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<SEC-DOCUMENT>0001178913-09-001561.txt : 20090701
<SEC-HEADER>0001178913-09-001561.hdr.sgml : 20090701
<ACCEPTANCE-DATETIME>20090630173217
ACCESSION NUMBER:		0001178913-09-001561
CONFORMED SUBMISSION TYPE:	20-F
PUBLIC DOCUMENT COUNT:		14
CONFORMED PERIOD OF REPORT:	20081231
FILED AS OF DATE:		20090701
DATE AS OF CHANGE:		20090630

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:		20-F
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-14184
		FILM NUMBER:		09920096

	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>20-F
<SEQUENCE>1
<FILENAME>zk96871.htm
<TEXT>
<HTML>
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     <!-- Project:        \\Backup\edgar filing\BOS better online solutions Ltd\96871\a96871.eep -->
     <!-- Control Number: 96871                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>UNITED STATES </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=4>SECURITIES AND EXCHANGE COMMISSION </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Washington, D.C. 20549 </FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>FORM 20-F </FONT></H1>

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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>   <FONT size="3" face="Wingdings">o</font>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF
1934</FONT></TD>
</TR>
</TABLE>
<BR>


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

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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><FONT size="3" face="Wingdings">x</font> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>           ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF           1934 </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the fiscal year ended <B><U>December 31, 2008</U></B> </FONT></P>

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

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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>   <FONT size="3" face="Wingdings">o
</font>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></TD>
</TR>
</TABLE>
<BR>

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

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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> <FONT size="3" face="Wingdings">o</font>    </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934</FONT></TD>
</TR>
</TABLE>
<BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date of event requiring this shell company report __________</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the transition period from ___________ to _____________</FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Commission
file number <U>001-14184</U> </FONT> </P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><IMG SRC="bos.jpg"></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">(Exact name of Registrant as specified in its charter) </FONT> </P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>ISRAEL </U></FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Jurisdiction of incorporation or organization) </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> </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>(Address of principal executive offices)</U> </FONT> </P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Securities registered or to be registered pursuant to Section 12(b) of the Act: <U>Ordinary Shares, nominal
value NIS 4.00 per share</U> </FONT>
</P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Securities registered or to be registered pursuant to Section 12(g) of the Act: <U>NONE</U> </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: <U>NONE</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>Indicate the number of outstanding
shares of each of the issuer&#146;s classes of capital or common stock as of the close of
the period covered by the annual report: <U>13,027,514 ordinary shares, nominal value
NIS 4.00 per share, as of December 31, 2008 and 13,027,514 ordinary shares, nominal value
NIS 4.00 per share, as of May 31, 2009.</U> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. </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 this report is an annual or
transition report, indicate by check-mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. </FONT></P>

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<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>Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (&sect;232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files)*. </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>*The registrant has not yet been
phased into the interactive data requirements. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of &#147;accelerated filer and large accelerated filer&#148; in Rule 12b-2
of the Exchange Act. (Check one): </FONT></P>


<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Large accelerated filer <FONT size="3" face="Wingdings">o
</font> &nbsp;&nbsp;&nbsp; Accelerated filer <FONT size="3" face="Wingdings">o
</font> &nbsp;&nbsp;&nbsp; Non-accelerated filer <FONT size="3" face="Wingdings">x
</font></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 which
financial statement item the registrant has elected to follow: </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Item 17 <FONT size="3" face="Wingdings">o
</font> Item 18 <FONT size="3" face="Wingdings">x
</font></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark which basis of
accounting the registrant has used to prepare the financial statements included in this
filing: </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>U.S.  GAAP  <FONT size="3" face="Wingdings">x
</font> &nbsp;&nbsp;&nbsp;  International  Financial  Reporting  Standards  as  issued  by the  International  Accounting
Standards Board  <FONT size="3" face="Wingdings">o
</font> &nbsp;&nbsp;&nbsp; Other <FONT size="3" face="Wingdings">o
</font>
</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If &#147;Other&#148; has been checked
in response to the previous question, indicate by check mark which financial statement
item the registrant has elected to follow. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Item 17 <FONT size="3" face="Wingdings">o
</font> Item 18 <FONT size="3" face="Wingdings">o
</font> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If this is an annual report, indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). </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>

<p align=center>
<font size=2>ii</font></p>
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<page>




<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>TABLE OF CONTENTS</B> </FONT></P>

<TABLE CELLPADDING=3 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE="2"><B></B> </FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE="2"><B></B> </FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE="2"><B></B> </FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE="2"><B></B> </FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE="2"><B></B> </FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE="2"><B></B> </FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE="2"><B></B> </FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE="2"><B></B> </FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE="2"><B></B> </FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE="2"><B></B> </FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=90% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk101"><B>PART I</B> </a></FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>1&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk102"><B>ITEM 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS</B></a> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>1&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk103"><B>ITEM 2: OFFER STATISTICS AND EXPECTED TIMETABLE</B></a> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>1&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk104"><B>ITEM 3: KEY INFORMATION REGARDING B.O.S</B> </a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>1&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk105"><B>ITEM 4: INFORMATION ON THE COMPANY</B></a> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>17&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk106"><B>ITEM 4A: UNRESOLVED STAFF COMMENTS</B> </a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>29&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk107"><B>ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS</B> </a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>29&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk108"><B>ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</B></a> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>53&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk109"><B>ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</B> </a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>65&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk110"><B>ITEM 8: FINANCIAL INFORMATION</B></a> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>69&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk111"><B>ITEM 9: THE OFFER AND LISTING</B> </a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>70&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk112"><B>ITEM 10: ADDITIONAL INFORMATION</B> </a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>72&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk113"><B>ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK</B></a> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>85&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk114"><B>ITEM 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</B></a> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>86&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk115"><B>PART II</B> </a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>86&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk116"><B>ITEM 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</B> </a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>86&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk117"><B>ITEM 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS</B> </a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>87&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk118"><B>ITEM 15: CONTROLS AND PROCEDURES</B></a> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>87&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk119"><B>ITEM 16: [RESERVED]</B></a> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>88&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk120"><B>ITEM 16A: AUDIT COMMITTEE FINANCIAL EXPERT</B> </a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>88&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk121"><B>ITEM 16B: CODE OF ETHICS</B> </a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>88&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk122"><B>ITEM 16C: PRINCIPAL ACCOUNTANT FEES AND SERVICES</B></a> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>88&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk123"><B>ITEM 16D: EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES</B></a> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>89&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk124"><B>ITEM 16E: PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS</B></a> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>89&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk125"><B>ITEM 16F: CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT</B></a> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>89&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk126"><B>ITEM 16G: CORPORATE GOVERNANCE</B></a> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>89&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk127"><B>PART III</B></a> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>89&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk128"><B>ITEM 17: FINANCIAL STATEMENTS</B> </a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>89&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk129"><B>ITEM 18: FINANCIAL STATEMENTS</B></a> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>89&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk130"><B>ITEM 19: EXHIBITS</B> </a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>90&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><a href="#zk131"><B>SIGNATURES</B> </a></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>92&nbsp;</B> </FONT></TD></TR>
</TABLE>
<BR>

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

<a name=zk101></a>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>PART I</B> </FONT></P>

<a name=zk102></a>

<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 1:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Identity of Directors, Senior Management and Advisors</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not required.</FONT></P>

<a name=zk103></a>

<!-- MARKER FORMAT-SHEET="Exhibit Index Hang" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 2:</B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Offer Statistics and Expected Timetable</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not required.</FONT></P>

<a name=zk104></a>

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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>Item 3:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Key Information Regarding BOS</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Unless the  context  in which such terms are used would  require a  different  meaning,  all  references  to "BOS",
"we",  "our" or the "Company" refer to B.O.S. Better Online Solutions Ltd. and its subsidiaries.
</FONT></P>

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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"><B>3A.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Selected
Consolidated Financial Data</B> </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The  consolidated  statement  of
 operations  data for B.O.S.  Better  Online  Solutions  Ltd. set forth below with
respect to the years  ended  December  31,  2008,  2007 and 2006,  and the  consolidated
 balance  sheet data as of December 31, 2008 and 2007, have been derived from the
Consolidated  Financial  Statements listed in Item 18, which have been  prepared in
 accordance  with  generally  accepted  accounting  principles  in the United  States
("U.S. GAAP"). The consolidated  statement of operations data set forth below with
respect to the years ended December 31, 2005 and 2004, and the  consolidated  balance
sheet data as of December 31, 2006,  2005 and 2004, have been derived from other
 consolidated  financial  statements not included  herein and have been prepared in
accordance with U.S. GAAP. The financial  statements for the years ended December 31,
2008,  2007,  2006,  2005 and 2004 were audited by Kost Forer  Gabbay &amp; Kasierer,  an
 independent  registered  public  accounting  firm and a member of Ernst &amp; Young Global.
 The financial  statements of BOS - Supply Chain Solutions (Lynk) Inc.  (formerly,  Lynk,
USA Inc.) and its subsidiaries  for the years ended  December  31,  2008 and 2007 were
 audited by Arik  Eshel,  CPA &amp; Assoc.,  PC an independent  registered public accounting
firm. The selected consolidated  financial data presented below should be read in
 conjunction  with Item 5:  "Operating  and Financial  Review and Prospects" and the
Notes to the Financial Statements included in this Form 20-F. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has accounted for
discontinued  operations,  in accordance with EITF 03-13 "Applying the Conditions in
Paragraph 42 of FASB  Statement  144 in  Determining  Whether to Report  Discontinued
 Operations".  As such,  the results of discontinued  operations,  including revenues,
 cost of revenues,  operating expenses, and other income and  expenses,  related  to the
 prior  periods  of the  discontinued  operation  have  been  reclassified  in the
accompanying  statements of operations (see Note 1c to the  Consolidated  Financial
 Statements for the year ended December 31, 2008). </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On May 29, 2003, the Company  effected a one-for-four  reverse stock split.  All share and per share numbers herein
reflect adjustments resulting from this reverse stock split.
</FONT></P>


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




<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Statement of Operations Data: (In U.S. thousands of dollars with the exception of per share data)</B> </FONT></P>








<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=15><FONT FACE="Times New Roman" SIZE=1>Year Ended December 31,</FONT><HR WIDTH=98% 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>2004</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2005</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>
     <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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>
     <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>
     <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>
     <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="43%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;Revenues</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="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>6,919</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>24,099</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>20,917</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>23,774</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>50,849</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;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>3,659</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>17,854</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>19,099</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>40,850</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>
     <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"><B>&nbsp;Gross profit</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>3,260</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>6,245</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>4,717</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>4,675</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>9,999</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2">&nbsp;<U>Operating expenses</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;Research and development, 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>669</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>893</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>636</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>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;In process 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>-</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>170</FONT></TD>
        <TD ALIGN=LEFT><FONT 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"><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>1,015</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>2,425</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>3,811</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>9,712</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;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>1,271</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>2,667</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,980</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>2,029</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;Impairment of 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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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="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="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>1,873</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>
     <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"><B>&nbsp;Total operating expenses</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>2,955</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>5,985</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>5,773</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>6,597</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>14,458</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&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;<U>Operating income (loss)</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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>305</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>260</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>(1,056</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>(1,922</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>(4,459</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;Financial income (expense), 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>(158</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>(448</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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(469</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>(636</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;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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>355</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>(6,233</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>(1,448</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>
     <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;&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;Income (loss) before tax on income</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>147</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>167</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>(1,682</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>(8,624</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>(6,543</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>)</B> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;Tax benefit (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>(20</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>(204</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>89</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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</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>403</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
      <TD>&nbsp; </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;Equity in losses of an affiliated 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>(308</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>(1,750</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>
     <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=16><FONT FACE="Times New Roman" SIZE=2>&nbsp;Minority interest in earnings of a</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;subsidiary</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>(17</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>(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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <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>
     <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>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>(198</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>(2,010</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>
     <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>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(6,140</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT" colspan=16><FONT FACE="Times New Roman" SIZE=2>&nbsp;Net income (loss) related to 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" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;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>(1,855</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>(1,595</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>&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>(260</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>
     <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"><B>&nbsp;Net income (loss)</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>(2,053</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>(3,605</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>92</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>(8,396</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>(6,400</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>)</B> </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>
     <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" colspan=16><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Basic and diluted net 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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     (0.04</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     (0.36</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     (0.24</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     (1.00</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     (0.51</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Basic and diluted net income (loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;per share from discontinued operations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>      0.40</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     (0.28</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>      0.25</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>      0.02</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     (0.02</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=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>
     <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;Basic and diluted net income (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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     (0.44</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     (0.64</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>      0.01</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     (0.97</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     (0.53</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=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>
     <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;Weighted average number of shares used in</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;computing basic net earning (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>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>4,631</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>5,616</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>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>6,675</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>8,651</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>11,979</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>
     <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" colspan=16><FONT FACE="Times New Roman" SIZE=2>&nbsp;Weighted average number of shares used in</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;computing diluted net earning (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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>4,631</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>5,616</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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>6,793</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>11,783</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>11,979</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>
     <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 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=15><FONT FACE="Times New Roman" SIZE=1>As of December 31,</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3 align=left><FONT FACE="Times New Roman" SIZE=1>Consolidated Balance<BR>
Sheet Data:</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2004</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2005</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>
     <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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>
     <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>
     <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>
     <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="41%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Cash and Cash Equivalents</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="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,304</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>2,232</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>2,033</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>4,271</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>1,637</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>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>5,195</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>4,162</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>3,046</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>10,407</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>4,915</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" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Total 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>22,485</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>22,646</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>24,529</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>31,132</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>37,345</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>Short-term banks loan</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>and 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></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>of 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></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>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>1,997</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>2,625</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>4,088</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>5,028</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>10,299</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" BGCOLOR="#CCEEFF">
     <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>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>3,380</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>2,517</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>4,450</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>4,564</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>Minority interest in a</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>subsidiary</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>809</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
     <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>&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>Share 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>4,823</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>6,432</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>10,628</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>13,159</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>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>44,426</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>47,588</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>54,758</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>55,830</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" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><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>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>10,048</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>11,266</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>14,438</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>11,244</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>(*)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></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>comprises of:</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" BGCOLOR="#CCEEFF">
     <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>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>12,581</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>12,233</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>22,651</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>26,452</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>Less: 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>7,386</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>8,071</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>12,244</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>21,537</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>
     <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>&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>5,195</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>4,162</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>3,046</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>10,407</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>4,915</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>
     <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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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3B.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Capitalization
and Indebtedness</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable </FONT></P>

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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"><B>3C.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Reasons
for the Offer and Use of proceeds</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable </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>

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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"><B>3D.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Risk
Factors</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following factors, in addition to
other information contained or incorporated by reference in this Form 20-F, should be
considered carefully. Our business, financial condition or results of operations could be
materially adversely affected by any of these risks. The risks described below are not the
only risks facing our company. Additional risks and uncertainties that we are not aware of
or that we currently believe are immaterial may also adversely affect our business,
financial condition, results of operation and liquidity. The trading price of our ordinary
shares could decline due to any of these risks, and you may lose all or part of your
investment. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Forward Looking Statements</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This report on Form 20-F contains
forward-looking statements that are intended to be, and are hereby identified as, forward
looking statements for the purposes of the safe harbor provisions of the Private
Securities Reform Act of 1995. These statements address, among other things: our strategy;
the anticipated development of our products; the results of completed acquisitions and our
ability to make future acquisitions; our projected capital expenditures and liquidity; our
development of additional revenue sources; our development and expansion of relationships;
the market acceptance of our products; and our technological advancement. Actual results
could differ materially from those anticipated in these forward-looking statements as a
result of various factors, including all the risks discussed below and elsewhere in this
report. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We urge you to consider that
statements which use the terms &#147;believe&#148;, &#147;do not believe&#148;,
&#147;expect&#148;, &#147;plan&#148;, &#147;intend&#148;, &#147;estimate&#148;,
&#147;anticipate&#148;, &#147;projections&#148;, &#147;forecast&#148; and similar
expressions are intended to identify forward-looking statements. These statements reflect
our current views with respect to future events and are based on assumptions and are
subject to risks and uncertainties. Except as required by applicable law, including the
federal securities laws of the United States, we do not intend to update or revise any
forward-looking statements, whether as a result of new information, future events or
otherwise. </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Risks relating to our
financial results and capital structure:</B></U> </FONT> </H1>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>The global economic
slowdown has and may continue to have an adverse impact on our financial results.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We,
like other companies, have been and are subject to the effects of market slowdowns. If
general economic conditions fail to improve, or if they continue to deteriorate, our
revenues, operating results and financial condition would be adversely affected. Our
revenues for the first quarter of 2009 decreased by 21.7% to $9 million from $11.5 million
in the fourth quarter of 2008, which reflects the impact of the economic slowdown on our
business. The sharpest decrease in revenues was in our subsidiary, BOS &#150; Supply Chain
Solutions (Summit), Inc. (formerly known as Summit Radio Corp.) (&#147;Summit&#148;),
whose revenues decreased from $3.7 million in the fourth quarter of year 2008 to $2.7
million in the first quarter of year 2009, a 27% decrease. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
intangible assets as of December 31, 2008 amounted to $7.8 million. Following the economic
slowdown we recorded a goodwill impairment charge of $1.9 million in 2008 related to our
Supply Chain Solutions segment. If general economic conditions fail to improve, we may be
required to record additional impairment charges. </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>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
customers&#146; debt is derived from sales to customers located primarily in Israel, South
America, North America and Europe. We do not have any collateral or credit insurance in
respect of the customers debt. The balance of allowance for bad debt as of December 31,
2008 amounted to $65,000, which was determined by the management to be sufficient. If
general economic conditions fail to improve, we may be required to record additional and
significant allowances for bad debts. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We have had a history of
losses and our future levels of sales and ability to achieve profitability are unpredictable.</I></B> </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of March 31, 2009, we had an accumulated deficit of $58 million. In 2008 we had a net loss
of $6.4 million and in the first quarter of 2009 we had net loss of $0.7 million. Our
ability to maintain and improve future levels of sales and achieve profitability depends
on many factors, which include: </FONT></P>

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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>successful
 integration  of Summit which was acquired in November  2007 and of the assets of Dimex
Systems (1988)            Ltd. and Dimex Hagalil Ltd. (collectively &#147;Dimex Systems&#148;),
which           were purchased in March 2008; </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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>servicing
the debt we have incurred for the financing of our acquisitions;</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>financing
working capital needs by debt or equity;</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>continuing
growth in the Aerospace industry and continued demand for our existing products;</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>developing
and selling new RFID and Mobile Solutions products to meet customer needs;</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>controlling
costs and successfully implementing our business strategy; and</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>manufacture
and delivery of products in a timely manner.</FONT></TD>
</TR>
</TABLE>
<BR>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
can be no assurance that we will be able to meet our challenges and experience any growth
in sales or achieve profitability in the future or that the levels of historic sales or
profitability experienced during previous years will continue in the future or that our
net losses will not increase in the future. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We may be unable to
maintain our gross profit margins.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
sales and profitability may vary in any given year, and from quarter to quarter. In order
to increase sales and enter into new markets with new products we may find it necessary to
decrease prices in order to be competitive. Additionally, the gross profit margin of our
Supply Chain Segment, whose sales accounted for 76% of our total sales in 2008 and 89% in
2007, tends to fluctuate mainly due to variety and mix of products of the Supply Chain
Solutions Segment. We may not be able to maintain current gross profit margins in the
future, which would have a material adverse effect on our business. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>We require a significant amount
of cash to satisfy our debt obligations. If we fail to generate sufficient cash flow from
operations, we may need to renegotiate or refinance our debt, obtain additional financing,
postpone capital expenditures or sell assets. If we are forced to repay our short and long
term bank loans in cash, we may not have enough cash to fund our operations.</I></B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of March 31, 2009 we had $10.3 million of short term bank loans drawn under a revolving
credit facility, $661,000 current maturities of long term loans and $2.9 million of long
terms loans. We depend mainly on our cash generated by continuing operating activities to
make payments on our debt. We cannot assure that we will generate sufficient cash flow
from operations to make the scheduled payments on our debt. Our ability to meet our debt
obligations will depend on whether we can successfully implement our strategy, as well as
on economic, financial, competitive and technical factors. (See &#147;Section 5B.
Liquidity and Capital Resources&#148;)  </FONT></P>

<p align=center>
<font size=2>- 5 -</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some
of the factors are beyond our control, such as economic conditions in the markets where we
operate or intend to operate, changes in our customers&#146; demand for our products, and
pressure from existing and new competitors. Also, because part of our loans bear interest
at floating rates, we are susceptible to an increase in interest rates. (See &#147;Item
11. Quantitative and Qualitative Disclosures about Market Risk&#148;) </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we cannot generate sufficient cash flow from operations to make scheduled payments on our
debt obligations, we may need to renegotiate the terms of our debt, refinance our debt,
obtain additional financing, delay planned capital expenditures or sell assets. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
our lenders decline to renegotiate the terms of our debt in these circumstances, the
lenders could declare all amounts borrowed and all amounts due to them under the
agreements due and payable. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, our short and long term bank loans contain certain provisions, restrictions and
financial covenants, which if violated, could result in the full principal amounts
together with interest and other amounts becoming immediately due and payable in cash. One
of the restrictions is on the transfer of funds between our Israeli and U.S. subsidiaries. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we do not have the cash resources to repay our indebtedness in such circumstances, our
lenders could foreclose on our assets that are subject to liens and sell our assets to
satisfy the debt. (See &#147;Section 5B. Liquidity and Capital
Resources&#148;) </FONT></P>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We depend on two banks
which provide our short and long term loans.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company manages its loans in two banks: (i) Bank Leumi Le Israel Ltd. (&#147;Bank
Leumi&#148;) which provides credit to the Company and its Israeli subsidiaries and (ii)
JPMorgan Chase Bank (&#147;JPMorgan Chase&#148;) which provides credit to Summit. In case
of adverse changes in the financial position of either of these banks or deterioration in
the relations of the Company with either of these banks, our liquidity could be materially
adversely affected. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Our assets are subject to
security interests in favor of our lenders. Our failure to repay the bank loans, if
required, could result in legal action against us, which could require the sale of all of
our assets.</I></B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
repayment of our bank debt is secured by a first priority floating charge on all of our
company&#146;s assets, present and future as they may be changing from time to time, and
by a first priority fixed charge on all of the Company&#146;s issued and unpaid-for share
capital, its goodwill and its shares of Dimex Solutions Ltd. (previously named BOScom Ltd.)
(&#147; Dimex Solutions&#148;),  Summit and Odem Electronic  Technologies 1992 Ltd. ("Odem").  In addition,  the Company and its
subsidiaries entered into a series of inter company guarantees in favor of our lenders.</FONT></P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we are unable to repay the bank loans when due, our lenders could foreclose on our assets
in order to recover the amounts due. Any such action would require us to curtail or cease
operations. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Our debt obligations may
hinder our growth and put us at a competitive disadvantage.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
debt obligations require us to use a substantial portion of our operating cash flow to
repay the principal and interest on our loans. This reduces funds available to grow and
expand our business, limits our ability to pursue business opportunities and makes us more
vulnerable to economic and industry downturns. The existence of debt obligations and
covenants also limits our ability to obtain additional financing on favorable terms. </FONT></P>

<p align=center>
<font size=2>- 6 -</font></p>
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<page>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Due to restrictions in
our loan agreements, we may not be able to operate our business as we desire.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
loan agreements contain a number of conditions and limitations on the way in which we can
operate our business, including limitations on our ability to raise debt, sell or acquire
assets and pay dividends. Our loan agreements also contain various covenants which require
that we maintain certain financial ratios related to shareholder&#146;s equity and
operating results. These limitations and covenants may force us to pursue less than
optimal business strategies or forgo business arrangements which could have been
financially advantageous to our shareholders and us. Our failure to comply with the
covenants and restrictions contained in our loan agreements could lead to a default under
the terms of these agreements. (See &#147;Section 5B. Liquidity and Capital
Resources&#148;) </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>The value of our holdings
in affiliated companies may decline and adversely affect our financial results.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of March 31, 2009 the Company held 6.1% of the outstanding shares of Surf Communication
Systems Ltd. (&#147;Surf&#148;) and 14.92% of New World Brands Inc. (&#147;New World
Brands&#148;). During 2008 and the first quarter of 2009, an impairment in the amount of
$1.5 million and $193,000 were recorded in respect of these shareholdings, respectively.
The book value of these investments as of March 31, 2009 amounted to $689,112. We may
record additional impairment in case of further deterioration in the business of these
entities. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
August 2008, we reached an agreement for the sale to New World Brands of up to thirty-five
(35) million shares of New World Brands common stock. During 2008, we sold to New World
Brands a total of 6.6 million shares of New World Brands common stock. This agreement has
expired. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Risks related to our
business:</U> </FONT> </H1>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We depend on key
personnel for the success of our business.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
success depends, to a significant extent, on the continued active participation of our
executive officers and other key personnel. In addition, there is significant competition
for employees with technical expertise in our industry. In order to succeed we would need
to be able to: </FONT></P>

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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>retain
the executive  officers and key technical  personnel who have been involved in the
 development  of         our two divisions;</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>attract
and retain additional  qualified  personnel to provide  technological depth and support
to enhance         existing products and develop new products; and</FONT></TD>
</TR>
</TABLE>
<BR>

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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>attract
and retain highly skilled computer operating, marketing and financial personnel.</FONT></TD>
</TR>
</TABLE>
<BR>


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

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We have recently
substantially decreased the number of our employees and due to the reduced staff we may be unable
to meet our revenue objectives.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Starting
from the end of 2008 and through May 2009, our workforce was reduced from 154 employees to
125 employees, a reduction of 29 employees, of which 13 were from Summit. This decrease
was related to the economic slow down, which affected our revenues. With the decreased
staff, we may be unable to meet our revenue targets. If we need to further reduce the
number of employees, our ability to grow, and achieve our business and operation goals may
be hindered. </FONT></P>

<p align=center>
<font size=2>- 7 -</font></p>
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<page>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Integration of our
acquisitions requires significant financial and management resources and there is no
assurance that the acquisitions may prove successful.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Over
the past years we have pursued the acquisition of businesses, products and technologies
and have completed two major acquisitions, of the U.S. based Summit, in November 2007, and
of the assets of Dimex Systems, in March 2008. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
growth increases the complexity of our operations, places significant demands on our
management and our operational, financial and marketing resources and involves a number of
challenges, including: </FONT></P>

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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>managing
geographically dispersed operations;</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>retaining
and motivating key personnel of the acquired businesses;</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>assimilating
different corporate cultures;</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>preserving
the business relationships with existing key customers and suppliers;</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>maintaining
uniform standards, controls, procedures and policies; and</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>introducing
joint products and service offerings.</FONT></TD>
</TR>
</TABLE>
<BR>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
can be no assurance that we will be able to successfully integrate and manage our
acquisitions in order to maintain and grow the combined business and maximize the
potential synergies. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Further,
once integrated, acquisitions may not achieve comparable levels of revenues, profitability
or productivity as our existing business or otherwise perform as expected. The occurrence
of any of these events could harm our business, financial condition or results of
operations. </FONT></P>

<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Our corporate rebranding
initiative may not be successful.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
February 2009, in order to strengthen the BOS brand-name and as part of our group
integration process, we decided to implement name changes of our wholly owned
subsidiaries. Recently, Lynk USA, Inc., has changed its name to BOS &#150; Supply Chain
Solutions (Lynk) Inc. (&#147;Lynk&#148;) and Summit Radio Corp. has changed its name to
BOS &#150; Supply Chain Solutions (Summit), Inc. The following subsidiaries are in the
process of the name change as follows: </FONT></P>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH align=left><FONT FACE="Times New Roman" SIZE=1>Previous Name</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH align=left><FONT FACE="Times New Roman" SIZE=1>New Name</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR>
      <TD>&nbsp; </TD>
      <TD> </TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Dimex Solutions Ltd.</FONT></TD>
     <TD WIDTH=60% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>BOS - Dimex Ltd.</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Odem Electronic Technologies 1992 Ltd.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>BOS - Odem Ltd.</FONT></TD></TR>
</TABLE><BR>

<p align=center>
<font size=2>- 8 -</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
is no assurance that the renaming and rebranding may prove to be successful to the
Company&#146;s business. In addition, the renaming and rebranding may cause interruption
in business with customers or suppliers in the short term. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We may be unable to
effectively manage our growth and expansion, and as a result, our business results may be adversely
affected.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
goal is to grow significantly over the next few years. The management of our growth, if
any, will require the continued expansion of our operational and financial control
systems, as well as a significant increase in our financial resources and in our delivery
and service capabilities. These factors could place a significant strain on our resources. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
inability to meet our delivery commitments in a timely manner (as a result of unexpected
increases in orders, for example) could result in losses of sales, our exposure to
contractual penalties, costs or expenses, as well as damage to our reputation in the
marketplace. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
inability to manage growth effectively could have a material adverse effect on our
business, financial condition and results of operations. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
our efforts to raise capital do not succeed, our efforts to increase our business may be
seriously jeopardized. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>A significant part of the
revenues of our supply chain business are from two major customers Israel Aircraft Industries
(&#147;IAI&#148;) and a strategic Latin American customer (the &#147;Strategic
Customer&#148;).</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
business relationship with IAI and the Strategic Customer accounted for 11% and 13% of our
year 2008 revenues, and accounted for 13% and 12% of our first quarter of 2009 revenues
respectively. An interruption in our business relationship with either of these customers
would result in a significant reduction in our revenues, backlog and in a write-off of
inventory, and would have a material adverse effect on our business and results of
operations. Our long term sales agreement with IAI will end by December 2010. In July
2008, we signed a contract for the sale of components to the Strategic Customer. The
contract provides for a framework for orders during an initial five-year term (until
2012). The contract may be extended for additional five-year terms. Pursuant to the
contracts with IAI and the Strategic Customer, we committed to a fixed components sale
price through the respective contract periods. Each of our agreements with IAI and the
Strategic Customer subjects us to the following risks: </FONT></P>

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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Significant
appreciation in the cost price of electronic components may materially adversely impact
our  financial results.</I></FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
sales agreements with IAI and the Strategic Customer provide for the supply of electronic
components at a fixed sales price. Absent the flexibility to increase our prices as a
result of increased costs of the components, significant increased costs may adversely
impact our financial results. </FONT></P>

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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>The
relationship with IAI and the Strategic Customer requires us to hold a large inventory,
in order to meet short lead time and delivery requirements. If we are unable to
sell this inventory on a  timely basis, we could incur charges for excess and
obsolete inventory, which would materially  adversely affect our results of
operations.</I></FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>- 9 -</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the agreements with IAI and the Strategic Customer, we are obligated to hold inventory of
products necessary for three months of production. This requires us to incur the costs of
purchasing inventory without having an outstanding purchase order for the products. If we
are unable to sell products that are purchased to hold in inventory, we may incur
difficulties in working capital, write-offs and write-downs as a result of slow-moving
items, technological obsolescence, excess inventories, discontinued products and products
with market prices lower than cost. Such write-offs and write-downs and difficulties in
working capital could adversely affect our operating results and financial condition. </FONT></P>

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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>If
we are unable to provide certain requested components, the entire order which includes
these  components may be cancelled.</I></FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Supply
Chain solution programs of electronic components accommodate the preference of customers
to work with a limited number of suppliers that will be able to provide a wide range of
electronic components under one order. In the event we are not able to provide certain of
the components ordered, the customer could elect to terminate the entire order before its
delivery. This could cause us to remain with excess and obsolete inventory and would
adversely affect our results of operations. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>The continued growth of
our RFID and Mobile Solutions segment depends on our ability to expand sales abroad.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2008, our RFID and Mobile Solutions revenues that were generated from sales outside of
Israel amounted to $2.4 million or 19.4% of the entire RFID and Mobile Solutions revenues.
Continued growth of this segment depends on our ability to further increase our sales
abroad. There can be no assurance that we will be able to maintain and increase our
revenues from these markets. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Certain customers of our
Supply Chain Solutions may cancel purchase orders they placed before the delivery.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
purchase orders of our Supply Chain Solutions provide that they may be canceled by the
customer before delivery. In the event substantial orders are so cancelled, there is no
assurance that we will be able to sell the pre-purchased inventory at a profit, or at all.
This could result in excess and obsolete inventory and could have a material adverse
effect on our results of operations. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>The Company&#146;s
subsidiary, Summit, engages in a number of business activities governed by Federal
Regulations, which if violated, could subject the Company to civil or criminal fines
and penalties.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company&#146;s subsidiary, Summit, engages in a number of business activities governed by
the Federal Acquisition Regulations (FAR), the Defense Federal Acquisition Regulations
(DFAR) and the export control provisions of the International Traffic In Arms Regulations
(ITAR) of the Department of State. The FAR and DFAR regulate business with the U.S.
Department of Defense as well as other U.S. Government agencies regardless of whether a
company serves in the role of a prime contractor (in direct privity of contract with the
governmental agency) or as a subcontractor to a prime contractor, regardless of how many
tiers down the contracting chain. Violation of the FAR or DFAR can result in civil and
criminal fines and other penalties, including suspension or debarment from the ability to
do business with any agency of the Federal Government, whether directly or indirectly.
Much of the Summit&#146;s business, regardless of whether with the Federal Government,
involves compliance with the ITAR, the export control regulations for the export of
defense articles, technology or defense services. ITAR violations are, in effect, a
violation of the Arms Export Control Act. Fines and penalties can be civil or criminal.
Civil fines are $250,000 per violation or twice the value of the transaction. Criminal
violations include fines of $1,000,000 per violation both for individuals and entities.
Violation of the ITAR can also lead to loss of export privileges for up to four years. </FONT></P>

<p align=center>
<font size=2>- 10 -</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>We have terminated our business
relationship with the US distributor of our BOS&acirc;NOVA Suite Solution (one of the
products of RFID and Mobile Solutions segment). Consequently, we may experience an
interruption or decrease in sales, which may have a material adverse effect on our
business.</I></B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have been marketing our BOS&acirc;NOVA Suite Solutions in the United States through one
key distributor. In 2008 and 2007 our sales through this distributor accounted for 2% and
4% of our total sales, respectively, and for approximately 7% and 18% of our gross profit,
respectively. In April 2009 we terminated our business relationship with this distributor
and intend to market and support the BOS&acirc;NOVA Suite Solutions in the US directly,
through our New Jersey operation. We cannot assure that the transition will be successful
and we may experience a reduction in our gross profit, which could have a material adverse
effect on our business. In addition, the former distributor has recently commenced a
lawsuit against Dimex Solutions seeking unspecified damages as a result of Dimex
Solution&#146;s alleged failure to provide the required level of technical support under
the distribution agreement. The Company intends to contest this lawsuit vigorously. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We are required to make
additional payments towards the acquisition of the assets of Dimex Systems.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the Dimex Systems Asset Purchase Agreement we are required to pay to the sellers an
additional amount of approximately NIS 10 million (approximately $2.57 million, based on a
3.8887 New Israeli Shekel (&#147;NIS&#148;) to U.S. dollar currency exchange rate as of
June 1, 2009), in three installments. The first installment of NIS 3.5 million was made in
March 2009 and the remaining amount was payable during the year 2010. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
March 2009, the Company entered into an amendment to the Dimex Systems Asset Purchase
Agreement that revises the payment schedule of the approximately NIS 10 million payable in
three semi-annual installments through March 2010. The amendment provides for a NIS 3.5
million payment in March 2009, NIS 4 million will be paid in 6 equal monthly installments
each, starting on January 15, 2010, and the remaining approximately NIS 2.5 million shall
be paid in two equal installments in March and April 2010. The amendment further provides,
that if the Company raises funds by way of a debt offering meeting certain conditions, the
last payment of approximately NIS 2.5 million shall be converted into the same type of
convertible debentures issued in the framework of such offering. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we are unable to make these payments, we will be in breach of contract and our financial
position, and results of operation could be adversely affected. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We rely on certain key
suppliers.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most
of our sales rely on products of certain key suppliers, which we represent. 20% of our
first quarter of 2009 Supply Chain Solutions segment purchases were sourced from five key
suppliers and 75% of our first quarter of 2009 Mobile and RFID<B> </B>Solutions segment
purchases were sourced from five key suppliers. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event that any of our key suppliers becomes unable to fulfill our requirements in a
timely manner or if we cease our business relationship with these suppliers, we may
experience an interruption in delivery until an alternative source of supply can be
obtained. </FONT></P>

