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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0001178913-07-002639.txt : 20071128
<SEC-HEADER>0001178913-07-002639.hdr.sgml : 20071128
<ACCEPTANCE-DATETIME>20071128090540
ACCESSION NUMBER:		0001178913-07-002639
CONFORMED SUBMISSION TYPE:	6-K/A
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20071128
FILED AS OF DATE:		20071128
DATE AS OF CHANGE:		20071128

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			BOS BETTER ONLINE SOLUTIONS LTD
		CENTRAL INDEX KEY:			0001005516
		STANDARD INDUSTRIAL CLASSIFICATION:	COMPUTER COMMUNICATIONS EQUIPMENT [3576]
		IRS NUMBER:				000000000
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		6-K/A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-14184
		FILM NUMBER:		071270170

	BUSINESS ADDRESS:	
		STREET 1:		20 FREIMAN STREET
		CITY:			RISHON LEZION
		STATE:			L3
		ZIP:			75100
		BUSINESS PHONE:		011-972-3-954-1000

	MAIL ADDRESS:	
		STREET 1:		20 FREIMAN STREET
		CITY:			RISHON LEZION
		STATE:			L3
		ZIP:			75100
</SEC-HEADER>
<DOCUMENT>
<TYPE>6-K/A
<SEQUENCE>1
<FILENAME>zk74552.htm
<TEXT>
<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        \\Backup\office\EDGAR Filing\BOS better online solutions Ltd\74552\a74552.eep -->
     <!-- Control Number: 74552                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   6-K/A                                                            -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>6-K/A</TITLE>
</HEAD>
<BODY>






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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="4"> <B>FORM
6 &#150; K/A</B> </FONT> <BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B> (Amendment No. 1) </B> </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="4"><B>SECURITIES AND EXCHANGE
COMMISSION</B> </FONT> </P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Washington, D.C. 20549 </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report of Foreign Issuer </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to Rule 13a
&#150; 16 or 15d &#150; 16 <BR>
of the Securities Exchange Act of 1934 </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2> For the Month of
November 2007 </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="5"><U><B>B.O.S. Better Online
Solutions Ltd.</B></U> </FONT> <BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Translation of
Registrant&#146;s Name into English) </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>20 Freiman Street,
Rishon LeZion, 75100, Israel  </U><BR>
(Address of Principal
Corporate Offices) </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark whether the
registrant files or will file annual reports under cover Form 20-F or Form 40-F. </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form 20-F <FONT size="3" face="Wingdings">x
</font> Form 40-F <FONT size="3" face="Wingdings">o
</font></FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark if the  registrant is  submitting  the Form 6-K in paper as permitted by Regulation
S-T Rule 101(b)(1): ___________
</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark if the  registrant is  submitting  the Form 6-K in paper as permitted by Regulation
S-T Rule 101(b)(7): ___________
</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark whether the registrant
by furnishing the information contained in this form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934. </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Yes <FONT size="3" face="Wingdings">o
</font> No <FONT size="3" face="Wingdings">x</font></FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">If &#147;Yes&#148; is marked,
indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): <U>N/A</U> </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>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> THIS IMMEDIATE REPORT ON FORM 6-K/A IS
HEREBY INCORPORATED BY REFERENCE INTO THE REGISTRANT&#146;S REGISTRATION STATEMENTS ON
FORM F-3 (NO. 333-130048) AND FORM S-8 (NOS. 333-136957, 333-110696, 333-100971 AND
333-11650), AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS SUBMITTED, TO
THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Attached hereto and incorporated by
reference are the Unaudited Interim Consolidated Financial Statements of the Registrant as
of June 30, 2007. </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> This report on Form 6-K/A amends
the Registrant's Unaudited Interim Consolidated Financial Statements as of June 30, 2007 originally furnished by the Registrant under Form 6-K on October 1, 2007.
This immediate report on Form 6-K/A is filed in order to correct and
supplement a description of a claim brought against&nbsp;B.O.S Better Online Solutions
Ltd. (&#147;BOS&#148;) by BosaNova EURL, a French company and former distributor
of&nbsp;BOS, in France. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In Note 8 to the Unaudited Financial
Statements it was mistakenly reported that the claim was filed in March 2005, for the
amount of 1.4 million Euros whereas the claim was served on BOS in April 2006, for
approximately 3.3 million Euros and additional remedies. &nbsp;Except for the
aforementioned, and an update on the claim in Note 11.b, no other changes have been made
to the Unaudited Interim Consolidated Financial Statements of BOS as of June 30, 2007. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Signature </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized. </FONT></P>










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<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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>B.O.S. Better Online Solutions Ltd.<BR>
(Registrant)<BR><BR>
<BR>By: /s/ Shmuel Koren<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Shmuel Koren<BR>President and CEO</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Dated: November 28, 2007 </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>

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     <P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>B.O.S.
          BETTER ONLINE SOLUTIONS LTD. AND ITS SUBSIDIARIES</B> </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AS OF JUNE 30, 2007 </FONT></H1>

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

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>UNAUDITED </FONT></H1>

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


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Page</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=89% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><A HREF="#zk101"><B>Consolidated Balance Sheets</B></A> </FONT></TD>
     <TD WIDTH=11% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2"><B>2 - 3</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><A HREF="#zk102"><B>Consolidated Statements of Operations</B></A> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2"><B>4</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><A HREF="#zk103"><B>Consolidated Statements of Cash Flows</B></A> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2"><B>5 - 6</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><A HREF="#zk104"><B>Notes to Interim Consolidated Unaudited Financial Statements</B></A> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2"><B>7 - 21</B> </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>

<A NAME=zk101></A>


<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD.<BR>AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CONSOLIDATED BALANCE SHEETS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands</B> </FONT></TD></TR>
</TABLE>
<BR>






<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>June<BR>
30, 2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>December <BR>31, 2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="72%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;ASSETS</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>CURRENT ASSETS:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Cash and cash equivalents</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  5,616</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  2,033</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Trade receivables</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>5,501</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>5,632</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Other accounts receivable and prepaid expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,041</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>858</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Inventories</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>4,570</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>4,017</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Total current assets</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>16,728</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>12,540</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>LONG-TERM ASSETS:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Severance pay fund</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>527</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>741</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Investment in other companies</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>8,082</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>8,082</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>24</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>65</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Total long-term assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>8,633</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>8,888</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>PROPERTY, PLANT AND EQUIPMENT, NET</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>561</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>520</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>CUSTOMER LIST, NET</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,527</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,629</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>GOODWILL</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>952</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>952</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>3,040</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>3,101</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 28,401</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 24,529</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>

