, purchase, or attempt to induce any
person to bid for or purchase our ordinary shares while the selling shareholder is
distributing ordinary shares covered by this prospectus. The selling shareholder is not
permitted to cover short sales by purchasing ordinary shares while the distribution is
taking place. Furthermore, Regulation M provides for restrictions on market-making
activities by persons engaged in the distribution of the ordinary shares. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
selling shareholder may enter into option or other transactions with broker-dealers that
involve the delivery of the securities offered hereby to the broker-dealers, who may then
resell or otherwise transfer those securities. The selling shareholder may also loan or
pledge the securities offered hereby to a broker-dealer and the broker-dealer may sell the
securities offered hereby so loaned or upon a default may sell or otherwise transfer the
pledged securities offered hereby. </FONT></P>

<p align=center>
<font size=2>20</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have agreed to indemnify in certain circumstances the selling shareholder of the
securities covered by the registration statement, against certain liabilities, including
liabilities under the Securities Act. The selling shareholder has agreed to indemnify us
in certain circumstances against certain liabilities, including liabilities under the
Securities Act. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
securities offered hereby were originally issued to the selling shareholder pursuant to an
exemption from the registration requirements of the Securities Act. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have agreed to pay certain fees and expenses in connection with this offering, not
including any selling commissions. We will not receive any proceeds from sales of any
securities by the selling shareholder. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
cannot assure you that the selling shareholder will sell all or any of the securities
offered for sale under this prospectus. </FONT></P>

<a name=zk109></a>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>VALIDITY OF SECURITIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
validity of the ordinary shares, including the ordinary shares issuable upon conversion of
the note and the exercise of the warrants, will be passed upon for us by Amit, Pollak,
Matalon &amp; Co., our Israeli counsel. </FONT></P>

<a name=zk110></a>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>EXPERTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
consolidated financial statements, included in our Annual Report on Form 20-F for the year
ended December 31, 2005, as amended, have been audited by Kost Forer Gabbay &amp;
Kasierer, independent registered public accounting firm and a member of Ernst &amp; Young
Global as set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated statements are incorporated herein by reference in reliance
upon such report given on the authority of such firm as experts in auditing and
accounting. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
consolidated financial statements of our consolidated subsidiary Odem Electronic
Technologies 1992 Ltd., for the year ended December 31, 2004, as amended have been audited
by Kesselman &amp; Kesselman, independent registered public accounting firm and a member
of PricewaterhouseCoopers, as set forth in their report thereon included in our Annual
Report on Form 20-F for the year ended December 31, 2005, as amended and incorporated
herein by reference. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
value attributed to our holdings in Surf Communication Systems Ltd., was supported by an
external valuation prepared by Variance Economic Consulting Ltd. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
value attributed to our holdings in Qualmax Inc. was supported by an external valuation
prepared by Melnik Oded Business Advisory Ltd. </FONT></P>

<a name=zk111></a>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>WHERE YOU CAN FIND
MORE INFORMATION </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have filed with the SEC a registration statement on Form F-3 under the Securities Act,
with respect to the securities offered by this prospectus. However, as is permitted by the
rules and regulations of the SEC, this prospectus, which is part of our registration
statement on Form F-3, omits certain non-material information, exhibits, schedules and
undertakings set forth in the registration statement. For further information about us,
and the securities offered by this prospectus, please refer to the registration statement. </FONT></P>

<p align=center>
<font size=2>21</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended, or the Exchange Act, that are applicable to a foreign private issuer. In
accordance with the Exchange Act, we file reports, including annual reports on Form 20-F
by June 30 of each year. We also furnish to the SEC under cover of Form 6-K material
information required to be made public in Israel, filed with and made public by any stock
exchange or distributed by us to our shareholders. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
registration statement on Form F-3 of which this prospectus forms a part, including the
exhibits and schedules thereto, and reports and other information filed by us with the SEC
may be inspected without charge and copied at prescribed rates at the SEC&#146;s Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Copies of this material are
also available by mail from the Public Reference Section of the SEC, at 100 F. Street,
N.E., Washington D.C. 20549, at prescribed rates. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site that contains reports, proxy and information statements, and
other information regarding issuers, such as us, that file electronically with the SEC
(http://www.sec.gov). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing
the furnishing and content of proxy statements to shareholders and our officers, directors
and principal shareholders are exempt from the &#147;short-swing profits&#148; reporting
and liability provisions contained in Section 16 of the Exchange Act and related Exchange
Act rules. </FONT></P>