<p align=center>
<font size=2>- 11 -</font></p>
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<page>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Future changes in
industry standards may have an adverse effect on our business.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New
industry standards in the aviation and defense industry could cause a portion of our
Supply Chain Solution segment&#146;s inventory to become obsolete and unmarketable which
would adversely affect our results of operations. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>If revenue levels for any
quarter fall below our expectations, our results of operations will be adversely affected.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
revenues in any quarter are substantially dependent on orders received and delivered in
that quarter. We base our decisions regarding our operating expenses on anticipated
revenue trends, and our expenses levels are relatively fixed, or require some time for
adjustment. As a result, revenue levels below our expectations will adversely affect our
results of operations. In the fourth quarter of 2008 we faced a significant reduction in
revenues which declined to $11.5 million from $13.4 million in the third quarter of 2008.
In the first quarter of 2009 we faced an additional reduction in revenues, which declined
to $9.0 million. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>The rate of inflation in
Israel may negatively impact our costs if it exceeds the rate of devaluation of the
NIS against the U.S. dollar. Similarly, the U.S. dollar cost of our operations in Israel
will increase to the extent increases in the rate of inflation in Israel are not
offset by a devaluation of the NIS in relation to the U.S. dollar.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
substantial amount of our revenues is denominated in U.S. dollars or is U.S.
dollar-linked, but we incur a significant portion of our expenses, principally salaries
and related personnel expenses in Israel and rent for our facilities in Israel, in NIS. As
a result, we are exposed to the risk that the rate of inflation in Israel will exceed the
rate of devaluation of the NIS in relation to the U.S. dollar or that the timing of this
devaluation lags behind inflation in Israel. In that event, the U.S. dollar cost of our
operations in Israel will increase and our U.S. dollar-measured results of operations will
be adversely affected. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Similarly,
we are exposed to the risk that the NIS, after adjustment for inflation in Israel, will
appreciate in relation to the U.S. dollar. In that event, the dollar cost of our
operations in Israel will increase and our dollar-measured results of operations will be
adversely affected. During 2006, 2007 and 2008, the inflation adjusted NIS appreciated
against the U.S. dollar, which raised the U.S. dollar cost of our Israeli operations. We
cannot predict whether in the future the NIS will appreciate against the U.S. dollar or
vice versa. Any increase in the rate of inflation in Israel, unless the increase is offset
on a timely basis by a devaluation of the NIS in relation to the U.S. dollar, will
increase labor and other costs, which will increase the U.S. dollar cost of our operations
in Israel and harm our results of operations. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(see "Section 5A. Results of Operation - Impact of Inflation and Currency Fluctuations")</FONT></P>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We may be unable to
maintain and continue developing marketing and distribution arrangements and expand our
reach&nbsp;into overseas markets.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
outside Israel accounted for 42% of our total sales in 2008 and for 33% in 2007. If we are
not able to maintain our existing distribution channels and expand to new international
markets, our operating results may be materially adversely affected. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>If we are unsuccessful in
developing and introducing new products, we may be unable to expand our business.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
market for some of our products is characterized by rapidly changing technology and
evolving industry standards. The introduction of products embodying new technology and the
emergence of new industry standards can render existing products obsolete and unmarketable
and can exert price pressures on existing products. </FONT></P>

<p align=center>
<font size=2>- 12 -</font></p>
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<page>

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have sold and intend to continue to sell our products in North and South America, Europe,
China and Asia Pacific. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
number of risks are inherent in engaging in international transactions, including: </FONT></P>


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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>possible
problems in collecting receivables;</FONT></TD>
</TR>
</TABLE>
<BR>

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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>imposition
of governmental controls, or export license requirements;</FONT></TD>
</TR>
</TABLE>
<BR>

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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>political
and economic instability in foreign countries;</FONT></TD>
</TR>
</TABLE>
<BR>

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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>trade
restrictions or changes in tariffs being imposed; and</FONT></TD>
</TR>
</TABLE>
<BR>

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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>laws
and legal issues concerning foreign countries.</FONT></TD>
</TR>
</TABLE>
<BR>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we should encounter such difficulties in conducting our international operations, it may
adversely affect our business condition and results of operations. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We may be unable to
successfully defend ourselves against claims brought against us.</I></B> </FONT> </P>

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

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We may be obligated to
indemnify our directors and officers.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has agreements with its directors and senior officers which provide, subject to
Israeli law, for the Company to indemnify these directors and senior officers for (a)
monetary liability imposed upon them in favor of a third party by a judgment, including a
settlement or an arbitral award confirmed by the court, as a result of an act or omission
of such person in his capacity as a director or officer of the Company, (b) reasonable
litigation expenses, including attorney&#146;s fees, incurred by them pursuant to an
investigation or a proceeding commenced against them by a competent authority and that was
terminated without an indictment and without having a monetary charge imposed on them in
exchange for a criminal procedure (as such terms are defined in the Israeli Companies Law
1999 &#150; 5759 (the &#147;Israeli Companies Law&#148;)), or that was terminated without
an indictment but with a monetary charge imposed on them in exchange for a criminal
procedure in a crime that does not require proof of criminal intent, as a result of an act
or omission of such person in his capacity as a director or officer of the Company, and
(c) reasonable litigation expenses, including attorney&#146;s fees, incurred by such a
director or officer or imposed on him by a court, in a proceeding brought against him by
or on behalf of the Company or by a third party, or in a criminal action in which he was
acquitted, or in a criminal action which does not require criminal intent in which he was
convicted, in each case relating to acts or omissions of such person in his capacity as a
director or officer of the Company. Such indemnification may materially adversely affect
our financial condition. </FONT></P>

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<font size=2>- 13 -</font></p>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>The measures we take in
order to protect our intellectual property may not be effective or sufficient.</I></B> </FONT> </P>

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based upon our current and projected
income, assets and activities, we do not believe that at this time BOS is a passive
foreign investment company (a &#147;PFIC&#148;) for U.S. federal income tax purposes, but
there can be no assurance that we will not be classified as such in the future. Such
classification may have grave tax consequences for U.S. shareholders. One method of
avoiding such tax consequences is by making a &#147;qualified electing fund&#148; election
for the first taxable year in which the Company is a PFIC. However, such an election is
conditioned upon our furnishing U.S. shareholders annually with certain tax information.
We do not presently prepare or provide such information, and such information may not be
available to U.S. shareholders if we are subsequently determined to be a PFIC. You are
advised to consult with your own tax advisor regarding the particular tax consequences
related to the ownership and disposition of the ordinary shares under your own particular
factual circumstances. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Risks related to our
ordinary shares:</B></U> </FONT> </H1>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
market price of our ordinary shares has been and may continue to be highly volatile and
subject to wide fluctuations. From January 2008 through May 31, 2009, the daily closing
price of our ordinary shares in NASDAQ has ranged from $0.22 to $2.05 per share. We
believe that these fluctuations have been in response to a number of factors including the
following, some of which are beyond our control: </FONT></P>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>adverse
world economic and capital market conditions;</FONT></TD>
</TR>
</TABLE>
<BR>

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<font size=2>- 14 -</font></p>
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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>actual
or anticipated variations in our quarterly operating results;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT size="2" face="Wingdings 2">&#151;</font></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>increase
in our bank debts;</FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
acquisition of Summit and of the assets of Dimex Systems;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>additions
or departures of key personnel;</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>changes
in our target markets, especially in the aviation industry; and</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><FONT size="2" face="Wingdings 2">&#151;</font></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>sales
of securities in private placements.</FONT></TD>
</TR>
</TABLE>
<BR>


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

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>The Company&#146;s shares
may be delisted from the NASDAQ Global Market if it does not meet NASDAQ&#146;s continued
listing requirements.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
late 2002 and early 2003 the Company received notice from the NASDAQ Stock Market that its
ordinary shares were subject to delisting from the NASDAQ Global Market for failure to
meet NASDAQ&#146;s minimum bid price and shareholders&#146; equity requirements ($10
million) for continued listing on the Global Market. Following a hearing, during 2003, we
were notified by NASDAQ that we had regained compliance. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
August 30, 2004, we received notice from the NASDAQ Stock Market that our ordinary shares
were subject to delisting from the NASDAQ Global Market for failure to meet NASDAQ&#146;s
minimum market value of publicly held shares requirement ($5 million) for continued
listing on the Global Market. On November 4, 2004, we were notified by NASDAQ that we had
regained compliance with this requirement. </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
June 2, 2005, the Company again received notice from the NASDAQ Stock Market indicating
that based on the results for the period ended March 31, 2005, the shareholders&#146;
equity was $9,425,000, and accordingly not in compliance with the minimum $10,000,000
shareholders&#146; equity requirement for continued listing on the Global Market. In June
2005, the Company regained compliance with NASDAQ&#146;s minimum $10,000,000
shareholders&#146; equity requirement for continued listing on the Global Market. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company&#146;s share has recently traded at a price below the NASDAQ&#146;s minimum bid
price of $1.00<B> </B>and its market value of publicly held shares is below the minimum
required of $5 million. NASDAQ has suspended these continued listing requirements through
July 20, 2009. There can be no assurance that we will be able to meet and continue to meet
these or other NASDAQ requirements to maintain our NASDAQ Global Market listing, in which
case we will seek to transfer the listing of our ordinary shares to the Over the Counter
Bulletin Board, of which there can be no assurance. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Risks related to our
location in Israel:</B></U> </FONT> </H1>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are incorporated under the laws of the State of Israel, where we also maintain our
headquarters and our principal research and development and sales and marketing
facilities. Political, economic, security and military conditions in Israel directly
influence us. We could be adversely affected by any major hostilities involving Israel,
the interruption or curtailment of trade between Israel and its trading partners or a
significant downturn in the economic or financial condition of Israel. In January 2006,
Hamas, an Islamic movement responsible for many attacks against Israelis, won the majority
of the seats in the Parliament of the Palestinian Authority. The election of a majority of
Hamas-supported candidates is a major obstacle to relations between Israel and the
Palestinian Authority, as well as to the stability in the Middle East as a whole. In
addition, the future of the &#147;peace process&#148; with the Palestinians is uncertain
and has deteriorated due to Palestinian violence, with the threat of a large-scale attack
by Palestinians on Israeli civilians and key infrastructure remaining a constant concern.
The past few years of renewed terrorist attacks by the Palestinians has severely affected
the Israeli economy in many ways. In June 2007, there was an escalation in violence in the
Gaza Strip resulting in Hamas effectively controlling the Gaza Strip and a further
escalation in violence has occurred during the first few months of 2008. In July 2006,
Israel became involved in a major military conflict with the Hizbullah organization in
Lebanon, which subjected the north of Israel to missile attacks. In December 2008, Israel
was involved in a military conflict with Hamas, which subjected the South of Israel to
missile attacks. Ongoing violence between Israel and the Palestinians as well as tension
between Israel and the neighboring Syria and Lebanon may have a material adverse effect on
our business, financial condition and results of operations. In addition, several
countries still restrict business with Israel and with companies doing business in Israel.
We could be adversely affected by adverse developments in the &#147;peace process&#148; or
by restrictive laws or policies directed towards Israel or Israeli businesses. </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Additionally, in recent years Israel
has been going through periods of recession in economic activity, resulting in low growth
rates and growing unemployment. Our operations could be adversely affected if the economic
conditions in Israel deteriorate. Furthermore, Israel is a party to certain trade
agreements with other countries, and material changes to these agreements could have an
adverse effect on our business.  </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>The anti-takeover effects of Israeli laws may delay or deter a change of control of the Company.</I></B></FONT></P>

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

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<font size=2>- 16 -</font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Companies Law provides that an acquisition of shares in a public company must be
made by means of a tender offer, if as a result of the acquisition, the purchaser would
become a holder of 25% or more of the voting power at general meetings, and no other
shareholder owns a 25% stake in the Company. Similarly, the Israeli Companies Law provides
that an acquisition of shares in a public company must be made by means of a tender offer
if, as a result of the acquisition, the purchaser would become a holder of 45% or more of
the voting power at general meetings, unless someone else already holds 45% of the voting
power. An acquisition from a 25% or 45% holder, which results in the purchaser becoming a
25% or 45% holder respectively, does not require a tender offer. An exception to the
tender offer requirement may also apply when the additional voting power is obtained by
means of a private placement approved by the general meeting of shareholders. These rules
also do not apply if the acquisition is made by way of a merger. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Companies Law also provides specific rules and procedures for the acquisition of
shares held by minority shareholders, if the majority shareholder shall hold more than 90%
of the outstanding shares. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
laws may have the effect of delaying or deterring a change in control of the Company,
thereby limiting the opportunity for shareholders to receive a premium for their shares
and possibly affecting the price that some investors are willing to pay for the
Company&#146;s securities. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>All of our directors and
most of our officers are non-U.S. residents and enforceability of civil liabilities against
them is uncertain.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
of our directors and most of our officers reside outside of the United States. Service of
process upon them may be difficult to effect within the United States. Furthermore,
because the majority of our assets are located in Israel, any judgment obtained in the
United States against us or any of our directors and non- U.S. officers may not be
collectible within the United States. </FONT></P>

<a name=zk105></a>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 4:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Information on the Company</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>4A.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>History
and Development of the Company</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We were incorporated in Israel in
1990 and are subject to the Israeli Companies Law. Our executive offices and engineering,
development, testing, shipping and service operations are located in Israel and the United
States. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our telephone number is
972-3-954-1000 and our website address is www.boscorporate.com. Our subsidiaries&#146;
websites are: Odem &#150; www.odem.co.il; Odem also maintains a website showcasing our
services in the field of RFID &#150; www.yourfid.com; Dimex Solutions &#150;
www.dimex.co.il and Summit &#150; www.summitradio.com. The information contained on, or
linked from, our websites is not a part of this report. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We operate our business through two
segments: </FONT></P>

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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supply
Chain Solutions &#150; conducted through two wholly owned subsidiaries: Odem and Summit.
Our Supply Chain Solutions business offers a wide range of electronic components to
customers in the aviation and aerospace industry that prefer consolidate their component
acquisitions through a supplier that is able to provide a comprehensive solution to their
components-supply needs. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>- 17 -</font></p>
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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><FONT size="2" face="Wingdings 2">&#151;</font>  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mobile
and RFID Solutions &#150; conducted through our wholly owned subsidiary, Dimex Solutions.
Our Mobile and RFID Solutions offerings form a comprehensive turn-key solution, combining
mobile infrastructure of manufacturers that we represent, middleware software and a
software application. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On November 18, 2004, we purchased
63.8% of Odem&#146;s issued and outstanding shares from Odem&#146;s shareholders, in
consideration of $2,740,000, comprised of cash in the amount of $1,971,000 and $769,000 by
the issuance of 290,532 of the Company&#146;s ordinary shares (subject to
&#147;lock-up&#148; periods of 2 to 4 years). We purchased an additional 23.9% and 12.3%
from the minority shareholders on September 29, 2005 and November 1, 2005, respectively,
and thus Odem became our wholly-owned subsidiary. In consideration for the 12.3% of
Odem&#146;s shares purchased in November 2005 the Company paid $554,000 in cash and for
the 23.9% of Odem&#146;s shares purchased in September 2005 the Company (i) issued 232,603
of the Company&#146;s ordinary shares (subject to &#147;lock up&#148; periods of 2 to 4
years) and paid $716,000 in cash. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In June 2007, the Company entered
into a Development, Credit and Purchase Agreement with OptimizeIT, an Israeli partnership,
pursuant to which the Company purchased the assets of OptimizeIT. The aggregate
consideration for the purchase was $170,000, which was paid by issuance of 8,000 shares of
the Company and by a cash payment of $150,000. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In March 2009, the Company sold the
OptimizeIT product and related intellectual property for a consideration of $70,000 plus
contingent consideration based on future revenues of up to $1,500,000. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On November 21, 2007 the Company
purchased all of the outstanding share capital of Summit, from Summit&#146;s existing
shareholders. In consideration for Summit&#146;s shares the Company issued 360,000 of the
Company&#146;s shares (subject to &#147;lock-up&#148; periods of up to 2 years) and (ii)
paid a cash amount of $4,472,000. In addition, Summit&#146;s selling shareholders are
entitled to receive contingent consideration of up to $500,000, based on performance in
the years 2008 and 2009. As of December 31, 2008, the Company accrued $60,000 on account
of contingent consideration for the year 2008. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In March 2008, Dimex Solutions and
its subsidiary Dimex Hagalil Projects (2008) Ltd. (&#147;Dimex Hagalil&#148;), purchased
the assets and activities of Dimex Systems, which was an integrator of AIDC (Automatic
Identification and Data Collection) solutions based on RFID and barcode technology. The
consideration for acquiring the business operation of Dimex Systems was NIS 17.6 million
(approximately $4,530,000 based on the June 1, 2009 exchange rate) and for the inventory,
accounts receivable and fixed assets, the consideration was NIS 27 million (approximately
$6,950,000 based on the June 1, 2009 exchange rate). The consideration was comprised of
cash, payable over a 24-month period and of 500,224 BOS shares (equal to approximately
4.4% of the then outstanding shares of BOS). In March 2009, the Company entered into an
amendment to the Dimex Systems Asset Purchase Agreement that revises the payment schedule
of the approximately NIS 10 million payable in three semi-annual installments through
March 2010. The amendment provides for a NIS 3.5 million payment in March 2009, NIS 4
million will be paid in 6 equal monthly installments each, starting on January 15, 2010,
and the remaining approximately NIS 2.5 million shall be paid in two equal installments in
March and April 2010. The amendment further provides, that if the Company raises funds by
way of a debt offering meeting certain conditions, the last payment of approximately NIS
2.5 million shall be converted into the same type of convertible debentures issued in the
framework of such offering.  </FONT></P>

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<font size=2>- 18 -</font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition, we have an interest in
two companies: </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)
          Surf, in which as of March 31, 2009 we held 6.1% of the issued and outstanding
          share capital. Established in 1996, Surf is an Israeli privately held company.
          Surf develops a suite of hardware and software products that drives a wide
          variety of applications whose common goal is high-capacity distribution of voice
          and video. In November 2001, the Company invested $1,000,000 as part of a
          private placement in Surf, and converted a convertible loan in the amount of
          $1,042,000 into Preferred Shares in Surf. In March 2003, the Company purchased
          from Catalyst Investments L.P. (&#147;Catalyst Investments&#148;) most of the
          Surf shares held by Catalyst Investments as a result of which Catalyst
          Investments held 16.6% of the outstanding Company shares, after the issuance. In
          September 2005, the Company invested $300,000 in Surf as part of a private
          placement. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)
          New World Brands, in which as of March 31, 2009 we held 14.92% of the issued and
          outstanding share capital. On December 31, 2005, we sold our Communications
          related 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 subsidiary
          of Qualmax. The consideration paid to the BOS in the transaction was
          approximately 3.2 million Qualmax shares of common stock, plus contingent
          consideration based on the performance of IP Gear. On June 8, 2006, Qualmax
          issued to BOS, on account of the abovementioned commitment, an additional
          250,000 Shares. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company also granted a bridge
loan to IP Gear in the amount of $1,000,000. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In May 2006, Qualmax issued to the
Company 244,755 shares, and the principal amount of the loan was reduced to $650,000. In
June 2006, Qualmax issued to BOS an additional 174,825 shares, further reducing the
principal amount of the loan, to $400,000. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On September 18, 2006, Qualmax
announced that it had consummated the transfer of all of its assets and liabilities to New
World in exchange for Series A Convertible Preferred Stock of New World convertible into
common stock with approximately 86% of the voting power of New World. The shares of common
stock of New World are quoted on the Over the Counter Bulletin Board. Immediately prior to
the closing of the transaction, New World sold all of its former business operations. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On January 10, 2007, we announced
that we closed a transaction with Qualmax and its subsidiaries, New World and IPGear,
pursuant to which approximately $1.5 million payable to us by Qualmax and IPGear
(including the outstanding balance of the aforementioned loan) was converted into 5.50652
shares of Series A Convertible Preferred Stock of New World. On April 27, 2007, New World
Brands announced the conversion of all of its outstanding Series A Convertible Preferred
Stock into shares of Common Stock. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Following the consummation of a
merger of Qualmax with and into New World Brands in January 2009, our holdings in Qualmax
were converted into shares of New World Brands. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In April 2007, the Company completed
a rights offering in which it raised gross proceeds of approximately $4.4 million and
issued 1,739,398 ordinary shares. </FONT></P>

<p align=center>
<font size=2>- 19 -</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On June 21, 2007, Laurus Master Fund
Ltd. converted the entire outstanding principal amount under its Convertible Notes of
approximately $2,223,000 into 878,670 ordinary shares of the Company. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In June 2007, the Company 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></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In December 2007, the Company entered
into a Share Purchase Agreement with Catalyst Fund L.P. (&#147;Catalyst Fund&#148;) and
three subsidiaries of D.S. Apex Holdings Ltd. (&#147;D.S. Apex&#148;), under which the
Company issued 833,560 ordinary shares at a price of $2.40 per share (reflecting an
aggregate investment of approximately $2 million), and 541,814 warrants at an exercise
price of $2.76, exercisable for four years from their date of issuance. In June 2008, the
Company entered into a Finder Letter Agreement with T.F.E. Holdings Ltd. under which the
Company issued 110,000 ordinary shares. These shares were issued as fees for services
rendered to the Company in connection with the acquisition of the assets of Dimex Systems. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In July 2008, the Company entered
into a Share Purchase Agreement with three non-U.S. investors, under which the Company
issued 740,740 ordinary shares at a price per share of $1.35 (reflecting an aggregate
investment of $1 million) and 370,370 ordinary shares issuable upon the exercise of
warrants, at an exercise price $1.60 per ordinary share, exercisable for 2 years from
their date of issuance. In August 2008, the Company entered into a Share Purchase
Agreement with a non-U.S. investor, under which the Company issued 816,327 ordinary shares
at a price per share of $1.225 (reflecting an aggregate investment of $1 million) and
408,164 ordinary shares issuable upon the exercise of warrants at an exercise price $1.475
per ordinary share, exercisable for 2 years from their date of issuance. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For more details on the
aforementioned private placements see Section 5B- Liquidity and Capital Resources. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
February 2009, in order to strengthen the BOS brand-name and as part of our group
integration process, we decided to implement name changes of our wholly owned
subsidiaries. Recently, Lynk USA, Inc., has changed its name to BOS &#150; Supply Chain
Solutions (Lynk) Inc. and Summit Radio Corp. has changed its name to BOS &#150; Supply
Chain Solutions (Summit), Inc. The following subsidiaries are in the process of the name
change as follows: </FONT></P>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1>Previous Name</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>New Name</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>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Dimex Solutions Ltd.</FONT></TD>
     <TD WIDTH=60% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>BOS - Dimex Ltd.</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Odem Electronic Technologies 1992 Ltd.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>BOS - Odem Ltd.</FONT></TD></TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
February 11, 2009 the Company announced that it requested the Tel Aviv Stock Exchange to
delist its shares from trading in Tel Aviv. The delisting became effective on May 12,
2009. The delisting of the ordinary shares from the TASE does not affect the continued
listing of the ordinary shares on the NASDAQ Global Market under the symbol BOSC. After
the delisting of the Company&#146;s ordinary shares from the TASE, the Company is not be
subject to reporting requirements in Israel. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has recently entered into a loan agreement with several lenders, including
Catalyst Private Equity Partners (Israel) II L.P., certain existing shareholders and
members of our management, including our chief executive officer, for an aggregate loan
amount of approximately $1.288 million. Closing of the transaction is subject to certain
closing conditions. The Company is in negotiations for obtaining additional loans, up to
an aggregate amount of $3.75 million. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For more details on the
aforementioned loan financing see Section 5B- Liquidity and Capital Resources. </FONT></P>

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



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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"><B>4B.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Business
Overview</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BOS&#146;s vision is to become a
worldwide leader in the field of RFID, Mobile and Supply Chain Solutions for enterprise
logistics and organizational processes. Committed to this vision, in 2007 and 2008, BOS
effected a reorganization, which included replacement of its senior management,
consolidation of offices in Israel, and the hiring of highly skilled employees. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BOS&#146; continues to execute a
growth strategy to strengthen its product offering and distribution channels worldwide. In
November 2007, we completed the acquisition of Summit, a U.S. based company, situated in
New Jersey. Summit transformed BOS into a diversified supply chain company with sales to
major international aviation and aerospace manufacturers, and gave its RFID and Mobile
Solutions a gateway to the U.S. markets.  <BR><BR>Summit brought with it:</FONT></P>

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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>(i)</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>           a
well established reputation in the Aviation and Aero-Space field, built over           50
years of business; </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>(ii) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>strong
business relationship with major customers in the field; </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>(iii) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
proven track-record of profitability; and </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>(iv) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>high
synergy with BOS&#146; Supply Chain Solutions. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Continuing this momentum of
synergetic acquisitions, in March 2008 we completed the acquisition of the assets of Dimex
Systems and transformed BOS into the leading Israeli integrator of AIDC (Automatic
Identification and Data Collection) solutions based on Mobile, RFID and Barcode
technology. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dimex Systems had: </FONT></P>

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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>(i) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
well established reputation in the AIDC field; </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>(ii) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>proven
professional capabilities of offering unique, innovative solutions; and </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>(iii) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>top
tier Israeli customers. </FONT></TD>
</TR>
</TABLE>
<BR>

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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>BOS product
offerings</I></B><I></I>: </FONT></P>

<center>

<DIV STYLE='position:relative;left:0;top:0;height:575px;width:720'>

<p style='position:absolute;top:0px;left:0px;'><img src="p23.jpg"></p>

<p style='position:absolute;top:161.1875px;left:106.25px;height:14.375px;width:217.25px; text-align:left;padding: 0in .07in 0in .07in;'>
<font style='font-family:Arial;font-size:12px;color:#1A2F5D;'>RFID Tags/Readers </font></p>

<p style='position:absolute;top:175.5625px;left:106.25px;height:14.375px;width:217.25px; text-align:left;padding: 0in .07in 0in .07in;'>
<font style='font-family:Arial;font-size:12px;color:#1A2F5D;'>Mobile Infrastructure </font></p>

<p style='position:absolute;top:204.3125px;left:106.25px;height:14.375px;width:217.25px; text-align:left;padding: 0in .07in 0in .07in;'>
<font style='font-family:Arial;font-size:12px;color:#001436;'>Electronic Components</font></p>

<p style='position:absolute;top:135.0625px;left:171px;height:12px;width:231.75px; text-align:left;padding: 0in .07in 0in .07in;'>
<font style='font-family:Arial;font-size:10px;color:#001436;'><b>Hardware</b></font></p>

<p style='position:absolute;top:161.1875px;left:321.625px;height:14.375px;width:162.375px; text-align:left;padding: 0in .07in 0in .07in;'>
<font style='font-family:Arial;font-size:12px;color:#1A2F5D;'>BOServer </font></p>

<p style='position:absolute;top:175.5625px;left:321.625px;height:14.375px;width:162.375px; text-align:left;padding: 0in .07in 0in .07in;'>
<font style='font-family:Arial;font-size:12px;color:#001436;'>BOSaNOVA</font></p>

<p style='position:absolute;top:135.4375px;left:352.75px;height:12px;width:172.125px; text-align:left;padding: 0in .07in 0in .07in;'>
<font style='font-family:Arial;font-size:10px;color:#001436;'><b>Middleware</b></font></p>

<p style='position:absolute;top:164.0625px;left:483.375px;height:14.375px;width:190px; text-align:left;padding: 0in .07in 0in .07in;'>
<font style='font-family:Arial;font-size:12px;color:#001436;'>Supply Chain </font></p>

<p style='position:absolute;top:178.4375px;left:483.375px;height:14.375px;width:190px; text-align:left;padding: 0in .07in 0in .07in;'>
<font style='font-family:Arial;font-size:12px;color:#001436;'>Logistics </font></p>

<p style='position:absolute;top:192.8125px;left:483.375px;height:14.375px;width:190px; text-align:left;padding: 0in .07in 0in .07in;'>
<font style='font-family:Arial;font-size:12px;color:#001436;'>Process automation </font></p>

<p style='position:absolute;top:207.1875px;left:483.375px;height:14.375px;width:190px; text-align:left;padding: 0in .07in 0in .07in;'>
<font style='font-family:Arial;font-size:12px;color:#001436;'>Healthcare </font></p>

<p style='position:absolute;top:221.5625px;left:483.375px;height:14.375px;width:190px; text-align:left;padding: 0in .07in 0in .07in;'>
<font style='font-family:Arial;font-size:12px;color:#001436;'>Retail </font></p>

<p style='position:absolute;top:235.9375px;left:483.375px;height:14.375px;width:190px; text-align:left;padding: 0in .07in 0in .07in;'>
<font style='font-family:Arial;font-size:12px;color:#001436;'>Environment </font></p>

<p style='position:absolute;top:135.4375px;left:513.5px;height:12px;width:201.75px; text-align:left;padding: 0in .07in 0in .07in;'>
<font style='font-family:Arial;font-size:10px;color:#001436;'><b>SW Applications</b></font></p>

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<font style='font-family:Arial;font-size:12px;color:#001436;'><b>Turn Key solution</b></font></p>

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<font style='font-family:Arial;font-size:21px;color:#001436;'><b>BOSolution</b></font></p>
</DIV>


</center>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BOS manages its business in two
reportable divisions, which consist of the RFID and Mobile Solutions &#150; offered
through Dimex Solutions, and the Supply Chain Solutions segment offered through Summit and
Odem. These segments are complementary with strong synergy. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Through our two business divisions we
offer comprehensive products and solutions consisting of three essential components &#150;
Hardware, MiddleWare and Software applications. As a sales strategy, these components are
also sold on a stand alone basis for the purpose of obtaining new customers, as well as
expanding the relationship with existing customers. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the Hardware field we offer, among
others, Mobile infrastructure, wireless equipment, RFID tags and readers and supply chain
components.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our Middleware product offering
consists, among others, of: an RFID Server named BOServer and an emulation server named
BOSaNOVA. Our Software applications aim at supply chain logistics, man process control and
monitoring, healthcare, retails and environment industries. </FONT></P>

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

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>RFID Tags and Readers </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>RFID (Radio Frequency Identification)
refers to the use of an automatic identification method to remotely retrieve data using
devices called RFID tags. An RFID tag is an object such as a pendant, bead, nail, label,
micro wire or fiber, which can be applied to or incorporated into a product, animal, or
person for the purpose of identification using radio waves. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mobile Infrastructure </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We represent worldwide leading
manufactures of Automatic Identification and Data Collection equipment based on RFID and
barcode technology. Among the manufacturers we represent are Motorola &#150; Symbol
Technologies Inc., Intermec Inc. (mobile terminals), Zebra Technologies Corporation
(barcode printers), Texas Instruments and HID &#150; Sokymat (RFID tags and readers). We
also provide processing services for a variety of raw materials, mainly for ink ribbons,
barcode printers and printing barcode labels. </FONT></P>

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

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Electronic Components </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our Supply Chain Solutions business
offers a wide range of electronic components to customers in the aviation and aerospace
industry that prefer to work with a limited number of suppliers such as BOS that are able
to provide a comprehensive solution to their components-supply needs. Our Supply Chain
Solutions segment operates through two subsidiaries: Odem which is located in Israel and
Summit which is located in New Jersey, USA. <BR><BR>We represent suppliers of electronic
components in four main categories: </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1)
          Active Components &#150; semiconductors, transistors, detectors, diodes,
          integrated circuits, hybrid modems, cellular components, communication ICs,
          memories, displays, and LEDS; </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2)
          Passive Components &#150; capacitors, thermistors, varistos, oscillators,
          crystals, resistors, C-DC converters, and power supplies; </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3)
          Electro-mechanical Components &#150; relays, connectors, circuit breakers,
          filters, transformers, plugs, thermostats, switches, etc.; and </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4)
          Discontinued Semiconductors- made by Intel, Fairchild, Harris, Microchip,
          National, Quality SMC, Texas Instruments, Vantis, Motorola, and more. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We provide full access networks
equipment for IT and telecommunications (LAN/WAN), communication servers, multi-protocol
print servers, server adapters, USB products, switches, fiber optics equipment, ADSL and
XDSL routers, modems, VoIP, storage equipment and ATM devices. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the first quarter of year 2009,
our Supply Chain sales to IAI and to a strategic Latin American customer, accounted for
13%, and 12% of revenues, respectively.<B> </B>An interruption in our business
relationship with either of these customers would result in a significant reduction in our
revenues, backlog and in a write-off of inventory, and would have a material adverse
effect on our business and results of operations. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2008 and 2007, 76% and 94% of our
sales, respectively, were attributed to sales of the Supply Chain Solutions segment. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Middleware RFID Server </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>RFID refers to the use of an
automatic identification method to remotely retrieve data using devices called RFID tags.
An RFID tag is an object such as a pendant, bead, nail, label, micro wire or fiber, which
can be applied to or incorporated into a product, animal, or person for the purpose of
identification using radio waves. </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our RFID server, named BOServer, is
the middleware between the Enterprise Application system and the RFID equipments (reader
and tags). This server enables customers to integrate their RFID environment directly with
their Enterprise Resource Planning (&#147;ERP<B>&#148;)</B> application and receive the
RFID data in either Batch mode or on-line mode, depending on their&nbsp;business needs. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We believe that the future years
shall bring the wide spread use of RFID to tag high volume items such as consumer goods,
drugs, and postal packages and that the technology will be adopted by retailers, military
forces and postal authorities. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BOS&acirc;NOVA </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The BOS&acirc;NOVA suite solution
enables customers to extend compatibility of IBM System i Servers to other environments by
implementing a variety of technologies such as Twinax to TCP/IP, WEB and Mobile
connectivity. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Software Application </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BOServer platform is a middleware and
application development tool which we developed and also use to develop RFID and Mobile
applications. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This platform is based on Point
Microsoft SharePoint Content Management portals with the following enhancements: </FONT></P>

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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>Extended
capabilities to perform critical documentation-related tasks. </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>Streamlined
administration, cutting the time needed for critical tasks from           hours to
minutes. </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>c. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Enhanced
the search abilities. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our Software applications aim at
supply chain logistics, man process control and monitoring, healthcare, retails and
environment industries. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Marketing, Distribution
and Sales </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We market our solutions primarily to
medium and large sized corporations through a combination of direct sales, sales agents
distributors and integrators. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>RFID and Mobile Solutions </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We market our BOServer and
BOS&acirc;NOVA solutions<B> </B>directly to customers or<B> </B>through distributors and
system integrators. We intend to continue to increase our international sales force with
new distributors, system integrators, sales representatives and direct sales persons who
specialize in the RFID and Mobile solutions. The sales to Bosanova Inc. in the first
quarter of 2009 were insignificant. </FONT></P>

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

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Supply Chain Solutions</U> </FONT> </H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We market our Supply Chain Solutions
in North and South America through our fully owned subsidiaries using the brands Summit,
Summit Aviation, Ruby-Tech Inc. (&#147;Ruby-Tech&#148;) and Odem. In the rest of world we
market our products mainly through our Israeli subsidiaries. Our sales force is comprised
of direct sales teams and sales representatives. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Seasonality</U> </FONT> </H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our sales fluctuate seasonally, with
the third quarter sales affected (set back) by summer vacations in Europe and new
years&#146; holidays in Israel, and December and January sales are affected (set back) by
the Christmas season. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table sets forth our
revenues (in thousands of $) from continuing operations, by major geographic area, for the
periods indicated below: </FONT></P>




<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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>%</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>%</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>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>%</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>
     <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>
     <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>
     <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>
     <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="32%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>America</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="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>12,671</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>25</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>5,420</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>23</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>2,848</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>14</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>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>1,342</FONT></TD>
        <TD ALIGN=LEFT><FONT 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</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>964</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
     <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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>10</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>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>7,490</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>&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>1,511</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>6</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>Israel and others</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>29,346</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>57</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>15,879</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>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>14,877</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>70</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>
     <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>Total 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>50,849</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>100</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>23,774</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>100</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>20,917</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>100</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>
     <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>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sales by divisions (see note 18 to
the Consolidated Financial Statements for the year ended December 31, 2008): </FONT></P>




<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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>%</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>%</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>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>%</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>
     <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>
     <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>
     <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>
     <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="31%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Mobile and RFID</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>12,379</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>24</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>2,673</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>11</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>2,344</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>11</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>Supply Chain Solutions</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>38,470</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>76</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>21,101</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>18,573</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
     <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>Total 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>50,849</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>100</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>23,774</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>100</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>20,917</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>100</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>
     <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>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Some of the offered products under
our brand Dimex, are designed, integrated and tested at our facilities in Israel. The
manufacturing is partly done by Israeli subcontractors using components and subassemblies
supplied by vendors to our specifications. Certain components and subassemblies used by us
in our existing products are purchased from a single supplier or a limited number of
suppliers. Most of the imported components are purchased in Israel from local
representatives of the manufacturers. Some of them have exclusive representative rights in
Israel. In the event that these suppliers are unable to meet our requirements in a timely
manner, we may experience an interruption in production until an alternative source of
supply can be obtained. We generally maintain an inventory, which we believe adequately
limits the exposure to such an interruption. Our current manufacturing facilities have
sufficient capacity to meet and exceed current demand. The prices of raw materials used in
our industry are volatile and availability may vary due to changing demand in the market. </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the first quarter of 2009, 20% of
our Supply Chain Solutions segment purchases and 75% of our Mobile and RFID Solutions
segment purchases were sourced from several key suppliers. </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We currently rely on a combination of
trade secrets, copyright and trademark law, together with non-disclosure agreements and
technical measures, to establish and protect proprietary rights in our products. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We believe that the improvement of
existing products and solutions, reliance upon trade secrets and proprietary know-how and
the development of new products are generally as important as patent protection in
establishing and maintaining a competitive advantage. We believe that the value of our
products is dependent upon our proprietary software and hardware remaining &#147;trade
secrets&#148; or subject to copyright protection. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Generally, we enter into
non-disclosure and invention assignment agreements with our employees and subcontractors.
However, there can be no assurance that our proprietary technology will remain a trade
secret, or that others will not develop a similar technology or use such technology in
products competitive with those offered by us. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>While our competitive position may be
affected by our inability to protect our proprietary information, we believe that because
of the rapid pace of technological change in the industry, factors such as the technical
expertise and the knowledge and innovative skill of our management and technical
personnel, name recognition, the timeliness and quality of support services provided by us
and our ability to rapidly develop, produce, enhance and market software products may be
more significant in maintaining our competitive position. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As the number of software products in
the industry increases and the functionality of these products further overlaps, we
believe that software programs will increasingly become subject to infringement claims.
The cost of responding to any such assertion may be material, whether or not the assertion
is valid. </FONT></P>