<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>



<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD.<BR>AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CONSOLIDATED BALANCE SHEETS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands</B> </FONT></TD></TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>June<BR>
30, 2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>December<BR> 31, 2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="74%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;LIABILITIES AND SHAREHOLDERS' EQUITY</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>CURRENT LIABILITIES:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Short term bank loans</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   2,844</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   2,931</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Current maturities of long-term bank loans and convertible note</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>569</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,157</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Trade payables</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,890</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>3,844</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Employees and payroll accruals</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>438</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>460</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Deferred revenues</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>148</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>103</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Accrued expenses and other liabilities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>753</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>999</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2><U>Total</U> current liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>7,642</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>9,494</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>LONG-TERM LIABILITIES:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Bank loans (net of current maturities)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>982</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Convertible note (net of current maturities)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,171</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Deferred taxes</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>345</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>362</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Accrued severance pay</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>658</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>916</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Other long-term liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>237</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>237</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><U>Total</U> long-term liabilities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,222</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,686</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" colspan=7><FONT FACE="Times New Roman" SIZE=2>SHAREHOLDERS' EQUITY</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Ordinary shares of NIS 4.00 par value- Authorized: 35,000,000 shares at</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2> June 30, 2007 and December 31, 2006; Issued and Outstanding 9,601,033 and </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>6,744,798 shares at June 30, 2007 and December 31, 2006, respectively;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>9,346</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>6,571</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Additional paid-in capital</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>52,891</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>48,330</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Accumulated other comprehensive income</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>19</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>19</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Accumulated deficit</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(43,719</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(42,571</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><U>Total</U> shareholders' equity</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>18,537</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>12,349</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2><U>Total</U> liabilities and shareholder's equity</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  28,401</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  24,529</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes are an
integral part of the interim consolidated financial statements. </FONT></P>

<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>

<A NAME=zk102></A>


<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD.<BR>AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CONSOLIDATED STATEMENTS OF OPERATIONS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands, except per share data</B> </FONT></TD></TR>
</TABLE>
<BR>










<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>Six months ended<BR>
June 30,</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3 rowspan=2><FONT FACE="Times New Roman" SIZE=1>Year ended<BR> December
31,<BR> 2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     </TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="61%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Revenues</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  11,072</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   9,559</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  20,917</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Cost of revenues</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>8,666</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>7,240</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>16,200</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Gross profit</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,406</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,319</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>4,717</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Operating costs and expenses:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Research and development</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>222</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>289</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>486</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Sales and marketing</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,470</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>996</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,019</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;General and administrative</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>973</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,534</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>3,268</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Total operating costs and expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,665</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,819</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>5,773</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Operating  loss</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(259</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(500</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,056</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Financial expenses, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(354</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(206</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(626</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Expenses related to conversion of convertible note</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(611</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Other income (expenses), net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>31</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(39</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Loss before taxes on income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,193</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(745</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,682</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Tax benefit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>43</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>13</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>89</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Loss from continuing operations</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,150</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(732</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,593</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Income related to discontinued operations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>906</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,685</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Net income (loss)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  (1,150</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     174</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>      92</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Basic and diluted net loss per share from continuing operations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   (0.15</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   (0.10</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   (0.24</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Diluted net earnings per share from discontinued operations</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    0.13</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    0.25</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Basic and diluted net earnings (loss) per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   (0.15</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    0.03</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    0.01</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</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>The accompanying notes are an integral
part of the interim consolidated financial statements. </FONT></P>

<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>


<A NAME=zk103></A>


<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD.<BR>AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands Unaudited</B> </FONT></TD></TR>
</TABLE>
<BR>










<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="Bottom">
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN="6"><FONT FACE="Times New Roman" SIZE=1>Six months ended<BR>June 30, </FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN="3" ROWSPAN="2"><FONT FACE="Times New Roman" SIZE=1>Year ended<BR>
December 31,<BR>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN="Bottom">
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN="Bottom">
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN="6"><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="Bottom">
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="Bottom">
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="62%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><U>Cash flows from operating activities:</U> </FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="Bottom">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="Bottom">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Net income (loss)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> (1,150</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    174</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     92</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" COLSPAN="10"><FONT FACE="Times New Roman" SIZE=2>Adjustments to reconcile net income (loss) to</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" COLSPAN="10"><FONT FACE="Times New Roman" SIZE=2>&nbsp;net cash used in operating activities:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="Bottom">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Loss (income) from discontinued</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="Bottom">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;operations (see Note 1b)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(906</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,685</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Depreciation and amortization</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>158</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>200</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>378</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="Bottom">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Increase (decrease) in accrued severance pay, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(44</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(87</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(75</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Impairment of investment in company</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>39</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>39</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="Bottom">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Stock-based compensation to employees and directors</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>288</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>143</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>431</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Stock-based compensation related to warrants issued to service providers</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>262</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>296</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="Bottom">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Expenses related to conversion of convertible note</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>611</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" colspan=10><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Amortization of issuance expenses in connection with </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;long-term convertible note</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>99</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>51</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>162</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Decrease (increase) in trade receivables</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>132</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>379</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(788</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Increase in other accounts receivable and prepaid expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(285</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(131</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(595</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Decrease (increase) in inventories</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(553</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>67</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(697</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Increase (decrease) in trade payables</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,109</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(935</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>790</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT" COLSPAN="10"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Decrease in employees and payroll accruals, deferred revenues, accrued</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;expenses and other liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(223</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(546</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(231</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Decrease in deferred taxes</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(15</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(33</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(70</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN="3"></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="Bottom">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Net cash used in operating activities from continuing operations</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(2,091</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,323</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,953</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Net cash used in operating activities from discontinued operations</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(79</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(446</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN="3"></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="Bottom">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Net cash used in operating activities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(2,091</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,402</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(2,399</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN="3"></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="Bottom">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"  colspan=10><FONT FACE="Times New Roman" SIZE="2"><U>Cash flows from investing activities:</U> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="Bottom">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Purchase of property, plant and equipment</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(97</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(24</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(24</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Investment in other companies</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(15</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(376</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(676</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Proceeds from sale of marketable securities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,327</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,331</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN="3"></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="Bottom">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Net cash (used in) provided by investing activities from continuing operations</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(112</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>927</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>631</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Net cash used in investing activities from discontinued operations</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(221</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(221</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN="3"></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Net cash provided by (used in) investing activities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(112</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>706</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>410</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN="3"></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN="2" ALIGN="RIGHT"><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes are an
integral part of the interim consolidated financial statements. </FONT></P>