<a name=zk112></a>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
SEC allows us to &#147;incorporate by reference&#148; the information we file with or
submit to it, which means that we can disclose important information to you by referring
to those documents. The information incorporated by reference is considered to be part of
this prospectus, and later information filed with or submitted to the SEC will update and
supersede this information. We incorporate by reference into this prospectus the documents
listed below: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (a) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our
annual report on Form 20-F for the fiscal year ended December 31, 2005, filed with the SEC
on June 28, 2006 and the amendments to such annual report, filed with the SEC on September
7, 2006, on October 30, 2006 and on November 30, 2006 (SEC File No. 001-14184); </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
description of our ordinary shares contained in our registration statement           on
Form 8-A filed with the SEC on April 1, 1996, as amended by the description           of
our ordinary shares contained in a Form 6-K filed on August 22, 2006; and </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (c) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our
current reports on Form 6-K filed with the SEC on August 22, 2006, September 7, 2006,
September 27, 2006, October 4, 2006, October 19, 2006, October 30, 2006 and November 20,
2006. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, all subsequent annual reports on Form 20-F filed prior to the termination of
this offering and any reports on Form 6-K subsequently submitted to the SEC or portions
thereof that we specifically identify in such forms as being incorporated by reference
into the registration statement of which this prospectus forms a part, shall be considered
to be incorporated into this prospectus by reference and shall be considered a part of
this prospectus from the date of filing or submission of such documents. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
you read the above documents, you may find inconsistencies in information from one
document to another. If you find inconsistencies between the documents and this
prospectus, you should rely on the statements made in the most recent document. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
will deliver to each person (including any beneficial owner) to whom this prospectus has
been delivered a copy of any or all of the information that has been incorporated by
reference into this prospectus but not delivered with this prospectus. We will provide
this information upon written or oral request, and at no cost to the requester. Requests
should be directed to: </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B.O.S.
Better Online Solutions Ltd. <BR>
Beit Rabin, BOS Road <BR>
Teradyon Industrial Park, <BR>
Misgav 20179, Israel </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>         Tel.: </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(+972)
4-990-7555</FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>         Fax: </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(+972)
4-999-0334</FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>         Attn.: </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nehemia
Kaufman, CFO</FONT></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>22</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<a name=zk113></a>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ENFORCEABILITY OF
CIVIL LIABILITIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have been informed by our legal counsel in Israel, Amit, Pollak, Matalon &amp; Co., that
there is doubt concerning the enforceability of civil liabilities under the Securities Act
and the Exchange Act in original actions instituted in Israel. However, subject to
specified time limitations, Israeli courts may enforce a United States final executory
judgment in a civil matter, including a monetary or compensatory judgment in a non-civil
matter, obtained after due process before a court of competent jurisdiction according to
the laws of the state in which the judgment is given and the rules of private
international law currently prevailing in Israel. The rules of private international law
currently prevailing in Israel do not prohibit the enforcement of a judgment by Israeli
courts provided that: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
judgment is enforceable in the state in which it was given;</FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>adequate
service of process has been effected and the defendant has had a reasonable opportunity
to                 present his arguments and evidence;</FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
judgment and the enforcement of the judgment are not contrary to the law, public policy,
security                 or sovereignty of the State of Israel;</FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
judgment was not obtained by fraud and does not conflict with any other valid judgment in
the                 same matter between the same parties; and</FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>an
action between the same parties in the same matter is not pending in any Israeli court at
the time the lawsuit is instituted in the foreign court. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have appointed Corporation Service Company<B> </B>as our agent to receive service of
process in any action against us in any competent court of the United States arising out
of this offering or any purchase or sale of securities in connection with this offering. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
a foreign judgment is enforced by an Israeli court, it generally will be payable in
Israeli currency, which can then be converted into non-Israeli currency and transferred
out of Israel. The usual practice in an action before an Israeli court to recover an
amount in a non-Israeli currency is for the Israeli court to issue a judgment for the
equivalent amount in Israeli currency at the rate of exchange in force on the date of the
judgment, but the judgment debtor may make payment in foreign currency. Pending
collection, the amount of the judgment of an Israeli court stated in Israeli currency
ordinarily will be linked to the Israeli consumer price index plus interest at an annual
statutory rate set by Israeli regulations prevailing at the time. Judgment creditors must
bear the risk of unfavorable exchange rates. </FONT></P>