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

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The RFID and Mobile Solutions market
is subject to rapidly changing technology and evolving standards incorporated into mobile
equipment, ERP system, computer networks and hosting computers. As the market is growing
the number of competitors increases. Some of the competitors haves substantially greater
financial, marketing and technological resources as well as name recognition than ours. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In Israel our main competitors in the
RFID and Mobile Solutions market are Dannet Advanced Technologies Ltd., L.X Mobile Systems
Ltd., Micronet Ltd., Nortec AMI Ltd., LogiTag System Ltd. and Galbital RFID Solutions Ltd.
In the global market, our main competitors are Aeroscout, RF Code and Tagsys. We see our
ability to offer our comprehensive solutions which combine software solutions and RFID
peripheral equipment such as readers and tags, as our main competitive advantage in the
competitive field. </FONT></P>

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

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We hold several representation
agreements with major suppliers and manufacturers such as: Sensata Technologies,
HID-Sokymat and Positronic Industries, Inc. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Although most of our representation
agreements are not on an exclusive basis, in most cases there are no local competitors who
distribute components from the same source. However, there may be competition in case of
similar components made by other manufacturers. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our Israeli competitors in
distribution to the electronic industry include the publicly traded Telsys Ltd., Nisco
Projects Ltd. and STG International Electronics (1981) Ltd., as well as Eastronics Ltd.,
Chayon Group Ltd. and C.M.S. Compucenter Ltd. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the international  market,  our competitors are mainly Arrow,  Avnet, TTI, PEI, Marine Air,  Airtechnics,  Inc.,
Flame enterprise Inc., Norstan Electronics Inc. and Peerless Electronics Inc.
</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our competitors in the Supply Chain Solutions to the aerospace  industry include:  Hansair,  Avial, API, Cooper and
Avio.
</FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s vision is to
become<B> </B>a<B> </B>worldwide leader in the field of RFID and Mobile Solutions for
enterprise logistics and organizational processes. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
key elements of our strategy are as follows: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Continue
to develop our range of RFID solutions to include generic, platform independent software
in order to diversify and expand our target markets. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Increase
our international sales force by new partnerships with distributors, integrators, sales
representatives and direct sales persons who specialize in RFID solutions. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Increase
partnerships with manufacturers for our Supply Chain Solutions. </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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Acquire
of RFID applications to be sold through our existing and future channels. </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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Leverage
the substantial synergy between BOS subsidiaries worldwide. </FONT></TD>
</TR>
</TABLE>
<BR>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exchange Controls </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>See &#147;Section 10D. Exchange
Controls&#148;. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For other government regulations
affecting the Company&#146;s business, see &#147;Section 5A. Results of Operations &#150;
Grants and Participation&#148;. </FONT></P>

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

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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"><B>4C.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Organizational
Structure</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s wholly owned
subsidiaries include: </FONT></P>

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

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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>(1) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dimex
Solutions, and its wholly owned subsidiary, Dimex Hagalil, which was
          incorporated in January 2008. Dimex Solutions and Dimex Hagalil are part of our
          RFID and Mobile Solutions Segment; </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>(2) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Odem
is a major solution provider and distributor of RFID and electronics           components
and advanced technologies in the Israeli market. Odem is also a           provider of
RFID peripheral equipment such as RFID readers and tags for the RFID           and Mobile
Solutions segment; and </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>(3) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Quasar
Telecom (2004) Ltd. (&#147;Quasar Telecom&#148;), which is inactive. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the United States:  </FONT></P>

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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>(1) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ruby-Tech,
a New York corporation is a wholly owned subsidiary of Odem and a           part of both
the RFID and Mobile Solutions and the Supply Chain Solutions           segments. </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>(2) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Lynk
USA Inc., a Delaware Corporation, and its subsidiaries: </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>a. </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Summit,
part of the Supply Chain Solutions segment, that was purchased in           November
2007. Summit is a supply chain provider, mainly of electronic           components to the
aircraft and defense industry.  </FONT></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>b. </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pacific
Information Systems, Inc. (&#147;PacInfo&#148;), a Delaware corporation           and
PacInfo&#146;s subsidiary, Dean Tech Technologies Associates, LLC., a Texan
          corporation, both of which are not active.  </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>(3) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BOS
Delaware Inc., a Delaware corporation, a wholly owned subsidiary of Dimex
          Solutions, which ceased operations in 2002. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In Europe:  </FONT></P>

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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>
Dimex
Solutions had a UK subsidiary, Better On-Line Solutions Ltd., and its subsidiary, Better
On-Line Solutions S.A.S in France. Since 2002, these subsidiaries are no longer active. </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>
In
addition, the Company holds interests in:  </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>
1.&nbsp;&nbsp;&nbsp;&nbsp;
            Surf, of which we held 6.1% as of May 31, 2009. (see &#147;Section 4A.
History           and Development of the Company&#148;).  </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>
2.&nbsp;&nbsp;&nbsp;&nbsp;
            New World Brands, of which we held 14.92% as of March 31, 2009. The
          Company&#146;s holdings in New World Brands were received as the consideration
          for the sale of the communication segment. Following the consummation of a
          merger of Qualmax with and into New World Brands in January 2009, our holdings
          in Qualmax were converted into shares of New World Brands.  </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>
(see &#147;Section 4A. History and Development of the Company&#148;).  </FONT></TD>
</TR>
</TABLE>
<BR>

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

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>4D.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Property,
Plants and Equipment</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Following the acquisition of Summit
in November 2007 and the assets of Dimex Systems in March 2008, our executive offices and
engineering, development, testing, shipping and service operations are located in Israel
and in United States, as follows </FONT></P>




<TABLE CELLPADDING="3" CELLSPACING="0" WIDTH="700" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1>Location</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Size (square<BR>
meters)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>End of lease period</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Extension Option</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>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="25%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><U>Israel:</U> </FONT></TD>
     <TD WIDTH="25%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="25%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="25%" 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>Rishon Lezion*</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,461&nbsp;</FONT></TD>
     <TD ALIGN="Center"><FONT FACE="Times New Roman" SIZE=2> January 2012</FONT></TD>
     <TD ALIGN="Center"><FONT FACE="Times New Roman" SIZE=2>January 31, 2016</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Tel Aviv</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>828&nbsp;</FONT></TD>
     <TD ALIGN="Center"><FONT FACE="Times New Roman" SIZE=2> September 2009</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>Kibutz Dafna</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>578&nbsp;</FONT></TD>
     <TD ALIGN="Center"><FONT FACE="Times New Roman" SIZE=2> January 31, 2012</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=4><FONT FACE="Times New Roman" SIZE="2"><U>USA:</U> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>New Jersey</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>678&nbsp;</FONT></TD>
     <TD ALIGN="Center"><FONT FACE="Times New Roman" SIZE=2> January 31, 2010</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE><BR>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*Includes 302 square meters in the
same building rented by Odem. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our average monthly rental fee in
2009 (up till May), for the year 2008 and for the year 2007 amounted to $14,000, $14,000
and $9,000, respectively. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the first quarter of 2009 we
closed the Company&#146;s offices in Yokneam and relocated the employees from the Yokneam
branch to our offices in Rishon Lezion and Tel Aviv. We plan to concentrate all of our
Israeli operation in one location in Rishon Lezion, by the end of 2009. </FONT></P>

<a name=zk106></a>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 4A:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Unresolved Staff Comments</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not Applicable. </FONT></P>

<a name=zk107></a>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 5:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Operating and Financial Review and Prospects</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following management&#146;s
discussion and analysis of financial condition and results of operations should be read in
conjunction with our financial statements and notes thereto. Certain matters discussed
below and throughout this annual report are forward-looking statements that are based on
our beliefs and assumptions as well as information currently available to us. Such
forward-looking statements may be identified by the use of the words
&#147;anticipate&#148;, &#147;believe&#148;, &#147;estimate&#148;, &#147;expect&#148;,
&#147;plan&#148; and similar expressions. Such statements reflect our current views with
respect to future events and are subject to certain risks and uncertainties. While we
believe such forward-looking statements are based on reasonable assumptions, should one or
more of the underlying assumptions prove incorrect, or these risks or uncertainties
materialize, our actual results may differ materially from those described herein. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s discussion and
analysis of its financial condition and result of operations is based upon the
Company&#146;s consolidated financial statements which have been prepared in accordance
with generally accepted accounting principles of the U.S. GAAP. </FONT></P>

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

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Critical accounting
policies </FONT></H1>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our discussion and analysis of our
financial condition and results of operations is based on our consolidated financial
statements which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of our financial statements in conformity
with generally accepted accounting principles in the United States requires our management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the
reporting period. These amounts and disclosures could potentially be materially different
under other assumptions and conditions. These are our management&#146;s best estimates
based on experience and historical data, however, actual results could differ materially
from these estimates. Our significant accounting principles are presented within Note 2 to
our consolidated financial statements attached to this annual report. While all the
accounting policies impact the financial statements, certain policies may be viewed to be
critical. Management believes that the following policies are those that are most
important to the portrayal of our financial condition and results of operations and fully
understanding and evaluating our reported results: </FONT></P>

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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><FONT size="2" face="Wingdings 2">&#151;</font>  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>financial
statements in U.S. dollars</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><FONT size="2" face="Wingdings 2">&#151;</font>  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>inventories</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><FONT size="2" face="Wingdings 2">&#151;</font>  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>investment
in 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=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT size="2" face="Wingdings 2">&#151;</font>  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>fair
value of financial instruments</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><FONT size="2" face="Wingdings 2">&#151;</font>  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>valuation of long-lived assets, intangible assets and goodwill</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><FONT size="2" face="Wingdings 2">&#151;</font>  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Revenue
recognition </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><FONT size="2" face="Wingdings 2">&#151;</font>  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income
taxes; and</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accounting
for share-based compensation</FONT></TD>
</TR>
</TABLE>
<BR>












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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial
statements in U.S. dollars: </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A substantial portion of the
Company&#146;s revenues is generated in U.S. dollar (&#147;dollars&#148;). In addition,
most of the Company&#146;s costs are incurred in dollars. The Company&#146;s management
believes that the dollar is the primary currency of the economic environment in which the
Company operates. Thus, the functional and reporting currency of the Company is the
dollar. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accordingly, monetary accounts
maintained in currencies other than the dollar are remeasured into U.S. dollars in
accordance with Statement 52 of the Financial Accounting Standards Board
(&#147;FASB&#148;) &#147;Foreign Currency Translation&#148;. All transactions gains and
losses from the remeasurement of monetary balance sheet items are reflected in the
statement of operations as financial income or expenses as appropriate. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The financial statements of Dimex
Solutions, whose functional currency is other than the dollar, have been translated into
U.S. dollars. All balance sheet accounts have been translated using the exchange rates in
effect at the balance sheet date. Statement of operations amounts have been translated
using the average exchange rate for the period. The resulting translation adjustments are
reported as a component of shareholders&#146; equity in accumulated other comprehensive
income (loss). </FONT></P>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inventories: </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inventories are valued at the lower
of cost or market value. Cost is determined pursuant to the moving average cost method. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inventory write-offs are provided to
cover risks arising from slow-moving items or technological obsolescence. As of December
31, 2008 and 2007, inventory is presented net of $1,059,000 and $358,000, respectively,
for technological obsolescence and slow moving items. </FONT></P>

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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>c.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Investment
in other companies: </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>1. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Investment
in New World Brands and Qualmax: </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 accounts for its holdings in New World Brands shares as available for sale in
accordance with Statement of Financial Accounting Standard 115 &#147;Accounting for
Certain Investments in Debt and Equity Securities&#148;. Unrealized gains and losses, net
of the related tax effect as of December 31, 2008, are included in other comprehensive
income. </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>
The
investment in Qualmax, which was traded in the Pink Sheet is presented at cost according
to APB 18 due to almost no trading volume. In accordance with the Company&#146;s policy,
FASB Staff Position (FSP) No. SFAS 115-&#147;The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments&#148; and SAB Topic 5M &#147;Other
Than Temporary Impairment Of Certain Investments In Debt And Equity Securities&#148; the
Company recognizes an impairment charge when a decline in the fair value of its
marketable securities below the cost basis is judged to be other-than-temporary. The
Company considers various factors in determining whether to recognize an impairment
charge, including the Company&#146;s intent and ability to hold the marketable securities
for a period of time sufficient to allow for any anticipated recovery in market value,
the length of time and extent to which the fair value has been less than the cost basis
and the financial condition and near-term prospects of the issuers. If, after
consideration of all available evidence to evaluate the realizable value of its
marketable securities, impairment is determined to be other than- temporary, then an
impairment loss should be recognized equal to the difference between the marketable
securities&#146; carrying amount and its fair value. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>- 30 -</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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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>
During
2008 and 2007, an impairment loss, due to other than temporary decline in the fair value
of investments in New World Brands and Qualmax, of $744,000 and $5,588,000 has been
recorded and presented in other expenses, net in the consolidated statements of
operations. Following the consummation of a merger of Qualmax with and into New World
Brands in January 2009, our holdings in Qualmax were converted into shares of New World
Brands. As a result, we hold 14.92% of the outstanding shares of New World Brands. </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>2. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Investment
in Surf: </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>
The
Company&#146;s holdings in Surf as of December 31, 2008 are 6.1% of Surf&#146;s issued
and outstanding shares. The Company&#146;s investment in Surf is accounted for based on
the cost accounting method. </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>
The
Company&#146;s investment in Surf is reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of the investment may not be
recoverable, in accordance with Accounting Principle Board Opinion 18 &#147;The Equity
Method of Accounting for Investments in Common Stock&#148; (&#147;APB 18&#148;). In this
respect, during 2008, an impairment of $712,000 has been recorded in &#147;other expenses&#148; in
the statement of operations. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>d.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fair
value of financial instruments: </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>
In
accordance with SFAS 157, the Company measures its investment in New World Brands at fair
value. Investment in New World Brands is classified within level 1 because it is valued
using quoted market prices in an active market. </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 financial assets and liabilities measured at fair value on a recurring
basis, consisted of the following types of instruments as of December 31, 2008: </FONT></TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="700" ALIGN="CENTER">
<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>Level 1</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>
</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>
</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>
</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>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="78%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Investment in New World Brands</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="15%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>168 </FONT></TD>
        <TD WIDTH="1%" 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>Investment 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>
</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>Investment in Surf</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>
</TR>
<TR>
     <TD COLSPAN=3></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</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> 168</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>- 31 -</font></p>
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<page>






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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>e.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Valuation
of Long-Lived Assets, Intangible Assets and Goodwill </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
accordance with Statement of Financial Accounting Standards (&#147;SFAS&#148;) No. 144,
&#147;Accounting for the Impairment or Disposal of Long-Lived Assets,&#148; we perform
tests for impairment of long-lived assets whenever events or circumstances suggest that
long-lived assets may not be recoverable. This analysis differs from our goodwill analysis
in that an impairment is only deemed to have occurred if the sum of the forecasted
undiscounted future cash flows related to the assets are less than the carrying value of
the assets we are testing for impairment. If the forecasted undiscounted cash flows are
less than the carrying value, then we must write down the carrying value to its estimated
fair value based primarily upon forecasted discounted cash flows. Based on the impairment
test performed as of December 31, 2008, no impairment was identified. </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>
These
forecasted undiscounted cash flows include estimates and assumptions related to revenue
growth rates and operating margins, future economic and market conditions. Our estimates
of market segment growth and our market segment share and costs are based on historical
data, various internal estimates and certain external sources, and are based on
assumptions that are consistent with the plans and estimates we are using to manage the
underlying business. Our business consists of both established and emerging technologies
and our forecasts for emerging technologies are based upon internal estimates and external
sources rather than upon historical information. If future forecasts are revised, they may
indicate or require future impairment charges. We base our fair value estimates on
assumptions we believe to be reasonable but that are unpredictable and inherently
uncertain. Actual future results may differ from those estimates. </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>
We
perform our annual impairment analysis of goodwill as of December 31 of each year, or more
often if there are indicators of impairment present. The provisions of Statement of
Financial Accounting Standards No. 142, &#147;Goodwill and Other Intangible Assets,&#148;
require that a two-step impairment test be performed on goodwill at the level of the
reporting units. In the first step, or Step 1, we compare the fair value of each reporting
unit to its carrying value. If the fair value exceeds the carrying value of the net
assets, goodwill is considered not impaired, and we are not required to perform further
testing. If the carrying value of the net assets exceeds the fair value, then we must
perform the second step, or Step 2, of the impairment test in order to determine the
implied fair value of goodwill. If the carrying value of goodwill exceeds its implied fair
value, then we would record an impairment loss equal to the difference. To determine the
fair value used in Step 1, we use discounted cash flows. If and when we are required to
perform a Step 2 analysis, determining the fair value of our net assets and our
off-balance sheet intangibles would require us to make judgments that involve the use of
significant estimates and assumptions. During 2008, an impairment in the amount of
$1,873,000 was recorded and was attributable to the supply chain reporting unit. In years
2007 and 2006, no impairment losses have been identified. </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>
We
determine the fair value of a reporting unit using the Income Approach, which utilizes a
discounted cash flow model, as we believe that this approach best approximates our fair
value at this time. We have corroborated the fair values using the Market Approach.
Judgments and assumptions related to revenue, gross profit, operating expenses, future
short-term and long-term growth rates, weighted average cost of capital, interest,
capital expenditures, cash flows, and market conditions are inherent in developing the
discounted cash flow model. If these estimates or their related assumptions change in the
future, we may be required to record impairment charges for our goodwill. Additionally,
we evaluated the reasonableness of the estimated fair value of our reporting units by
reconciling to our market capitalization. This reconciliation allowed us to consider
market expectations in corroborating the reasonableness of the fair value of our
reporting units. In addition, we compared our market capitalization, including an
estimated control premium that an investor would be willing to pay for a controlling
interest in us, to the fair value of the Company based on a third-party valuation study.
The determination of a control premium requires the use of judgment and is based
primarily on comparable industry and deal-size transactions, related synergies and other
benefits. Our market capitalization declined during the fourth quarter of 2008, and
subsequently, as a result of market-driven declines in our stock trading price. Our
reconciliation of the gap between our market capitalization and the aggregate fair value
of the Company depends on various factors, some of which are qualitative and involve
management judgment, including relatively stable high backlog coverage and experience in
meeting operating cash flow targets. We will continue to monitor our market
capitalization and expectations of future cash flows and will perform impairment testing
if deemed necessary.  </FONT></TD>
</TR>
</TABLE>
<BR>









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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>f.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Revenue
recognition: </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 sells its products through direct sales, distributors and resellers channels.  </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 derives its revenues from the sale of products, license fees for its products,
commissions, support and services. </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>
Revenues
from product sales, related to both Supply Chain and RFID and Mobile Solutions segments,
are recognized in accordance with Staff Accounting Bulletin 104 &#147;Revenue Recognition
in Financial Statements&#148; (&#147;SAB 104&#148;) when delivery has occurred,
persuasive evidence of an arrangement exists, the vendor&#146;s fee is fixed or
determinable, no further obligation exists, and collectibility is reasonably assured. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>- 32 -</font></p>
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Most
of the Company&#146;s revenues are generated from sales of its products directly to
end-users and indirectly, mostly through independent distributors. Other than pricing
terms, which may differ due to the volume of purchases between distributors and
end-users, there are no material differences in the terms and arrangements involving
direct and indirect customers. The majority of the Company&#146;s products sold through
agreements with independent distributors are non-exchangeable, non refundable,
non-returnable without any rights of price protection or stock rotation. Accordingly, the
Company considers the distributors as end-users. </FONT></TD>
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Revenue
from license fees, related to the RFID and Mobile Solutions Segment, is recognized in
accordance with Statement of Position (&#147;SOP&#148;)&nbsp;97-2 &#147;Software Revenue
Recognition&#148;, when persuasive evidence of an agreement exists, delivery has
occurred, no significant obligations with regard to implementation remain, the fee is
fixed or determinable, and collectibility is probable. The Company generally does not
grant a right of return to its customers. When a right of return exists, the Company
defers revenue until the right of return expires, at which time revenue is recognized
provided that all other revenue recognition criteria have been met. </FONT></TD>
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Revenues
from maintenance and support are recognized ratably over the period of the support
contract. The fair value of the support is determined based on the price charged when it
is sold separately or renewed. </FONT></TD>
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With
regard to software arrangements involving multiple elements such as software product and
maintenance and support, the Company has adopted Statement of Position No. 98-9, &#147;Modification
of SOP No. 97-2, Software Revenue Recognition with Respect to Certain Transactions&#148; (&#147;SOP
No.&nbsp;98-9&#148;). According to SOP No. 98-9, revenues should be allocated to the
different elements in the arrangement under the &#147;residual method&#148; when Vendor
Specific Objective Evidence (&#147;VSOE&#148;) of fair value exists for all undelivered
elements and no VSOE exists for the delivered elements. Under the residual method, at the
outset of the arrangement with the customer, the Company defers revenue for the fair
value of its undelivered elements (maintenance and support) and recognizes revenue for
the remainder of the arrangement fee attributable to the elements initially delivered in
the arrangement (software product) when the basic criteria in SOP No. 97-2 have been met.
Any discount in the arrangement is allocated to the delivered element. Maintenance and
support revenue is deferred and recognized on a straight-line basis over the term of the
maintenance and support agreement. The VSOE of fair value of the undelivered elements
(maintenance and support) is determined based on the price charged for the undelivered
element when sold separately. </FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>g.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income
taxes: </FONT></TD>
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The
Company and its subsidiaries account for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, &#147;Accounting for Income Taxes&#148;(&#147;SFAS
No. 109&#148;). This Statement prescribes the use of the liability method whereby
deferred tax assets and liability account balances are determined based on the
differences between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. The Company and its subsidiaries provide a valuation allowance,
if necessary, to reduce deferred tax assets to the amounts that are more likely-than-not
to be realized. </FONT></TD>
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<font size=2>- 33 -</font></p>
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In
June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48 (&#147;FIN
48&#148;), Accounting for Uncertainty in Income Taxes&#150;An interpretation of FASB
Statement No. 109. </FONT></TD>
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The
Interpretation clarifies the accounting for uncertainties in income taxes recognized in
an enterprise&#146;s financial statements and prescribes a recognition threshold and
measurement attributes of income tax positions taken or expected to be taken on a tax
return. Under FIN 48, the impact of an uncertain tax position taken or expected to be
taken on an income tax return must be recognized in the financial statements at the
largest amount that is more-likely-than-not to be sustained upon audit by the relevant
taxing authority. An uncertain income tax position will not be recognized in the
financial statements unless it is more likely than not of being sustained. The Company
adopted the provisions of FIN 48 as of January 1, 2007. The impact of adopting FIN 48 was
insignificant to the Company&#146;s consolidated financial statements. </FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>h.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accounting
for share-based compensation: </FONT></TD>
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On
January&nbsp;1, 2006, the Company adopted Statement of Financial Accounting Standards&nbsp;123
(revised 2004), &#147;Share-Based Payment&#148; (&#147;SFAS 123(R)&#148;) which requires
the measurement and recognition of compensation expense based on estimated fair values
for all share-based payment awards made to employees and directors. SFAS 123(R)
supersedes Accounting Principles Board Opinion&nbsp;25, &#147;Accounting for Stock Issued
to Employees&#148; (&#147;APB 25&#148;), for periods beginning in fiscal 2006. The
Company has applied the provisions of Staff Accounting Bulletin 107 (&#147;SAB 107&#148;)
in its adoption of SFAS 123(R). </FONT></TD>
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SFAS
123(R) requires companies to estimate the fair value of equity-based payment awards on
the date of grant using an option pricing model. The value of the portion of the award
that is ultimately expected to vest is recognized as an expense over the requisite
service periods in the Company&#146;s consolidated statement of operations. </FONT></TD>
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The
Company adopted SFAS 123(R) using the modified prospective transition method, which
requires the application of the Accounting Standard starting from January&nbsp;1, 2006,
the first day of the Company&#146;s fiscal year 2006. Under that transition method,
compensation cost recognized in the year ended December 31, 2006 includes: (a)
compensation cost for all share-based payments granted prior to, but not yet vested as of
January 1, 2006, based on the grant date fair value estimated in accordance with the
original provisions of SFAS 123, and (b) compensation cost for all share-based payments
granted subsequent to January 1, 2006, based on the grant date fair value estimated in
accordance with the provisions of SFAS 123(R). Results for prior periods have not been
restated. </FONT></TD>
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The
Company recognizes compensation expenses for the value of its awards granted based on the
straight line method over the requisite service period of each of the awards, net of
estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of
grant and revised, if necessary, in subsequent periods if actual forfeitures differ from
those estimates. Estimated forfeitures are based on actual historical pre-vesting
forfeitures. The Company considers many factors when estimating forfeitures, including
employee classification and historical experience. </FONT></TD>
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<font size=2>- 34 -</font></p>
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The
Company estimates the fair value of stock options granted using the Black-Scholes options
pricing model. The option-pricing model requires a number of assumptions, of which the
most significant are expected stock price volatility and the expected option term.
Expected volatility was calculated based upon actual historical stock price movements
over the most recent periods ending on the date of grant, equal to the expected option
term. The expected option term represents the period that the Company&#146;s stock
options are expected to be outstanding and was determined based on the simplified method
permitted by SAB 107 and extended by SAB 110 as the average of the vesting period and the
contractual term. The Company currently uses the simplified method, as adequate
historical experience is not available to provide a reasonable estimate. The Company
adopted SAB 110 effective January 1, 2008 and will continue to apply the simplified
method until enough historical experience is available to provide a reasonable estimate
of the expected term for stock option grants. The risk-free interest rate is based on the
yield from U.S. Treasury zero-coupon bonds with an equivalent term. The Company has
historically not paid dividends and has no foreseeable plans to pay dividends. </FONT></TD>
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The
Company applies SFAS 123 &#147;Accounting for stock Based Compensation&#148; (&#147;SFAS
123&#148;) and EITF 96-18, &#147;Accounting for Equity Instruments that are Issued to
Other than Employees for Acquiring, or in Conjunction With, Selling, Goods or Services&#148;,
with respect to warrants issued to non-employees. SFAS 123 requires the use of option
valuation models to measure the fair value of the warrants at the date of grant. </FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>i.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Impact
of recently issued accounting pronouncements: </FONT></TD>
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In
December&nbsp;2007, the FASB issued SFAS 141(R), &#147;Business Combinations&#148;(&#147;SFAS
141(R)&#148;). This Statement replaces SFAS No. 141, &#147;Business Combinations&#148;,
and requires an acquirer to recognize the assets acquired, the liabilities assumed,
including those arising from contractual contingencies, any contingent consideration and
any noncontrolling interest in the acquiree at the acquisition date, measured at their
fair values as of that date, with limited exceptions specified in the statement. SFAS&nbsp;141(R)
also requires the acquirer in a business combination achieved in stages (sometimes
referred to as a step acquisition) to recognize the identifiable assets and liabilities,
as well as the noncontrolling interest in the acquiree, at the full amounts of their fair
values (or other amounts determined in accordance with SFAS 141(R)). In addition, SFAS
141(R)&#145;s requirement to measure the noncontrolling interest in the acquiree at fair
value will result in recognizing the goodwill attributable to the noncontrolling interest
in addition to that attributable to the acquirer. SFAS 141(R) applies prospectively to
business combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December&nbsp;15,&nbsp;2008. As such,
the adoption of SFAS 141(R) is not expected to have a material effect on accounting for
the Company current subsidiaries. </FONT></TD>
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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
December 2007, the Financial Accounting Standards Board ratified a consensus opinion
reached by the Emerging Issues Task Force (&#147;EITF&#148;) on EITF Issue 07-1, &#147;Accounting
for Collaborative Arrangements&#148; (&#147;EITF 07-1&#148;). The guidance in EITF 07-1
defines collaborative arrangements and establishes presentation and disclosure
requirements for transactions within a collaborative arrangement (both with third parties
and between participants in the arrangement).&nbsp;&nbsp;The consensus in EITF 07-1 is
effective for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2008. The consensus requires retrospective application to all
collaborative arrangements existing as of the effective date, unless retrospective
application is impracticable. The impracticability evaluation and exception should be
performed on an arrangement-by-arrangement basis.&nbsp;&nbsp;The Company is evaluating
the impact EITF 07-1 will have on its financial statements. The Company currently does
not believe that the adoption of EITF 07-1 will have a significant effect on its
financial statements. </FONT></TD>
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<font size=2>- 35 -</font></p>
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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
December 2007 the FASB issued SFAS&nbsp;No.&nbsp;160, Noncontrolling Interests in
Consolidated Financial Statements&nbsp;&#150; an amendment of Accounting Research Bulletin&nbsp;No.&nbsp;51,
or SFAS&nbsp;160. SFAS&nbsp;160 addresses the accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent, the amount of
consolidated net income attributable to the parent and to the noncontrolling interest,
changes in a parent&#146;s ownership interest, and the valuation of retained
noncontrolling equity investments when a subsidiary is deconsolidated. SFAS&nbsp;160 also
establishes disclosure requirements that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. SFAS&nbsp;160 is
effective for fiscal years beginning after December&nbsp;15, 2008.  <BR><BR>In December&nbsp;2007, the FASB issued
SFAS 141(R), &#147;Business Combinations&#148;(&#147;SFAS 141(R)&#148;). This Statement
replaces SFAS No. 141, &#147;Business Combinations&#148;, and requires an acquirer to
recognize the assets acquired, the liabilities assumed, including those arising from
contractual contingencies, any contingent consideration and any noncontrolling interest
in the acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the statement. SFAS&nbsp;141(R) also requires the
acquirer in a business combination achieved in stages (sometimes referred to as a step
acquisition) to recognize the identifiable assets and liabilities, as well as the
noncontrolling interest in the acquiree, at the full amounts of their fair values (or
other amounts determined in accordancewith SFAS 141(R)). In addition, SFAS 141(R)&#145;s
requirement to measure the noncontrolling interest in the acquiree at fair value will
result in recognizing the goodwill attributable to the noncontrolling interest in
addition to that attributable to the acquirer. </FONT></TD>
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SFAS
141(R) applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or after
December&nbsp;15,&nbsp;2008. As such, the adoption of SFAS 141(R) is not expected to have
a material effect on accounting for the Company&#146;s current subsidiaries. </FONT></TD>
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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
February 2008, the FASB issued FASB Staff Position (&#147;FSP&#148;) FAS No. 157-2, &#147;Effective
Date of FASB Statement No. 157&#148; (&#147;FSP FAS 157-2&#148;), to delay the effective
date of FASB Statement 157 for one year for certain nonfinancial assets and nonfinancial
liabilities, excluding those that are recognized or disclosed in financial statements at
fair value on a recurring basis (that is, at least annually). For purposes of applying
the FSP FAS 157-2, nonfinancial assets and nonfinancial liabilities include all assets
and liabilities other than those meeting the definition of a financial asset or a
financial liability in FASB Statement 159. FSP FAS 157-2 defers the effective date of
Statement 157 to fiscal years beginning after November 15, 2008, and interim periods
within those fiscal years for items within the scope of this FSP FAS 157-2. The Company
does not expect the adoption of FAS 157 for certain nonfinancial assets and nonfinancial
liabilities, excluding those that are recognized or disclosed in the financial statements
at fair value on a recurring basis, to have a material impact on its financial position,
statements of operations or cash flow. </FONT></TD>
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<font size=2>- 36 -</font></p>
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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
March 2008, the FASB issued Statement 161 &#147;Disclosures about Derivative Instruments
and Hedging Activities&#148; (&#147;SFAS 161&#148;) an amendment to FASB No. 133.&nbsp;&nbsp;This
statement changes the disclosure requirements for derivative instruments and hedging
activities.&nbsp;&nbsp;Entities are required to provide enhanced disclosures about (a)
how and why and entity uses derivative instruments, (b) how derivative instruments and
related hedged items are accounted for under Statement 133 and its related
interpretations, and (c) how derivative instruments and related hedged items affect an
entity&#146;s financial position, financial performance, and cash flows.&nbsp;&nbsp;This
statement is effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008.&nbsp;&nbsp;Early application is encouraged.&nbsp;&nbsp;The
Company does not expect the adoption of SFAS 161 to have a material impact on its
financial position, results of operations or cash flows. </FONT></TD>
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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
April 2008, the FASB issued FSP 142-3, &#147;Determination of the Useful Life of
Intangible Assets&#148; (FSP 142-3). FSP 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the useful
life of a recognized intangible asset under SFAS No. 142, &#147;Goodwill and Other
Intangible Assets&#148;. FSP 142-3 is effective for fiscal years beginning after December
15, 2008. The Company does not expect the adoption of FSP 142-3 will have a material
impact on the Company&#146;s consolidated financial position, results of operations and
cash flows. </FONT></TD>
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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
May 2008, the FASB issued SFAS No. 162, &#147;The Hierarchy of Generally Accepted
Accounting Principles&#148;. SFAS 162 identifies the sources of accounting principles and
the framework for selecting the principles to be used in the preparation of financial
statements of nongovernmental entities that are presented in conformity with generally
accepted accounting principles in the United States. It is effective 60 days following
the SEC&#146;s approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, &#147;The Meaning of Present Fairly in Conformity With Generally Accepted
Accounting Principles&#148;. The Company statements evaluated the impact of FAS No. 162
on the Company&#146;s financial statement and the adoption of the statement did not have
a material effect on the Company&#146;s financial statements. </FONT></TD>
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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
June 2008, the FASB issued EITF No. 07-5 &#147;Determining whether an Instrument (or
Embedded Feature) is indexed to an Entity&#146;s Own Stock&#148; (&#147;EITF 07-5&#148;).
EITF 07-5 is effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early application is
not permitted. Paragraph 11(a) of SFAS No. 133 specifies that a contract that would
otherwise meet the definition of a derivative but is both (a) indexed to the Company&#146;s
own stock and (b) classified in stockholders&#146; equity in the statement of financial
position would not be considered a derivative financial instrument. EITF 07-5 provides a
new two-step model to be applied in determining whether a financial instrument or an
embedded feature is indexed to an issuer&#146;s own stock and thus able to qualify for
the SFAS 133 paragraph 11(a) scope exception. The Company believes adopting this
statement will have no impact on the consolidated financial statements. </FONT></TD>
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In
October 29, 2008, the FASB issued FSP No.132 (R)-a, &#147;Employers&#146; Disclosures
about Pensions and Other Postretirement Benefits,&#148; to require that an employer
disclose the following information about the fair value of plan assets: 1) the level
within the fair value hierarchy in which fair value measurements of plan assets fall; 2)
information about the inputs and valuation techniques used to measure the fair value of
plan assets; and 3) a reconciliation of beginning and ending balances for fair value
measurements of plan assets using significant unobservable inputs.&nbsp;&nbsp;The FSP
will be effective for fiscal years ending after December 15, 2009, with early application
permitted. Application of the FSP would not be required for earlier periods that are
presented for comparative purposes.&nbsp;&nbsp;The company is currently evaluating the
potential impact of adopting this FSP on its disclosures in the financial statements. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>- 37 -</font></p>
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<page>

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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 2009, the FASB issued FSP, No. FAS 115-2 and FAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments, or the FSP. The FSP is intended to
provide greater clarity to investors about the credit and noncredit component of an
other-than-temporary impairment event and to more effectively communicate when an
other-than-temporary impairment event has occurred. The FSP applies to fixed maturity
securities only and requires separate display of losses related to credit deterioration
and losses related to other market factors. When an entity does not intend to sell the
security and it is more likely than not that an entity will not have to sell the security
before recovery of its cost basis, it must recognize the credit component of an
other-than-temporary impairment in earnings and the remaining portion in other
comprehensive income. Upon adoption of the FSP, an entity will be required to record a
cumulative-effect adjustment as of the beginning of the period of adoption to reclassify
the noncredit component of a previously recognized other-than-temporary impairment from
retained earnings to accumulated other comprehensive income. The FSP will be effective
for us for the quarter ending June 30, 2009. The Company is currently evaluating the
impact of adopting the FSP. </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 2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly, or FSP 157-4. FSP 157-4 provides additional
authoritative guidance to assist both issuers and users of financial statements in
determining whether a market is active or inactive, and whether a transaction is
distressed. The FSP will be effective for us for the quarter ending June 30, 2009. The
Company is currently evaluating the impact of adopting the FSP 157-4. </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 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about
Fair Value of Financial Instruments, or FSP 107-1 and APB 28-1. FSP 107-1 and APB 28-1
require disclosures about fair value of financial instruments for interim reporting
periods of publicly traded companies as well as in annual financial statements. FSP 107-1
and APB 28-1 will be effective for the quarter ending June 30, 2009. The adoption of FSP
107-1 and APB 28-1 will not have an impact on our consolidated financial position and
results of operations. </FONT></TD>
</TR>
</TABLE>
<BR>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Legal contingencies </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has been a party to
various legal proceedings in the normal course of its business. The results of legal
proceedings are difficult to predict and an unfavorable resolution of a lawsuit or
proceeding may occur. Management believes that the prospects of these proceedings to
prevail and recover a significant amount, seem remote, and a corresponding provision was
recorded in this respect. For additional information see &#147;Section 8A. Consolidated
Statements and Other Financial Information &#150; Legal Proceedings&#148;. As additional
information becomes available, management will reassess the potential liability related to
these legal proceedings and may revise its estimate of the probable cost of these
proceedings. Such revisions in the estimates of the probable cost could have a material
adverse effect on the Company&#146;s future results of operations and financial position. </FONT></P>