<p align=center>
<font size=2>- 5 -</font></p>
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<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
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     <TH></TH></TR>
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     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD.<BR>AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands</B> </FONT></TD></TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>Six months ended<BR>June 30,</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3 rowspan=2><FONT FACE="Times New Roman" SIZE=1>Year ended<BR>
December 31,<BR>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     </TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="62%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><U>Cash flows from financing activities:</U> </FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Repayment of short-term and long-term bank loans</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(533</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(15</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(26</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Proceeds from long-term bank loans</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,441</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Proceeds from short-term bank loans</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>539</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>884</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>686</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Proceeds from issuance of shares and exercise of options, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>4,690</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>54</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>135</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Proceeds from long-term convertible note, net of issuance expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(13</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,319</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Payment of long-term convertible note</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(351</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(90</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(438</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Net cash provided by financing activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>5,786</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>820</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,676</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Increase (decrease) in cash and cash equivalents</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>3,583</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>124</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(313</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Increase in cash and cash equivalents of discontinued operations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>114</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>114</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Cash and cash equivalents at the beginning of the period</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,033</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,232</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,232</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Cash and cash equivalents at the end of the period</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  5,616</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  2,470</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  2,033</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" colspan=10><FONT FACE="Times New Roman" SIZE="2"><U>Supplemental disclosure of cash flow activities:</U> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2">(a)&nbsp;&nbsp; <U>Non-cash activities</U>: </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conversion of convertible note into shares</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  1,897</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     -</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     -</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of the communication segment in consideration </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for shares in Qualmax</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>958</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    958</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conversion of Qualmax's debt into New World Brand's shares</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>      -</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   -</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  1,480</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>(b)&nbsp;&nbsp; <U>Net cash paid during the period for</U></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    303</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    173</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    532</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     32</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     59</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    180</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes are an integral
part of the interim consolidated financial statements. </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>

<A NAME=zk104></A>



<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD. AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands, except share and per share data</B> </FONT></TD></TR>
</TABLE>
<BR>






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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 1:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
GENERAL</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<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>B.O.S.
Better Online Solutions Ltd. (together with its subsidiaries &#147;the
               Company&#148;), manages its business in two reportable segments, which
consist                of Software Solutions and the Supply-Chain Solutions. A third
segment,                Communication Solutions, existed until it was sold in the fourth
quarter of 2005                (see b). </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s wholly owned subsidiaries include:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
Israel: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(1)
          BOScom Ltd.;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(2)
           Odem, which we purchased on November 18, 2004 from Odem&#146;s previous
          shareholders, and in which, by November 2005, our holdings increased to 100%.
          Odem, an Israeli company, is a major solution provider and distributor of RFID
          and electronics components and advance technologies in the Israeli market; and  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(3)
           Quasar Telecom (2004) Ltd.. The assets of Quasar Telecom were sold as part of
          the sale of the Communications Segment in the fourth quarter of 2005.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
the U.S.: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(1)
           Ruby-Tech Inc., a wholly owned subsidiary of Odem;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(2)
           Lynk USA Inc., a subsidiary of BOS, and its subsidiary PacInfo (both Delaware
          corporations) and PacInfo&#146;s subsidiary, Dean Tech Technologies Associates,
          LLC., a Texan corporation; and  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(3)
           BOS Delaware Inc. a Delaware corporation.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
the U.S., only Ruby-Tech is still operational.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
Europe &#150; BOScom had a UK subsidiary, Better On-Line Solutions Ltd., and its
subsidiary, Better On-Line Solutions S.A.S in France. Since mid-2003 the operations of
all the company in Europe were ceased. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
addition, the Company holds shares in two other companies:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<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>1. </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Surf
Communication Systems Ltd. (&#147;Surf&#148;), a developer and supplier of
          access and network convergence software solutions to the wire line and wireless
          telecommunications and data communications industries. The Company holds 7.8%
of           Surf&#146;s issued and outstanding shares (see Note 6).  </FONT></TD>
</TR>
</TABLE>
<BR>

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<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>2. </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Qualmax
Inc. (&#147;Qualmax&#148;), a U.S. public corporation listed on the Pink
               Sheets (&#147;QMXI.PK&#148;), and its subsidiaries New World Brands Inc.
(OTC:                NWBD.OB) and IPGear. Qualmax and its subsidiaries are developers and
suppliers                of voiceover IP technology products and services. The Company
holds 18% of the                issued and  outstanding
shares of Qualmax Inc. and holds 3.9% of the issued and outstanding shares of New World
Brands Inc.. The Company&#146;s holdings in Qualmax were received as the consideration for
the sale of its communication segment (see Note 6).</FONT></TD>
</TR>
</TABLE>
<BR>

<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>


<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD. AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands, except share and per share data</B> </FONT></TD></TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 1:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
GENERAL (Cont.)</B> </FONT> </TD>
</TR>
</TABLE>
<BR>


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<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>Discontinued
operations: </FONT></TD>
</TR>
</TABLE>
<BR>