<p align=center>
<font size=2>23</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BOS BETTER ONLINE
SOLUTIONS LTD. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Up to 645,720 Ordinary
Shares </FONT></H1>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PROSPECTUS </FONT></H1>

<p align=center>
<font size=2>24</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART II <BR>
INFORMATION NOT
REQUIRED IN PROSPECTUS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 8.
INDEMNIFICATION OF DIRECTORS AND OFFICERS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR"  -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consistent
with the provisions of the Israeli Companies Law, 1999 (the &#147;Companies Law&#148;),
the amended Articles of the Registrant include provisions permitting the Registrant to
procure insurance coverage for its &#147;office holders&#148;, exempt them from certain
liabilities and indemnify them, to the maximum extent permitted by law. An &#147;office
holder&#148; is defined in the Companies Law and the Articles as a director, managing
director, chief business manager, executive vice president, vice president, other manager
reporting directly to the managing director and any other person assuming the
responsibilities of any of the foregoing positions without regard to such person&#146;s
title. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INSURANCE </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR"  -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Companies Law, a company may obtain insurance for any of its office holders for: (i) a
breach of his duty of care to the company or to another person; (ii) a breach of his duty
of loyalty to the company provided that the office holder acted in good faith and had
reasonable cause to assume that his act would not prejudice the company&#146;s interests;
or (iii) a financial liability imposed upon him in favor of another person concerning an
act preformed by him in his capacity as an office holder. <BR><BR>The Registrant has obtained
directors&#146; and officers&#146; liability insurance covering its officers and directors
and those of its subsidiaries. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INDEMNIFICATION </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Companies Law provides that a company may indemnify an officer holder against: (i) a
financial liability imposed on him in favor of another person by any judgment concerning
an act preformed in his capacity as an office holder; (ii) reasonable litigation expenses,
including attorneys&#146; fees, expended by the office holder or charged to him by a court
relating to an act preformed in his capacity as an office holder in connection with: (a)
proceedings the company institutes against him or instituted on its behalf or by another
person; (b) a criminal charge from which he was acquitted; (c) a criminal charge in which
he was convicted for a criminal offence that does not require proof of criminal intent;
and (d) an investigation or a proceeding instituted against him by an authority competent
to administrate such an investigation or proceeding that ended without the filing of an
indictment against the office holder and, either without any financial obligation imposed
on the office holder in lieu of criminal proceedings; or with financial obligation imposed
on him in lieu of criminal proceedings, in a crime which does not require proof of
criminal intent. The Articles of the Registrant authorize the Registrant to indemnify its
office holders to the fullest extent permitted under the law. The Companies Law also
authorizes a company to undertake in advance to indemnify an office holder with respect to
events specified above, provided that, with respect to indemnification under sub-section
(i) above, the undertaking: (a) is limited to events which the board of directors
determines can be anticipated, based on the activity of the Company at the time the
undertaking is given; (b) is limited in amount or criteria determined by the board of
directors to be reasonable for the circumstances; and (c) specifies the abovementioned
events, amounts or criteria. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR"  -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have entered into indemnification agreements with directors and some officers providing
for indemnification under certain circumstances for acts and omissions which may not be
covered (or not be covered in full) by any directors&#146; and officers&#146; liability
insurance. Such indemnification agreement appears in exhibit 4.1 of our Annual Report on
Form 20-F filed with the Securities and Exchange Commission on June 28, 2006. </FONT></P>