<p align=center>
<font size=2>- 38 -</font></p>
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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"><B>5A.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Results
of Operations</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Comparison of 2008 and
2007 </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In November 2007 we purchased 100% of
the outstanding shares of Summit, from Summit&#146;s existing shareholders. In March 2008,
we purchased the assets and activities of Dimex Systems. As indicated below, these
acquisitions resulted in a significant increase in our 2008 revenues and operating
expenses. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Revenues for 2008 were $50.8 million
compared to $23.8 million in 2007. The increase in revenues is attributed mainly to the
acquisition of Dimex Systems and Summit. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross profit for 2008 was $10 million
(gross margin of 20%), compared to $4.7 million (gross margin of 20%) for 2007. The
increase in the gross profit is attributed to increase in revenues. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research and development expenses for
2008 were $844,000 compared to $636,000 in 2007. The increase is related to an upgrade of
our technological infrastructure and future software products offering, which was effected
through an increase in workforce. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling and marketing expenses for
2008 increased to $9.7 million from to $3.8 million in 2007. The increase is attributed
mainly to the acquisition of Dimex Systems and Summit. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>General and administrative expenses
for 2008 were $2 million compared to $2 million in the year 2007. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Impairment of goodwill in 2008
amounted to $1.9 million and is attributed to impairment of goodwill in the Supply Chain
Segment due to the current economic slow down, which will effect our future revenues and
cash flows. We did not record an impairment in 2007. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As a result of the above, operating
loss in 2008 amounted to $4.4 million compared to operating loss of $1.7 million in year
2007. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial expenses for 2008 were
$636,000 compared to $469,000 in 2007. The increase is related to the acquisitions we
consummated in 2007 and in the first quarter of 2008, which increased our use of loans in
order to finance the working capital needs and partly finance the acquisitions (see
&#147;Section 5B. Liquidity and Capital Resources&#148;). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other expenses in year 2008 amounted
to $1.5 million which resulted from: (a) an impairment loss in the amount of $744,000 due
to a decrease in the share price of New World Brands and Qualmax; and (b) an impairment
loss in the amount of $712,000 due to a decrease in the value of our holdings in Surf. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other expenses in year 2007 amounted
to approximately $6 million which resulted from: (a) an impairment loss in the amount of
$5.6 million due to a decrease in the share price of New World Brands and Qualmax; and (b)
on June 21, 2007, we entered into an agreement with the holder of our convertible note,
pursuant to which the holder converted the entire outstanding principal amount of
approximately $2 million into 878,670 ordinary shares of the Company at a conversion price
of $2.53. As a result of reducing the conversion price we recorded expenses upon
conversion of $611,000 in year 2007. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tax benefit in 2008 amounted to
$403,000 compared to tax on income of $9,000 in 2007. Tax benefit in year 2008 reflects
the future usage of carry forward losses. </FONT></P>

<p align=center>
<font size=2>- 39 -</font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loss from continuing operations in
2008 amounted to $6.1 million compared to a loss of $8.5 million in 2007. On a per share
basis, the basic and diluted loss per share from continuing operations in 2008 was $0.51,
compared to $0.98 in 2007. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loss from discontinued operation in
2008 amounted to $260,000 which is attributed to the discontinuance of the OptimizeIT
product line. In March 2009, the Company sold its OptimizeIT product line and related IP
in consideration for $70,000 plus contingent consideration based on future revenues of up
to $1.5 million. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic and diluted net loss per share
in 2008 was $0.53, compared to net loss of $0.97 in 2007. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Comparison of 2007 and
2006 </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In November 2007, we announced the
acquisition of Summit, a U.S. based company, situated in New Jersey. Summit transformed
BOS into a diversified supply chain company with sales to major international aviation and
aerospace manufacturers, and gave BOS&#146; RFID and Mobile Solutions a gateway to the
U.S. markets. These activities had a significant impact on the revenues and operating
expenses of year 2007 as compared to year 2006. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Revenues of 2007 were $23.8 million
compared to $20.9 million in 2006. A decrease in revenues from our BOS&acirc;NOVA Suite
Solution products was offset by increases in revenues from new software products and from
our Supply Chain Solutions segment, including from Summit.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross profit for 2007 was $4.7
million (gross margin of 20%), compared to $4.7 million (gross margin of 23%) for 2006.
The decrease in the gross margin in 2007 as compared to 2006 is related mainly to two
expenses we incurred in year 2007: (a) an inventory write off in the amount of $258,000
and (b) amortization of intangible assets in the amount of $89,000. Excluding these
expenses, the gross margin of 20% in year 2007 would have been 21% compared to 23% in year
2006. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research and development expenses for
2007 were $636,000 compared to $486,000 for 2006. The increase related to an upgrade of
our technological infrastructure and future software products offering, which was effected
through workforce adjustment and through the acquisition of new software technology in
connection with the acquisition, of the assets of CYMS and OptimizeIT, that we made during
the second half of year 2007. In-process research and development expenses in year 2007
amounted to $170,000 and are attributable to a one- time amortization of the purchase
price of OptimizeIT. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling and marketing expenses for
2007 were $3.8 million compared to $2.0 million in 2006, an increase of $1.8 million. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>General and administrative expenses
for 2007 were $2.0 million compared to $3.3 million in the year 2006, a decrease of $1.3
million </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The increase in the selling and
marketing expenses and the decrease in general and administrative expenses are due to the
following principal reasons: (a) commencing the second quarter of 2007, the general and
administrative expenses of our subsidiaries are presented under sales and marketing
expenses as compared to 2006, when an amount of $1.4 million was presented under general
and administrative expenses. The change in the classification reflects the reorganization
we made in the organization of BOS during 2007; and (b) consolidation of Summit as of
November 2007 contributed $363,000 to the sales and marketing expenses. </FONT></P>


<p align=center>
<font size=2>- 40 -</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As a result of the above, operating
loss in year 2007 amounted to $1.9 million compared to operating loss of $1.4
million in year 2006. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial expenses for 2007 were
$469,000 compared to $626,000 in 2006. The decrease is related to the conversion of
convertible notes in June 2007. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other expenses in year 2007 amounted
to $6.2 million which resulted from: (a) an impairment loss in the amount of $5.6 million
due to a decrease in the share price of New World Brands and Qualmax; and (b) on June 21,
2007, we entered into an agreement with the holder of our convertible note, pursuant to
which the holder converted the entire outstanding principal amount of approximately $2.2
million into 878,670 ordinary shares of the Company at a conversion price of $2.53. As a
result of reducing the conversion price we recorded expenses upon conversion of $611,000
in year 2007. Tax on income in 2007 amounted to $9,000 compared to taxes benefit of
$89,000 in 2006. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loss from continuing operations in
2007 amounted to $8.6 million compared to a loss of $1.6 million in 2006. On a per share
basis, the basic and diluted loss per share from continuing operations in 2007 was $1.00,
compared to $0.24 in 2006. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income from discontinued operations
is attributed to the operational results of the Communication segment that was sold in
2005. On a per share basis, the basic and diluted earning per share from discontinuing
operations in 2007 was $0.02, compared to loss $0.25 in 2006. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic and diluted net loss per share
in 2007 was $0.97, compared to net earnings of $0.01 in 2006. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Variability of Quarterly
Operating Results </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our revenues and profitability may
vary in any given year, and from quarter to quarter, depending on the number of products
sold. In addition, due to potential competition, uncertain market acceptance and other
factors, we may be required to reduce prices for our products in the future. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our future results will be affected
by a number of factors including our ability to: </FONT></P>

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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>increase
the number of products sold; </FONT></TD>
</TR>
</TABLE>


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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><FONT size="2" face="Wingdings 2">&#151;</font></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>acquire
effective distribution channels and manage them;</FONT></TD>
</TR>
</TABLE>


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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>develop,
introduce and deliver new products on a timely basis,</FONT></TD>
</TR>
</TABLE>


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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>anticipate
accurately customer demand patterns; and</FONT></TD>
</TR>
</TABLE>


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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>manage
future inventory levels in line with anticipated demand.</FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>These results may also be affected by
currency exchange rate fluctuations and economic conditions in the geographical areas in
which we operate. There can be no assurance that our historical trends will continue, or
that revenues, gross profit and net income in any particular quarter will not be lower
than those of the preceding quarters, including comparable quarters. </FONT></P>

<p align=center>
<font size=2>- 41 -</font></p>
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<page>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Impact of Inflation and
Currency Fluctuations </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The U.S.  dollar cost of our
operations in Israel is influenced by the  differential  between the rate of inflation in
Israel and any change in the value of the NIS relative to the U.S. dollar. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A devaluation of the NIS in relation to
the U.S. dollar will have the effect of decreasing the costs in NIS and a converse effect
in case of devaluation of the U.S. dollar in relation to the NIS. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A devaluation of the NIS in relation
to the U.S. dollar will have the effect of decreasing the U.S. dollar value of any of our
assets which consist of NIS (unless such asset is linked to the U.S. dollar). Such a
devaluation would also have the effect of reducing the U.S. dollar amount of any of our
liabilities and expenses which are payable in NIS (unless such payables are linked to the
U.S. dollar). Conversely, any increase in the value of the NIS in relation to the U.S.
dollar will have the effect of increasing the U.S. dollar value of our assets which
consist of NIS (unless such asset is linked to the U.S. dollar). Such an increase would
also have the effect of increasing the U.S. dollar amount of any of our liabilities and
expenses which are payable in NIS (unless such payables are linked to the U.S. dollar). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the years ended December 31, 2008,
2007, 2006, 2005, 2004 the inflation rate in Israel as adjusted for the devaluation of the
Israeli currency in relation to the U.S. dollar was 4.9%,<B> </B>8.6%, 8.1%, (4.5)% and
2.8%, respectively. The closing representative exchange rate of the U.S. dollar at the end
of each such period, as reported by the Bank of Israel, was NIS 3.802<B>, </B>NIS 3.846,
NIS 4.225, NIS 4.44, NIS 4.603 and NIS 4.308, respectively. As a result, the Company
experienced increases in the U.S. dollar costs of operations in Israel in 2008, 2007,
2006, 2004 and decreases in 2005. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective Corporate Tax
Rate </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Israeli companies are generally
subject to income tax at the declining corporate rate of 27% in 2008, 26% in 2009 and 25%
in 2010 and thereafter. The Company and its Israeli subsidiaries have accumulated losses
for Israel income tax purposes as of December 31, 2008, in the amount of approximately
$38,964. These losses may be carry forward (linked to the Israeli Consumer Price Index
(&#147;CPI&#148;)) and offset against taxable income in the future for an indefinite
period. As of December 31, 2008, the U.S. subsidiaries had U.S. Federal and State net
operating loss carryforward of approximately $8.9 million, which can be carried forward
and offset against taxable income for 15 to 20 years. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Grants and Participation </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under the Law for the Encouragement
of Industrial Research and Development, 1984 (the &#147;Research Law&#148;), research and
development programs approved by a research committee of the Office of the Chief Scientist
(&#147;OCS&#148;) of Israel&#146;s Ministry of Industry, Trade and Labor, are eligible for
grants in exchange for payment to the Government of royalties from the sale of products
developed in accordance with the Program. In order to be eligible, the applicant must be
an Israeli company that proposes to invest in the development of industrial know-how, the
development of new products, the development of new processing or manufacturing procedures
or the development of significant improvements to an existing process or product. A
committee of the OCS reviews the applications, evaluates the feasibility of the proposal,
determines whether or not to approve a grant, and also determines the extent of Chief
Scientist funding (within a range specified by the law) for approved projects. Depending
on the nature of the project, the OCS grants generally amount up to 50% of the approved
research expenses. </FONT></P>

<p align=center>
<font size=2>- 42 -</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under the Company&#146;s research and
development agreements with the OCS and pursuant to applicable laws, the Company is
required to pay royalties at the rate of 3.5% of sales of products developed with funds
provided by the OCS, up to an amount equal to 100% of the research and development grants
(U.S. dollar-linked) received from the OCS. The obligation to pay these royalties is
contingent upon actual sales of the products. Royalties payable with respect to grants
received under programs approved by the OCS after January 1, 1999, are subject to interest
on the U.S. dollar-linked value of the total grants received at the annual rate of LIBOR
applicable to U.S. dollar deposits at the time the grants are received. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Research Law requires that the
manufacture of any product developed as a result of research and development funded by the
Israeli Government take place in Israel. If any of the manufacturing is performed outside
of Israel, the Company would ordinarily be required to pay royalties at an increased rate
and to increase the aggregate repayment amount to between 120% and 300% of the grant
amount, depending on the manufacturing volume that is performed outside Israel, except in
special cases that receive the prior approval of the research committee, and subject to
certain payments to be made to the Israeli Government (generally an amount no less that
the aggregate grants plus interest less royalties paid). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Research Law also provides that
know-how from the research may not be transferred to third parties in Israel without prior
approval of the research committee. This approval, however, is not required for the sale
or export of any products resulting from such research and development. Approval of such
transfer of know-how may be granted in specific circumstances, only if the recipient
abides by the provisions of the Research Law and related regulations, including the
restrictions on the transfer of know-how and the obligation to pay royalties in an amount
that may be increased. The Research Law further provides that the know-how developed under
an approved research and development program may not be transferred to any third parties
outside Israel. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Research Law imposes reporting
requirements with respect to certain changes in the ownership of a grant recipient. The
law requires the grant recipient and its controlling shareholders and interested parties
to notify the Office of the Chief Scientist of any change in control of the recipient or a
change in the holdings of the significant stockholders of the recipient that results in a
non-Israeli becoming an interested party directly in the recipient and requires the new
interested party to undertake to the Office of the Chief Scientist to comply with the
Research Law. In addition, the rules of the Office of the Chief Scientist may require
prior approval of the Office of the Chief Scientist or additional information or
representations in respect of certain of such events. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The funds available for Office of the
Chief Scientist grants out of the annual budget of the State of Israel have been reduced,
and the Israeli authorities have indicated that the government may further reduce or
abolish Office of the Chief Scientist grants in the future. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Since year 2006, we have not
participated in research and development programs supported by the OCS. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December 31, 2008, the Company
has an outstanding contingent obligation to pay royalties in respect of OCS grants, in the
amount of approximately $3.5 million, compared to $3.5 million as of December 31, 2007. </FONT></P>

<p align=center>
<font size=2>- 43 -</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are committed to paying royalties
to the Fund for the Encouragement of Exports for its participation, by way of grants, in
our marketing expenses outside of Israel. Royalties payable are 3% of the growth in
exports, from the year we received the grant, up to 100% of the U.S. dollar-linked amount
of the grant received at the date the grants received. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Since 1996, we have not participated
in Fund for the Encouragement of Exports programs. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December 31, 2008, the Company has
an outstanding contingent obligation to pay royalties of $84,000 with respect to these
grants, compared to $83,000 on December 31, 2007. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Conditions in Israel </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are incorporated under the laws of
Israel. Our offices and product development and manufacturing facilities are located in
Israel. As a consequence, we are directly affected by political, economic and military
conditions in Israel. Our operations would be substantially impaired if major hostilities
involving Israel should occur or if trade between Israel and its present trading partners
should be curtailed. See also &#147;Section 3D. Risk Factors&#148;. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Political and Economic
Conditions</I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Since the establishment of the State
of Israel in 1948, a number of armed conflicts have taken place between Israel and its
Arab neighbors and a state of hostility, varying from time to time in intensity and
degree, has led to security and economic problems for Israel. A peace agreement between
Israel and Egypt was signed in 1979. However, economic relations have been limited. A
peace agreement between Israel and Jordan was signed in 1994. However, as of the date
hereof, Israel has not entered into any peace agreement with Syria or Lebanon. No
prediction can be made as to whether any other written agreements will be entered into
between Israel and its neighboring countries, whether a final resolution of the
area&#146;s problems will be achieved, the nature of any such resolution or whether civil
unrest will resume and to what extent such unrest would have an adverse impact on
Israel&#146;s economic development or on our operations in the future. There is
substantial uncertainty about how or whether any peace process will develop or what effect
it may have upon us. Since October 2000, there has been a substantial deterioration in the
relationship between Israel and the Palestinians, which has resulted in increased
violence. The future effect of this deterioration and violence on the Israeli economy and
our operations is unclear. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In January 2006, Hamas, an Islamic
movement responsible for many attacks against Israelis, won the majority of the seats in
the Parliament of the Palestinian Authority. The election of a majority of Hamas-supported
candidates is a major obstacle to relations between Israel and the Palestinian Authority,
as well as to the stability in the Middle East as a whole. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition, the future of the
&#147;peace process&#148; with the Palestinians is uncertain and has deteriorated due to
Palestinian violence, with the threat of a large-scale attack by Palestinians on Israeli
civilians and key infrastructure remaining a constant concern. The past few years of
renewed terrorist attacks by the Palestinians has severely affected the Israeli economy in
many ways<B>.</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In July 2006, Israel became involved
in a major military conflict with the Hizbullah organization in Lebanon, which subjected
the north of Israel to missile attacks. </FONT></P>

<p align=center>
<font size=2>- 44 -</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In June 2007, there was an escalation
in violence in the Gaza Strip resulting in Hamas effectively controlling the Gaza Strip
and a further escalation in violence has occurred during the first few months of 2008.
Ongoing violence between Israel and the Palestinians as well as tension between Israel and
the neighboring Syria and Lebanon may have a material adverse effect on our business,
financial conditions and results of operations. In addition, several countries still
restrict business with Israel and with companies doing business in Israel. We could be
adversely affected by adverse developments in the &#147;peace process&#148; or by
restrictive laws or policies directed towards Israel or Israeli businesses. Some of our
employees are obligated to perform annual reserve duty in the Israel Defense Forces and
may, at any time, be called for active military duty. While we have operated effectively
under those and similar requirements in the past, no assessment can be made of the full
impact of such requirements on us in the future, particularly if emergency circumstances
occur. If many of our employees are called for active duty, our business may be adversely
affected. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In December 2008, Israel was involved
in a military conflict with Hamas, which subjected the South of Israel to missile attacks. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In recent years Israel has been going through
a period of recession in economic activity, resulting in low growth rates and growing
unemployment. Our operations could be adversely affected if the economic conditions in
Israel continue to deteriorate. In 1998, the Israeli currency control regulations were
liberalized dramatically. As a result, Israeli citizens can generally freely purchase and
sell Israeli currency and assets. The Government of Israel has periodically changed its
policies in these areas. There are currently no Israeli currency control restrictions on
remittances of dividends on ordinary shares or proceeds from the sale of ordinary shares;
however, legislation remains in effect pursuant to which currency controls can be imposed
by administrative action at any time. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The costs of our operations in Israel
are generally incurred in NIS. If the inflation rate in Israel exceeds the rate of
devaluation of the NIS against the U.S. dollar in any period, the costs of our Israeli
operations, as measured in U.S. dollars, could increase. Israel&#146;s economy has, at
various times in the past, experienced high rates of inflation. </FONT></P>

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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"><B>5B.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Liquidity
and Capital Resources</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December 31, 2008 we had $1.6
million in cash, $9.6 million of short term bank loans drawn under a revolving credit
facility, $671 thousands current maturities of long term loans and long terms loans in the
amount of $2.3 million. Our bank credit lines are supplied mainly from two banks, JPMorgan
Chase which, as of December 31, 2008 provided $3.4 million and the remaining amount of
$9.2 million was supplied by Bank Leumi. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of March 31, 2009 we had $1.1
million in cash, $10.3 million of short term bank loans drawn under a revolving credit
facility, $661,000 current maturities of long term loans and long terms loans in the
amount of $2.9 million. As of March 31, 2009 JPMorgan Chase has provided us credit in the
amount $4.6 million and the remaining amount of $9.3 million was provided by Bank Leumi. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In March 2009, the Company entered
into an amendment to the Dimex Systems Asset Purchase Agreement that revises the payment
schedule of the approximately NIS 10 million payable in three semi-annual installments
through March 2010. The amendment provides for a NIS 3.5 million payment in March 2009,
NIS 4 million will be paid in 6 equal monthly installments each, starting on January 15,
2010, and the remaining approximately NIS 2.5 million shall be paid in two equal
installments in March and April 2010. The amendment further provides that if the Company
raises funds by way of a debt offering meeting certain conditions, the last payment of
approximately NIS 2.5 million shall be converted into the same type of convertible
debentures issued in the framework of such offering. </FONT></P>

<p align=center>
<font size=2>- 45 -</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has recently entered into
a loan agreement with several lenders, including Catalyst Private Equity Partners (Israel)
II L.P., certain existing shareholders and members of our management, including our chief
executive officer, for an aggregate loan amount of approximately $1.288 million. Closing
of the transaction is subject to certain closing conditions. The Company is in
negotiations for obtaining additional loans, up to an aggregate amount of $3.75 million.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The terms of the loan transaction are
in accordance with the resolutions adopted at the Company&#146;s Special General Meeting
held on May 14, 2009, in which the shareholders resolved to approve the issuance of up to
$3.75 million in principal amount of debt convertible into ordinary shares and of
warrants, in one or more private placements, to be consummated by December 31, 2009. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The terms of the convertible loan are
as follows: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company shall repay the loan
principal amount and the accrued interest in one payment, three years following the
closing of the transaction, unless converted earlier at the discretion of the lender into
ordinary shares. The loan conversion rate is $0.65 per ordinary share. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest shall accrue from the grant
of the loan at the rate equal to 8% per annum, compounded annually. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The warrants issued to the lenders
amount to 100% of the number of ordinary shares into which the loan is convertible. The
warrants are exercisable from 18 months to 36 months from grant, at an exercise price per
ordinary share of $0.55. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s loans from Bank
Leumi are secured by: </FONT></P>

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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>first
ranking fixed charges on the goodwill of the Company and its Israeli subsidiaries, on our
shareholdings in the Israeli subsidiaries and on certain Bank Leumi accounts of Odem; and </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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>floating
 charges on all of the assets of the  Company and its  subsidiaries,  owned now or in the
future;             and</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company also guarantees the liabilities of its Israeli subsidiaries to Bank Leumi and
each of its Israeli subsidiaries guarantee the Company&#146;s liabilities to Bank Leumi. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On March 23, 2009, the Company
and&nbsp;its Israeli subsidiaries executed&nbsp;revised loan&nbsp;documents governing the
Company&#146;s and&nbsp;its Israeli subsidiaries&#146; short term revolving credit line
from&nbsp;Bank Leumi. In the revised loan&nbsp;documents, the Company and its Israeli
subsidiaries undertook updated covenants relating to, among other things,&nbsp;financial
ratios&nbsp;of equity and EBIDTA, and continue to provide Bank Leumi with various security
interests and cross guarantees.&nbsp; The loan terms continue to&nbsp;restrict substantial
asset sales, cash dividends, and certain inter-company and shareholders payments. The
Company anticipates that it will continue to meet the covenants through December 31, 2009.  </FONT></P>

<p align=center>
<font size=2>- 46 -</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s loan from JPMorgan
Chase is secured by: </FONT></P>

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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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>first
 ranking fixed charge on all of the assets of Summit and on the  shareholdings  in Summit
of Lynk, a             subsidiary of the Company;</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>floating
charge on all of the assets of Summit, owned now or in the future; and</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><FONT size="2" face="Wingdings 2">&#151;</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Lynk
guarantees the liabilities of Summit to JPMorgan Chase. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We finance our activities by
different means, including equity financings, short and long-term loans, and income from
operating activities. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net cash provided by<B> </B>operating
activities from continuing operations in 2008 was $676,000 compared to net cash used in<B>
</B>operating activities of $4.6 million in 2007. The improvement in cash flow from
operating activities is attributed to a decrease in working capital needs which resulted
from the acquisition of Dimex System&#146;s assets which includes account receivable but
not its trade payable. In addition decrease in losses in 2008 compared to 2007 improved
our cash flow from operating activities. During 2008, cash used in investing activities
amounted to $9 million, mainly to pay for the acquisition of Dimex System&#146;s assets.
Cash flow used in investing activities in 2007 in the amount of $4.7 million was mainly to
pay for the acquisition of Summit. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net cash provided by financing
activities in 2008 amounted to $6 million which relates mainly to (a) $1.8 million
proceeds from share issuance and (b) $4.2 million proceeds from short term bank loans. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Working capital requirements will
vary from time-to-time and will depend on numerous factors, including but not limited to,
the operating results, scope of sales, supplier and customer credit, the level of
resources devoted to research and development, new product introductions, and marketing
and acquisition activities. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have in-balance sheet financial
instruments and off-balance sheet contingent commitments. Our in-balance sheet financial
instruments consist of our assets and liabilities. Our cash is invested in short-term
(less than 3 months) U.S. dollars and NIS interest bearing deposits with banks. As of
December 31, 2008, our average trade receivables&#146; and trade payables&#146; aging days
are 104 and 64 days, respectively. The fair value of our financial instruments is similar
to their book value. Our off-balance sheet contingent commitments consist of: (a) royalty
commitments that are directly related to our future revenues, (b) lease commitments of our
premises and vehicles, (c) directors and officers&#146; indemnities, in excess of the
proceeds received from liability insurance which we obtain, and (d) legal proceedings. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We believe that our cash resources
are sufficient to meet our operating needs for at least the next 12 months. It is our
intention to seek to raise additional equity and debt financings, to fund additional
product development, establish distribution channels in new markets and for the payment of
our liabilities related to the acquisition of Dimex. There is, however, no assurance that
we shall be able to obtain such financing. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Laurus Convertible Note
Financings</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On June 10, 2004, the Company entered
into a Securities Purchase Agreement with Laurus Master Fund Ltd. under which the Company
issued to the Laurus in a private placement (i) a Secured Convertible Term Note of a
$2,000,000 principal amount, was due June 10, 2007 and (ii) a warrant to purchase 130,000
ordinary shares at an exercise price of $4.04 per share. The warrant is exercisable, in
whole or in part, until June 10, 2011. </FONT></P>

<p align=center>
<font size=2>- 47 -</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to its undertaking in the
Registration Rights agreement with Laurus the Company filed with the Securities and
Exchange Commission a registration statement on Form F-3 covering the resale of ordinary
shares that were issued upon conversion of the Note and that shall be issued upon exercise
of the Warrants. The registration statement became effective on March 11, 2005. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On March 23, 2005, after Laurus
elected to convert $308,000 of the principal sum of the convertible note, Laurus was
issued 100,000 ordinary shares of the Company. On July 14, 2005, Laurus completed the
conversion of the balance of the principal, which had not been previously converted or
repaid, and the accrued interest, into an additional 540,293 ordinary shares, for
approximately $1.58 million. On September 29, 2005, the Company entered into a Second
Securities Purchase Agreement with Laurus, under which the Company issued to Laurus in a
private placement (i) a Secured Convertible Term Note of a $1.5 million principal amount,
due September 2008 and the conversion price into ordinary shares at was $3.08 per share.
As a result of the price per share in the rights offering described below (that was
completed on April 16, 2007), the conversion price of the convertible note was reduced to
$2.97 per share, and (ii) a Warrant to purchase 73,052 ordinary shares at an exercise
price of $4.04 per share. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Warrant is exercisable, in whole
or in part, until September 29, 2012, and payment of the exercise price may be made either
in cash or in a &#147;cashless&#148; exercise (or in a combination of both methods). The
warrant exercise price is also subject to proportional adjustment in the event of
combinations, subdivisions of the ordinary shares or if dividend is paid on the ordinary
shares in ordinary shares. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to its undertaking in the
Registration Rights Agreement with Laurus, the Company filed with the Securities and
Exchange Commission a registration statement on Form F-3 covering the resale of ordinary
shares that are issuable upon conversion of the Note and/or exercise of the Warrants,
and/or issuable in payment of principal and interest on the Note. The registration
statement became effective on February 8, 2006. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On August 17, 2006 the Company
entered into and closed a third financing transaction with Laurus. The financing consisted
of a $1.5 million Secured Convertible Term Note with a term of three years. In addition,
BOS 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 thereunder, and of $5.30 per share
for the additional 48,701 acquirable thereunder. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The conversion rate under the Note
was $3.08 per share for the first $500,000 of principal amount payable thereunder and
$4.08 for any additional amount payable thereunder (subject to adjustment). As a result of
the price per share in the rights offering described below (that was completed on April
16, 2007), the $3.08 conversion rate was reduced to $2.97 and the $4.08 conversion rate
was reduced to $3.78. The Company also entered into a Registration Rights agreement with
Laurus pursuant to which the Company agreed to prepare and file with the Securities and
Exchange Commission a registration statement covering the resale of ordinary shares that
are issuable upon conversion of the Note and/or exercise of the Warrants, and/or issuable
in payment of principal and interest on the Note. The registration statement became
effective on December 5, 2006. </FONT></P>

<p align=center>
<font size=2>- 48 -</font></p>
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<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On June 21, 2007 Laurus Master Fund
Ltd. converted the entire outstanding principal amount under its Convertible Notes of
approximately $2,223,000 into 878,670 ordinary shares of the Company, at a conversion
price of $2.53. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005 Private Placement </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On May 24, 2005 the Company entered
into a Share Purchase Agreement, under which the Company issued and sold to certain
Israeli and European investors, in a private placement offering, 953,698 ordinary shares
at a price of $2.30 per share for a consideration of approximately $2,040,000 (net of
issuance expenses amounted to $154,000), and 572,219 warrants to purchase ordinary shares
reflecting a 60% warrant coverage, exercisable for three years from their date of
issuance. The exercise price under the warrants is $2.50 per Ordinary Share during for the
first year from the issuance, and increasing to $2.75 per Ordinary Share and $3.03 per
Ordinary Share, on the first and second anniversaries of the issuance, respectively. The
Company filed with the Securities and Exchange Commission a registration statement
covering the resale of the ordinary shares issued to the investors, which became effective
on February 8, 2006. </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In April 2007 the Company completed a
rights offering in which it raised gross proceeds of approximately $4.4 million by issuing
1,739,398 ordinary shares. In the rights offering, the Company offered its shareholders
rights to purchase its ordinary shares at a subscription price of $2.50 per ordinary
share. The rights were traded for one day on both the Nasdaq Global Market and the
Tel-Aviv Stock Exchange. The offering ended on April 16, 2007. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2007 Private Placements </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On June 26, 2007, the Company 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. Pursuant to its
undertaking, under the Registration Rights Agreement with the investor, the Company filed
with the Securities and Exchange Commission a registration statement covering the resale
of the ordinary shares issued to the investor, which became effective on May 20, 2009. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has paid 6% of the
investment amount in cash as placement fees to Cukierman &amp; Co. (see note 19 to the
Consolidated Financial Statements for the year ended December 31, 2008). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In December 2007, the Company entered
into a Share Purchase Agreement with Catalyst Fund and three subsidiaries of D.S. Apex,
under which the Company issued 833,560 ordinary shares at a price of $2.40 per share
(reflecting an aggregate investment of approximately $2 million), and 541,814 warrants at
an exercise price of $2.76, exercisable for four years from their date of issuance. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has paid 3% in cash and
6% in ordinary shares as placement fees to placement entities related to the
aforementioned investors (see note 19 to the Consolidated Financial Statements for the
year ended December 31, 2008). Pursuant to its undertaking under the Registration Rights
Agreement with the investors, the Company filed with the Securities and Exchange
Commission a registration statement covering the resale of the ordinary shares issued to
the investors and issuable upon the exercise of the warrants issued to the investors,
which became effective on May 20, 2009. </FONT></P>

<p align=center>
<font size=2>- 49 -</font></p>
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<page>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2008 Private Placements </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In June 2008, the Company entered
into a Finder Letter Agreement with T.F.E. Holdings Ltd. under which the Company issued
110,000 ordinary shares. These shares were issued as fees for services rendered to the
Company in connection with the acquisition of the assets of Dimex Systems. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company filed with the Securities
and Exchange Commission a registration statement covering the resale of the ordinary
shares issued to T.F.E. Holdings Ltd., which became effective on May 20, 2009. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In July 2008, the Company entered
into a Share Purchase Agreement with three non-U.S. investors, under which the Company
issued 740,740 ordinary shares at a price per share of $1.35 (reflecting an aggregate
investment of $1 million) and 370,370 ordinary shares issuable upon the exercise of
warrants at an exercise price $1.60 per ordinary share, exercisable for 2 years from their
date of issuance. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has paid 6% of the
investment amount in cash as placement fees to Cukierman &amp; Co. (see note 19 to the
Consolidated Financial Statements for the year ended December 31, 2008). The Company also
entered into a Registration Rights Agreement granting the investor certain incidental
registration rights. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In August 2008, the Company entered
into a Share Purchase Agreement with a non-U.S. investor, under which the Company issued
816,327 ordinary shares at a price per share of $1.225 (reflecting an aggregate investment
of $1 million) and 408,164 ordinary shares issuable upon the exercise of warrants at an
exercise price $1.475 per ordinary share, exercisable for 2 years from their date of
issuance. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has paid 6% of the
investment amount in cash as placement fees to Cukierman &amp; Co. (see note 19 to the
Consolidated Financial Statements for the year ended December 31, 2008). The Company also
entered into a Registration Rights Agreement granting the investor certain incidental
registration rights. </FONT></P>

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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"><B>5C.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Research
and Development</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We believe that our future growth
will depend upon our ability to enhance our existing products and introduce new products
on a timely basis. Since we commenced operations, we have conducted extensive research and
development activities. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Historically our research and
development efforts related to our Communication Solutions, until sold in December 2005.
Our current research and development efforts focus on our RFID and Mobile Solutions for
enterprise logistics and organizational processes and on our software products offering
(see &#147;Section 4B. Business Overview&#148; for the detailed list of our software
products). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We intend to finance our research and
development activities with our own resources and by raising equity and debt financings. </FONT></P>

<p align=center>
<font size=2>- 50 -</font></p>
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<page>

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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"><B>5D.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Trend
Information</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We, like other companies, have been
and are subject to the effects of market slowdowns. If general economic conditions fail to
improve, or if they continue to deteriorate, we anticipate that it will adversely affect
our revenues and increase our account receivables and inventory days. Our revenues for the
first quarter of 2009 decreased 21.7% to $9 million from $11.5 million in the fourth
quarter of 2008. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BOS&#146;s vision is to become a
worldwide leader in the field of RFID and Mobile Solutions for enterprise logistics and
organizational processes. Committed to this vision, we plan to expand our suite of
solutions and anticipate that the portion of RFID and Mobile revenues will increase
gradually going forward. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Following the economic slowdown we
recorded a goodwill impairment charge of $1.9 million in 2008 related to the Supply Chain
segment. If general economic conditions fail to improve, we may be required to record
additional impairment charges. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The vast majority of our sales are
made in U.S. dollars and significant portion of our expenses is in NIS. The U.S. dollar
cost of our operations in Israel is increased by the extent to which the NIS appreciates
in relation to the U.S. dollar. In 2008, and until May 31, 2009, the U.S. dollar increased
in value against the NIS by approximately 2.9%, which resulted in a corresponding increase
in the U.S. dollar cost of our operating expenses. Further significant devaluation could
have an adverse effect on our results of operation and financial condition. We cannot
predict any future trends in the rate of devaluation or appreciation of the NIS against
the U.S. dollar, and may not be successful in attempting to purchase instruments that
reduce exposure to currency exchange fluctuations. Further significant depreciation could
have an adverse effect on our results of operations and financial condition. </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In September 2004 Odem signed a long
term sale agreement for the supply of electronic components (&#147;components&#148;). The
agreement provides for a fixed sales price of the components during the term of the
agreement through December 2010. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In July 2008, we signed a contract
for the sale of components to the Strategic Customer. The contract provides for a
framework for orders during an initial five-year term (until 2012).<B> </B>The contract
may be extended for additional five-year terms. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to the contracts with IAI
and the Strategic Customer, we committed to a fixed components sale price through the
respective contract periods, which is partly covered by manufacturers obligation for fixed
prices for part of the period. </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December 31, 2008 we had no
write down of write off or inventory that related to these agreements. </FONT></P>

<p align=center>
<font size=2>- 51 -</font></p>
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<page>

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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"><B>5F.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Tabular
Disclosure of Contractual Obligations</B> </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 following table of our material
contractual obligations as of December 31, 2008, summarizes the aggregate effect that
these obligations are expected to have on our cash flows in the periods indicated: </FONT></P>







<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=15><FONT FACE="Times New Roman" SIZE=1>Payment due by period</FONT><HR WIDTH=98% 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>Total</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Less than 1 year</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>1-3 years</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>3-5 years</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>More than 5<BR>
years</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>
     <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>
     <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>
     <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="42%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">Long-term loans <SUP>1</SUP> </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>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  2,927,150</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    670,704</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>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  2,256,446</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2">Accrued severance pay <SUP>2</SUP> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>929,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    929,000</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 lease - cars</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>743,757</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>434,406</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>309,351</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="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>Purchase obligation for</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>service and inventory</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>6,020,672</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>6,020,672</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>&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>&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>Facilities lease</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>257,058</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>131,504</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>125,554</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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>Total</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 10,877,637</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  7,257,286</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  2,691,351</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    929,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE><BR>



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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Does
not include interest. For information on interest rate on long terms loans
               see note 12 to the Consolidated Financial Statements for the year ended
December                31, 2008. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This
amount reflects our accrued severance pay liability. The time for payment
               of the severance cannot be predicted and, as a result, this amount is
presented                in the more than 5 years column. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition, the above table does not
include (i) contingent obligations to pay royalties to the Office of the Chief Scientist
and to the Overseas Marketing Fund since the total amount to be paid under the terms of
those agreements is a function of future sales, and (ii) contingent legal claims (see
&#147;Section 8A. Consolidated Statements and Other Financial Information &#150; Legal
Proceedings&#148;). </FONT></P>

<p align=center>
<font size=2>- 52 -</font></p>
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<page>