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<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>1. </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sale
of communication segment:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>&nbsp;</TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
December 31, 2005, the Company sold its communication segment, including its property and
equipment, goodwill, technology, trade name, existing distribution channels and related
contingent liability to the Office of the Chief Scientist to IP Gear Ltd. (&#147;IP Gear&#148;),
a wholly owned Israeli subsidiary of Qualmax. The consideration paid to the Company in
the transaction was approximately 3.2 million Qualmax shares of Common stock constituting
approximately 16% of Qualmax&#146;s total issued and outstanding Common stock and $800 in
royalties to be paid at a rate of 4% from future revenues IP Gear will generate from the
disposed segment (&#147;Royalties&#148;) with the entire $800 due no later than 90 days
from the third anniversary of the closing of the transaction. Additional shares could be
issued to the Company at the end of four consecutive fiscal quarters following the
closing of the transaction, contingent upon IP Gear generating by then a certain level of
revenues from the disposed segment (&#147;Earn Out Shares&#148;). The maximum number of
Earn Out Shares could have further been issued to the Company is approximately 1 million,
constituting an additional 5% of Qualmax outstanding shares. In June 2006, the Company
received 250,000 of Qualmax shares, valued at $1.43 per share, as part of the Earn Out
Shares consideration. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>&nbsp;</TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company received certain piggy-back registration rights with respect to the Qualmax
shares. The Company does not have a representative on the Board of Qualmax. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>&nbsp;</TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
addition, the Company and IP Gear entered into an Outsourcing Agreement, pursuant to
which the Company provided IP Gear with certain operating services relating to the sold
communication segment through December 31, 2006. In accordance with the Outsourcing
Agreement, the first three months of services were provided for no charge. For services
rendered from April 2006 through December 2006, the Company charged IP Gear $240, which
was paid by issuing the Company Qualmax subsidiary&#146;s shares in December 2006, as
part of an agreement signed by the parties (see below). </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>&nbsp;</TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company also granted a bridge loan to IP Gear in the amount of $1,000. The term of the
loan is three years and it bears interest equal to the Prime rate plus 2.5%, up to a
maximum of 12%. In the first 18 months, IP Gear shall pay only the interest accrued on
the loan and monthly principal and interest payments shall commence thereafter. The loan
granted to IP Gear is secured by a first priority floating charge, which may be
subordinated to a charge in favor of a major financial institution in the event such
charge is recorded. In addition, repayment is guaranteed by Qualmax Inc. </FONT></TD>
</TR>
</TABLE>
<BR>


<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>


<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD. AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands, except share and per share data</B> </FONT></TD></TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 1:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
GENERAL (Cont.)</B> </FONT> </TD>
</TR>
</TABLE>
<BR>




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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>&nbsp;</TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
loan agreement provides that if the disposed segment would incur in the first quarter of
2006, losses that exceed $250, the principal amount to be repaid under the loan shall be
reduced by the excess losses. In such event, Qualmax shall issue to the Company
additional shares of Common stock against such reduction, valued at a predetermined price
of $1.43 per share. Pursuant to this provision, in May 2006, Qualmax issued to the
Company 244,755 shares, at a price of $1.43 per share, resulting in an amount of $350. In
June 2006, Qualmax issued BOS an additional 174,825 shares, reducing the principal amount
of the loan to $400 following which, the Company holds approximately 17.8% of Qualmax&#146;s
total issued and outstanding Common stock. As part of the agreement signed between the
parties in December 2006, the loan was fully repaid by issuance of additional shares of
Qualmax (see below). </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>&nbsp;</TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Qualmax
also issued to the Company a five-year warrant for the purchase of up to 107,143 shares,
constituting less the 1%, of its outstanding shares in Qualmax, at the exercise price of
$2.80 per share (&#147;Warrants&#148;). The Company received certain piggy-back
registration rights with respect to the shares underlying the warrants. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>&nbsp;</TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company signed in December 2006 an agreement with Qualmax and its subsidiaries, New World
Brands Inc. (&#147;NWB&#148;) and IP Gear, pursuant to which, the outstanding debt of
Qualmax to the Company, in the amount of $1,480 (which included long-term debt,
outsourcing fees, royalties and other debts), was repaid to the Company through the
issuance of 5.506652 shares of series A Convertible Preferred stock of NWB which are
convertible into approximately 16,450,000 shares of NWB Common stock. On April 24, 2007
series A Preferred stock converted into Common stock. As of June 30, 2007, the Company
holds 18% in Qualmax and 3.9% in NWB. The Company&#146;s registration rights with respect
to the Qualmax shares also apply to NWB shares. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>&nbsp;</TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
connection with the transaction, the Company agreed to grant NWB, contingent upon the
satisfaction of certain conditions, a three-year option to purchase up to 30% of the NWB&#146;s
shares held by the Company, at prices ranging from $0.12 to $0.24 per share of Common
stock. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>&nbsp;</TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
addition, the Company agreed to enter into a lock up agreement, restricting the transfer
of the share holdings in Qualmax and in NWB, for up to two years. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>&nbsp;</TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company accounts for its holdings in Qualmax shares on the cost basis since it is unable
to exercise significant influence over Qualmax financial policies and since the shares
held in Qualmax are restricted stock which do not meet the fair value availability
criteria of FAS 115. </FONT></TD>
</TR>
</TABLE>
<BR>

<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>


<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD. AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands, except share and per share data</B> </FONT></TD></TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 1:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
GENERAL (Cont.)</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=15%>&nbsp;</TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
For
the six months ended June 30, 2006 and for the year ended December 31, 2006 the Company&#146;s
consolidated financial statements reflected a capital gain from the sale of the
communication segment, which was determined as follows: </FONT></TD>
</TR>
</TABLE>
<BR>




<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Six months <BR>ended<BR>
June 30, 2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Year ended <BR>December<BR>
31,2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="15%"> </TD>
     <TD WIDTH="60%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Consideration:</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Ordinary shares of Qualmax (1)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   957</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   957</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;5.50652 series A Preferred stock of NWB (2)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,480</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Royalties</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>51</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Total consideration</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,008</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,437</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Cost:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>102</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Disposal of assets (liabilities) related to the communication segment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>752</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Total cost</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>102</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>752</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Capital gain</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   906</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,685</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>


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<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>(1) </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Valuated
at $1.43 per share.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<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>(2) </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.50652
series A Preferred stock convertible into 16.5 million Common stock of           NWB.
Each Common stock is valuated at $0.09 per share.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=15%>&nbsp;</TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Following
the agreement, signed in December 2006, the Company has accounted for the communication
segment as a &#147;discontinued operation&#148;, in accordance with EITF 03-13 &#147;Applying
the Conditions in Paragraph 42 of FASB Statement 144 in Determining Whether to Report
Discontinued Operations&#148;. As such, the results of operations, including revenues,
cost of revenues, operating expenses, and other income and expenses of the communication
segment for 2006 have been reclassified in the accompanying statements of operations as
discontinued operations. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=15%>&nbsp;</TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
results of operations, including revenues, cost of revenues, operating expenses and other
income and expenses of the communication segment and PacInfo&#146;s operations for 2006
have been reclassified in the statements of operations. Taxes were not attributed to the
discontinued operations due to utilization of losses from previous years, for which a
valuation allowance was provided. </FONT></TD>
</TR>
</TABLE>
<BR>