<p align=center>
<font size=2>25</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EXEMPTION </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Companies Law, an Israeli company may not exempt an office holder from liability for a
breach of his duty of loyalty, but may exempt in advance an office holder from his
liability to the company, in whole or in part, for a breach of his duty of care, provided
that in no event shall the office holder be exempt from any liability for damages caused
as a result of a breach of his duty of care to the company in the event of a
&#147;distribution&#148; (as defined in the Companies Law). The Articles authorize
Registrant to exempt any office holder from liability to the Registrant to the extent
permitted by law. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Both
the Companies Law and the Articles provide that the Registrant may not exempt or indemnify
an office holder nor enter into an insurance contract which would provide coverage for
liability incurred as a result of any of the following: (a) a breach by the office holder
of his duty of loyalty (however, the Registrant may insure and indemnify against such
breach if the office holder acted in good faith and had a reasonable basis to assume that
the act would not harm the Registrant); (b) a breach by the office holder of his duty of
care if the breach was done intentionally or recklessly, unless made in negligence only;
(c) any act done with the intent to derive an illegal personal benefit; or (d) any fine or
monetary penalty levied against the office holder. </FONT></P>

<p align=center>
<font size=2>26</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 9. EXHIBITS </FONT></H1>




<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH="12%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Exhibit No.</B> </FONT> <HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TD>
<TD WIDTH="88%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Description</B> </FONT> <HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.1*  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Articles
of Association </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.1***  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Secured
Convertible Term Note </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.2***  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Ordinary
Shares Purchase Warrant </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.3**  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Form
of share certificate. </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.4***  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Registration
Rights Agreement by and between the Company and Laurus Master Fund dated August
                        16, 2006. </FONT></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.5**  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Master
Security Agreement by and between the Company and Laurus Master Fund dated August 16,
                        2006 and related debentures (Fixed Charge and Floating Charge) </FONT></TD>
</TR>
</TABLE>





<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5.1***  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Opinion
of Amit,  Pollak,  Matalon &amp; Co.  Israeli  counsel for B.O.S Better  Online  Solutions
                        Ltd., as to the validity of the ordinary shares. </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 23.1***  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Consent
of Amit, Pollak, Matalon &amp; Co. (included in Exhibit 5.1). </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 23.2***  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Consent
of Kost Forer Gabbay &amp; Kasierer, a Member Firm of Ernst &amp; Young Global. </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 23.3***  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Consent
of Kesselman &amp; Kesselman, a member of PricewaterhouseCoopers International Limited. </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 23.4***  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Consent
of Variance Economic Consulting Ltd. </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 23.5***  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Consent
of Melnik Oded Business Advisory Ltd. </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 24.1***  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Power
of Attorney (included on signature page). </FONT></TD>
</TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="Footnote Rule-TNR" FSL="Workstation" -->
<HR SIZE=1 NOSHADE WIDTH=15% ALIGN=LEFT>

<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> *  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Incorporated
by reference to Exhibit 1.2 of the Company's Annual Report on Form 20-F filed with
       the SEC on June 28, 2006. </FONT></TD>
</TR>
</TABLE>