<a name=zk108></a>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 6:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Directors, Senior Management and Employees</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>6A.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Directors
and Senior Management</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set
forth below is information regarding our directors and senior management. </FONT></P>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>Name</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=1>Age</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH> </TH>
     <TH ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>Position</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 ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH> </TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH> </TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH> </TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH> </TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="30%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">Mr. Edouard Cukierman<SUP>1</SUP> </FONT></TD>
     <TD WIDTH="7%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>44&nbsp;</FONT></TD>
     <TD WIDTH="3%"> </TD>
     <TD WIDTH="60%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Chairman of the Board of Directors</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Mr. Shalom Daskal</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>49&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Chief Executive Officer</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Mr. Eyal Cohen</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>40&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Chief Financial Officer</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Mr. Joel Adler</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>55&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Director</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Mr. Guillaume Binder</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>54&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Director</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Mr. Jacob Neuhof</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>64&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Director</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Mr. Dan Hoz</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>38&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Director</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Mr. Gerard Limat</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>68&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Director</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Mr. Ronen Zavlik</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>48&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Director</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Ms. Nelly Assouline</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>43&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>External Director</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Mr. David Golan</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>68&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>External Director</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2">Mr. Avidan Zelicovsky<SUP>1</SUP> </FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>39&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Head of Supply Chain Solutions Division</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Mr. Yuval Viner</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>46&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Head of RFID and Mobile Solutions division</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Mr. Andrew Levi</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>46&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Managing Director BOS - Supply Chain Solutions (Summit) Inc.</FONT></TD></TR>
</TABLE>
<BR>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>1</SUP>
          Mr. Cukierman and Mr. Zelicovsky are first cousins. There are no other family
          relationships among the officers and directors. </FONT></P>


<p align=center>
<font size=2>- 53 -</font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mr.
          Edouard Cukierman</B> has been a director since May 2003 and Chairman of the
          Company since June 2003. Mr. Cukierman is the founder and CEO of Catalyst Funds
          and serves as Chairman of Cukierman &amp; Co Investment House. Since its
          establishment in 1993 Cukierman &amp; Co., Investment House realized &#128; 2.7
          billion of corporate finance transactions. Mr. Cukierman serves as Chairman of
          the Board of Summit, a subsidiary of the Company, is a Board member of Lamina
          Technologies in Switzerland, Mainsoft in Israel and Nessink in France. Prior to
          managing Catalyst in 2000, he was the President and CEO of the Astra
          Technological Investments, a venture capital fund established in 1993, which
was           the first Israeli company which went public in continental Europe. He is
also           the Chairman of the Board of &#147;Friends of Sar-El&#148;, an Israeli
Defense           Forces volunteer organization and is a board member of the &#147;Alliance
          Israelite Universelle en Israel&#148;. He serves as an officer in the Israeli
          Defense Forces Spokesman Unit, and part of the Hostage &amp; Crisis Negotiation
          Team (Reserves). Mr. Cukierman holds an MBA from INSEAD, Fontainebleau, France
          and a B.Sc from the Technion &#150; Israel Institute of Technology.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mr.
          Shalom Daskal</B> has been serving as the Chief Executive Officer of the
Company           since November 2008 and has over 28 years of executive experience in
global High           Tech companies. Prior to joining the Company, Mr. Daskal served as
an active           chairman of several High Tech companies based in Israel. During the
years           2005-2006, Mr. Daskal was the Chief Executive Officer of Shellcase Ltd.,
which           was acquired by Tessera Technologies Inc. (Nasdaq: TSRA). Prior to
joining           Shellcase, between 2002-2004, he was the Chief Executive Officer of
Power Paper           Ltd., and during 1999-2002 he was the Chief Operation Officer of
the           International Division of Crystal Systems Solutions Ltd. (later renamed
          BluePhoenix Solutions). Between 1996-1998, Mr. Daskal was the CEO of Emultek
          Ltd. Mr. Daskal began his career in the computer center of the Israeli Defense
          Forces (Mamram), and earned a Bachelor&#146;s degree in computer science from
          the Israeli Defense Forces computers academy.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mr.
          Eyal Cohen</B> was appointed as the Company&#146;s Chief Financial Officer in
          January 2007. From 2004 through 2006, Mr. Cohen served as the Company&#146;s
          controller, and prior to that held the position of Chief Financial Officer at
          Cellact Ltd. From 1998 to 2001, Mr. Cohen was the controller of e-SIM Ltd.
          (NASDAQ:ESIMF) and in the years 1995-1997 held an audit manager position in
          PricewaterhouseCoopers. Mr. Cohen holds a B.A. in Accounting and Business
          Administration from the College of Management in Tel-Aviv and is a certified
          public accountant in Israel and in the United States, in the state of Maine.  </FONT></P>


<p align=center>
<font size=2>- 54 -</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mr.
          Joel Adler</B> has been a director since June 2005. Mr. Adler is a partner in
          Mishcon de Reya a leading law firm in London. He specializes in mergers &amp;          acquisitions
and corporate finance work, in particular international corporate           transactions.
Mr. Adler advises a number of major Israel based companies on           their business
activities in the UK and Europe and on IPO of foreign companies           on the London
Stock Exchange (AIM). Mr. Adler joined Mishcon de Reya as a           partner in 2006,
from the London law firm of Speechly Bircham, where he was a           partner from 1999.
Previously, Mr. Adler was head of the corporate department of           Rakisons (now
part of U.S. law firm Steptoe &amp; Johnson). He gained his           experience with
other leading law firms in London Herbert Oppenheimer Nathan           &amp; Vandyck (now
Denton Wilde Sapte) and DJ Freeman. He is a member of the           Israeli Bar and
worked for the well-known Israeli law firm Caspi &amp; Co. for           two years. Mr.
Adler holds a Law degree from Bar Ilan University in Israel, and           an LLM from
London University. He was born and educated in Vienna.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mr.
          Ronen Zavlik</B> has been a director since May 2003. He is a partner in the CPA
          firm of Grinberg-Zavlik, which he founded in 1987. His firm provides a wide
          range of audit, tax consultancy and CFO services to a wide variety of
companies.           Mr. Zavlik provides internal auditing services to a number of large
companies           whose shares are traded on the Tel-Aviv Stock Exchange, including Ma&#146;ariv
          Holdings Ltd., Extra Plastic Ltd., Rapid Vision Ltd., and Optima Management and
          Investments 66 Ltd. Mr. Zavlik holds a B.A. in Accountancy and Business
          Management from the College of Management in Tel-Aviv. Mr. Zavlik is a licensed
          CPA in Israel and a member of the Institute of Certified Public Accountants in
          Israel.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mr.
          Dan Hoz</B>, has been a director of the Company since August 2007. Mr. Hoz
          serves as the Chief Executive Officer of Valor Computerized System Ltd., a
          provider of vertically integrated manufacturing productivity solutions to the
          PCB industry since 2002, following 5 years as the Company&#146;s Chief
Financial           Officer. Mr. Hoz also serves on the board of directors of Frontline
PCB           Solutions, a joint venture company between Valor and Orbotech. Previously,
Mr.           Hoz was the Vice President of Operations and Finance of CAM Division
          (Frontline), in Orbotech-Valor. Mr. Hoz is also a former Senior Auditor in the
          High Tech group of Deloitte Touche Tohmatsu. Mr. Hoz holds a B.A. in Accounting
          and Economics and an MBA (major in Finance) from Ben Gurion University of the
          Negev, and is a certified CPA.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mr.
          G&eacute;rard Limat </B>has been a director of the Company since April 2008.
          Since 1968, Mr. Limat has held various managerial positions with the Dassault
          group, which operates in the civil aviation and the military sectors. Mr. Limat
          is also the founder and Chief Executive Officer of Dasnair, a business plane
          charter company. In addition, Mr. Limat serves as a director in           G&eacute;n&eacute;rale
Immobili&egrave;re Dassualt and in Cendres &amp;          M&eacute;taux SA, a company
that produces semi-finished and finished products           for the dental, jewellery and
heavy industries. Mr. Limat is a certified public           accountant.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mr.
          Guillaume Binder</B> has been a director of the Company since July 2008. Mr.
          Binder is a licensed lawyer in France and holds a Masters in Law from Paris
          University, a certificate of specalization in Corporate and Tax Law and a
degree           of superior accounting study (DECS). Mr. Binder serves as a director in
several           seed and startup companies, including First Care products and Neuronix.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mr.
          Jacob Neuhof </B>has been a director of the Company since September 2009. Mr.
          Neuhof founded Odem Electronic Technologies 1992 Ltd.&nbsp;in May 2002 and
          managed the company for 16 years. Between 2005-2007, Mr. Neuhof served as the
          Chairman of the Board of Odem Electronic Technologies 1992 Ltd. &nbsp;Odem was
          purchased by the Company in 2004-2005 and is its wholly owned subsidiary.
          &nbsp;In the past, Mr. Neuhof served as Country Manager for Texas Instruments
in           Israel for a period of ten years and as a design engineer at General Signal
          Corp. Mr. Neuhof holds an Electrical Engineering degree from&nbsp;McGill
          University, Canada and an MBA with a specialization in Marketing from the
          University of Bridgeport, Connecticut.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Ms.
          Nelly Assouline</B> has been an external director of the Company since November
          2008. Ms. Assouline has been holding various positions in Dexia since 1989,
most           recently in Paris. Between the years 2001-2007 she has served as Deputy
General           Manager and Chief Financial Officer of Dexia Israel. She has set up and
served           as a board member of Dexia Israel Issuance Ltd. and of Dexia Operational
          Financing Ltd. Between the years 1989 and 2001 she was the senior executive
          funding director &#150; Financial Markets in the Dexia Funding Department. Ms.
          Assouline holds a Post Graduate degree in Mathematics and Finance from the
          Dauphine University and an International Executive MBA from the Kellog
          University of Management (Northwestern and Tel-Aviv University).  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mr.
          David Golan</B> has been an external director of the
Company since February 2009. Mr. Golan provides private investment banking, consulting and
brokerage services. He currently serves as a director in several companies, including the
Investec Bank since 1992, Clal Tourism Ltd., Cimatron Ltd. and Zoko Enterprises Ltd. In
the years 1998-2000 he served as President of the Zeevi Investments group. Between
1997-1998, Mr. Golan served as President of Clal Trading Ltd. and between 1992-1997 he
served as Vice President Clal Trading Ltd. Between the years 1988-1992 Mr. Golan served as
managing director of Gal Industries Ltd. Mr. Golan holds a bachelors degree in Economics
and Statistics from the Hebrew University, an MBA from New York University and took part
in a senior management course in IMD Lausaunne.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mr.
          Avidan Zelicovsky</B> is the Head of Supply Chain Solutions Division. Mr.
          Zelicovsky first joined the Company&#146;s subsidiary Odem Electronic
          Technologies 1992 Ltd. in 1996. Mr. Zelicovsky holds a B.A. in Business
          Administration from the Tel Aviv College of Management and an LL.M. from the
          Ben-Gurion University.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mr.
          Yuval Viner </B>is the Head of RFID and Mobile Solutions division. Mr. Viner
          joined Dimex Systems (1988) Ltd. in 1993 and was appointed as Dimex
          System&#146;s CEO in 2000. Mr. Viner joined the Company as part of the
          acquisition of Dimex Systems assets. Mr. Viner is a graduate of the Practical
          Engineering Academy of Tel Aviv.  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mr.
          Andrew Levi</B> was appointed President of Summit Radio Corp. in the year 1984.
          Mr. Levi joined BOS as part of the Summit acquisition and currently serves as
          Managing Director BOS &#150; Supply Chain Solutions (Summit) Inc. Mr. Levi
holds           a Bachelor of Science from the Syracuse University in New York.  </FONT></P>


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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"><B>6B.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Board
and Executive Compensation</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
February 18, 2003 the shareholders approved compensation for all directors who are not
employees or consultants, including directors appointed in the future, at the same rate
the external directors of the Company are paid. However, on August 5, 2004 the
shareholders approved an exception &#150; that Edouard Cukierman, Chairman of the Board,
will receive remuneration (retroactively from the date of his nomination in May 2003) as a
Board member, under the same terms as all other directors, despite his being (indirectly)
a controlling shareholder and senior executive of Cukierman &amp; Co. (a service provider
to the Company). On November 7, 2007 the shareholders approved an Active Chairman
Agreement with Mr. Edouard Cukierman. Pursuant to this Agreement, in consideration for Mr.
Cukierman&#146;s services as the Company&#146;s Active Chairman in the years 2007-2010, he
is granted 400,000 options to purchase the Company&#146;s ordinary shares in four equal
annual tranches (pro-rated for any part of the Calendar year). These options shall be in
lieu of any compensation, fees or options otherwise payable by the Company to Cukierman as
a director. (see &#147;Section 7B. Related Party Transactions&#148;). </FONT></P>

<p align=center>
<font size=2>- 56 -</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
current compensation rates for our directors, excluding the external directors, are an
annual fee of approximately $5,734 and a meeting participation fee of approximately $297.
These rates reflect a following a voluntary waiver by each of the non-external directors
of 15% of their fees for the year 2009. The rates for of our external directors are an
annual fee of approximately $8,270 and a participation fee in meetings of approximately
$415. Additionally, the Company&#146;s directors are granted options (see &#147;Section
6E. Share Ownership&#148;). The Company does not have any contracts with any of its non
employee/consultant directors, that would provide for benefits upon termination of
service. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following tables present the total compensation paid to or accrued on behalf of all of our
directors and officers as a group for the year ended December 31, 2008: </FONT></P>




<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">Salaries, Directors' fees,<BR>
Service fees, Commissions<BR>
and Bonus<SUP>1</SUP> </FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Pension, Retirement<BR>
and Similar benefits</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>
     <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=71% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>All  directors and officers as a group (then 20 persons)</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>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 2,170,190</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   231,602</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>1</SUP> &nbsp;Figure also includes (a)
consulting and other fees paid to Cukierman &amp; Co., of which Mr. Edouard Cukierman, the
Company&#146;s Chairman, is (indirectly) a controlling shareholder and (b) Stock based
compensation in the amount of $532,000. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Such
remuneration does not include amounts expended by the Company for expenses, including
business association dues and expenses reimbursed to said officers, and other fringe
benefits commonly reimbursed or paid by companies in the location in which the particular
executive officer of the Company is located, as the case may be. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Starting
from November 2008, Mr. Shalom Daskal provides CEO services to the Company. (For more
information, see Section 7B. &#150; Related Party Transactions). </FONT></P>

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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"><B>6C.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Board
Practices</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
Board of Directors is currently comprised of nine directors, including two external
directors. The directors are elected at the annual shareholders meeting, by a simple
majority, to serve until the next annual meeting of our shareholders and until their
respective successors are elected and qualified, with the exception of the external
directors who, by rule of the Israeli Companies Law, serve for three years. Our Articles
of Association provide that the number of directors in the Company (including external
directors) shall be determined from time to time by the annual general meeting of
shareholders, provided that it shall not be less than four nor more than eleven. Our
Articles of Association provide that the directors may appoint additional directors
(whether to fill a vacancy or to expand the Board) so long as the number of directors so
appointed does not exceed the number of directors authorized by shareholders at the annual
general meeting, and such appointees shall serve until the next annual general meeting. </FONT></P>

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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has determined that Messrs. Adler, Zavlik, Hoz, Binder, Limat and Golan and Ms.
Assouline, who constitute a majority of the Board of Directors, are independent directors
under the applicable Nasdaq Stock Market requirements. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Israeli Companies Law and the regulations promulgated pursuant thereto, Israeli
companies whose shares have been offered to the public in, or that are publicly traded
outside of Israel are required to appoint at least two natural persons as &#147;external
directors&#148;. No person may be appointed as an external director if the person, or a
relative, partner or employer of the person, or any entity under the person&#146;s
control, has or had, on or within the two years preceding the date of the person&#146;s
appointment to serve as an external director, any affiliation with the company to whose
board the external director is proposed to be appointed or with any entity controlling or
controlled by such company or by the entity controlling such company. The term affiliation
includes an employment relationship, a business or professional relationship maintained on
a regular basis, control and service as an office holder (which term includes a director). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, no person may serve as an external director if the person&#146;s position or
other business activities create, or may create, a conflict of interest with the
person&#146;s responsibilities as an external director or interfere with the person&#146;s
ability to serve as an external director or if the person is an employee of the Israel
Securities Authority or of an Israeli stock exchange. If at the time of election of an
external director, all other directors are of the same gender, the external director to be
elected must be of the other gender. The external directors must have professional
qualifications to serve as a director, and at least one of the external directors must be
a financial expert. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;External
directors are elected for a term of three years and may be re-elected for one additional
three-year term. Each committee of a company&#146;s Board of Directors that has the
authority to exercise powers of the Board of Directors is required to include at least one
external director and its audit committee must include all external directors. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;External
directors are elected at the general meeting of shareholders by a simple majority,
provided that the majority includes at least one-third of the shareholders who are not
controlling shareholders, who are present and voting, or that the non-controlling
shareholders who vote against the election hold one percent or less of the voting power of
the company. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Israeli Companies Law an external director cannot be dismissed from office unless: (i)
the Board of Directors determines that the external director no longer meets the statutory
requirements for holding the office, or that the external director is in breach of the
external director&#146;s fiduciary duties and the shareholders vote, by the same majority
required for the appointment, to remove the external director after the external director
has been given the opportunity to present his or her position; (ii) a court determines,
upon a request of a director or a shareholder, that the external director no longer meets
the statutory requirements of an external director or that the external director is in
breach of his or her fiduciary duties to the company; or (iii) a court determines, upon a
request of the company or a director, shareholder or creditor of the company, that the
external director is unable to fulfill his or her duty or has been convicted of specified
crimes. </FONT></P>

<p align=center>
<font size=2>- 58 -</font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
Articles of Association provide that a director may appoint, by written notice to us, any
individual to serve as an alternate director, up to a maximum period of one month, if the
alternate is not then a member of the Board. Any alternate director shall have all of the
rights and obligations of the director appointing him or her and shall be subject to all
of the provisions of the Articles of Association and the Israeli Companies Law. Unless the
time period or scope of any such appointment is limited by the appointing director, such
appointment is effective for all purposes for a period of one month, but in any event will
expire upon the expiration of the appointing director&#146;s term, removal of the
alternate at an annual general meeting, the bankruptcy of the alternate, the conviction of
the alternate for an offense under Section 232 of the Israeli Companies Law, the legal
incapacitation of the alternate, the removal of the alternate by court order or the
resignation of the alternate. Currently, no alternate directors have been appointed. A
director may appoint an alternate to serve in his place as a member of a committee of the
Board of Directors, even if the alternate currently serves as a director, as long as he
does not already serve as a member of that committee. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Officers
serve at the discretion of the Board or until their successors are appointed. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According
to the provisions of our Articles of Association and the Israeli Companies Law, the Board
of Directors convenes in accordance with the Company&#146;s requirements, and at least
once every three months. In practice, the Board of Directors convenes more often.
Furthermore, our Articles of Association provide that the Board of Directors may also pass
resolutions without actually convening, provided that all the directors entitled to
participate in the discussion and vote on a matter that is brought for resolution agree
not to convene for discussion of the matter. Resolutions passed without convening, shall
be passed by an ordinary majority (just as in the case of convened meetings) and shall
have the same effect as resolutions passed at a duly convened meeting. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
accordance with the requirements of the Nasdaq Stock Market, commencing on July 31, 2005,
nominees for directors will be recommended for selection by a majority of the independent
directors. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Audit Committee:</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Companies Law requires public companies to appoint an audit committee comprised of
at least three directors, including all of the external directors, and further stipulates
that the chairman of the Board of Directors, any director employed by or providing other
services to a company and a controlling shareholder or any relative of a controlling
shareholder may not be members of the audit committee. The responsibilities of the audit
committee include identifying flaws in the management of a company&#146;s business, making
recommendations to the Board of Directors as to how to correct them and deciding whether
to approve actions or transactions which by law require audit committee approval. An audit
committee may not approve an action or transaction with a controlling shareholder or with
an office holder unless at the time of approval two external directors are serving as
members of the audit committee and at least one participated in the meeting at which the
action or transaction was approved. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
order to comply with the Sarbanes-Oxley Act of 2002, the Board of Directors has expanded
the role of the Company&#146;s Audit Committee to provide assistance to the Board of
Directors in fulfilling its legal and fiduciary obligations with respect to matters
involving the accounting, auditing, financial reporting and internal control functions of
the Company. In carrying out these duties, the Audit Committee must meet at least once in
each fiscal quarter with management at which time, among other things, it reviews, and
either approves or disapproves, the financial statements of the Company for the
immediately preceding fiscal quarter and conveys its conclusions in this regard to the
Board of Directors. The Audit Committee also monitors generally the services provided by
the Company&#146;s external auditors to ensure their independence, and reviews, and either
approves or disapproves, all audit and non-audit services provided by them. The
Company&#146;s external and internal auditors must also report regularly to the Audit
Committee at its meetings, and the Audit Committee discusses with the Company&#146;s
external auditors the quality, not just the acceptability, of the accounting principles,
the reasonableness of significant judgments and the clarity of disclosures in the
Company&#146;s financial statements, as and when it deems it appropriate to do so. </FONT></P>

<p align=center>
<font size=2>- 59 -</font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Sarbanes-Oxley Act of 2002, the Audit Committee is also responsible for the
appointment, compensation, retention and oversight of the work of the Company&#146;s
external auditors. However, under Israeli law, the appointment of external auditors
requires the approval of the shareholders of the Company. Accordingly, the appointment of
the external auditors is approved and recommended to the shareholders by the Audit
Committee and ratified by the shareholders. Furthermore, pursuant to the Company&#146;s
Articles of Association, the Board of Directors is the organ that has the authority to
determine the compensation of the external auditors, however, the Board of Directors
delegated its authority to the audit committee, so that a second discussion by the Board
of Directors shall not be necessary. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has determined that the members of the audit committee meet the applicable Nasdaq
Stock Market and SEC independence standards. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2003 the Company adopted an Audit Committee Charter, which sets forth the responsibilities
of the committee. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Remuneration Committee:</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
role of the Remuneration Committee is to provide assistance and make recommendations to
the Board of Directors regarding matters related to the compensation of employees of the
Company. The Remuneration Committee of the Company meets on an ad hoc basis. Under the
Israeli Companies Law, generally the Remuneration Committee may only make recommendations
to the Board of Directors concerning the grant of options (and in some cases, such grants
may need approval of the audit committee, the Board of Directors and the shareholders as
well). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commencing
July 31, 2005, in accordance with Nasdaq rules, the compensation of the Company&#146;s
Chief Executive Officer and other executive officers is recommended to the Board of
Directors by a majority of the independent directors on the Company&#146;s Board of
Directors. </FONT></P>

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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"><B>6D.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Employees</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December 31, 2007, we employed 93 employees. As of May 31, 2009, we employed 125
employees, of which 100 are employed in Israel and the rest are employed in the United
States. Of these 125 employees: 13 employees are in general and administrative positions,
70 employees in marketing and sales, 8 employees in research and development, and 34
employees in manufacturing and related activities. We believe that our relations with our
employees are satisfactory. We have not experienced a collective labor dispute or a
strike. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Israeli
labor laws are applicable to all of our employees in Israel. The laws principally concern
the length of the work day, minimum daily wages for professional workers, contributions to
a pension fund, insurance for work-related accidents, allotment of vacation and sickness
days, procedures for dismissing employees, determination of severance pay and other
conditions of employment. </FONT></P>

<p align=center>
<font size=2>- 60 -</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
Israeli employers are required to provide a certain escalation of wages in relation to the
increase in the Israeli Consumer Price Index. The specific formula of such escalation
varies according to agreements reached between the Government of Israel, the
Manufacturers&#146; Association and the Histadrut, the general labor union in Israel. All
of our Israeli employees are covered by pension insurance policies. Israeli employees and
employers are required to pay predetermined sums to the Israel National Insurance
Institute which amounts also include, since January 1, 1995, payments for national health
insurance. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
December 2008 and in May 2009, we have effected a progressive reduction in the salaries of
the employees of the Company and its subsidiaries of up to 15%, depending on the level of
salary. In connection with such reduction, in May 2009, the Company granted its employees
a total of 538,753 options to purchase ordinary shares of the Company with exercise price
of $0.00 per ordinary share. The options vest on a quarterly basis starting from January
2009 over a period of four quarters, in four equal parts. The exercise period of the
options is 5 years from January 1, 2009. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, in May 2009, the Company&#146;s employees were granted a total of 545,166
options to purchase the Company&#146;s ordinary shares, as a prospective incentive. The
exercise price of these options is $1.00 per ordinary share. These options vest on a
yearly basis starting from January 2009 over a period of four years, in four equal parts.
The exercise period of the options is 5 years from January 1, 2009. </FONT></P>

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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"><B>6E.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Share
Ownership</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of May 31, 2009, out of our
directors and officers, then consisting of 14 persons, shares held by our officers and
directors are as follows: </FONT></P>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH align=left><FONT FACE="Times New Roman" SIZE=1>Name</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Position</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Shares</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Options</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>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="27%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">Mr. Edouard Cukierman<SUP>1</SUP> </FONT></TD>
     <TD WIDTH="49%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Chairman of the Board of Directors</FONT></TD>
     <TD WIDTH="12%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>40,690&nbsp;</FONT></TD>
     <TD WIDTH="12%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>641,376&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2">Mr. Joel Adler<SUP>2</SUP> </FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Director</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>140,925&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>29,000&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Mr. Jacob Neuhof</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Director</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>275,567&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>21,500&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Mr. Shalom Daskal</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Chief Executive Officer</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>*&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>594,832&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Mr. Avidan Zelicovsky</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Head of Supply Chain Solutions, Division</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>73,000&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>558,108&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Mr. Yuval Viner</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Head of RFID and Mobile Solutions Division</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>42,981&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>206,209&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Mr. Andrew Levy</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Managing Director BOS - Supply Chain Solutions (Summit) Inc.</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>180,000&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>66,666&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Other directors and officers</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>156,590&nbsp;</FONT></TD></TR>
</TABLE>
<BR>

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<HR SIZE=1 NOSHADE WIDTH=15% ALIGN=LEFT>

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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><SUP>1</SUP></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>               Mr.
Edouard Cukierman held 21,666 ordinary shares directly, 6,424 ordinary
               shares through a wholly owned company, E.D.I European Development and
               Investments Ltd and an additional 12,600 ordinary shares through Cukierman
&amp;               Co. Investment House &amp; Co. that is indirectly controlled by Mr.
Cukierman. </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><SUP>2</SUP></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>               Brada
Investments Limited is discretionary trust of which Mr. Joel Adler, a
               director of the Company, is one of the beneficiaries. Brada Investments
Limited                holds 140,925 ordinary shares. Mr. Joel Adler holds 29,000
options, which he                received as a director. </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>   * </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Less
than 1%. For additional information see "Section 7B.  Related Party Transactions".</FONT></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>- 61 -</font></p>
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<page>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
February 18, 2003 the Company&#146;s shareholders approved the grant of 7,500 options to
any future first-time director, who is not an employee or paid consultant of the Company.
The terms and conditions of the grant, as approved by the shareholders, are as follows:
the exercise price shall be $1.84; the options will vest over a three year period from the
date of grant (one-third vesting every year) and be exercisable within five years from the
date of grant. Due to share fluctuation, at the recommendation of the Board of Directors,
the shareholders resolved on August 5, 2004, that future issuances to new directors will
have an exercise price equal to the average closing price of the shares on the Nasdaq
Global Market on the 20 trading days preceding their appointment. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
shareholders approved on August 5, 2004, that Edouard Cukierman, Chairman of the Board,
will be granted 7,500 options under the same terms as all other directors, despite his
being (indirectly) a controlling shareholder and senior executive of Cukierman &amp; Co.
(a service provider to the Company), and therefore not eligible for options according to
the current shareholder resolution. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
shareholders also approved on June 29, 2005, to grant all directors of the Company
(including external directors), who are not employees or consultants of the Company (or
who have been granted options similar to all directors despite their employment and/or
services), an additional 7,500 options to purchase ordinary shares of the Company on the
third anniversary of their service as directors, under the same terms approved by the
shareholders on February 18, 2003 and as amended on August 5, 2004. Following this
decision Edouard Cukierman was granted 7,500 options at an exercise price of $2.695. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
May 18, 2006 and in November 2007 the shareholders approved to grant Mr. Edouard
Cukierman, the Chairman of the Board of Directors, a total of 21,666 ordinary shares (for
no consideration), and 633,876 options to purchase ordinary shares of the Company,
pursuant to the Company&#146;s 2003 Israeli Share Option Plan. (see &#147;Section 7B.
Related Party Transactions&#148;) </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
May 14, 2009 the shareholders approved the grant to each of the directors of the Company
(excluding the external directors and Mr. Edouard Cukierman) 14,000 options to purchase
the Company&#146;s ordinary shares in accordance with the Company&#146;s 2003 Israeli
Share Option Plan. The terms and conditions of the grant, as approved by the shareholders,
are as follows: the exercise price shall be $1.00; the options will vest over a four year
period from May 14, 2009, in four equal parts and be exercisable within five years from
the date of grant. </FONT></P>

<p align=center>
<font size=2>- 62 -</font></p>
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<page>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Share Option Plans </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
purpose of the Share Option Plans is to enable us to attract and retain qualified persons
as employees, officers, directors, consultants and advisors and to motivate such persons
by providing them with an equity participation in the company. The Section 102 Plan is
designed to afford qualified optionees certain tax benefits under the Israel Income Tax
Ordinance. The Share Option Plans will expire 10 years after their adoption, unless
terminated earlier by the Board of Directors. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Share Option Plans are administered by the Board of Directors, which has broad discretion,
subject to certain limitations, to determine the persons entitled to receive options. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Share Option Plans, the terms and conditions under which options are granted and the
number of shares subject thereto shall be determined by the Board of Directors. The Board
of Directors also has discretion to determine the nature of the consideration to be paid
upon the exercise of an option under the Share Option Plans. Such consideration generally
may consist of cash, or, at the discretion of the Board of Directors, cash and a recourse
promissory note. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
ordinary shares acquired upon exercise of an option are subject to certain restrictions on
transfer, sale or hypothecation. Options are exercisable and restrictions on disposition
of shares lapse pursuant to the terms of the individual agreements under which such
options were granted or shares issued. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due
to a tax reform in Israel, after January 1, 2003 the Company may not grant options
pursuant to an &#147;old&#148; Section 102 Plan. Therefore, the Company may not grant any
more options pursuant to the 2000 and 1995 Plans described below. Previous grants under
these Plans remain unaffected. In any event, after the adoption of the 2003 Plan (see
below), the Board of Directors resolved that no further grants shall be made from the
previously adopted plans. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>2003
Plan </I> </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
May 2003 the Company&#146;s shareholders approved the adoption of the 2003 Israeli Stock
Option Plan, pursuant to which 625,000 ordinary shares were reserved for purchase by the
employees, directors, consultants and service providers of the Company and its
subsidiaries. Subsequently, the shareholders approved increases of the shares reserved for
issuance under the Plan, initially to 1 million, and thereafter to 1.5 million, to 2.6
million and in May 14, 2009 to 4.15 million. The Board of Directors has resolved that no
further grants shall be made from the previous plans. The Company has elected the benefits
available under the &#147;capital gains&#148; alternative. Pursuant to the election made
by the Company, capital gains derived by optionees arising from the sale of shares derived
from the exercise of options granted to them under Section 102, will be subject to a flat
capital gains tax rate of 25% (instead of the gains being taxed as salary income at the
employee&#146;s marginal tax rate). However, as a result of this election, the Company
will no longer be allowed to claim as an expense for tax purposes the amounts credited to
such employees as a benefit when the related capital gains tax is payable by them, as the
Company was previously entitled to do. The Company may change its election from time to
time, as permitted by the Tax Ordinance. There are various conditions that must be met in
order to qualify for these benefits, including registration of the options in the name of
a trustee (the &#147;Trustee&#148;) for each of the employees who is granted options. Each
option, and any ordinary shares acquired upon the exercise of the option, must be held by
the Trustee for a period commencing on the date of grant and ending no earlier than 24
months after the date of grant. </FONT></P>

<p align=center>
<font size=2>- 63 -</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of May 31, 2009 we had 3,166,955 options outstanding under this plan (of which 1,250,339
are vested) with the exercise prices as set forth below: </FONT></P>



<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="450" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1>Exercise Price Per Share $</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Outstanding</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN="3" ALIGN="LEFT"><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 COLSPAN="3" ALIGN="LEFT"><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" ALIGN="LEFT"><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" ALIGN="LEFT"><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="20%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Less than $0.01</FONT></TD><TD WIDTH="30%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="45%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>759,084</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  0.50</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>7,500</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  0.61</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>60,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 0.697</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>7,500</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  1.00</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>629,166</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  1.01</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>250,000</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 1.044</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>7,500</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1.466</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>7,500</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 1.499</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>7,500</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  1.68</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>100,000</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 1.713</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>7,500</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$</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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,929</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  2.28</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>7,500</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 2.385</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>400,000</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  2.52</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>441,800</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  2.57</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>7,500</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  2.68</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>420,976</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 2.695</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>15,000</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  3.00</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>28,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN="2" ALIGN="LEFT"><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</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"><B>3,166,955</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN="2" ALIGN="LEFT"><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>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>2001
Plan </I> </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
March 2002, the Company&#146;s shareholders approved the adoption of the 2001 Stock Option
Plan, pursuant to which 250,000 ordinary shares were reserved for purchase by the
Company&#146;s employees, directors, consultants or service providers, as determined by
the Board of Directors or its authorized sub-committee. As of May 31, 2009, we had 1,160
options outstanding under this plan, at an exercise price of $6.8 per share. All of the
outstanding options had vested as of May 31, 2008. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>2000
Plan </I> </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
April 2001, the Company&#146;s shareholders approved our 2000 Employees Incentive Share
Option Plan, pursuant to which 112,500 ordinary shares were reserved for purchase. The
plan is subject to Section 102 of the Israeli Income Tax Ordinance. As of May 31, 2009, we
had 1,250 options outstanding under this plan at an exercise price of $28.00 per share.
All of the outstanding options had vested as of April 30, 2008. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>1995
Plans </I> </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
December 1995, the Company&#146;s shareholders approved our 1995 Employee Incentive Share
Option Plans. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Share Option Plans provide for the grant of options to purchase up to an aggregate of
50,000 ordinary shares. As of May 31, 2009, we had 450 options outstanding under this plan
at an exercise price of $18.00. All of the outstanding options had vested as of May 31,
2008. </FONT></P>

<p align=center>
<font size=2>- 64 -</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<a name=zk109></a>

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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>Item 7:</B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Major Shareholders and Related Party Transactions</U></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"><B>7A.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Major
Shareholders</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are not directly or indirectly
owned or controlled by another corporation or by any foreign government. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table sets forth, as of
May 2009, information to the best of the Company&#146;s knowledge, as to each person known
to the Company to be the beneficial owner of more than five percent (5%) of the
Company&#146;s outstanding ordinary shares. Except where indicated, to the best of the
Company&#146;s knowledge based on information provided by the owners, the beneficial
owners of the Ordinary Shares listed below have sole investment and voting power with
respect to those shares. Applicable percentage ownership in the following table is based
on 13,027,514 shares outstanding as of May 31, 2009. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The voting rights of our major
shareholders do not differ from the voting rights of other holders of our ordinary shares. </FONT></P>




<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=9><FONT FACE="Times New Roman" SIZE=1>Shares Beneficially Owned</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3 align=left><FONT FACE="Times New Roman" SIZE=1>Name and Address</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Number</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Percent</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Warrants</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>
     <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="57%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Catalyst Fund, LP (1)</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></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" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT" colspan=10><FONT FACE="Times New Roman" SIZE=2>3 Daniel Frisch Street, Tel-Aviv</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>64731, Israel</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>2,117,252</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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>16.3</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>270,907</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>D.S. Apex Holdings Ltd. (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></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Discount  Tower,  23 Yehuda Halevi</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>St., Tel Aviv, Israel</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>1,601,053</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>12.29</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>270,907</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" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT" colspan=10><FONT FACE="Times New Roman" SIZE=2>SITA S.A. (3)</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>27, RTE DE GY  1252 Meinier,</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>Geneva, Switzerland</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>878,670</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>6.7</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 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>Bellite Pty Limited (4)</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>7 Beresford Road, Rose Bay 2029,</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>NSW, Australia</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>816,327</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>6.3</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>408,164</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%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Catalyst
Fund&#148; refers collectively to Catalyst Fund L.P., Catalyst                Fund II
L.P. and Catalyst Fund III, L.P., all of which are limited partnerships
               organized and existing under the laws of the State of Israel, and which
share                the same general partner, Catalyst Investments. Mr. Edouard
Cukierman may be                deemed to have sole voting and dispositive power with
respect to the shares held                by Catalyst Fund. Mr. Cukierman disclaims
beneficial ownership in such shares,                except to the extent of his
proportionate interest in them as an indirect                shareholder in the general
partner of Catalyst Fund. Includes 464,160 ordinary                shares held by
Catalyst Investment L.P. the general partner of Catalyst Fund. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>- 65 -</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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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>(2) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Refers
to the holdings of D.S. Apex Holdings Ltd. and its subsidiaries. Includes
               500,307 ordinary shares DS Apex Holdings Ltd. holds for its nostro
accounts. </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>(3) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr.
G&eacute;rard Limat, a member of our board of Directors is the Chairman of
               SITA SA and may be deemed to have sole voting and dispositive power with
respect                to the shares held by SITA SA. </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>(4) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr.
Les Szekely may be deemed to have sole voting and dispositive power with
               respect to the shares offered for resale by Bellite Pty Limited. </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 changes in holdings of the major
shareholders over the last three years, are detailed to the best of our knowledge in the
table below: </FONT></P>