<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>


<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD. AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands, except share and per share data</B> </FONT></TD></TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 1:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
GENERAL (Cont.)</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>&nbsp;</TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Summarized
selected financial information and cash flows of the discontinued operations are as
follows: </FONT></TD>
</TR>
</TABLE>
<BR>




<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Six months ended<BR>
June 30, 2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Year ended<BR>
December 31, 2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="15%"> </TD>
     <TD WIDTH="57%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><U>Cash flows from operating activities</U> </FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Gain from discontinue operations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    906</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  1,685</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Capital gain</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(906</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(2,052</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Adjustments due to changes in working capital</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(79</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(79</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><U>Net cash flows used in operating activities</U> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    (79</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   (446</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><U>Cash flows from investing activities</U> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Communication sales costs</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   (221</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   (221</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><U>Net cash flows used in investing activities</U> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   (221</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   (221</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>



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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 2:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
SIGNIFICANT ACCOUNTING POLICIES</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<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>The
significant accounting policies followed in the preparation of these
               financial statements are identical to those applied in the preparation of
the                latest annual financial statements except as detailed in below. </FONT></TD>
</TR>
</TABLE>
<BR>

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<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>Recently
issued accounting pronouncements: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
July 2006, the FASB issued FASB Interpretation No. 48, &#147;Accounting for Uncertainty
in Income Taxes, an Interpretation of FASB Statement No. 109&#148; (&#147;FIN 48&#148;).
FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition
threshold a tax position is required to meet before being recognized in the financial
statements. FIN 48 utilizes a two-step approach for evaluating tax positions. Recognition
(step one) occurs when an enterprise concludes that a tax position, based solely on its
technical merits, is more-likely-than-not to be sustained upon examination. Measurement
(step two) is only addressed if step one has been satisfied (i.e., the position is
more-likely-than-not to be sustained). Under step two, the tax benefit is measured as the
largest amount of benefit, determined on a cumulative probability basis that is
more-likely-than-not to be realized upon ultimate settlement. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
FIN
48 applies to all tax positions related to income taxes subject to the Financial
Accounting Standard Board Statement No. 109, &#147;Accounting for Income Taxes&#148;(&#147;SFAS
109&#148;). This includes tax positions considered to be &#147;routine&#148;as well as
those with a high degree of uncertainty. </FONT></TD>
</TR>
</TABLE>
<BR>

<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>


<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD. AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands, except share and per share data</B> </FONT></TD></TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 2:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
SIGNIFICANT ACCOUNTING POLICIES (Cont.)</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
FIN
48 has expanded disclosure requirements, which include a tabular roll-forward of the
beginning and ending aggregate unrecognized tax benefits as well as specific details
related to tax uncertainties for which it is reasonably possible the amount of
unrecognized tax benefit will significantly increase or decrease within twelve months.
These disclosures are required at each annual reporting period unless a significant
change occurs in an interim period. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
FIN
48 is effective for fiscal years beginning after December 15, 2006. The cumulative effect
of applying FIN 48 will be reported as an adjustment to the opening balance of retained
earnings. The Company has adopted FIN 48 commencing January 1, 2007 and it has no effect
on its financial position and results of operations. </FONT></TD>
</TR>
</TABLE>
<BR>


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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 3:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
accompanying unaudited interim consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States for interim
financial information. Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating results for
the six months ended June 30, 2007 are not necessarily indicative of the results that may
be expected for the year ended December&nbsp;31, 2007. </FONT></TD>
</TR>
</TABLE>
<BR>



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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 4:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
INVENTORIES</B> </FONT> </TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>June<BR>
30, 2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>December 31, 2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="5%"> </TD>
     <TD WIDTH="69%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Raw materials (including packaging materials)</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   109</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   120</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Finished products</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>4,461</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>3,897</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 4,570</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 4,017</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
inventories are presented net of provision for technological obsolescence and slow-moving
items of $ 87 and $&nbsp;100 as of June 30, 2007 and December 31, 2006, respectively.  </FONT></TD>
</TR>
</TABLE>
<BR>

<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>


<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD. AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands, except share and per share data</B> </FONT></TD></TR>
</TABLE>
<BR>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 5:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
CUSTOMER LIST, NET</B> </FONT> </TD>
</TR>
</TABLE>
<BR>





<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>June<BR>
30, 2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>December 31, 2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="5%"> </TD>
     <TD WIDTH="64%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Cost</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 2,010</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 2,010</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Accumulated amortization</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>483</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>381</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Amortized cost</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 1,527</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 1,629</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Amortization
expenses with respect to the customer list amounted to $ 102 and $&nbsp;207 for the six
months ended June 30, 2007 and for year ended December 31, 2006, respectively.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Amortization
expenses for the years ended December 31:  </FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="5%"> </TD>
     <TD WIDTH="29%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>2007&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="14%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 207</FONT></TD>
        <TD WIDTH="40%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>2008&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 207</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>2009&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 207</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>2010&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 207</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>2011- 2013&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 699</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR>



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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 6:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
INVESTMENT IN OTHER COMPANIES</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s investments in companies comprise of:  </FONT></TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>June 30,</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>December 31,</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="5%"> </TD>
     <TD WIDTH="68%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Surf Communication Systems Ltd.</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   983</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   983</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Qualmax Inc. (see note 1b)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>5,619</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>5,619</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>New World Brands Inc. (see note 1b)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,480</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,480</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 8,082</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 8,082</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>