<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> **  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Previously
filed with the SEC on November 24, 2003 as Exhibit 4.1 to the Company&#146;s Registration
Statement on Form S-8, SEC File Number 333-110696, and incorporated herein by reference. </FONT></TD>
</TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> ***  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Previously
filed. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 10. UNDERTAKINGS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
undersigned registrant hereby undertakes: </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To
file, during any period in which offers or sales are being made, a
          post-effective amendment to this registration statement: </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To
include any prospectus required by Section 10(a)(3) of the Securities Act of
          1933;  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To
reflect in the prospectus any facts or events arising after the effective           date
of the registration statement (or the most recent post- effective amendment
          thereof) which, individually or in the aggregate, represent a fundamental
change           in the information set forth in the registration statement.
Notwithstanding the           foregoing, any increase or decrease in volume of securities
offered (if the           total dollar value of securities offered would not exceed that
which was           registered) and any deviation from the low or high end of the
estimated maximum           offering range may be reflected in the form of prospectus
filed with the           Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume           and price represent no more than a 20% change in the maximum
aggregate offering           price set forth in the &#147;Calculation of Registration Fee&#148; table
in the           effective registration statement;  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To
include any material information with respect to the plan of distribution           not
previously disclosed in the registration statement or any material change to
          such information in the registration statement;  </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>27</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<I>provided,
however,</I> that Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not
apply if the registration statement is on Form S-3 or Form F-3 and the information
required to be included in a post-effective amendment by those paragraphs is contained in
reports filed with or furnished to the Commission by the registrant pursuant to section
13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement, or is contained in a form of prospectus filed
pursuant to Rule 424(b) that is part of the registration statement.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>That,
for the purpose of determining any liability under the Securities Act of           1933,
each such post-effective amendment shall be deemed to be a new           registration
statement relating to the securities offered therein, and the           offering of such
securities at that time shall be deemed
to be the initial bona fide offering thereof. </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To
remove from registration by means of a post-effective amendment any of the
          securities being registered which remain unsold at the termination of the
          offering. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To
file a post-effective amendment to the registration statement to include any
          financial statements required by Item 8.A of Form 20-F at the start of any
          delayed offering or throughout a continuous offering. Financial statements and
          information otherwise required by Section 10(a)(3) of the Act need not be
          furnished, provided that the registrant includes in the prospectus, by means of
          a post-effective amendment, financial statements required pursuant to this
          paragraph (a)(4) and other information necessary to ensure that all other
          information in the prospectus is at least as current as the date of those
          financial statements. Notwithstanding the foregoing, with respect to
          registration statements on Form F-3, a post-effective amendment need not be
          filed to include financial statements and information required by Section
          10(a)(3) of the Act Item 8.A of Form 20-F if such financial statements and
          information are contained in periodic reports filed with or furnished to the
          Commission by the registrant pursuant to Section 13 or Section l5(d) of the
          Securities Exchange Act of 1934 that are incorporated by reference in the Form
          F-3. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(5)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>That,
for the purpose of determining liability under the Securities Act of 1933           to
any purchaser: </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 2-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If
the registrant is relying on Rule 430B (Sec 230.430B of this chapter):  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 3-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A. </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be           deemed
to be part of the registration statement as of the date the filed           prospectus
was deemed part of and included in the registration statement; and  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 3-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B. </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or           (b)(7)
as part of a registration statement in reliance on Rule 430B relating to           an
offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of
          providing the information required by section 10(a) of the Securities Act of
          1933 shall be deemed to be part of and included in the registration statement
as           of the earlier of the date such form of prospectus is first used after
          effectiveness or the date of the first contract of sale of securities in the
          offering described in the prospectus. As provided in Rule 430B, for liability
          purposes of the issuer and any person that is at that date an underwriter, such
          date shall be deemed to be a new effective date of the registration statement
          relating to the securities in the registration statement to which that
          prospectus relates, and the offering of such securities at that time shall be
          deemed to be the initial bona fide offering thereof. Provided, however, that no
          statement made in a registration statement or prospectus that is part of the
          registration statement or made in a document incorporated or deemed
incorporated           by reference into the registration statement or prospectus that is
part of the           registration statement will, as to a purchaser with a time of
contract of sale           prior to such effective date, supersede or modify any
statement that was made in           the registration statement or prospectus that was
part of the registration           statement or made in any such document immediately
prior to such effective date;           or  </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 2-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If
the registrant is subject to Rule 430C, each prospectus filed pursuant to           Rule
424(b) as part of a registration statement relating to an offering, other           than
registration statements relying on Rule 430B or other than prospectuses           filed
in reliance on Rule 430A, shall be deemed to be part of and included in           the
registration statement as of the date it is first used after effectiveness.
          Provided, however, that no statement made in a registration statement or
          prospectus that is part of the registration statement or made in a document
          incorporated or deemed incorporated by reference into the registration
statement           or prospectus that is part of the registration statement will, as to
a purchaser           with a time of contract of sale prior to such first use, supersede
or modify any           statement that was made in the registration statement or
prospectus that was           part of the registration statement or made in any such
document immediately           prior to such date of first use.  </FONT></TD>
</TR>
</TABLE>
<BR>