<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Holdings as of:</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>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>December 31, 2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>December 31, 2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>May 31, 2009</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>
     <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>
     <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>
     <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>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="42%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Catalyst Fund, LP</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>1,292,275</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>2,117,252</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>2,117,252</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>2,117,252</FONT></TD>
        <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><SUP>1</SUP> </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>D.S. Apex Holdings Ltd.</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>&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>1,338,885</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>1,354,966</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>1,601,053</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" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>SITA</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>&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>878,670</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>878,670</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>878,670</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
      <TD>&nbsp; </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD>
      <TD> </TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Bellite Pty Limited</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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>816,327</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>816,327</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR>



<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><SUP>1</SUP> Includes 464,160 ordinary shares held by Catalyst Investment L.P. the general partner of Catalyst
Fund. </FONT>
</P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The  shareholders'  holdings
 reflect their voting rights.  The Company's major  shareholders do not have different
voting rights than other shareholders, with respect to their shares. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of May 31, 2009,  there were 50
record holders of ordinary  shares,  of which 13 were  registered with addresses in the
United States,  representing  approximately 53% of the outstanding  ordinary shares.
 However, the number of record  holders  in the  United  States  is not  representative
 of the  number  of  beneficial  holders  nor is it representative  of where such
beneficial  holders are resident since many of the ordinary shares are held of record by
brokers and other nominees. </FONT></P>

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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"><B>7B.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Related
Party Transactions</B> </FONT></TD>
</TR>
</TABLE>
<BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Grant of Shares and Options and to Mr. Cukierman</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The shareholders  approved on August
5, 2004, that Edouard Cukierman,  Chairman of the Board, will be granted 7,500 options at
an  exercise  price of $1.84 under the same terms as all other first time  directors.
 The  shareholders also  approved,  on June 29, 2005, to grant all directors of the
Company,  an additional  7,500 options to purchase ordinary  shares of the Company on the
third  anniversary  of their service as directors.  Following  this decision Edouard
Cukierman was granted 7,500 options at an exercise price of $2.695 (see "Section 6E.
Share Ownership"). </FONT></P>

<p align=center>
<font size=2>- 66 -</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On May 18, 2006 the  shareholders
 approved a grant to Mr.  Edouard  Cukierman  of 21,666  ordinary  shares (for no
consideration),  and 233,876  options to purchase  ordinary  shares of the Company,
 pursuant to the Company's 2003 Israeli  Share Option Plan, at an exercise  price of
$2.68.  The options'  exercise  price was equal to the average closing  price  of the
 Company's  shares  on the  Nasdaq  Global  Market  on the 20  trading  days  preceding
 the shareholders'  meeting date at which the grant was  approved  (the "Grant  Date").
 The options vest in three equal parts on the first, second and third anniversary of the
Grant Date, and expire from May 2010 through May 2012. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On November 7, 2007 the shareholders
 approved an Active Chairman  Agreement with Mr. Edouard  Cukierman.  Pursuant to this
Agreement,  in  consideration  for Mr.  Cukierman's  services as the Company's Active
Chairman in the years 2007-2010,  he shall be granted  400,000  options  in four equal
 annual  tranches  (pro-rated  for any part of the Calendar  year).  The  options  shall
be in lieu of any  compensation,  fees or  options  otherwise  payable by the Company to
Mr. Cukierman as a director. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The options shall vest on a
quarterly  basis.  The exercise price of the options is $2.385,  which was equal to the
weighted  average of the closing  prices of the  Company's  ordinary  shares on the
Nasdaq Global Market during the thirty-day  period  preceding the  shareholders
 approval.  Unexercised  options shall expire after five years from their respective
grant date. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to the  Agreement,  if the
Service is terminated by the Company for no Cause (as defined in the Agreement) then: (i)
any unvested  options shall be  immediately  vested in full as of the date of the
 termination;  (ii) the Company shall grant Mr. Cukierman such number of options
amounting,  together with options previously  granted,  to 400,000  options,  and such
 additional  options  shall be  vested  upon  grant;  and (iii)  the  options  shall be
exercisable for a period of twenty four (24) months from termination. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If the Service is terminated by Mr.
 Cukierman in  circumstances  not involving  Cause, his vested options shall be
exercisable for six (6) months from the date of said termination. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2003,  the  Company's  audit
 committee  and Board  approved  the  engagement  of  Cukierman  &amp; Co., to provide
non-exclusive  investment-banking  services and business development services to the
Company,  effective April 15, 2003.  Cukierman &amp; Co. is a company  indirectly  controlled
by Mr.  Edouard  Cukierman.  Since  June 26,  2003, he serves as Chairman of the
 Company's  Board,  and he is also a co-manager  of the  Catalyst  Fund,  the  Company's
largest shareholder.  For its services,  Cukierman &amp; Co. is paid a monthly sum of $10,000
plus VAT, in addition to a success fee of 4%-6% for a consummated  private  placements.
 According to its terms,  the Company may terminate the  agreement at any time,  by
giving one month prior written  notice.  The  agreement  provided that the success fees
for securing M&amp;A transactions  shall be discussed and drafted as an Addendum to the
Service  Agreement.  Such an Addendum was approved on August 22,  2004, and it provides
for a success fee of 3.5% of the proceeds  exchanged in such a transaction. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For  payments  the Company  paid and
accrued  pursuant  to the  Service  Agreement  in year 2008 see Note 19 to the
Consolidated Financial Statements for the year ended December 31, 2008). </FONT></P>

<p align=center>
<font size=2>- 67 -</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Management Agreement with Shalom Daskal and N-D-P Consulting Ltd.</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Starting  from  November  2008,  Mr.
 Shalom  Daskal  provides the Company  with CEO services  through a management agreement
by and among the Company,  Shalom Daskal and N-D-P  Consulting  Ltd. In addition,  Mr.
Daskal is entitled to 400,000 options to purchase the Company's  ordinary shares,  in
connection with his service as a director in the Company's  subsidiaries.  The terms of
the options are as follows: (1) options to purchase 150,000 ordinary shares, which  have
an  exercise  price  of NIS  0.01 per  Ordinary  Share  and  vest  and  become
 exercisable  in 3 equal semi-annual  installments  of 50,000 options each,  with the
first  installment  vesting upon the lapse of 6 months from November 19, 2008. (2)
Options to purchase up to 250,000 ordinary  shares,  which have an exercise price equal
to NIS 4.00. These options vest and become  exercisable in 10 equal quarterly
 installments of 25,000 options each, with the first installment vesting in March 30,
2009 and thereafter upon the lapse of every 4 months. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In May 2009, Mr. Daskal was granted
an additional  194,832 options to purchase the Company's  ordinary shares.  The terms of
the options are as follows:  (a) 62,832  options to purchase  ordinary  shares,  with an
exercise price of $0.00 per ordinary  share.  The options vest on a quarterly  basis
starting from January 2009 over a period of four quarters,  in four equal parts.  The
exercise period of these options is 5 years from the  commencement of vesting; (b)
 132,000  options to purchase  ordinary  shares,  with an exercise  price of $1.00 per
 ordinary  share.  These options vest on a yearly basis  starting  from January 2009 over
a period of four years,  in four equal parts.  The exercise period of these options is 5
years from the commencement of the vesting. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>December 2007 Private Placement</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In December 2007, the Company
entered into a Share Purchase  Agreement with two of its shareholders,  Catalyst Fund and
three  subsidiaries  of D.S. Apex,  under which the Company issued 833,560  ordinary
shares at a price of $2.40 per share  (reflecting an aggregate  investment of
 approximately $2 million).  In addition,  the Company issued to the  investors an
 aggregate of 541,814  warrants at an exercise  price of $2.76,  exercisable  for four
years from their date of issuance. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company also entered into a
 Registration  Rights  Agreement  pursuant to which the Company  shall  prepare and file
with the  Securities  and Exchange  Commission a  registration  statement  covering the
resale of the ordinary shares  issued to the  investors.  The Company filed with the
 Securities  and Exchange  Commission a  registration statement  covering the resale of
the ordinary  shares and the ordinary  shares  underlying the warrants  issued to
Catalyst Fund and D.S. Apex, which became effective on May 20, 2009. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Private Placement Fees</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The  Company has paid  Cukierman  &amp;Co.
 placement  fees equal to 6% of the  investment  amount in cash or ordinary shares with
respect to the June 2007 Private  Placement,  December  2007 Private  Placement,  the
July 2008 Private Placement and the August 2008 Private  Placement.  In addition,  the
Company paid 3% placement fees in cash to D.S. Apex with respect to the December 2007
Private  Placement  (see note 19 to the  Consolidated  Financial  Statements for the year
ended December 31, 2008). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Indemnity Undertakings by the
Company to its Directors and Officers</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On February 18, 2003, the Company's
 shareholders  approved  indemnity  undertakings  to its directors and officers
(including  future  directors  and  officers as may be  appointed  from time to time),
 in excess of any  insurance proceeds,  not to exceed,  in the aggregate over the years,
 a total amount of $2,500,000.  On May 18, 2006, at the recommendation  of the audit
 committee and the Board of Directors,  the  shareholders  approved  amendments to the
indemnity undertakings, in light of changes to the Israeli Companies Law. </FONT></P>

<p align=center>
<font size=2>- 68 -</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 7C.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Interests
of Experts and Counsel</B> </FONT></TD>
</TR>
</TABLE>
<BR>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable.</FONT></P>

<a name=zk110></a>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 8:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Financial Information</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>


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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 8A.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Consolidated
Statements and Other Financial Information</B> </FONT></TD>
</TR>
</TABLE>
<BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Consolidated Financial Statements</I></B> </FONT> </P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>See "Item 18. Financial Statements".</FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Sales Outside of Israel</I></B> </FONT> </P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The total amount of revenues of the Company and its subsidiaries from export out of Israel has been as follows:</FONT></P>





<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="500" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH COLSPAN=3 align=left><FONT FACE="Times New Roman" SIZE=1>Year</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Export revenues</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>% of all revenues</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>
     <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="24%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>2008&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="7%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="28%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 5,559,000</FONT></TD>
        <TD WIDTH="8%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="28%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>16</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>2007&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 6,328,000</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=RIGHT><FONT FACE="Times New Roman" SIZE=2>27</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>2006&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> 6,040,000</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="RIGHT"><FONT FACE="Times New Roman" SIZE=2>29</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>%</FONT></TD></TR>
</TABLE>
<BR>




<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sales  outside of Israel in the year 2008 and 2007 do not  include  sales of Summit,  in the amount of  $16,928,000
and $1,684,000 respectively.
</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Legal Proceedings</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In January 2008, a former  employee
of Dimex  Solutions,  filed a claim against the Company and Dimex  Solutions in the Labor
Court in Tel Aviv,  requiring  severance  payments  for the amount of NIS 306,000  and
 compensation  for delay in payment  of said  severance  payments  as of the time of the
filing of the  lawsuit of  approximately  NIS 207,000.  An attempt to reach a settlement
 failed and the proceedings are pending a preliminary  hearing.  At this stage,  we are
unable to assess the  claim's  chance of  success.  The  Company's  financial  statements
 include a provision in this respect. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In April 2009, Odem filed a claim
with the Magistrate's  Court of Tel-Aviv,  against Nir Tal Computers Systems Ltd. ("Nir
Tal"),  for an amount of NIS 784,657  alleging that Nir Tal breached its  undertakings to
distribute Ultra PC computers,  under an  agreement  between the parties.  On May 17,
2009,  Nir Tal filed a statement of defense and a counter-claim  in the amount of NIS
816,115,  stating that Odem is the one that has breached the agreement  between the
parties,  by supplying Nir Tal with  defective  Ultra PCs. On June 18, 2009,  Odem filed
a statement of defense against the counter  claim.  The court has referred the
 proceeding to mediation.  At this stage,  we are unable to assess the outcome and
 consequences of this  counter-claim.  The Company's  financial  statements do not
include a provision in this respect. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In June 2008, a former  employee of
the Company filed a claim  against the Company with respect to the  termination of his
employment.  The former employee demands from the Company payments totaling
 approximately NIS 208,000.  The Company  assesses  the  prospect  of  claimant  as
remote.  The  Company's  financial  statements  do not include a provision in this
respect. </FONT></P>

<p align=center>
<font size=2>- 69 -</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>In April 2009, Dimex Solutions,  was
served with a claim seeking  unspecified  damages,  filed by 10Zig Technology Inc.
 (formerly  BOSaNOVA  Inc.)  ("10Zig"),  in the U.S.  District  Court for the District of
Arizona.  The claim alleges  that Dimex has breached  the  distribution  agreement
 entered  into by the parties in January  2003,  by failing to provide the required
 second level  technical  support.  In May 2009,  10Zig filed a request to include the
 Company's  subsidiary  Summit as an additional  defendant,  and to add  allegations
 related to the misuse by Dimex of customer  information.  Dimex and Summit filed an
Answer on June 12, 2009 denying 10Zig's allegations and presenting  various
 counterclaims.  At this stage,  we are unable to assess the outcome and  consequences of
this counterclaim. The Company's financial statements do not include a provision in this
respect. </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Dividend Policy</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company does not currently have
a dividend  policy.  The  declaration  and payment of any cash dividends in the future
will be determined  by the Board of Directors in light of the  conditions  existing at
that time.  This will include  our  earnings  and  financial  condition.  We may only pay
 cash  dividends  in any  fiscal  year,  out of "profits",  as defined under Israeli law.
As we cannot currently distribute  dividends,  no provision has been made for this
additional tax in our Financial Statements. </FONT></P>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 8B.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Significant
Changes</B> </FONT></TD>
</TR>
</TABLE>
<BR>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable.</FONT></P>


<a name=zk111></a>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 9:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
The Offer and Listing</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>


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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> 9A.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Offer
and Listing Details</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Since April 1996,  our ordinary
 shares were traded,  and our warrants,  until they expired on April 2, 2000,  were
traded in the  over-the-counter  market in the United  States,  and quoted on what is now
called the NASDAQ Capital Market under the symbol "BOSC" and "BOSCW,"  respectively.  In
September  2000,  our shares started to be traded on what is now called the NASDAQ Global
 Market.  In January 2002, our shares began trading also on the Tel-Aviv Stock Exchange
 (the  "TASE"),  under  the  symbol  "BOSC",  pursuant  to the  dual-listing  regulations
 of the  Israeli Securities  Authority.  On May 12,  2009,  we  delisted  our  ordinary
 shares from trade on The  delisting  of the ordinary  shares from the TASE does not
affect the  continued  listing of the ordinary  shares on the NASDAQ Global Market under
the symbol  BOSC.  After the  delisting  of the  Company's  ordinary  shares from the
TASE,  we are no longer subject to reporting requirements in Israel. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In April 2007 we concluded a rights
offering in which we raised gross proceeds of approximately  $4.4 million.  The rights
were traded for one day, April 12, 2007, on both the Nasdaq Global Market and the
Tel-Aviv Stock Exchange. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Exemption from Nasdaq Marketplace
Rules</I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nasdaq  Marketplace Rule 4350(a)(1)
 allows foreign private issuers an exemption from certain Nasdaq  requirements, if the
foreign private issuer follows home country practice. </FONT></P>

<p align=center>
<font size=2>- 70 -</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>Under the Israeli  Companies Law,
there is no  requirement to send  shareholders  of a public company a copy of the
Company's annual financial  statements.  The Company's  annual  financial  statements are
available  through to the Company's  public  filings.  In reliance on this home country
 practice,  the Company does not distribute it annual financial statements to its
shareholder by mail. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition,  under the Israeli
 Companies  Law the Company was not required to seek  shareholder  approval for its 2007
 rights  offering.  The  Company  has  relied on this home  country  practice  for an
 exemption  from  Nasdaq Marketplace Rule 4350(i)(1).  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Prices set forth below are high and
low reported  closing prices for our ordinary  shares as reported by NASDAQ for the
periods  indicated.  All share prices have been  retroactively  adjusted to reflect the
1:4 reverse stock split effected on May 29, 2003. </FONT></P>








<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3 align=left><FONT FACE="Times New Roman" SIZE=1>Period</FONT><HR WIDTH=95% SIZE=1 COLOR=white NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>NASDAQ</FONT><HR WIDTH=98% 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></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>High ($)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Low ($)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>
     <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%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>2004&nbsp;</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="50%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Annual</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="4%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="8%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>4.00</FONT></TD>
        <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="4%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="8%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1.62</FONT></TD>
        <TD WIDTH="4%" 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>2005&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>Annual</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>3.74</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2.15</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>2006&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>Annual</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>2.97</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2.11</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>2007&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>Annual</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>2.90</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1.90</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="LEFT"><FONT FACE="Times New Roman" SIZE=2>First Quarter</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="CENTER"><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="CENTER"><FONT FACE="Times New Roman" SIZE=2>2.50</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=LEFT><FONT FACE="Times New Roman" SIZE=2>Second Quarter</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>2.90</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2.55</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="LEFT"><FONT FACE="Times New Roman" SIZE=2>Third Quarter</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>2.74</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2.30</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=LEFT><FONT FACE="Times New Roman" SIZE=2>Fourth Quarter</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>2.49</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1.90</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="LEFT"><FONT FACE="Times New Roman" SIZE=2>December</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>2.27</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1.90</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>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=LEFT><FONT FACE="Times New Roman" SIZE=2>Annual</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>2.05</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>0.23</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="LEFT"><FONT FACE="Times New Roman" SIZE=2>First Quarter</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>2.05</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1.48</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=LEFT><FONT FACE="Times New Roman" SIZE=2>Second Quarter</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>1.69</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1.40</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="LEFT"><FONT FACE="Times New Roman" SIZE=2>Third Quarter</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>1.38</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>0.77</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=LEFT><FONT FACE="Times New Roman" SIZE=2>Fourth Quarter</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>0.79</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>0.23</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="LEFT"><FONT FACE="Times New Roman" SIZE=2>December</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>0.52</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>0.23</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>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=LEFT><FONT FACE="Times New Roman" SIZE=2>January</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>0.49</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>0.22</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="LEFT"><FONT FACE="Times New Roman" SIZE=2>February</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>0.64</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>0.47</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=LEFT><FONT FACE="Times New Roman" SIZE=2>March</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>0.64</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><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" 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="LEFT"><FONT FACE="Times New Roman" SIZE=2>April</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>0.60</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>0.39</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;</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>May</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>0.66</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>0.40</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="LEFT"><FONT FACE="Times New Roman" SIZE=2>June (until June 26)</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>0.45</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>0.40</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%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>9B.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Plan
of Distribution</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable. </FONT></P>

<p align=center>
<font size=2>- 71 -</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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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"><B>9C.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Markets</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our securities are traded on the
NASDAQ Stock Exchange (symbol &#147;BOSC&#148;). </FONT></P>

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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"><B>9D.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Selling
Shareholders</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable. </FONT></P>

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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"><B>9E.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Dilution</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable. </FONT></P>

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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"><B>9F.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Expenses
of Issue</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable. </FONT></P>

<a name=zk112></a>

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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>Item 10:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Additional Information</U></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"><B>10A.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Share
Capital</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Not applicable. </FONT> </P>

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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"><B>10B.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Memorandum
and Articles of Association</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In March 2002 the Company adopted new
Articles of Association, in view of the Israeli Companies Law. Since then, certain
articles of the Article of Association have been amended. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Set forth below is a summary of
certain provisions of our Memorandum and Articles of Association. This summary is not
complete and should be read together with our Memorandum and Articles of Association,
previously filed. </FONT></P>

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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"><B><I>1.</I></B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Objects
of the Company:</I></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s objects and
purposes are outlined in the Memorandum of Association. These objects include: the
development of sophisticated interfaces for IBM mainframe computers; the export of hi-tech
products to Europe and the USA; and research, development and manufacture of products in
the sphere of communication networks. The Company&#146;s Articles of
Association (Article 2) allow it to engage in any legal business.</FONT></P>


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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"><B><I>2.</I></B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Provisions
related to the directors of the Company:</I></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors may issue
shares and other securities, which are convertible or exercisable into shares, up to the
limit of the Company&#146;s authorized share capital. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)
          Approval of Certain Transactions under the Israeli Companies Law: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are subject to the provisions of
the Israeli Companies Law, which became effective on February 1, 2000. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Israeli Companies Law codifies
the fiduciary duties that an Office Holder has to the Company. An &#147;Office
Holder&#148; is defined in the Israeli Companies Law as any Director, General Manager or
any other Manager directly subordinate to the General Manager and any other person with
similar responsibilities. </FONT></P>

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<font size=2>- 72 -</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>An Office Holder&#146;s fiduciary
duties consist of a Duty of Loyalty and a Duty of Care. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Duty of Loyalty includes: the avoidance
of any conflict of interest between the Office Holder&#146;s position in the company and
his personal affairs; the avoidance of any competition with the company; the avoidance of
any exploitation of any business opportunity of the Company in order to receive personal
advantage for himself or others; and a duty to reveal to the Company any documents or
information relating to the Company&#146;s affairs that the Office Holder has received due
to his position. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Duty of Care requires an Office
Holder to act at a level of care that a reasonable Office Holder in the same position
would employ under the same circumstances. This includes the duty to utilize reasonable
means to obtain (1) information regarding the appropriateness of a given action brought
for his approval or performed by him by virtue of his position and (2) all other
information of importance pertaining to the foregoing actions. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under the Israeli<B> </B>Companies
Law, all arrangements with regard to the compensation of Office Holders who are not
Directors require the approval of the Board of Directors. Arrangements regarding the
compensation of Directors require Audit Committee, Board and Shareholder approval. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Companies Law requires that an
Office Holder of a company promptly disclose to the company&#146;s Board of Directors any
personal interest that he or she may have, and all related material information known to
him in connection with any existing or proposed transaction by the company. This
disclosure must be made by the Office Holder, whether orally or in writing, no later than
the first meeting of the Company&#146;s Board of Directors, which discusses the particular
transaction. An Office Holder is deemed to have a &#147;personal interest&#148; if he,
certain members of his family, or a corporation in which he or any one of those family
members is a 5% or greater shareholder or exercises or has the right to exercise control,
has an interest in a transaction with the company. An &#147;Extraordinary
Transaction&#148; is defined as a transaction &#150; other than in the ordinary course of
business, not on market terms, or that is likely to have a material impact on the
company&#146;s profitability, assets or liabilities. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the case of a transaction that is
not an Extraordinary Transaction, after the office holder complies with the above
disclosure requirements, only board approval is required. The transaction must not be
adverse to the company&#146;s interests. In the case of an Extraordinary Transaction, the
company&#146;s Audit Committee and the Board of Directors, and, under certain
circumstances, the shareholders of the company must approve the transaction, in addition
to any approval stipulated by the Articles of Association. An Office Holder who has a
personal interest in a matter that is considered at a meeting of the Board of Directors or
the Audit Committee may not be present at this meeting or vote on this matter, unless a
majority of the members of the Board of Directors or Audit Committee, respectively, have a
personal interest in the matter, in which case they may all be present and vote, after
which the matter must be approved by the shareholders of the Company. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)
          Borrowing powers exercisable by the Directors are not specifically outlined in
          the Company&#146;s Articles of Association, however, according to Article 15:
          &#147;Any power of the Company which has not been vested in another organ
          pursuant to the Israeli Companies Law or the articles may be exercised by the
          Board of Directors&#148;. </FONT></P>

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<font size=2>- 73 -</font></p>
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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c)
          The Company&#146;s Articles of Association do not contain provisions regarding
          the retirement of directors under an age limit requirement, nor do they contain
          a provision requiring a Director to hold any Company shares in order to qualify
          as a Director. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>3. &nbsp;&nbsp;&nbsp;&nbsp;
          </I></B>  <B><I>With regard to the rights, preferences and restrictions
          attaching to the shares, the Company&#146;s Articles of Association provide the
          following:</I></B> </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)
          Dividends, Rights to Share in the Company&#146;s Profits and Rights to Share in
          any Surplus upon Liquidation <BR><BR>All holders of paid-up ordinary shares of the
          Company have an equal right to participate in the distribution of (i) dividends,
          whether by cash or by bonus shares; (ii) Company assets; and (iii) the
          Company&#146;s surplus assets upon winding up, all pro rata to the nominal value
          of the shares held by them (Articles 4.2.2, 4.2.3 and 7.3). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors is the organ
authorized to decide upon the distribution of dividends and bonus shares (Article 26). The
shareholders who are entitled to a dividend are the shareholders on the date of the
resolution for the dividend or on a later date if another date is specified in the
resolution on the dividend&#146;s distribution. If the Board of Directors does not
otherwise determine, any dividend may be paid by way of a cheque or payment order that
shall be sent by mail in accordance with the registered address of the shareholder or
person entitled thereto, or in the case of registered joint shareholders to the
shareholder whose name appears first in the shareholders&#146; register in relation to the
joint shareholding. Every such cheque shall be drawn up to the order of the person to whom
it is being sent. The receipt of a person who on the date of the dividend&#146;s
declaration is listed in the shareholders&#146; register as the holder of any share or, in
the case of joint shareholders, of one of the joint shareholders shall serve as
confirmation of all the payments made in connection with such share. For the purpose of
implementing any resolution pursuant to the provisions of this paragraph, the Board of
Directors may settle, as it deems fit, any difficulty arising in relation to the
distribution of the dividend and/or bonus shares, including determine the value for the
purpose of the said distribution of certain assets and resolve that payments in cash shall
be made to members in reliance upon the value thus determined, determine regulations in
relation to fractions of shares or in relation to non-payment of amounts less than NIS
200. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) Voting Rights </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All holders of paid-up ordinary
shares of the Company have an equal right to participate in and vote at the Company&#146;s
general meetings, whether ordinary or special, and each of the shares in the Company shall
entitle its holder, present at the meeting and participating in the vote, himself, by
proxy or through a voting instrument, to one vote (Article 4.2.1). Such voting rights may
be affected in the future by the grant of any special voting rights to the holders of a
class of shares with preferential rights. Shareholders may vote either in person or
through a proxy or voting instrument, unless the Board of Directors prohibited voting
through a voting instrument on a certain matter and stated so in the notice of the meeting
(Articles 14.1 and 14.6). A resolution at the general meeting shall be passed by an
ordinary majority unless another majority is specified in the Israeli Companies Law or the
Company&#146;s Articles of Association (Article 14.3). </FONT></P>

<p align=center>
<font size=2>- 74 -</font></p>
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<page>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c)
          Election of Directors. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s directors are
elected by the shareholders at a shareholders&#146; meeting. The ordinary shares do not
have cumulative voting rights in the election of directors. The holders of ordinary shares
conferring more than 50% of the voting power present by person or by proxy at the
shareholders&#146; meeting, have the power to elect the directors. The directors elected
shall hold office until the next annual meeting, or sooner if they cease to hold office
pursuant to the provisions of the Company&#146;s Articles. In addition, the Board of
Directors may appoint a director (to fill a vacancy or otherwise) between shareholder
meetings, and such appointment shall be valid until the next annual meeting or until such
appointee ceases to hold office pursuant to the provisions of the Company&#146;s Articles.
In compliance with the Israeli Companies Law, the Company has two external directors. The
external directors are also appointed by the shareholders and their term of office is
three years. Directors of the Company stand for reelection at every annual meeting
(Article 16.2) and not at staggered intervals, with the exception of the External
directors who are appointed for a period of 3 years under the Israeli Companies Law. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(d) Redemption </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company may, subject to any
applicable law, issue redeemable securities on such terms as determined by the Board of
Directors, provided that the general meeting of shareholders approves the Board of
Director&#146;s recommendation and the terms determined (Article 27). </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(e) Capital Calls by the
Company </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors may only make
calls for payment upon shareholders in respect of monies not yet paid for shares held by
them (Article 7.2). </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(f) Discrimination </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>No provision in the Company&#146;s
Articles of Association discriminates against an existing or prospective holder of
securities, as a result of such shareholder owning a substantial amount of shares. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>4. &nbsp;&nbsp;&nbsp;&nbsp;Modification of Rights
of Holders of Stock</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The general meeting of shareholders
may resolve to create new shares of an existing class or of a new class with special
rights and/or restrictions (Article 9.1). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>So long as not otherwise provided in
the shares&#146; issue terms and subject to the provisions of any law, the rights attached
to a particular class of shares may be altered, after a resolution is passed by the
Company and with the approval of a resolution passed at a general meeting of the holders
of the shares of such class or the written agreement of all the class holders. The
provisions of the Company&#146;s Articles of Association regarding general meetings shall
apply, mutatis mutandis, to a general meeting of the holders of a particular class of
shares (Article 10.1). The rights vested in the holders of shares of a particular class
that were issued with special rights shall not be deemed to have been altered by the
creation or issue of further shares ranking equally with them, unless otherwise provided
in such shares&#146; issue terms (Article 10.2). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The above mentioned conditions are
not more onerous than is required by law. </FONT></P>

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<font size=2>- 75 -</font></p>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>5. &nbsp;&nbsp;&nbsp;&nbsp;Annual General
Meetings and Extraordinary General Meetings</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>General meetings shall be convened at
least once a year at such place and time as determined by the Board of Directors but no
later than 15 months from the last general meeting. Such general meetings shall be called
&#147;annual meetings&#148;. The Company&#146;s other meetings shall be called
&#147;special meetings&#148; (Article 12.1). The annual meeting&#146;s agenda shall
include a discussion of the Board of Directors&#146; reports and the financial statements
as required at law. The annual meeting shall appoint an auditor, appoint the directors
pursuant to these articles and discuss all the other matters which must be discussed at
the Company&#146;s annual general meeting, pursuant to these articles or the Law, as well
as any other matter determined by the Board of Directors (Article 12.2).<BR><BR> The Board of
Directors may convene a special meeting pursuant to its resolution and it must convene a
general meeting if it receives a written requisition from any one of the following
(hereinafter referred to as &#147;requisition&#148;) (i) two directors or one quarter of
the directors holding office; and/or (ii) one or more shareholders holding at least 5% of
the issued capital and at least 1% of the voting rights in the Company; and/or (iii) one
or more shareholders holding at least 5% of the voting rights in the Company (Article
12.3). A requisition must detail the objects for which the meeting must be convened and
shall be signed by the persons requisitioning it and sent to the Company&#146;s registered
office. The requisition may be made up of a number of documents in an identical form of
wording, each of which shall be signed by one or more of the persons requisitioning the
meeting (Article 12.4). Where the Board of Directors is required to convene a special
meeting, it shall do so within 21 days of the requisition being submitted to it, for a
date that shall be specified in the invitation and subject to the law (Article 12.5). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notice to the Company&#146;s members
regarding the convening of a general meeting shall be sent to all the shareholders listed
in the Company&#146;s shareholders&#146; register at least 21 days prior to the meeting
and shall be published in other ways insofar as required by the law. The notice shall
include the agenda, proposed resolutions and arrangements with regard to a written vote.
The accidental omission to give notice of a meeting to any member, or the non-receipt of
notice sent to such member, shall not invalidate the proceedings at such meeting (Article
12.6). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The shareholders entitled to
participate in and vote at the general meeting are the shareholders on the date specified
by the Board of Directors in the resolution to convene the meeting, and subject to the law
(Article 14.1). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>No discussions may be commenced at
the general meeting unless a quorum is present at the time of the discussion&#146;s
commencement. A quorum is the presence of at least two shareholders holding at least 33?%
of the voting rights (including presence through a proxy or a voting instrument), within
half an hour of the time fixed for the meeting&#146;s commencement (Article 13.1). If no
quorum is present at a general meeting within half an hour of the time fixed for the
commencement thereof, the meeting shall be adjourned for one week, to the same day, time
and place, or to a later time if stated in the invitation to the meeting or in the notice
of the meeting (hereinafter referred to as &#147;the adjourned meeting&#148;) (Article
13.2). The quorum for the commencement of the adjourned meeting shall be any number of
participants. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Articles of Association provide
that all shareholder resolutions shall be passed by an ordinary (simple) majority of the
votes cast, unless another majority is specified in the Israeli Companies Law or in the
Articles (Article 14.3). </FONT></P>

<p align=center>
<font size=2>- 76 -</font></p>
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<page>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>6. &nbsp;&nbsp;&nbsp;&nbsp;Limitations on the
rights to own securities</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There are no limitations on the
rights to own the Company&#146;s securities, including the rights of non-residents or
foreign shareholders to do so. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>7. &nbsp;&nbsp;&nbsp;&nbsp;Change of Control</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under the Israeli Companies Law, a
merger is generally required to be approved by the shareholders and Board of Directors of
each of the merging companies. Shareholder approval isn&#146;t required if the company
that will not survive is controlled by the surviving company. Additionally, the law
provides some exceptions to the shareholder approval requirement in the surviving company.
If the share capital of the company that will not be the surviving company is divided into
different classes of shares, the approval of each class is also required, unless
determined otherwise by the court. A majority of votes approving the merger shall suffice,
unless the company (like ours) was incorporated in Israel prior to the Israeli Companies
Law, in which case a majority of 75% of the voting power is needed in order to approve the
merger. Additionally, unless the court determines differently, a merger will not be
approved if it is objected to by a majority of the shareholders present at the meeting,
after excluding the shares held by the other party to the merger, by any person who holds
25% or more of the other party to the merger and by the relatives of and corporations
controlled by these persons. Upon the request of a creditor of either party to the
proposed merger, the court may delay or prevent the merger if it concludes that there
exists a reasonable concern that, as a result of the merger, the surviving company will be
unable to satisfy the obligations of any of the parties of the merger. Also, a merger can
be completed only after all approvals have been submitted to the Israeli Registrar of
Companies and provided that 30 days have elapsed since shareholder approval was received
and 50 days have elapsed from the time that a proposal for approval of the merger was
filed with the Registrar. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Israeli Companies Law also
provides that an acquisition of shares in a public company must be made by means of a
tender offer if, as a result of the acquisition, the purchaser would become a holder of
25% or more of the voting power at general meetings. This rule does not apply if there is
already another holder of 25% or more of the voting power at general meetings. Similarly,
the Israeli Companies Law provides that an acquisition of shares in a public company must
be made by means of a tender offer if, as a result of the acquisition, the purchaser would
become a holder of more than 45% of the voting power of the company. This rule does not
apply if someone else already holds 45% of the voting power of the company. An acquisition
from a 25% or 45% holder, which turns the purchaser into a 25% or 45% holder respectively,
does not require a tender offer. An exception to the tender offer requirement may also
apply when the additional voting power is obtained by means of a private placement
approved by the general meeting of shareholders. These tender offer requirements do not
apply to companies whose shares are listed for trading outside of Israel if, under local
law or the rules of the stock exchange on which their shares are traded, there is a
limitation on the percentage of control which may be acquired or the purchaser is required
to make a tender offer to the public. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under the Israeli Companies Law, a
person may not acquire shares in a public company if, after the acquisition, he will hold
more than 90% of the shares or more than 90% of any class of shares of that company,
unless a tender offer is made to purchase all of the shares or all of the shares of the
particular class. The Israeli Companies Law also provides that as long as a shareholder in
a public company holds more than 90% of the company&#146;s shares or of a class of shares,
that shareholder shall be precluded from purchasing any additional shares (an exemption
exists where the shareholder held prior to and following February 2000, over 90% of any
class of shares, in which case he may purchase additional shares by a tender offer that
was accepted by a majority of the offerees). If a tender offer is accepted and less than
5% of the shares of the company are not tendered, all of the shares will transfer to the
ownership of the purchaser. If 5% or more of the shares of the company are not tendered,
the purchaser may not purchase shares in a manner which will grant him more than 90% of
the shares of the company. </FONT></P>

<p align=center>
<font size=2>- 77 -</font></p>
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<page>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>8. &nbsp;&nbsp;&nbsp;&nbsp;Disclosing Share
Ownership</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has no bylaw provisions
governing the ownership threshold, above which shareholder ownership must be disclosed. </FONT></P>

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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"><B>10C.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Material
Contracts</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All material contracts have been
described in detail throughout this form, wherever applicable. </FONT></P>

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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"><B>10D.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Exchange
Controls</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All exchange control restrictions
previously imposed by the State of Israel have been removed, although there are still
reporting requirements for foreign currency transactions. Legislation remains in effect,
however, pursuant to which currency controls can be imposed by administrative action at
any time. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At this time, due to the removal of
the restrictions, non-residents of Israel who purchase our ordinary shares will be able to
convert any proceeds from the sale of these ordinary shares, as well as dividend and
liquidation distributions, if any, into non-Israeli currency. There are no limitations on
the Company&#146;s ability to import and export capital. </FONT></P>