<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>

<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD. AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands, except share and per share data</B> </FONT></TD></TR>
</TABLE>
<BR>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 6:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
INVESTMENT IN OTHER COMPANIES (Cont.)</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Investment
in Surf Communication Systems Ltd.: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
During
the years 2001 through 2005 the company participated in several investment rounds in
Surf. In June 2006, as part of the investment round, the Company invested $300 in Surf,
following which, the Company holds 7.8% of Surf&#146;s issued and outstanding shares. The
investment is accounted for based on the cost accounting method.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 7:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
LONG-TERM CONVERTIBLE NOTE</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
September 2005, the Company entered into a Securities Purchase Agreement (&#147;the
Purchase Agreement&#148;) with Laurus Master Fund (&#147;Laurus&#148;), an a U.S. based
fund making investments in public companies, under which the Company issued to Laurus in
a private placement (i) a Secured Convertible Term Note of a $ 1,500 principal amount,
due September 2008 (&#147;the Note&#148;), and (ii) a warrant to purchase 73,052 Ordinary
shares at an exercise price of $ 4.04 per share (&#147;the Warrant&#148;). According to
the agreement, several fees in the total amount of $&nbsp;116 were paid to the investor.
These fees are presented as a discount of the principal convertible loan. The Note is
convertible into Ordinary shares at a price of $ 3.08 per share. The principal amount of
the Note is repayable in monthly installments, commencing as of January 2006, in the
initial amount of $ 15 eventually increasing to $ 55. The Note bears Prime interest rate
plus 1.5% which is subject to reduction under certain conditions. The Warrant is
exercisable, in whole or in part, until September 29, 2012.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
fair value of the Warrants was calculated using the Black-Scholes option pricing model
with the following assumptions: a risk-free interest rate of 4.08%, a dividend yield of
0%, a volatility of the expected market price of the Company&#146;s Ordinary shares of
100% and a weighted-average contractual life of seven years. The fair value of the
Warrants in the amount of $&nbsp;144 is offset against the Note, amortized over the
period of the Note and presented as a component in shareholders&#146; equity.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
August 17, 2006, the Company entered into an additional financing transaction with
Laurus. The third financing consisted of a $ 1.5 million Secured Convertible Term Note
with a term of three years. In addition, the Company granted to Laurus a warrant to
purchase up to 73,052 Ordinary shares, which is exercisable, in whole or in part, until
August 16, 2013 at an exercise price of $ 4.04 per share for the first 24,351 Ordinary
shares acquirable there under and of $ 5.30 per share for the additional 48,701 shares
acquirable hereunder. The fair value of the warrants was calculated using the
Black-Scholes option pricing model with the following assumptions: a risk-free interest
rate of 4.83%, a dividend yield of 0%, a volatility of the expected market price of the
Company&#146;s Ordinary shares of 81% and a weighted-average contractual life of seven
years. The fair value of the warrants in the amount of $&nbsp;131 is offset against the
Note, amortized over the period of the Note and presented as a component in shareholders&#146; equity.
The Note bears interest which begins at the Prime rate plus 1.5%.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
conversion rate under the Note is $ 3.08 per share for the first $ 500 of the principal
amount payable there under and $ 4.08 for any additional amount payable there under
(subject to adjustment). The principal amount of the Note is repayable in monthly
installments commencing as of December 1, 2006, and may be paid in cash or, subject to
certain conditions, in Ordinary shares. Interest on the Note is payable monthly and may
be paid in cash or, subject to certain conditions, in Ordinary shares. The Note is
secured by a security interest in certain assets of the Company.  </FONT></TD>
</TR>
</TABLE>
<BR>

<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>

<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD. AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands, except share and per share data</B> </FONT></TD></TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 7:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
LONG-TERM CONVERTIBLE NOTE (Cont.)</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
registration statement filed in this respect became effective on December 6, 2006.  </FONT></TD>
</TR>
</TABLE>
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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
June 21, 2007, the company reduced the conversion price of the Note to $2.53 and Laurus
converted the entire outstanding principal amount under the Notes, of approximately $
2,223,000, into 878,670 Ordinary Shares of the company. As a result the Company recorded
expenses of $611 in the first six months of year 2007.  </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
maturity of the loan is as follows:  </FONT></TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>June 30,<BR>
2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>December 31,<BR>
2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="5%"> </TD>
     <TD WIDTH="67%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>First year (current maturities)</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    -</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 1,139</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Second year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,104</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Third year</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>331</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,574</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Less - discount</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>264</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   -</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 2,310</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 8:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
COMMITMENTS AND CONTINGENT LIABILITIES</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<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>Legal
proceedings: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In April 2006, BOS&acirc;NOVA EURL, a
French company and former distributor of the Company, served the Company with a claim
filed with the French Trade Tribunal, alleging breach of exclusive distributor rights in
France and asserting ownership to certain intellectual property rights in the
Company&#146;s products. The plaintiff seeks an amount of approximately 3.3 million Euros
and additional remedies. This claim follows a previous motion for temporary injunctive
relief that was filed against the Company&#146;s new French distributor, said motion
ultimately denied by the French Trade Tribunal. The Company assesses the prospects of
claim to prevail and recover a significant amount, as remote. The Company&#146;s financial
statements include a provision in this respect.  </FONT></TD>
</TR>
</TABLE>
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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
1998, as part of PacInfo Share Purchase Agreement between the Company and Mr.&nbsp;Lee
and Ms. Lee (&#147;the Sellers&#148;), the Company may be obligated to grant the Sellers
a loan on a full recourse basis for certain tax payments the Sellers may be liable for
and reimburse the Sellers for certain interest on taxes that they may owe, currently
estimated at approximately $2 million. The Company will receive a security interest in
shares of the Company that the Sellers holds 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. 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 an
obligation by the Company to lend the Sellers such amount and to reimburse them for
interest expenses incidental to the tax event. Based on the Company&#146;s legal counsel
opinion and management estimation, no provision was recorded.  </FONT></TD>
</TR>
</TABLE>
<BR>

<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>

<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD. AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands, except share and per share data</B> </FONT></TD></TR>
</TABLE>
<BR>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 8:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)</B> </FONT> </TD>
</TR>
</TABLE>
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<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>Other
commitments: </FONT></TD>
</TR>
</TABLE>
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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
facilities of the Company are rented under lease agreements that expire on various dates
ending in 2012. Minimum future rental payments are as follows:  </FONT></TD>
</TR>
</TABLE>
<BR>