<p align=center>
<font size=2>28</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
undersigned registrant hereby undertakes that, for purposes of determining
               any liability under the Securities Act of 1933, each filing of the
               registrant&#146;s annual report pursuant to Section 13(a) or Section 15(d)
of                the Securities Exchange Act of 1934 (and, where applicable, each filing
of an                employee benefit plan&#146;s annual report pursuant to Section l5(d)
of the                Securities Exchange Act of 1934) that is incorporated by reference
in the                registration statement shall be deemed to be a new registration
statement                relating to the securities offered therein, and the offering of
such securities                at that time shall be deemed to be the initial bona fide
offering thereof. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Insofar
as indemnification for liabilities arising under the Securities Act of
               1933 may be permitted to the directors, officers and controlling persons
of the                registrant pursuant to the provisions described under &#147;Item 8.
               Indemnification of Directors and Officers&#148; above, or otherwise, the
               registrant has been advised that in the opinion of the Securities and
Exchange                Commission such indemnification is against public policy as
expressed in the Act                and is, therefore, unenforceable. In the event that a
claim for indemnification                against such liabilities (other than the payment
by the registrant of expenses                incurred or paid by a director, officer or
controlling person of the registrant                in the successful defense of any
action, suit or proceeding) is asserted by such                director, officer or
controlling person in connection with the securities being                registered, the
registrant will, unless in the opinion of our counsel the matter                has been
settled by controlling precedent, submit to a court of appropriate
               jurisdiction the question whether such indemnification by it is against
public                policy as expressed in the Act and will be governed by the final
adjudication of                such issue. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>29</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SIGNATURES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Pursuant
to the  requirements  of the Securities  Act of 1933,  the registrant  certifies that it has
reasonable  grounds to believe that it meets all of the  requirements  for filing on Form F-3 and has duly
caused this Amendment No. 2 to be signed on its behalf by the undersigned,  thereunto duly authorized,  in
Misgav, in the State of Israel, on November 30, 2006. </FONT></P>



<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD ALIGN="Center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>B.O.S. Better Online Solutions Ltd.</B><BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR><BR>&nbsp;</FONT></TD>
</TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=34%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> /s/ Shmuel Koren<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Shmuel Koren<BR>President and Chief<BR>
Executive Officer </FONT></TD>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Nehemia Kaufman<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Nehemia Kaufman<BR>Chief Financial<BR>
Officer</FONT></TD>
</TR>
</TABLE>
<BR>




<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to the requirements of the
Securities Act of 1933, as amended, this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated: </FONT></P>




<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH="33%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>Signature</U></B> </FONT> </TD>
<TD WIDTH="34%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>Title</U></B> </FONT> </TD>
<TD WIDTH="33%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>Date</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>





<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Mr. Edouard Cukierman</FONT></TD>
<TD WIDTH="34%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chairman of the Board of Directors</FONT></TD>
<TD WIDTH="33%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> November 30, 2006 </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Mr. Adiv Baruch</FONT></TD>
<TD WIDTH="34%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Director </FONT></TD>
<TD WIDTH="33%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> November 30, 2006 </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Mr. Nehemia Kaufman</FONT></TD>
<TD WIDTH="34%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>           Chief Financial Officer          <BR>
(Principal Financial and Accounting Officer)
</FONT></TD>
<TD WIDTH="33%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> November 30, 2006 </FONT></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>



<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Mr. Joel Adler</FONT></TD>
<TD WIDTH="34%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
<TD WIDTH="33%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Mr. Ronen Zavlik</FONT></TD>
<TD WIDTH="34%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
<TD WIDTH="33%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> November 30, 2006 </FONT></TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Mr. Jean-Marc Bally</FONT></TD>
<TD WIDTH="34%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
<TD WIDTH="33%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> November 30, 2006 </FONT></TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Mr. Andrea Mandel-Mantello</FONT></TD>
<TD WIDTH="34%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
<TD WIDTH="33%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> November 30, 2006 </FONT></TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Mr. Avishai Gluck</FONT></TD>
<TD WIDTH="34%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
<TD WIDTH="33%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> November 30, 2006 </FONT></TD>
</TR>
</TABLE>
<BR>




<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Dr. Yael Ilan</FONT></TD>
<TD WIDTH="34%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
<TD WIDTH="33%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> November 30, 2006 </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Prof. Adi Raveh</FONT></TD>
<TD WIDTH="34%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD>
<TD WIDTH="33%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> November 30, 2006 </FONT></TD>
</TR>
</TABLE>
<BR>




<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Authorized Representative in the U.S.:</B><BR><BR>
Corporation Service Company<BR><BR>
<BR>By: *<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Name: John H. Pelletier<BR><BR>Title: Assistant Secretary<BR><BR> Date: November 30, 2006 </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
</TR>
</TABLE>
<BR>









<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> *By  /s/ Nehemia Kaufman<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Mr. Nehemia Kaufman<BR>(Attorney-in-Fact) </FONT></TD>
<TD WIDTH=34%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=22%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">



</body>
</html>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