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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"><B>10E.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Taxation</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following is a summary of the
material Israeli tax consequences, Israeli foreign exchange regulations and certain
Israeli government programs affecting the Company. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To the extent that the discussion is
based on new tax or other legislation that has not been subject to judicial or
administrative interpretation, there can be no assurance that the views expressed in the
discussion will be accepted by the tax or other authorities in question. The discussion is
not intended, and should not be construed, as legal or professional tax advice and is not
exhaustive of all possible tax considerations. </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following is a description of
material tax consequences regarding the ownership and disposition of our ordinary shares
under Israeli tax laws to which our shareholders may be subject. The information below
does not apply to specific persons or cover specific situations. Therefore, you are
advised to consult your own tax advisor as to particular tax consequences unique to you
related to an investment in our ordinary shares including the effects of applicable
Israeli or foreign or other tax laws and possible changes in the tax laws. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To the extent that the discussion is
based on legislation yet to be judicially or administratively interpreted, we cannot
assure you that the views we express herein will accord with any such interpretation in
the future. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tax Consequences
Regarding Disposition of Our Ordinary Shares </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In general, Israel imposes capital
gains tax on the sale of capital assets, including shares of Israeli companies by both
Israeli residents and non-Israeli resident shareholders, unless a specific exemption is
available or unless a tax treaty between Israel and the shareholders&#146; country of
residence provide otherwise. Shareholders that are not Israeli residents are generally
exempt from Israeli capital gains tax on any gain derived from the sale of our ordinary
shares, provided that such gains did not derive from a permanent establishment of such
shareholders in Israel. However, non-Israeli corporations will not be entitled to the
foregoing exemption if an Israeli resident (a) has a controlling interest of 25% or more
in such non-Israeli corporation; or (b) is the beneficiary of or is entitled to 25% or
more of the revenues or profits of such non-Israeli corporation, whether directly or
indirectly and if the shares were purchased upon or after the registration of the shares
on the stock exchange. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In certain instances where our
non-Israeli shareholders may be liable to Israeli tax on the sale of our ordinary shares,
the payment of the consideration may be subject to Israeli withholding tax. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition, the sale, exchange or
disposition of our ordinary shares by shareholders who are U.S. residents (within the
meaning of the U.S.-Israel Tax Treaty) holding the ordinary shares as a capital asset will
be also exempt from Israeli capital gains tax under the U.S.-Israel Tax Treaty, unless,
either (i) the shareholders hold, directly or indirectly, shares representing 10% or more
of our voting shares during any part of the 12-month period preceding such sale, exchange
or disposition; or (ii) the capital gains arising from such sale, exchange or disposition
are attributable to a permanent establishment of the shareholders located in Israel. In
such case, the shareholders would be subject to Israeli capital gain tax, to the extent
applicable, as mentioned above. However, under the U.S.-Israel Tax Treaty, the U.S.
resident would be permitted to claim a credit for such taxes against the U.S. federal
income tax imposed on the sale, exchange or disposition, subject to the limitation in the
U.S. law applicable to foreign tax credits. The U.S.-Israel Tax Treaty does not relate to
U.S. state or local taxes. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Israeli individual shareholders
selling our ordinary shares are subject to 20% tax rate on any real capital gain accrued
after January 1, 2003. However, if the individual shareholder is a &#147;Controlling
Shareholder&#148; (i.e., a person who holds, directly or indirectly, alone or together
with other, 10% or more of one of the Israeli resident company&#146;s means of control at
the time of sale or at any time during the preceding 12 months period) such gain will be
taxed at the rate of 25%. Israeli corporate shareholders (which were not subject to the
provisions of the Inflationary Adjustments Law, prior to the publishing of amendment no.
147 to the Income Tax Ordinance, in 2005), selling our ordinary shares are subject to a
25% tax rate on any real capital gain. Israeli corporate shareholders which were subject
in 2005 to the provisions of the Inflationary Adjustments Law, selling our ordinary shares
are subject to the regular corporate tax rates on any capital gain only if such securities
were held by such a corporation prior to December 31, 2005. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Taxes Applicable to
Dividends distributed </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-residents of Israel are generally
subject to Israeli income tax on the receipt of dividends paid on our ordinary shares at
the rate of 20%, which tax will be withheld at source, unless a different rate is provided
in a treaty between Israel and the shareholder&#146;s country of residence. However, if
the individual shareholder is a &#147;Controlling Shareholder&#148; such dividend will be
taxed at the rate of 25%. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under the U.S.-Israel Tax Treaty, the
maximum rate of tax withheld in Israel on dividends paid to a holder of our ordinary
shares who is a U.S. resident (within the meaning of the U.S.-Israel Tax Treaty) is 25%.
Furthermore, the maximum rate of withholding tax on dividends, that are paid to a U.S.
corporation holding 10% or more of our outstanding voting capital during the part of the
tax year that precedes the date of the payment of the dividend and during the whole of its
prior tax year, is 12.5%. This reduced rate will not apply if more than 25% of our gross
income consists of interest or dividends, other than dividends or interest received from a
subsidiary corporation 50% or more of the outstanding shares of the voting shares of which
are owned by the company. In order to obtain such a reduced tax rate, it is necessary to
submit an application to the tax assessing officer. Israeli resident individuals are
generally subject to Israeli income tax on the receipt of dividends paid on our ordinary
shares, other than bonus shares (share dividends) or stock dividends, at the rate of 20%.
However, if the individual shareholder is a &#147;Controlling Shareholder&#148; such
dividend will be taxed at the rate of 25%. Dividends
paid on our ordinary shares to Israeli companies are exempt from such tax, except for
dividends distributed from income derived outside of Israel, which are subject to the 25%
tax rate.</FONT></P>

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<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>An Israeli resident company whose
shares are listed in a stock exchange is obligated to withhold tax, upon the distribution
of a dividend. The following withholding tax rates will apply: (i) Israeli resident
corporation &#150; 0%, (ii) Israeli resident individual &#150; 20% (iii) non-Israeli
resident &#150; 20%, subject to a reduced tax rate under an applicable double tax treaty. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>General Corporate Tax
Structure</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Israeli companies are generally
subject to income tax on their taxable income at the rate of 31% for the year 2006, 29%
for 2007, 27% for 2008, 26% for 2009 and 25% for year 2010 and thereafter, and are subject
to capital gains tax at a rate of 25% for capital gains (other than gains deriving from
the sale of listed securities) derived after January 1, 2003. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Tax Benefits and Grants
for Research and Development</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Israeli tax law allows, under certain
conditions, a tax deduction in the year incurred for expenditures (including capital
expenditures) in scientific research and development projects, if the expenditures are
approved by the relevant Israeli government ministry, determined by the field of research,
the research and development is for the promotion of the enterprise and is carried out by
or on behalf of the company seeking such deduction. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In case the tax deduction, in the
year research and development expenditures are incurred, is not approved by the relevant
Israeli government ministry, the Company will be entitled for the tax deduction over a
period of three years. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Special Provisions
Relating to Taxation Under Inflationary Conditions</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In February 2008, the Israeli
legislator adopted an amendment to the Income Tax (Inflationary Adjustments) Law, 1985,
which limits the scope of the law starting in 2008 and thereafter. Starting in 2008, the
results for tax purposes are measured in nominal values, excluding certain adjustments for
changes in the Consumer Price Index carried out in the period up to December 31, 2007. The
amended law includes, <I>inter alia</I>, the elimination of the inflationary additions and
deductions and the additional deduction for depreciation starting in 2008. </FONT></P>

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<font size=2>- 80 -</font></p>
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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>U.S.
          TAXATION </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subject to the limitations described
herein, the following is a discussion of the material U.S. federal income tax consequences
of the purchase, ownership and disposition of our ordinary shares to a U.S. holder. A U.S.
holder is a beneficial owner of our ordinary shares who is: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT size="2" face="Wingdings 2">&#151;</font> &nbsp;&nbsp;an individual who is a
citizen or resident of the United States for U.S. federal income tax purposes; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT size="2" face="Wingdings 2">&#151;</font> &nbsp;&nbsp;a corporation (or other
entity taxable as a corporation for U.S. federal income tax purposes) created or organized
under the laws of the United States or any political subdivision thereof or the District
of Columbia; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT size="2" face="Wingdings 2">&#151;</font> &nbsp;&nbsp;an estate,  the income of which is
includible in gross income for U.S.  federal  income tax purposes  regardless of its
source; or </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT size="2" face="Wingdings 2">&#151;</font> &nbsp;&nbsp;a trust (i) if a U.S. court
is able to exercise primary supervision over its administration and one or more U.S.
persons have the authority to control all of its substantial decisions or (ii) that has in
effect a valid election under applicable U.S. Treasury Regulations to be treated as a U.S.
person. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A non-U.S. holder is a beneficial
owner of our ordinary shares that is not a U.S. holder. Unless otherwise specifically
indicated, this discussion does not consider the U.S. federal income tax consequences to a
person that is a non-U.S. holder of our ordinary shares and considers only U.S. holders
that will own the ordinary shares as capital assets (generally for investment). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If a partnership (or any other entity treated as a partnership for U.S. federal income tax
purposes) holds our ordinary shares, the tax treatment of the partnership and a partner in
such partnership will generally depend on the status of the partner and the activities of
the partnership. Such a partner or partnership should consult its tax advisor as to its
tax consequences. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This discussion is based on current provisions of the Internal Revenue Code of 1986, as amended
(the &#147;Code&#148;), current and proposed Treasury Regulations promulgated under the
Code and administrative and judicial interpretations of the Code, all as currently in
effect and all of which are subject to change, possibly with retroactive effect. This
discussion does not address all aspects of U.S. federal income taxation that may be
relevant to any particular U.S. holder based on the U.S. holder&#146;s particular
circumstances. In particular, this discussion does not address the U.S. federal income tax
consequences to U.S. holders who are broker-dealers or who own, directly, indirectly or
constructively, 10% or more (by voting power) of our company, real estate investment
trusts, regulated investment companies, grantor trusts, U.S. holders holding the ordinary
shares as part of a hedging, straddle or conversion transaction, U.S. holders whose
functional currency is not the U.S. dollar, insurance companies, tax-exempt organizations,
financial institutions, persons that receive ordinary shares as compensation for the
performance of services, certain former citizens or long-term residents of the United
States and persons subject to the alternative minimum tax, who may be subject to special
rules not discussed below. Additionally, this discussion does not address the possible
application of U.S. federal estate or gift taxes or any aspect of state, local or non-U.S.
tax laws. </FONT></P>

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<font size=2>- 81 -</font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Each holder of our ordinary shares is
advised to consult his or her tax advisor with respect to the specific U.S. federal,
state, local and foreign income tax consequences to him or her of purchasing, holding or
disposing of our ordinary shares. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>U.S. Holders of Ordinary
Shares </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Taxation of distributions on
ordinary shares</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subject to the discussion below under
&#147;Tax consequences if we are a passive foreign investment company,&#148; a
distribution paid by us with respect to our ordinary shares, including the amount of any
non-US taxes withheld, to a U.S. holder will be treated as dividend income to the extent
that the distribution does not exceed our current and accumulated earnings and profits, as
determined for U.S. federal income tax purposes. Dividends that are received with respect
to ordinary shares by U.S. holders that are individuals, estates or trusts generally will
be taxed at the rate applicable to long-term capital gains (currently a maximum rate of
15% for the taxable years beginning on or before December 31, 2010), provided that such
dividends meet the requirements of &#147;qualified dividend income.&#148; Dividends that
fail to meet such requirements, and dividends received by corporate U.S. holders, are
taxed at ordinary income rates. No dividend received by a U.S. holder will be a qualified
dividend (1) if the U.S. holder held the ordinary share with respect to which the dividend
was paid for less than 61 days during the 121-day period beginning on the date that is 60
days before the ex-dividend date with respect to such dividend, excluding for this
purpose, under the rules of Code section 246(c), any period during which the U.S. holder
has an option to sell, is under a contractual obligation to sell, has made and not closed
a short sale of, is the grantor of a deep-in-the-money or otherwise nonqualified option to
buy, or has otherwise diminished its risk of loss by holding other positions with respect
to, such ordinary share (or substantially identical securities); or (2) to the extent that
the U.S. holder is under an obligation (pursuant to a short sale or otherwise) to make
related payments with respect to positions in property substantially similar or related to
the ordinary share with respect to which the dividend is paid. If we were to be a
&#147;passive foreign investment company&#148; (as such term is defined in the Code) for
any taxable year, dividends paid on our ordinary shares in such year or in the following
taxable year would not be qualified dividends. In addition, a non-corporate U.S. holder
will be able to take a qualified dividend into account in determining its deductible
investment interest (which is generally limited to its net investment income) only if it
elects to do so; in such case the dividend will be taxed at ordinary income rates. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The amount of any distribution which
exceeds the amount treated as a dividend will be treated first as a non-taxable return of
capital, reducing the U.S. holder&#146;s tax basis in its ordinary shares to the extent
thereof, and then as capital gain from the deemed disposition of the ordinary shares.
Corporate holders will not be allowed a deduction for dividends received in respect of the
ordinary shares. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividends paid by us in NIS will be
included in the gross income of U.S. holders at the U.S. dollar amount of the dividend
(including any non-U.S. taxes withheld therefrom), based upon the spot rate of exchange in
effect on the date the distribution is included in income. U.S. holders will have a tax
basis in the NIS for U.S. federal income tax purposes equal to that dollar value. Any
subsequent gain or loss in respect of the NIS arising from exchange rate fluctuations will
generally be taxable as U.S. source ordinary income or loss. </FONT></P>

<p align=center>
<font size=2>- 82 -</font></p>
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<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subject to the limitations set forth
in the Code and the Treasury Regulations thereunder, U.S. holders may elect to claim as a
foreign tax credit against their U.S. federal income tax liability the non-U.S. income tax
withheld from dividends received in respect of the ordinary shares. The limitations on
claiming a foreign tax credit include, among others, computation rules under which foreign
tax credits allowable with respect to specific classes of income cannot exceed the U.S.
federal income taxes otherwise payable with respect to each such class of income. In this
regard, dividends paid by us generally will be foreign source &#147;passive income&#148;
for U.S. foreign tax credit purposes. U.S. holders that do not elect to claim a foreign
tax credit may instead claim a deduction for the non-U.S. income tax withheld if they
itemize deductions. The rules relating to foreign tax credits are complex, and you should
consult your tax advisor to determine whether and to what extent you would be entitled to
this credit. A U.S. holder will be denied a foreign tax credit for non-U.S. income taxes
withheld from a dividend received on the ordinary shares (i) if the U.S. holder has not
held the ordinary shares for at least 16 days of the 31-day period beginning on the date
which is 15 days before the ex-dividend date with respect to such dividend or (ii) to the
extent the U.S. holder is under an obligation to make related payments with respect to
positions in substantially similar or related property. Any days during which a U.S.
holder has substantially diminished its risk of loss on the ordinary shares are not
counted toward meeting the required 16-day holding period. Distributions of current or
accumulated earnings and profits generally will be foreign source passive income for U.S.
foreign tax credit purposes. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Taxation of the disposition of
ordinary shares</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subject to the discussion below under
&#147;Tax consequences if we are a passive foreign investment company,&#148; upon the
sale, exchange or other disposition of our ordinary shares, a U.S. holder will recognize
capital gain or loss in an amount equal to the difference between the amount realized on
the disposition and the U.S. holder&#146;s tax basis in the ordinary shares. The gain or
loss recognized on the disposition of the ordinary shares will be long-term capital gain
or loss if the U.S. holder held the ordinary shares for more than one year at the time of
the disposition (long-term capital gains are currently taxable at a maximum rate of 15%
for taxable years beginning on or before December 31, 2010). Capital gain from the sale,
exchange or other disposition of ordinary shares held for one year or less is short-term
capital gain. Gain or loss recognized by a U.S. holder on a sale, exchange or other
disposition of ordinary shares generally will be treated as U.S. source income or loss for
U.S. foreign tax credit purposes. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A U.S. holder that uses the cash
method of accounting calculates the U.S. dollar value of the proceeds received on the sale
as of the date that the sale settles. However, a U.S. holder that uses the accrual method
of accounting is required to calculate the value of the proceeds of the sale as of the
trade date and may therefore realize foreign currency gain or loss. A U.S. holder may
avoid realizing foreign currency gain or loss by electing to use the settlement date to
determine the proceeds of sale for purposes of calculating the foreign currency gain or
loss. In addition, a U.S. holder that receives foreign currency upon disposition of
ordinary shares and converts the foreign currency into U.S. dollars after the settlement
date or trade date (whichever date the U.S. holder is required to use to calculate the
value of the proceeds of sale) will have foreign exchange gain or loss based on any
appreciation or depreciation in the value of the foreign currency against the U.S. dollar,
which will generally be U.S. source ordinary income of loss. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tax consequences if we
are a passive foreign investment company </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We will be a passive foreign
investment company, or PFIC, for a taxable year if either (1) 75% or more of our gross
income in a taxable year is passive income or (2) 50% or more of the value, determined on
the basis of a quarterly average, of our assets in the taxable year produce, or are held
for the production of, passive income. If we own (directly or indirectly) at least 25% by
value of the stock of another corporation, we will be treated for purposes of the
foregoing tests as owning our proportionate share of the other corporation&#146;s assets
and as directly earning our proportionate share of the other corporation&#146;s income.
Passive income for this purpose generally includes dividends, interest, royalties, rents
and gains from commodities and securities transactions. </FONT></P>

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<font size=2>- 83 -</font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We believe that we were not a PFIC
for our 2008 taxable year. Our status in the current and future taxable years will depend
on our assets and income in those years. We have no reason to believe that our assets or
income will change in a manner that would cause us to be classified as a PFIC. However,
since the determination of whether we are a PFIC is based upon such factual matters as the
valuation of our assets (which may depend upon our market capitalization, which is subject
to fluctuation) and, in certain cases, the assets of companies held by us, there can be no
assurance that we will not become a PFIC. If we were a PFIC, and you are a U.S. holder,
you generally would be subject to imputed interest charges and other disadvantageous tax
treatment with respect to any gain from the sale or exchange of, and certain distributions
with respect to, your ordinary shares (including the denial of the taxation of such
distributions and gains at the lower rates applicable to long-term capital gains as
discussed above under &#147;Taxation of distributions on ordinary shares&#148; and
&#147;Taxation of the disposition of ordinary shares&#148;). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If we were a PFIC, you could make
certain elections that may alleviate certain tax consequences referred to above, and one
of these elections may be made retroactively if certain conditions are satisfied. It is
expected that the conditions necessary for making certain of such elections will apply in
the case of our ordinary shares. Neither the Company nor its advisors have the duty to or
will undertake to inform U.S. Shareholders of changes in circumstances that would cause
the Company to become a PFIC. The Company does not currently intend to take the action
necessary for a U.S. Shareholder to make a &#147;qualified electing fund&#148; election in
the event the Company is determined to be a PFIC. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>U.S.
          holders are urged to consult their tax advisors regarding the application of the
          PFIC rules, including eligibility for and the manner and advisability of making
          certain elections with respect to our PFIC status. </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A U.S. holder generally is subject to
information reporting and may be subject to backup withholding at a rate of 28% with
respect to dividend payments made with respect to, and proceeds from the disposition of,
the ordinary shares. Backup withholding will not apply with respect to payments made to
exempt recipients, including corporations, or if a U.S. holder provides a correct taxpayer
identification number, certifies that such holder is not subject to backup withholding or
otherwise establishes an exemption. Backup withholding is not an additional tax. It may be
claimed as a credit against the U.S. federal income tax liability of a U.S. holder or the
U.S. holder may be eligible for a refund of any excess amounts withheld under the backup
withholding rules provided, in either case, that the required information is furnished to
the Internal Revenue Service. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-U.S. Holders of
Ordinary Shares </FONT></p>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Except as provided below, a non-U.S. holder
of ordinary shares will not be subject to U.S. federal income or withholding, in the case
of U.S. Federal income taxes, tax on the receipt of dividends on, and the proceeds from
the disposition of, an ordinary share, unless that item is effectively connected with the
conduct by the non-U.S. holder of a trade or business in the United States and, in the
case of a resident of a country which has an income tax treaty with the United States,
that item is attributable to a permanent establishment in the United States or, in the
case of an individual, a fixed place of business in the United States. In addition, gain
recognized by an individual non-U.S. holder on the disposition of the ordinary shares will
be subject to tax in the United States if such non-U.S. holder is present in the United
States for 183 days or more in the taxable year of the sale and other conditions are met. </FONT></P>

<p align=center>
<font size=2>- 84 -</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-U.S.           holders are
generally not subject to information reporting or backup withholding           with
respect to the payment of dividends on, or proceeds from the disposition           of,
ordinary shares, provided that the non-U.S. holder provides its taxpayer
          identification number, certifies to its foreign status or otherwise establishes
          an exemption.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>10F.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Dividends
and Paying Agents</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>10G.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Statement
by Experts</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>10H.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Documents
on Display</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The documents concerning the Company
that are referred to in the form may be inspected at the Company&#146;s office in Israel. </FONT></P>

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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"><B>10I.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Subsidiary
Information</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For information relating to the
Company&#146;s subsidiaries, see &#147;Item 4C. Organizational Structure&#148; as well as
the Company&#146;s Consolidated Financial Statements (Items 8 and 18 of this form). </FONT></P>

<a name=zk113></a>

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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>Item 11:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Quantitative and Qualitative Disclosure about Market Risk</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Market risk represents the risk of
changes in the value of our financial instruments caused by fluctuations in interest
rates, foreign exchange rates and equity prices. We do not engage in trading market-risk
instruments or purchase hedging or &#147;other than trading&#148; instruments that are
likely to expose us to market risk, whether interest rate, commodity price or equity price
risk. We have not purchased options or entered into swaps or forward or futures contracts
and do not use derivative financial instruments for speculative trading purposes. <BR><BR><B>Foreign
currency exchange rate risk:</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The results of operation and
financial position of Dimex Solutions, whose functional currency is NIS, have been
translated into U.S. dollars at the applicable exchange rate for inclusion in our
consolidated financial statements, exposing us to currency translation risk. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition, we are exposed to
currency transaction risk because some of our expenses are incurred in a different
currency from the currency in which our revenues are received. Our most significant
currency exposures are to the New Israeli Shekel and Euro. In periods when the U.S. dollar
strengthens against these other currencies, our reported results of operations may
adversely affected. Although from time to time we purchase forward exchange contracts to
reduce currency transaction risk, these purchases will not eliminate translation risk or
all currency risk. </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The company sells its products and
purchases products from vendors on credit terms. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The trade receivables of the Company
are derived from sales to customers located primarily in Israel, the United States and
Europe. The Company generally does not require collateral; however, in certain
circumstances, the Company may require letters of credit, other collateral, additional
guarantees or advanced payments. </FONT></P>

<p align=center>
<font size=2>- 85 -</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Provisions are made for doubtful
debts on a specific basis and, in management&#146;s opinion, appropriately reflect the
loss inherent in collection of the debts. Management bases this provision on its
assessment of the risk of the debt. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The table below presents the account
receivables balance by geographical market as of December 31, 2008 and December 31, 2007: </FONT></P>




<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=6><FONT FACE="Times New Roman" SIZE=1>December 31</FONT><HR WIDTH=98% 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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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="68%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>America</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>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 2,194,000</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 1,820,000</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>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>1,804,000</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=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,667,000</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>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>60,000</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="RIGHT"><FONT FACE="Times New Roman" SIZE=2>43,000</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>Israel and others</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>9,256,000</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=RIGHT><FONT FACE="Times New Roman" SIZE=2>5,584,000</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 13,314,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 9,114,000</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><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Interest Rate Risk</B> </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The  Company's  exposure  to market
risk for changes in interest  rates,  is due to its  investment  of its surplus funds and
loans that carry variable interest. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has a conservative
investment policy. According to this policy the Company invests in bank deposits. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A  material  change in  interest  we
 receive  on our bank  deposits  or pay on our loans may have an effect on the Company's
financial results and cash flow. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Bank Risk</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company manages its loans in two
banks: (i) Bank Leumi which provides credit to the Company and its Israeli subsidiaries
and (ii) JPMorgan which provides credit to Summit. In case of adverse changes in the
financial position of either of these banks or deterioration in the relations of the
Company with either of these banks, our liquidity could be materially adversely affected.  </FONT></P>

<a name=zk114></a>

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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>Item 12:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Description of Securities Other than Equity Securities</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable.</FONT></P>

<a name=zk115></a>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>PART II</B> </FONT></P>

<a name=zk116></a>

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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>Item 13:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Defaults, Dividend Arrearages and Delinquencies</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable.</FONT></P>

<p align=center>
<font size=2>- 86 -</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<a name=zk117></a>

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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>Item 14:</B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Material Modifications to the Rights of Security Holders and Use of Proceeds</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable.</FONT></P>

<a name=zk118></a>

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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>Item 15:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Controls and Procedures</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) Disclosure controls and
procedures. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company's  principal  executive
officer and its principal  financial officer evaluated the effectiveness of the Company's
 disclosure  controls and  procedures  (as defined in Rule  13a-15(e)  and  15d-15(e)  of
the  Securities Exchange Act of 1934,  as amended) as of the end of the period  covered
by this report.  Based on that  evaluation, such principal executive officer and
principal  financial officer concluded that the Company's  disclosure controls and
 procedures  were  effective as of the end of the period  covered by this report.  This
Annual  Report does not include an attestation  report of our registered public
 accounting firm regarding  internal control over financial reporting.  Management's
 report was not subject to attestation by our registered  public  accounting firm
pursuant to temporary  rules of the Securities and Exchange  Commission that permit us to
provide only  management's  report in this Annual Report. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)  Management's Annual Report on
Internal Control Over Financial Reporting. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our management,  under the
supervision of our Chief Executive Officer and Chief Financial  Officer,  is responsible
for establishing and maintaining  adequate  internal control over financial  reporting as
defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act. Our internal  control
system was designed to provide  reasonable  assurance regarding the  reliability of
financial  reporting and the preparation  and fair  presentation of our  consolidated
financial statements for external purposes in accordance with generally accepted
accounting  principles.  Our Chief Executive  Officer and Chief Financial  Officer
 assessed the  effectiveness of our internal control over financial reporting as of
December 31,  2008.  In making this  assessment,  they used the  criteria  established
 in Internal Control-Integrated  Framework  issued by the  Committee of  Sponsoring
 Organizations  of the  Treadway  Commission (COSO).  Based on this assessment,  our
Chief Executive Officer and Chief Financial Officer have concluded that, as of December
 31, 2008,  our  internal  control over  financial  reporting  is  effective  based on
those  criteria. Notwithstanding  the  foregoing,  all  internal  control  systems,  no
 matter  how well  designed,  have  inherent limitations.  Therefore,  even those systems
determined to be effective may not prevent or detect misstatements and can provide only
 reasonable  assurance with respect to financial  statement  preparation and
 presentation.  Also, projections of any evaluation of  effectiveness  to future periods
are subject to the risk that controls may become inadequate  because of changes in
conditions,  or that the degree of compliance with the policies or procedures may
deteriorate. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This Annual  Report does not include
an  attestation  report of the Company's  registered  public  accounting  firm regarding
 internal  control over financial  reporting.  Management's  report was not subject to
attestation by the Company's  registered  public  accounting  firm  pursuant to temporary
 rules of the SEC that permit the Company to provide only management's report in this
Annual Report. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c)  Change in Internal Control over
Financial Reporting. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There were no changes in the
Company's  internal controls over financial  reporting that occurred during the fiscal
year ended December 31, 2008, that have  materially  affected or are reasonably  likely
to materially  affect these controls. </FONT></P>

<p align=center>
<font size=2>- 87 -</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>(d)  Other. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company  believes that a control
 system,  no matter how well designed and operated,  can not provide  absolute assurance
 that the  objectives of the control  system are met, and no evaluation of controls can
provide  absolute assurance that all control issues and instances of fraud, if any, with
the Company have been determined. </FONT></P>

<a name=zk119></a>

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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>Item 16:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
[Reserved]</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>


<a name=zk120></a>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 16A:</B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Audit Committee Financial Expert</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company's  Board of Directors
has determined  that Ms. Nelly  Assouline,  Mr. David Golan and Mr. Ronen Zavlik, all
members of the audit  committee,  are "audit  committee  financial  experts",  as defined
by the applicable SEC regulations.  The  experience of each is listed under Item 6A. All
are  "independent"  under the applicable SEC and Nasdaq regulations. </FONT></P>

<a name=zk121></a>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 16B:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Code of Ethics</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has adopted a Code of
Ethics applicable to its executive  officers,  directors and all other employees. A copy
of the code is posted on our  website  and may also be  obtained,  without  charge,  upon
a written  request addressed to the Company's investor relations department. </FONT></P>

<a name=zk122></a>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 16C:</B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Principal Accountant Fees and Services</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The  Company's  principal
 accountants  for the years 2007 and 2008 were Kost Forer Gabbay &amp; Kasierer,  a member of
Ernst &amp; Young Global. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The table  below  summarizes  the
 audit  and other  fees paid and  accrued  by the  Company  and its  consolidated
subsidiaries to Kost Forer Gabbay &amp; Kasierer and Arik Eshel, during each of 2007 and 2008: </FONT></P>





<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=6><FONT FACE="Times New Roman" SIZE=1>Year Ended December 31, 2008</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>Year Ended December 31, 2007</FONT><HR WIDTH=98% 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>Amount</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Percentage</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Amount</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Percentage</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>
     <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>
     <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>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="43%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Audit Fees</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>136,298</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>78</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="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>134,200</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>94</FONT></TD>
        <TD WIDTH="2%" 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 Fees (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>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>37,566</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>22</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>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>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>6</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>
     <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>Total</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>173,864</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>100</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>142,700</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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>100</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=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>
     <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%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Tax
fees&#148; are fees for professional services rendered by the                Company&#146;s
auditors with respect to tax advice related to acquisitions and                tax
compliance with the Israeli law for encouragement of investment, and
               issuance of annual tax reports. </FONT></TD>
</TR>
</TABLE>
<BR>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Audit Committee&#146;s
pre-approval policies and procedures: </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Audit Committee is responsible
for the oversight of the independent auditors&#146; work, including the approval of
services provided by the independent auditor. These services may include audit,
audit-related, tax or other services, as described above. On an annual basis the audit
committee pre-approves audit and non-audit services to be provided to the Company by its
auditors, listing the particular services or categories of services, and sets forth a
specific budget for such services. Additional services not covered by the annual
pre-approval may be approved by the Audit Committee on a case-by-case basis as the need
for such services arises. Furthermore, the Audit Committee has authorized the Committee
Chairman to pre-approve engagements of the Company&#146;s auditors so long as the fee for
each such engagement does not exceed $5,000 and so long as the engagement is notified to
the Committee at its next subsequent meeting. Any services pre-approved by the Audit
Committee (or by the Chairman) must be permitted by applicable law. Once services have
been pre-approved, the audit committee receives a report on a periodic basis regarding the
extent of the services actually provided and the fees paid. </FONT></P>

<p align=center>
<font size=2>- 88 -</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<a name=zk123></a>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 16D:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Exemptions from the Listing Standards for Audit Committees</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable to
Registrant </FONT></P>

<a name=zk124></a>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 16E:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Purchases of Equity Securities by the Issuer and Affiliated Purchasers</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company (or anyone acting on its
behalf) did not purchase any of the Company&#146;s securities in 2008. </FONT></P>

<a name=zk125></a>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 16F:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Change in Registrant&#146;s Certifying Accountant</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable. </FONT></P>

<a name=zk126></a>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 16G:</B> </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Corporate Governance</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable. </FONT></P>

<a name=zk127></a>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART III </FONT></H1>

<a name=zk128></a>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 17:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Financial Statements</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable. </FONT></P>

<a name=zk129></a>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 18:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Financial Statements</U></B> </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 following financial statements
are filed as part of this Annual Report: </FONT></P>



<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>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="85%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Reports of Independent Registered Public Accounting Firms</FONT></TD>
     <TD WIDTH="15%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>F-2 - F-3</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Consolidated Balance Sheets</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>F-4 - F-5</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Consolidated Statements of Operations</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>F-6</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Statement of Changes in Shareholders' Equity</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>F-7</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Consolidated Statements of Cash Flows</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>F-8 - F-10</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Notes to Consolidated Financial Statements</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>F-11 - F-54</FONT></TD></TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The audited financial statements
filed as part of this Form 20-F are identical to the audited financial statements that
were furnished under Form 6-K on March 31, 2009. </FONT></P>

<p align=center>
<font size=2>- 89 -</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<a name=zk130></a>

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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>Item 19:</B> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B></B> </FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>
Exhibits</U></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following exhibits are filed as
part of this Annual Report: </FONT></P>

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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>1.1  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Memorandum
of Association, as amended (incorporated by reference to Exhibit 1.1 of the Company&#146;s
Annual Report on Form 20-F filed with the SEC on June 28, 2006).  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.2  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Articles
of Association, as amended (incorporated by reference to Exhibit 1.2 of the Company&#146;s
Annual Report on Form 20-F filed with the SEC on June 28, 2006).  </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>4.1  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form
of Indemnification Agreement between the Company and its officers and directors, as
amended (incorporated by reference to Exhibit 4.1 of the Company&#146;s Annual Report on
Form 20-F filed with the SEC on June 28, 2006).  </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>4.2  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Services
 Agreement,  dated as of April 15, 2003,  between  Cukierman &amp; Co.  Investment  House
Ltd., Dimex          Solutions  Ltd. and the  Registrant  (incorporated  by reference to
the  Company's  Annual Report on Form          20-F filed on June 17, 2004). </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>4.3  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>M&amp;A Addendum
to the Service  Agreement,  as of August 22, 2004,  between  Cukierman &amp; Co. Investment
House          Ltd.,  Dimex Solutions Ltd. and the Registrant  (incorporated by reference
to the Company's Annual Report          on Form 20-F filed on June 27, 2005). </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.4  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Registrant's  Israeli 2003 Share Option Plan (incorporated by reference to the Company's
 Registration          Statement on Form S-8 No. 333-11650). </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>4.5  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Share
Purchase Agreement dated as of the October 30, 2007 by and between Donald Levi and Andrew
Levi and the Registrant (incorporated by reference to the Company&#146;s Annual Report on
Form 20-F filed on June 30, 2008).  </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>4.6  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Securities
Purchase Agreement, dated as of the December 10, 2007, by and between certain investors
and the Registrant; Registration Rights Agreement dated as of the December 10, 2007 by
and between certain investors and the Registrant; and Form of Warrant dated as of
December 31, 2007 issued by the Registrant to certain investors (incorporated by
reference to the Company&#146;s Annual Report on Form 20-F filed on June 30, 2008).  </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>4.7  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Asset
Purchase Agreement dated as of the January 29, 2008 by and between Dimex Systems (1988)
Ltd., Dimex Hagalil Ltd., and the Registrant (incorporated by reference to the Company&#146;s
Annual Report on Form 20-F filed on June 30, 2008).  </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>4.8  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amendment
 No. 1 to Asset  Purchase  Agreement by and among the  Company,  Dimex  Systems  (1988)
Ltd. and          Dimex  Hagalil Ltd.,  dated March 23, 2009  (incorporated  by reference
to the Company's  Amendment no. 2          to Registration Statement on Form F-3 no.
333-152020). </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>4.9  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Finder
Fee Letter by and between the Company and T.F.E.  Holdings Ltd.,  dated June 3, 2008
 (incorporated          by reference to the Company's Registration Statement on Form F-3
no. 333-152020). </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>4.10  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Share
 Purchase  Agreement  and  Registration  Rights  Agreement  dated as of July 16, 2008 by
and between          certain  investors  and  the  Registrant.  Form of  Warrant  dated
 as of July  16,  2008  issued  by the          Registrant  to  certain  investors
 (incorporated  by  reference  to the  Company's  Amendment  no.  1 to
         Registration Statement on Form F-3 no. 333-152020). </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>4.11  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Share
Purchase  Agreement and  Registration  Rights  Agreement  dated as of August 25, 2008 by
and between          certain  investors  and the  Registrant.  Form of  Warrant  dated as
of  August  25,  2008  issued by the          Registrant  to  certain  investors
 (incorporated  by  reference  to the  Company's  Amendment  no. 1 to
         Registration Statement on Form F-3 no. 333-152020). </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>4.12  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bank
Leumi Le-Israel Agreements: Summary of Economic Terms, Form of Request to Allocate a
Credit in Israeli Currency (unlinked), and Form of Request to Allocate a Credit Framework
in Debitory Account (unlinked) (incorporated by reference to the Company&#146;s Annual
Report on Form 20-F filed on June 30, 2008).  </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>4.13  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Forms
of Advised  Line of Credit Note,  Continuing  Security  Agreement  and  Continuing
 Guarantee by and          between BOS - Supply Chain Solutions  (Summit),  Inc.
(formerly known as Summit Radio Corp.) and JPMorgan          Chase Bank. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>- 90 -</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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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>4.14  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Credit
Line agreements by and between Bank Leumi Le-Israel and each of Odem Electronic
 Technologies  1992          Ltd. and Dimex Solutions Ltd.; Covenant Letters and
Subordination  Letters  (incorporated by reference to          the Company's Amendment
no. 2 to Registration Statement on Form F-3 no. 333-152020). </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>4.15  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Framework
Agreement between BOS - Supply Chain Solutions (Summit), Inc. (formerly known as Summit
Radio Corp.) and a          Strategic Customer. (Confidential treatment has been
requested with respect to portions of this          exhibit, which have been redacted,
and the redacted portions have been filed separately with the          Securities and
Exchange Commission.) </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>4.16  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form
of Loan Agreement and Registration Rights Agreement by and between certain lenders and
the Registrant. Form of Warrant issued by the Registrant to certain lenders.  </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>8.1  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>List
of subsidiaries (incorporated by reference to Item 4C of this Annual Report on Form 20-F). </FONT></TD>
</TR>
</TABLE>
<BR>


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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Statement
of Computation of Earnings Per Share  </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>12.1  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certification
by Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934.  </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>12.2  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certification
by Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934.  </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>13.1  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certification
by Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) or Rule
15d-14(b) of the Securities Exchange Act of 1934.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23.1  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent
of Kost Forer Gabbay &amp; Kasierer, a member of Ernst &amp; Young Global. </FONT></TD>
</TR>
</TABLE>
<BR>


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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23.2  </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent
of Arik Eshel, CPA &amp; Assoc., PC  </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>- 91 -</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<a name=zk131></a>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Registrant hereby certifies that
it meets all of the requirements for filing on Form 20-F and that it has duly caused and
authorized the undersigned to sign this annual report on its behalf. </FONT></P>





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<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR>
      <TD align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2">B.O.S. Better Online Solutions Ltd.</FONT> </TD>
      </TR>
<TR VALIGN=TOP>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<BR>/s/ Shalom Daskal<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Shalom Daskal<BR>Chief Executive Officer</FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<BR>/s/ Eyal Cohen<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Eyal Cohen<BR> Chief Financial Officer</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: June 30, 2009 </FONT></P>