<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN="3" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>Period:</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="5%"> </TD>
     <TD WIDTH="66%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>7-12/2007&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="15%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 53</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>2008&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>64</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>2009&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>58</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>2010&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>46</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>2011&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>45</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>2012&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>4</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s motor vehicles are rented under various cancelable operating lease
agreements. The lease agreements for the motor vehicles expire on various dates ending in
2010. The maximum breach of contract fees can amount to $ 39.  </FONT></TD>
</TR>
</TABLE>
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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Lease
payments for the facilities occupied by the Company and the Company&#146;s motor vehicles
in the first six months of 2007 and 2006 amounted to $ 197 and $ 408, respectively.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
of June 30, 2006, Odem has bank guarantees in the amount of $ 271 in favor of certain
third parties.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 9:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
SHAREHOLDERS&#146; EQUITY</B> </FONT> </TD>
</TR>
</TABLE>
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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
March 25, 2007 the company granted to its employee 627,000 options in exercise price of
$2.52 per share. The options shall vest and become exercisable in 4 equal annual
installments with the first installment vesting upon the lapse of a year from grant.  </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
April 2007 the Company completed rights offering in which it issued 1,739,398 ordinary
shares at a share price of $2.5. The gross proceeds amounted to $4.4 million.  </FONT></TD>
</TR>
</TABLE>
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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
June 21, 2007 B.O.S. Laurus Master Fund Ltd., converted the entire outstanding principal
amount under the Notes, of approximately $ 2,223,000, into 878,670 Ordinary Shares of
BOS.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
June 26, 2007 BOS entered into a definitive private placement agreement with a European
private investor for the issuance of 226,415 Ordinary Shares at a price per share of
$2.65.  </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>

<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD. AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands, except share and per share data</B> </FONT></TD></TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 9:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
SHAREHOLDERS&#146; EQUITY (Cont.)</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s outstanding warrants to shareholders as of June 30, 2007 are as follows:  </FONT></TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Issuance date</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Warrants for<BR>
Ordinary shares</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Exercise price<BR> per
share</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Warrants exercisable</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Exercisable through</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="32%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>June 2005</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>441,785</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> *) &nbsp;&nbsp;2.75</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>441,785</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="12%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>June 2008</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>July 2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>130,434</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> *) &nbsp;&nbsp;2.75</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>130,434</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>June 2008</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>572,219</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>572,219</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD></TR>
</TABLE>
<BR>



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<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>(*) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
exercise price of the warrants will increases to $ 3.03 per Ordinary share,           on
July 2007  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
A
summary of employee option activity under the Company&#146;s stock option plans as of
June 30, 2007 and changes during the six months ended June 30, 2007 are as follows:  </FONT></TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Number<BR> of options</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Weighted
average<BR>
exercise
price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="62%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Options outstanding at beginning of period</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>822,660</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  3.36</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Changes during the period:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Granted</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>627,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  2.52</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Exercised</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(8,239</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  2.00</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Forfeited or cancelled</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(42,425</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 15.16</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Options outstanding at the end of the period</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,398,996</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  2.63</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Options exercisable at the end of the period</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>287,749</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  3.48</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>


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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
weighted-average grant-date fair value of options granted during the six months ended
June 30, 2007 and during the year ended December 31, 2006 was $ 2.57 and $ 1.45,
respectively. As of June 30, 2007, there was $&nbsp;1,321 of total unrecognized
compensation cost related to non-vested share-based compensation arrangements granted to
employees and directors under the Company&#146;s stock option plans. That cost is
expected to be recognized over a weighted-average period of 1.7 years.  </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>

<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD. AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands, except share and per share data</B> </FONT></TD></TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 9:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
SHAREHOLDERS&#146; EQUITY (Cont.)</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<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>
The
fair value of the Company&#146;s stock options granted to employees and directors for the
six months ended June 30, 2007 was estimated using the following weighted average
assumptions:  </FONT></TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Six months ended<BR>
June 30, 2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="68%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Risk free interest</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="9%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>5.03</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Dividend yields</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Volatility</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>60</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Expected term (in years)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>4</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR>


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<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>
The
options granted to employees outstanding as of June 30, 2007 have been separated into
ranges of exercise prices, as follows:  </FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Range of<BR>
exercise<BR>
price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Options<BR>
outstanding<BR>
as of<BR>
June 30,<BR>
2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Weighted<BR>
average<BR>
exercise<BR>
price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Weighted<BR>
average<BR>
remaining<BR>
contractual<BR>
life (years)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Options<BR>
exercisable<BR>
as of<BR>
June 30,<BR>
2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Weighted average<BR>
exercise<BR>
price of<BR>
options<BR>
exercisable</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="21%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$ 0&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>73,000</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  0.00</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>7.39</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  0.00</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>$ 1.84-2.00&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>59,722</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  1.88</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2.43</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>59,722</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  1.88</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$ 2.28-3&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,247,237</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  2.61</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>7.18</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>208,990</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  2.74</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>$ 6.8&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>9,937</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  6.80</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2.31</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>9,937</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  6.80</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$ 18.00&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>600</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 18.00</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2.37</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>600</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 18.00</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>$ 28.00&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>8,500</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 28.00</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1.77</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>8,500</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 28.00</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,398,996</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  2.63</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2.91</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>287,749</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  3.48</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD></TR>
</TABLE>
<BR>


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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Options
issued to service providers:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<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>
The
Company accounts for these options in accordance with the provisions of SFAS 123 and EITF
96-18. There were no grants of options to service providers during the six months ended
June 30, 2007. The fair value for these options was estimated at the date of grant using
Black-Scholes option pricing model with the following assumptions for the 6 months ended
June 2006 and the year ended December 31, 2006: risk-free interest rate of 4.8%, and
4.9%, respectively, dividend yields of 0% and 0%, respectively, volatility of 76% and
77%, respectively, and an expected life of 2.6 years and 2.6 years, respectively   </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
compensation expenses that have been recorded in the consolidated financial statements
regarding these warrants for the six months ended June 30, 2007 and for the year ended
December 31, 2006 were $ 1 and $&nbsp;116, respectively. </FONT></TD>
</TR>
</TABLE>
<BR>

<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>

<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD. AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands, except share and per share data</B> </FONT></TD></TR>
</TABLE>
<BR>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 9:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
SHAREHOLDERS&#146; EQUITY (Cont.)</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<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>
The
Company&#146;s outstanding options to service providers as of June 30, 2007 are as
follows:  </FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Issuance date</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Options for<BR>
Ordinary<BR>
shares</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Exercise price<BR> per
share</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Options exercisable</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Exercisable through</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="21%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;October 2002</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>75,000</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 4.00</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>75,000</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="22%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>December 2008</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;June 2004</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>130,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 4.04</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>130,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT" WIDTH="22%"><FONT FACE="Times New Roman" SIZE=2>June 2011</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;March 2005</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>10,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 3.08</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>3,334</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT" WIDTH="22%"><FONT FACE="Times New Roman" SIZE=2>March 2010</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;September 2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>73,052</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 4.04</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>73,052</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT" WIDTH="22%"><FONT FACE="Times New Roman" SIZE=2>September 2012</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;March 2006</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>10,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 2.30</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>10,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT" WIDTH="22%"><FONT FACE="Times New Roman" SIZE=2>December 2008</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>August 2006</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>48,701</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 5.30</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>48,701</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT" WIDTH="22%"><FONT FACE="Times New Roman" SIZE=2>August 2013</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>August 2006</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>24,351</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 4.04</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>24,351</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT" WIDTH="22%"><FONT FACE="Times New Roman" SIZE=2>August 2013</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>371,104</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>364,438</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT" WIDTH="22%"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD></TR>
</TABLE>
<BR>


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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 10:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
SEGMENTS AND GEOGRAPHICAL INFORMATION</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company manages its business in two reportable segments, which consist of software
solutions and supply chain solutions.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s management makes financial decisions and allocates resources, based on the
information it receives from its internal management system. The Company allocates
resources and assesses performance for each operating segment using information about
revenues, gross profit and operating income (loss) before interest and taxes.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<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>Revenues,
gross profit and operating income (loss) for operating segments for                the
six months ended June 30, 2007 and 2006 and for the year ended December 31,
               2006 were as follows: </FONT></TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=12><FONT FACE="Times New Roman" SIZE=1>Six months ended June 30, 2007</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Software Solutions</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Supply Chain<BR>
Solutions</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Not allocated</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Consolidated</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=12><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="34%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Revenues</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     824</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  10,248</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  11,072</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Gross profit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     647</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   1,759</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   2,406</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Operating income (loss)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     147</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     290</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    (696</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    (259</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Assets related to segment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     252</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  14,431</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  13,718</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  28,401</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</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>

<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD. AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands, except share and per share data</B> </FONT></TD></TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 10:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
SEGMENTS AND GEOGRAPHICAL INFORMATION (Cont.)</B> </FONT> </TD>
</TR>
</TABLE>
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<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=12><FONT FACE="Times New Roman" SIZE=1>Six months ended June 30, 2006</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Software Solutions</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Supply Chain<BR>
Solutions</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Not allocated</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Consolidated</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=12><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="34%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Revenues</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   1,018</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   8,541</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   -</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   9,559</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Gross profit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     665</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   1,654</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   -</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   2,319</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Operating income (loss)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     (71</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     102</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    (531</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    (500</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Assets related to segment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   1,786</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  11,780</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   7,938</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  21,504</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR>




<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=12><FONT FACE="Times New Roman" SIZE=1>Year ended December 31, 2006</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Software Solutions</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Supply Chain<BR>
Solutions</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Not allocated</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Consolidated</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="34%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Revenues</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   2,058</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  18,859</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  -</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  20,917</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Gross profit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   1,341</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   3,376</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     -</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   4,717</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Operating income (loss)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     (35</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     (64</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    (957</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  (1,056</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Assets related to segment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     243</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  13,700</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  10,586</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  24,529</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR>

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<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
following presents total revenues and long-lived assets for the six months
          ended June 30, 2007 and 2006 and for the year ended December 31, 2006 in
          accordance with Statement of Financial Accounting No. 131, &#147;Disclosures
          about Segments of an Enterprise and Related Information&#148; (&#147;SFAS
          131&#148;): </FONT></TD>
</TR>
</TABLE>
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<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>Six months ended<BR>
June 30,</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3 rowspan=2><FONT FACE="Times New Roman" SIZE=1>Year ended<BR>
December 31,<BR>
2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="45%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Revenues:</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>United States</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  1,928</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  1,087</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  2,848</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Far-East</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>554</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,253</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,019</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Europe</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>966</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>447</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,173</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Israel and other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>7,624</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>6,772</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>14,877</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 11,072</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  9,559</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 20,917</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>

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<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
All
the long-lived assets are attributed to Israel&#146;s geographic area, and are comprised
of goodwill, intangible assets, property, plant and equipment. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>- 20 -</font></p>
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<page>

<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD. AND ITS SUBSIDIARIES</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands, except share and per share data</B> </FONT></TD></TR>
</TABLE>
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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 10:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
SEGMENTS AND GEOGRAPHICAL INFORMATION (Cont.)</B> </FONT> </TD>
</TR>
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<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>Major
customer data as a percentage of total revenues: </FONT></TD>
</TR>
</TABLE>
<BR>




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     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>Six months ended<BR>
June 30,</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3 rowspan=2><FONT FACE="Times New Roman" SIZE=1>Year ended <BR>December
31,<BR>
2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>Unaudited</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="47%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Customer A</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="9%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>27</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>%</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>20</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>%</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>24</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>%</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
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<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Major
customers debt balances as of June 30, 2007 and December 31, 2006 are $&nbsp;1,869 and $&nbsp;1,971,
respectively. </FONT></TD>
</TR>
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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 11:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#150;</B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
SUBSEQUENT EVENTS</B> </FONT> </TD>
</TR>
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<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> The
general meeting of shareholders that held on August 9, 2007, adopted, as the following
resolutions: </FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1. </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> reelect
Messrs. Edouard Cukierman, Joel Adler and Ronen Zavlik and to elect           Messrs.
Amir Ohad, Joshua Zoller and Dan Hoz to the Company&#146;s Board of           Directors,
to serve until the next annual general meeting of shareholders and           until their
successors have been duly elected and qualified.  </FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2. </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> reappoint
Kost, Forer, Gabbay &amp; Kasierer, a member of Ernst &amp; Young
          International, Ltd. as the Company&#146;s Independent Auditors.  </FONT></TD>
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<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> 3. </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> approve
an increase of options available for issuance under the           Company&#146;s 2003
Israeli Share Option Plan to 2.6 million from 1.5 million.  </FONT></TD>
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<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Following
this approval, 103,600 options were granted to officers at an exercise           price of
$2.52 per share. The options shall vest and become exercisable in 4           equal
annual installments with the first installment vesting upon the lapse of a           year
from March 25, 2007.  </FONT></TD>
</TR>
</TABLE>
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<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> On
September 18, 2007, the French Trade Tribunal rejected the Company&#146;s assertion that
                     jurisdiction is with the Israeli courts. The Company appealed
this decision. </FONT></TD>
</TR>
</TABLE>
<BR>



<p align=center>
<font size=2>- 21 -</font></p>
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