<p align=center>
<font size=2>- 92 -</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>
















<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>B.O.S. BETTER ONLINE SOLUTIONS LTD.
<BR><BR>AND SUBSIDIARIES
<BR><BR>CONSOLIDATED FINANCIAL STATEMENTS
<BR><BR>AS OF DECEMBER 31, 2008
<BR><BR>IN U.S. DOLLARS</B> </FONT>
</P>






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






<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></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=90% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk201">Reports of Independent Registered Public Accounting Firms</a>
</B> </FONT></TD>
     <TD WIDTH=10% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2"><B>F - 2 - F - 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"><B><a href="#zk202">Consolidated Balance Sheets</a>
</B> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2"><B>F - 4 - F - 5</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"><B><a href="#zk203">Consolidated Statements of Operations</a>
</B> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2"><B>F - 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"><B><a href="#zk204">Statements of Changes in Shareholders' Equity</a>
</B> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2"><B>F - 7</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"><B><a href="#zk205">Consolidated Statements of Cash Flows</a>
</B> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2"><B>F - 8 - F - 10</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"><B><a href="#zk206">Notes to Consolidated Financial Statements</a>
</B> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2"><B>F - 11 - F - 54</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=zk201></a>


<IMG SRC="eylogo.jpg">




<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
<BR><BR>To the Board of Directors and Shareholders of
<BR><BR>B.O.S. BETTER ONLINE SOLUTIONS LTD.</B> </FONT>
</P>



<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying consolidated balance sheets of B.O.S Better Online Solutions
Ltd. (the &#147;Company&#148;) and subsidiaries as of December 31, 2008 and 2007, and the
related consolidated statements of operations, changes in shareholders&#146; equity and
cash flows for each of the three years in the period ended December 31, 2008. These
financial statements are the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial statements based on our audit.
We did not audit the financial statements of Lynk USA Inc., a wholly-owned U.S.
subsidiary, which statements reflect total assets constituting 9% and 14% in 2008 and
2007, respectively and total revenues constituting 33% and 7% in 2008 and 2007,
respectively of the related consolidated totals. These statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for Lynk USA Inc., is based solely on the report of the other
auditors. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. We were not engaged to perform an audit of the Company&#146;s
internal control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company&#146;s internal control over financial reporting. Accordingly
we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management and evaluating the
overall financial statement presentation. We believe that our audit and the report of the
other auditors provide a reasonable basis for our opinion. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, based on our audit and the report of other auditors, the financial statements
referred to above present fairly, in all material respects, the consolidated financial
position of the Company and its subsidiaries at December&nbsp;31, 2008 and 2007, and the
consolidated results of their operations and their cash flows for each of the three years
in the period ended December&nbsp;31, 2008, in conformity with U.S. generally accepted
accounting principles. </FONT></P>


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     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
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     <TD WIDTH=70% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Tel-Aviv, Israel</FONT></TD>
     <TD WIDTH=30% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>KOST FORER GABBAY &amp; KASIERER</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>March 29, 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>A Member of Ernst &amp; Young Global</FONT></TD></TR>
</TABLE>
<BR>



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




<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="4"><B>ARIK ESHEL, CPA &amp;
ASSOC., PC</B> </FONT>
<BR><FONT FACE="Times New Roman, Times, Serif" SIZE="3">Certified Public
Accountants and Consultants </FONT> </P>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report of Independent
Registered Public Accounting Firm </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To the Board of Directors
and<BR>Stockholders of Lynk, USA Inc. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have audited the accompanying
consolidated balance sheets of Lynk, USA Inc. (the &#147;Company&#148;) and its
subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of
income, stockholders&#146; equity (deficit), and cash flows for each of the years in the
two-year period ended December 31, 2008. The Company&#146;s management is responsible for
these financial statements. Our responsibility is to express an opinion on these financial
statements based on our audits. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December 31, 2008 and for the
year then ended, we conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). As of December 31, 2007 and for the
year then ended, we conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company&#146;s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the
financial position of Lynk USA, Inc. and its subsidiaries as of December 31, 2008 and
2007, and the results of its operations and its cash flows for each of the years in the
two-year period ended December 31, 2008 in conformity with accounting principles generally
accepted in the United States of America. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARIK ESHEL, CPA &amp;
ASSOC., PC </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>March 29, 2009 </FONT></P>



<p align=center>
<font size=2>F - 3</font></p>
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<page>


<a name=zk202></a>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CONSOLIDATED BALANCE SHEETS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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=6><FONT FACE="Times New Roman" SIZE=1>December 31,</FONT><HR WIDTH=98% 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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="71%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ASSETS</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="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 ALIGN=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;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;&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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  1,637</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  4,271</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;Trade receivables (net of allowance for doubtful accounts of $65 and $122 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>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 31, 2008 and 2007, 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>13,314</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>9,114</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>&nbsp;&nbsp;&nbsp;Other accounts receivable and prepaid expenses (Note 3)</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>1,155</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>945</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;Inventories (Note 5)</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>10,346</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>8,321</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;<U>Total</U> 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>26,452</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>22,651</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;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;&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>652</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>687</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;Investment in other companies (Note 6)</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>882</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>2,494</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;Deferred 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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>452</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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</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;<U>Total</U> 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>1,986</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>3,223</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;PROPERTY, PLANT AND EQUIPMENT, NET (Note 7)</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>1,128</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>719</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;OTHER INTANGIBLE ASSETS, NET (Note 8)</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>2,418</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>1,678</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;GOODWILL (Note 9)</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>5,361</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>2,861</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 37,345</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 31,132</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>F - 4</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CONSOLIDATED BALANCE SHEETS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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=6><FONT FACE="Times New Roman" SIZE=1>December 31,</FONT><HR WIDTH=98% 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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="71%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;CURRENT LIABILITIES:</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="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 ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Short-term bank loans and current maturities (Note 10)</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  10,299</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   5,028</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;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>6,458</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>5,258</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;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>843</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>552</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;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>826</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>116</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;Accrued expenses and other liabilities (Note 11)</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>3,111</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>1,290</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;<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>21,537</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>12,244</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;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;&nbsp;Long-term bank loans, net of current maturities (Note 12)</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>2,256</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>3,286</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;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>541</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>366</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;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>929</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>798</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;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>838</FONT></TD>
        <TD ALIGN=LEFT><FONT 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 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;<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>4,564</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>4,450</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;COMMITMENTS AND CONTINGENT LIABILITIES (Note 13)</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" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" COLSPAN="7"><FONT FACE="Times New Roman" SIZE=2>&nbsp;SHAREHOLDERS' EQUITY (Note 15):</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;Share 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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" COLSPAN="7"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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" BGCOLOR="#cceeff">
     <TD ALIGN="Left" COLSPAN="7"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 31, 2008 and 2007; Issued and outstanding: 13,027,514 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" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,857,554 shares at December 31, 2008 and 2007, 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>13,159</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>10,628</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;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>55,830</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>54,758</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;Accumulated other comprehensive 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>&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>)</FONT></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>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&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>(57,367</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>(50,967</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" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">&nbsp;<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>11,244</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>14,438</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;<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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  37,345</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  31,132</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 consolidated financial statements. </FONT></P>


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


<a name=zk203></a>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CONSOLIDATED STATEMENTS OF OPERATIONS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <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,</FONT><HR WIDTH=98% 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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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=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>
     <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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="62%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;Revenues</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>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>        50,849</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>        23,774</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;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>40,850</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>19,099</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>&nbsp;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>9,999</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>4,675</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>&nbsp;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;&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>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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>636</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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;&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>9,712</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>3,811</FONT></TD>
        <TD ALIGN=LEFT><FONT 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;&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>2,029</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>1,980</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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 VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Impairment of 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>1,873</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
     <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">&nbsp;<U>Total</U> 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>14,458</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>6,427</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;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>(4,459</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>(1,752</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" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;Financial expenses, net (Note 17a)</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>(636</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>(469</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>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;Other expenses, net (Note 2g,)</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>(1,448</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>(6,233</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>
     <TD ALIGN=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;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>(6,543</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>(8,454</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>&nbsp;Taxes on income (tax benefit) (Note 16)</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>(403</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>9</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>)</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>&nbsp;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>(6,140</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>(8,463</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>&nbsp;Income (loss) from discontinued operations (Note 1c)</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>(260</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>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>
     <TD ALIGN=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;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>        (6,400</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>        (8,396</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>            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>&nbsp;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></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;(Note 17b)</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>         (0.51</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>         (0.98</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>         (0.24</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="Left" COLSPAN="10"><FONT FACE="Times New Roman" SIZE=2>&nbsp;Basic and diluted net earnings (loss) per share from discontinued</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;operations (Note 17b)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>         (0.02</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>          0.01</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</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>
     <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>&nbsp;Basic and diluted net earnings (loss) per share (Note 17b)</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>         (0.53</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>         (0.97</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</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>
<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>



<!-- 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 consolidated financial statements. </FONT></P>



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



<a name=zk204></a>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>U.S. dollars in thousands, except share data</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>Ordinary
<BR>
shares</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Share
<BR>
capital</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Additional<BR>
paid in<BR>
capital</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Deferred<BR>
share-based<BR>
compensation</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Accumulated other<BR>
comprehensive<BR>
income</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Accumulated
<BR>
deficit</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Total<BR>
comprehensive<BR>
loss</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Total<BR>
shareholders'<BR>
equity</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></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>
     <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>
     <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 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>
     <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>
     <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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="34%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;Balance at January 1, 2006</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="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>6,589,385</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="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>6,432</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="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>47,588</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="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(112</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="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>21</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="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(42,663</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="5%" ALIGN="RIGHT"><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="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>11,266</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;&nbsp;&nbsp;Reversal of deferred share-based compensation</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>-</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>112</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
     <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>-</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;Issuance of Ordinary shares for options 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>68,747</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>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>74</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <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>&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>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>&nbsp;&nbsp;&nbsp;Share-based compensation expense</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>21,666</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>20</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>411</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
     <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>&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>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;&nbsp;&nbsp;&nbsp; Share-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>65,000</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="RIGHT"><FONT FACE="Times New Roman" SIZE=2>58</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>238</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <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>
     <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;&nbsp;&nbsp;&nbsp;Warrants related to a convertible note issued to lenders</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>-</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>131</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
     <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>&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>131</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="25"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;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></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net 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>-</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
     <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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</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>
     <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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</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"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on available-for-sale 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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(2</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>(2</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</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>
     <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>
     <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;&nbsp;&nbsp;Total comprehensive 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>&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>&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>&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>&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>&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>&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>90</FONT></TD>
        <TD ALIGN=LEFT><FONT 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></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></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>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;Balance at January 1, 2007</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>6,744,798</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <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>
     <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>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>(42,571</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>&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>12,349</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;Issuance of Ordinary shares for options 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>23,498</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>23</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>23</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>&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>&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>&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 ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuance of shares related to the private placement 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>1,471,176</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>1,483</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>1,983</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>&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>&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>&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>3,466</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;Issuance of shares related to rights offering, 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>1,739,412</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>1,720</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>2,229</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>&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>&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>&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>3,949</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; Issuance of shares 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>878,670</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>831</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>1,066</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>&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>&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>&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>1,897</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;Share-based compensation expense</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>-</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>516</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
     <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>&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>516</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;Warrants related to a convertible note issued to lenders</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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <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>&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></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net 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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <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>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(8,396</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>       (8,396</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>(8,396</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></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></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 ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Total comprehensive 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>&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>&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>&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>&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>&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>&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>      (8,396</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>&nbsp;</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>
     <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>
     <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>&nbsp;Balance at December 31, 2007</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>10,857,554</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    10,628</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    54,758</FONT></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>          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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>      (50,967</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    14,438</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;Issuance of Ordinary shares for options 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>2,669</FONT></TD>
        <TD ALIGN=LEFT><FONT 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</FONT></TD>
        <TD ALIGN=LEFT><FONT 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</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>
     <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>&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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuance of shares related to the private placement, 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>1,557,067</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>1,843</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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</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>
     <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>&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>1,791</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;Issuance of shares related to acquisition of Dimex, 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>610,224</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>685</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>546</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
     <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>&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>1,231</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;Share-based compensation expense</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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>581</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <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>&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>581</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;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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign currency translation adjustments</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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(397</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>&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>(397</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;&nbsp;&nbsp;&nbsp;Net 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>-</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
     <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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(6,400</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>      (6,400</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>(6,400</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></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></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" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Total comprehensive 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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <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>
     <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>       6,400</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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></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>
     <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>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></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;Balance at December 31, 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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>13,027,514</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    13,159</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    55,830</FONT></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>        (378</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>      (57,367</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    11,244</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>
     <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>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</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 consolidated financial statements. </FONT></P>




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


<a name=zk205></a>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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="12"><FONT FACE="Times New Roman" SIZE=1>Year ended December 31,</FONT><HR WIDTH=98% 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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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="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">
     <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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="62%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><U>&nbsp;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;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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  (6,400</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  (8,396</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>      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>&nbsp;Adjustments to reconcile net income (loss) to net cash used in operating</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;&nbsp;&nbsp;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;&nbsp;Loss (income) 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>260</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>(67</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;&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>674</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>418</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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;&nbsp;Impairment of 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>1,873</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Capital gain from sale 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>(8</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>&nbsp;&nbsp;&nbsp;Impairment of investments in 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>1,456</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>5,588</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;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>168</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>)</FONT></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">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Share-based compensation related to warrants issued to service</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;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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Capital loss from sale of property 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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>)</FONT></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;&nbsp;Share-based compensation related to employees</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>581</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>516</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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;&nbsp;Financial expenses in connection with 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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>710</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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;&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>1,547</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>(687</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>(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;&nbsp;Decrease in deferred taxes, 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>(317</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>(118</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 VALIGN="Bottom">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Decrease (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>135</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>(121</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" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&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>308</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>(1,209</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>(697</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;&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>(328</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>(1,135</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" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" COLSPAN="10"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Increase (decrease) in employees and payroll accruals, deferred</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;revenues, 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>727</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>(11</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>
     <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>&nbsp;Net cash provided by (used in) operating activities from continuing</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;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>676</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>(4,595</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>&nbsp;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>(260)</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>(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>&nbsp;Net cash provided by (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>416</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>(4,595</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">&nbsp;<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;Purchase of property 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>(251</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>(214</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>&nbsp;Proceeds from sale of property 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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>-</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;Proceeds from sale 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>165</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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"><FONT FACE="Times New Roman" SIZE=2>&nbsp;Proceeds from redemption 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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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 VALIGN="Bottom">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>(676</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;Acquisitions, net of cash acquired (a,b,c,d)</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>(8,964</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>(4,548</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">
     <TD ALIGN="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;Net cash provided by (used in) investing activities from continuing</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;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>(9,050</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>(4,731</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>631</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;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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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></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>&nbsp;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>(9,050</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>(4,731</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>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>
<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">&nbsp;<U>Cash flows from financing 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;Proceeds from shares issuance, 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>1,758</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>6,625</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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"><FONT FACE="Times New Roman" SIZE=2>&nbsp;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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>4,203</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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;Proceeds from short and long term bank loans, 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>4,242</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>1,161</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>660</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;Proceeds (payments) from long-term convertible note and warrants, net of</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;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>(120</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">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;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>&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>(438</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;Proceeds from exercise of options</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>46</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <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>&nbsp;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>6,000</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="RIGHT"><FONT FACE="Times New Roman" SIZE=2>11,564</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>&nbsp;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>(2,634</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>2,238</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>&nbsp;Increase in cash and cash equivalents 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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>&nbsp;Cash and cash equivalents at the beginning of the 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>4,271</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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></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>&nbsp;Cash and cash equivalents at the end of the 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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   1,637</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   4,271</FONT></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>
</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 consolidated financial statements. </FONT></P>


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




<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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=12><FONT FACE="Times New Roman" SIZE=1>Year ended December 31,</FONT><HR WIDTH=98% 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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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=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>
     <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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="62%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><U>Supplemental disclosure of cash flow 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">(i) Net cash paid during the year for:</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;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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>        700</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>        336</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    532</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>        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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>         38</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</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>
<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">(ii) <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>
     <TD ALIGN=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;&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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>          -</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>      2,017</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" COLSPAN="10"><FONT FACE="Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sale of the communication segment in consideration for shares</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in Qualmax</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</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>    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>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  1,480</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="Left" COLSPAN="10"><FONT FACE="Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Sale of the communication segment:</U> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consideration, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</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>  2,437</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;Disposal of tangible and intangible 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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>)</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;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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>          -</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</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>  1,685</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=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>



<!-- 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 consolidated financial statements. </FONT></P>



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



<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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=12><FONT FACE="Times New Roman" SIZE=1>Year ended December 31,</FONT><HR WIDTH=98% 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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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=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>
     <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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="61%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">(a)  <U>Acquisition of Summit</U> </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="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;&nbsp;&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;&nbsp;&nbsp;&nbsp;Fair value of net tangible assets acquired (excluding cash</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;and cash equivalents) and liabilities assumed 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>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;acquisition date</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>  3,192</FONT></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 VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" COLSPAN="10"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Fair value of net intangible assets acquired at acquisition</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;date</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>255</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>2,058</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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;&nbsp;&nbsp;Less - Amount acquired by issuance of 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>&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>(903</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>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&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;&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>    255</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  4,347</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</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=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;&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) <U>Acquisition of Dimex</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;&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>&nbsp;&nbsp;&nbsp;&nbsp;Fair value of net tangible assets acquired (excluding cash</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and cash equivalents) and liabilities assumed 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" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;acquisition date</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  7,326</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></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 VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Fair value of net intangible assets acquired at acquisition</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;date</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>5,191</FONT></TD>
        <TD ALIGN=LEFT><FONT 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"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Less - Amount acquired by issuance of 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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,053</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>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less - unpaid balance on account of acquisition</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>(2,755</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>
     <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;&nbsp;&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;&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>  8,709</FONT></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=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;&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">(c) <U>Acquisition of CYMS Ltd assets and liabilities</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;&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>&nbsp;&nbsp;&nbsp;&nbsp;Fair value of net tangible assets acquired (excluding cash</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and cash equivalents) and liabilities assumed 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" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;acquisition date                                       </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>     11</FONT></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 VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Fair value of net intangible assets acquired at acquisition</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;date</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>55</FONT></TD>
        <TD ALIGN=LEFT><FONT 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"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Less amount acquired by issuance of 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>&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>(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>-</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;&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;&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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     51</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</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" COLSPAN="10"><FONT FACE="Times New Roman" SIZE="2">(d) <U>Acquisition of OptimizeIT assets and liabilities</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;&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;&nbsp;&nbsp;&nbsp;Fair value of net intangible assets acquired at acquisition</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;date</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>    170</FONT></TD>
        <TD ALIGN=LEFT><FONT 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"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Less amount acquired by issuance of 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>&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>(20</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>
     <TD ALIGN=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>$</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    150</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</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>
</TABLE>
<BR>


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


<a name=zk206></a>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 1: &#150; GENERAL </FONT></H1>




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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>B.O.S.
Better Online Solutions Ltd. (&#147;BOS&#148;) is an Israeli corporation
          (together with its subsidiaries the &#147;Company&#148;). </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 has two operating segments, the Mobile and RFID Solutions segment and the Supply
Chain Solutions segment. </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%><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>Dimex
Solutions Ltd. (previously BOScom Ltd.), which purchased on March 2008           all of
Dimex Systems Ltd. assets and activities, and its wholly owned           subsidiary,
Dimex Hagalil Projects (2008) Ltd., which was incorporated in           January 2008<B></B>and
purchased all of Dimex Hagalil Ltd. assets and           activities (together: &#147;Dimex&#148;).
Dimex is a part of the Mobile and RFID           segment;  </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>Odem
Electronic Technologies 1992 Ltd., which was purchased on November 18,           2004
from Odem&#146;s previous shareholders, and in which, by November 2005, the
          Company&#146;s 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. Odem is a part of the Supply Chain
Solutions           segments; 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%><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>Quasar
Telecom (2004) Ltd. (&#147;Quasar Telecom&#148;), which is inactive.  </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%><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>Ruby-Tech
Inc., a New York corporation, a wholly owned subsidiary of Odem and a           part of
both the Mobile and RFID and the Supply Chain Solutions segments;  </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>Lynk
USA Inc., a Delaware Corporation, and its subsidiaries:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a. </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Summit
Radio Corp., part of the Supply Chain Solutions segment, was purchased           on
November 21, 2007 from Summit&#146;s shareholders. Summit is a supply chain
          provider, mainly of electronic components to the aircraft and defense industry.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b. </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pacific
Information Systems, Inc. (&#147;PacInfo&#148;), a Delaware corporation           and
PacInfo&#146;s subsidiary, Dean Tech Technologies Associates, LLC., a Texan
          corporation, are no longer active.  </FONT></TD>
</TR>
</TABLE>
<BR>

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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>BOS
Delaware Inc., a Delaware corporation, which operations ceased in 2002.  </FONT></TD>
</TR>
</TABLE>
<BR>





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



<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 1: &#150; GENERAL (Cont.) </FONT></H1>

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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
Europe: </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>
BOScom
had a UK subsidiary, Better On-Line Solutions Ltd., and its subsidiary, Better On-Line
Solutions S.A.S in France. Since 2002, these subsidiaries are no longer active. </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
addition, the Company holds shares in three other companies:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Surf
Communication Systems Ltd. (&#147;Surf&#148;), is a developer and global
          supplier of universal access and network convergence software solutions to the
          wire line and wireless telecommunications and data communications industries.
As           of December 31, 2008, the Company holds 6.1% of the outstanding shares of
Surf           (see note 2g).  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
<TD ALIGN=LEFT WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Qualmax
Inc. (&#147;Qualmax&#148;), a U.S. public corporation listed on the           Pink Sheets
(&#147;QMXI.PK&#148;), and its subsidiary New World Brands Inc.           (OTC: NWBD.OB) (&#147;NWB&#148;).
The Company holds 17.87% of the issued and           outstanding shares of Qualmax Inc.
and 2.38% of the issued and outstanding           shares of NWB as of December 31, 2008
(see note 20a). The Company&#146;s           holdings in Qualmax and NWB were received as
the consideration for the sale of           the communication segment (see c).  </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>b. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Business
combination: </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>
Acquisition
of Summit: </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>
On
November 21, 2007 the Company purchased 100% of the outstanding shares of Summit, from
Summit&#146;s shareholders. In consideration for Summit&#146;s shares the Company (i)
issued 360,000 of the Company&#146;s Ordinary shares subject to &#147;lock-up&#148;periods
of 1-2 years and (ii) paid an amount of $4,472 in cash. In addition, Summit&#146;s
selling shareholders will receive contingent consideration up to $500, based on
performance in the years 2008 and 2009. As of December 31, 2008 the Company accrued $60in
related with the earn out of year 2008. </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 consolidated financial statements reflect the purchase price determined 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></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>November 21,<BR>
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>&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="10%"> </TD>
     <TD WIDTH="74%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Issuance of shares (1)</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="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   874</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>Cash 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>4,472</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>Transaction costs (includes issuance costs in the amount of $29)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>355</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Total purchase price</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 5,701</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></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>(1) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
value of the Ordinary shares issued was determined based on the average           market
price of the Company&#146;s Ordinary shares over the period of two days           before
and after the terms of the transaction were agreed to and announced.  </FONT></TD>
</TR>
</TABLE>
<BR>

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



<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 1: &#150; GENERAL (Cont.) </FONT></H1>




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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
Company has allocated the total purchase price as follows:  </FONT></TD>
</TR>
</TABLE>
<BR>







<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN="3" ALIGN="Left"><FONT FACE="Times New Roman" SIZE=1>Allocation of purchase price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Summit As of<BR>
November 21,<BR>
2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Estimated<BR>
useful life</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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="15%"> </TD>
     <TD WIDTH="57%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;Cash</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="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    451</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="10%" 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>Tangible assets (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>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>3,192</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>&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;Backlog (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>55</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>&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;Customer list (3)</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>167</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></FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>12 years</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;Non-competing rights (4)</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>40</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></FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>6 years</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;Deferred tax liability</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>(113</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=CENTER><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;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>1,909</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>&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=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;Total purchase price</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>  5,701</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></TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Includes
fair value of inventory &#150; Reflects the expected profit from           realization of
the inventory.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Backlog
&#150; The economic value of the backlog is calculated by deducting the
          relative expenses which will be accrued to sales equal to the Backlog.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3) </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Customer
list &#150; The Company&#146;s allocation of purchase price is valued           the
acquired customer list by calculating cash flow benefit based on income
          approach.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4) </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-competing
rights &#150; The value of the non-competing right is calculated           by assessing
the economic damage which might occur due to possible competing by           the Sellers,
and which is mitigated by having a non-competing agreement. The           value of the
non-competing right is the discounted cash flow which relates to           portion of the
Company&#146;s income that could have been lost if the Sellers           would compete.  </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
acquisitions have been treated using the purchase method of accounting in accordance with
SFAS 141 &#147;Business Combinations&#148;. The purchase price has been allocated to the
assets acquired and liabilities assumed based on their estimated fair value at the date
of acquisition.  </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
excess of the purchase price over the estimated fair value of the tangible and intangible
assets acquired has been recorded as goodwill.  </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
results of operations of Summit have been included in the Company&#146;s consolidated
statements of income since the completion of the acquisition in November 21, 2007. The
following unaudited pro forma information presents a summary of the results of operations
of the Company assuming the acquisition of Summit occurred January 1, 2006:  </FONT></TD>
</TR>
</TABLE>
<BR>


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


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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>





<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 1: &#150; GENERAL (Cont.)</B> </FONT></P>












<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=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>Year Ended<BR>
December 31,</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>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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">

     <TD WIDTH="10%"> </TD>
     <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>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  39,110</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  36,436</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>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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  (8,669</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     309</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>Net income per share - basic and diluted</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   (1.00</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    0.05</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=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
unaudited pro forma results of operations are not necessarily indicative of what would
have occurred had the acquisition been made as of at January 1, 20076, or of the results
that may occur in the future. </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>
Acquisition
of Dimex: </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 March 2008, BOScom Ltd. (now Dimex
Solutions) and its subsidiary Dimex Hagalil Projects (2008) Ltd., purchased the assets and
activities of Dimex Systems (1988) Ltd., an Israeli private company and its subsidiary,
Dimex Hagalil Ltd. Dimex is an integrator of AIDC (Automatic Identification and Data
Collection) solutions based on RFID and barcode technology. The consideration was NIS 44.6
million (approximately $12,426). The consideration is comprised of cash, payable over a
24-month period and of 500,224 BOS shares. </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 consolidated financial statements reflect the purchase price determined 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></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>March 1, 2008</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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="74%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Cash 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>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  4,253</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>Issuance BOS shares (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>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,053</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>Deferred payment (include transaction costs of $181)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>7,120</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Total purchase price</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 12,426</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></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>The
value of the Ordinary shares issued was determined based on the average           market
price of the Company&#146;s Ordinary shares over the period of two days           before
and after the terms of the transaction were agreed to and announced.  </FONT></TD>
</TR>
</TABLE>
<BR>



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


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 1: &#150; GENERAL (Cont.) </FONT></H1>




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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company has allocated the total purchase price as follows:  </FONT></TD>
</TR>
</TABLE>
<BR>







<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN="3" ALIGN="Left"><FONT FACE="Times New Roman" SIZE=1>Allocation of purchase price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Dimex</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Estimated<BR>
useful life</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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="62%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;Cash</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="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>      11</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="CENTER"><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>Tangible 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>7,326</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><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;Customer list (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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>462</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>6 years</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;Brand name (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>704</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>8 years</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;Backlog (3)</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>29</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><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;Deferred tax liability</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>(305</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="CENTER"><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;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>4,199</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><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>&nbsp;</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;Total purchase price</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>  12,426</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><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>&nbsp;</TD><TD></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>Customer
list &#150; The Company&#146;s allocation of purchase price is valued           the
acquired customer list by calculating cash flow benefit based on income
          approach.  </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>Brand
name &#150; The Company&#146;s allocation of purchase price is valued the
          acquired Brand name by calculating cash flow benefit based on relief from
          royalties approach.  </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>(3) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Backlog
&#150; The economic value of the backlog is calculated by deducting the
          relative expenses which will be accrued to sales equal to the Backlog.  </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
acquisitions have been treated using the purchase method of accounting in accordance with
SFAS 141 &#147;Business Combinations&#148;. The purchase price has been allocated to the
assets acquired based on their estimated fair value at the date of acquisition. The
results of operations of Dimex are included in the consolidated financial statements of
operations as of the acquisition date. </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
excess of the purchase price over the estimated fair value of the tangible and intangible
assets acquired has been recorded as goodwill. </FONT></TD>
</TR>
</TABLE>
<BR>



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




<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 1: &#150; GENERAL (Cont.) </FONT></H1>



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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
results of operations of Dimex have been included in the Company&#146;s consolidated
statements of income since the completion of the acquisition in March 1, 2008. The
following unaudited pro forma information presents a summary of the results of operations
of the Company assuming the acquisition of Dimex occurred at January 1, 2007: </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></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Year Ended<BR>
December 31,<BR>
 2008</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,<BR>
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></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <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>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>             52,924</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>             36,969</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>Net 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>             (6,300</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>             (8,515</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>Net income per share - basic and diluted</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>              (0.50</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>              (0.98</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</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
unaudited pro forma results of operations are not necessarily indicative of what would
have occurred had the acquisition been made as of at January 1, 2007, or of the results
that may occur in the future. </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>
Acquisition
of Cyms Ltd. and OptimizeIT: </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>
On
July 1, 2007, the Company entered into an agreement with Cyms Ltd. (&#147;Cyms&#148;), to
purchase its assets and liabilities, for an aggregate consideration of $&nbsp;66 which
was paid by issuance of 5,594 shares of the Company and cash payment of $51. The assets
of Cyms were transferred into the Company on July 1, 2007. </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>
On
October 1, 2007, the Company entered into an agreement with OptimizeIT to purchase its
assets, for an aggregate consideration of $&nbsp;170 which was paid by issuance of 8,000
shares of the Company and a cash payment of $150. The assets of Optimize IT were
transferred into the Company on October 1, 2007. In December 2008 the company decided to
cease the operation of this product line (see note 1c) </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 consolidated financial statements reflect the purchase price determined 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></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Cyms<BR>
July 1, 2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>OptimizeIT<BR>
November 21, 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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="61%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Issuance of shares (1)</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>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  15</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  20</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>Cash 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>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>150</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" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Total purchase price</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  66</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 170</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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<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>The
value of the Ordinary shares issued was determined based on the average           market
price of the Company&#146;s Ordinary shares over the period of two days           before
and after the terms of the transaction were agreed to and announced.  </FONT></TD>
</TR>
</TABLE>
<BR>


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


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 1: &#150; GENERAL (Cont.) </FONT></H1>




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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 has allocated the total purchase price as follows:  </FONT></TD>
</TR>
</TABLE>
<BR>





<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN="3" ALIGN="Left"><FONT FACE="Times New Roman" SIZE=1>Allocation of purchase price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Cyms</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>OptimizeIT</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Estimated<BR>
useful life</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></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>
     <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>
     <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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="52%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;Tangible assets</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>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>11</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</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>&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>&nbsp;Technology (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>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>55</FONT></TD>
        <TD ALIGN=LEFT><FONT 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="Center"><FONT FACE="Times New Roman" SIZE=2>6 years</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;Research and development in process</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>170</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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></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>&nbsp;</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;Total purchase price</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  66</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 170</FONT></TD>
        <TD ALIGN=LEFT><FONT 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></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>&nbsp;</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>(1) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company&#146;s allocation of purchase price valued the acquired technology           by
calculating cash flow benefit as a direct result of the technology.  </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 recorded a charge of $170 with respect to the OptimizeIT transaction related to
in process research and development for projects which have not yet reached technological
feasibility and which have no alternative future use. </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
Cyms and OptimizeIT transactions have been treated as asset acquisitions on the basis of
the fair values exchanged. </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>c. </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%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company has accounted for discontinued operations, 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 related to the prior
periods of the discontinued operation, have been reclassified in the accompanying
statements of operations as 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%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Statement
of operation of discontinued operations  </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></FONT></TH>
     <TH COLSPAN=12><FONT FACE="Times New Roman" SIZE=1>Year ended December 31,</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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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></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>
     <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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="15%"> </TD>
     <TD WIDTH="43%" 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>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>61</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</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>-</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>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>-</FONT></TD>
        <TD ALIGN=LEFT><FONT 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> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Operating 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>321</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>170</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>
     <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>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>(260</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>(170</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>(752</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" COLSPAN="10"><FONT FACE="Times New Roman" SIZE=2>Gain derived from sale of the</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;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>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>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>
     <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>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>   (260</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     67</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</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>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>




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


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 1: &#150; GENERAL (Cont.) </FONT></H1>

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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>
Statement
of operation of Cash flows of discontinued operations  </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></FONT></TH>
     <TH COLSPAN=12><FONT FACE="Times New Roman" SIZE=1>Year ended December 31,</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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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></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>
     <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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="51%" 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="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>
     <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 (Loss) 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   (260</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     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>$</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>Depreciation and amortization of equipment and intangibles</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>170</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>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>-</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>(2,052</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>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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>)</FONT></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>
     <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 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>   (260</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   (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>
     <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" 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> </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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   (221</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><U>Net cash flows used in investing activities</U> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></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>   (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>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></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>Cease
the operations of Pacific Information Systems Inc  </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
June 1, 1998, the Company acquired 100% of the share capital of Pacific Information
Systems Inc. (&#147;PacInfo&#148;), a U.S. corporation. PacInfo was a reseller of
computer networking products. During the fourth quarter of 2002, the Company ceased the
operation of Pacific. In year 2007 the Company recorded a non cash gain of $237 related
to this product line.  </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>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. 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. 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>



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


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 1: &#150; GENERAL (Cont.) </FONT></H1>




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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%. Qualmax also issued to the Company a five-year warrant for the purchase
of up to 107,143 shares, constituting less than 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
loan to IP gear was converted into shares as follow:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a. </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b. </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
June 2006, Qualmax issued BOS an additional 174,825 shares, reducing the
               principal amount of the loan to $400.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>c. </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company signed in December 2006 an agreement with Qualmax and its           subsidiaries,
NWB 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 16,446,544 shares of NWB.  </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&#146;s registration rights with respect to the Qualmax shares shall also apply to
NWB shares. In addition, the Company agreed to enter into a lock up agreement,
restricting the transfer of its 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>
In
connection with the transaction, the Company agreed to grant NWB, contingent upon the
satisfaction of certain conditions, a three-year option that will expire on December 31,
2009, 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. As of December 31, 2008 the
conditions have not been met, hence the option has not been granted and the fair value of
the option is $0. </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>
During
year 2008 the company sold 6.6 million shares of NWB for total consideration of $165 and
recorded a gain of $8. During year 2008 the Company recorded losses in amount of $368 and
$376, to other-than-temporary impairment related to NWB and QMX (see note 2g). </FONT></TD>
</TR>
</TABLE>
<BR>


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


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 1: &#150; GENERAL (Cont.) </FONT></H1>

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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>
As
of December 31, 2008 the company holds 17.87% of the issued and outstanding Common stock
of QMX and 2.38% of the issued and outstanding Common stock of NWB (see note 20a). </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>
As
of December 31, 2008, the restriction on the sale of shares held in NWB terminated and as
a result the shares should be recorded at fair value. Therefore, the Company accounts for
its holdings in Qualmax and NWB shares as available for sale in accordance with Statement
of Financial Accounting Standard 115 &#147;Accounting for Certain Investments in Debt and
Equity Securities&#148;. The investment in Qualmax, which is traded in the Pink Sheet
presented at cost according to APB 18 due to low trading volume in share. </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>
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 BORDER=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>Year ended<BR> 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>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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="15%"> </TD>
     <TD WIDTH="69%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>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="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>&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></TR>
<TR VALIGN=Bottom>
     <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>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></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>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></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" COLSPAN="4"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Disposal of assets (liabilities) related to the</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;&nbsp;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>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></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>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>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></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>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> 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></TR>
</TABLE>
<BR>





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<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>was
no capital gain in 2008 and 2007 with respect to the discontinued operation. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Valued
at $1.43 per share.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(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 shares of Common           stock
of NWB. Each share of Common stock is valued at $0.09 per share.  </FONT></TD>
</TR>
</TABLE>
<BR>



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


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 1: &#150; GENERAL (Cont.) </FONT></H1>





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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>3. </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On
October 1, 2007, the Company entered into an agreement with OptimizeIT to
          purchase its assets, for an aggregate consideration of $&nbsp;170 which was
paid           by issuance of 8,000 shares of the Company and a cash payment of $150. The
          assets of Optimize IT were transferred into the Company on October 1, 2007. In
          December 2008 the Company decided to cease the operation of this product line
          (see note 20b)  </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" BORDER="0" WIDTH="50%" ALIGN="Center">
<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>Year ended<BR>
December 31,</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>2008</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></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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="74%" 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="20%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   61</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>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>-</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" BGCOLOR="#cceeff">
     <TD ALIGN="Left" COLSPAN="4"><FONT FACE="Times New Roman" SIZE=2>Operating 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>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>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>153</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>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>168</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></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Total Operating 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>321</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" 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>(260</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>Gain derived from sale of the</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;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></TR>
<TR>
     <TD COLSPAN=3></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 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> (260</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=3></TD><TD></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 discontinued product line operations for 2008, 2007 and 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>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2: &#150; SIGNIFICANT
ACCOUNTING POLICIES </FONT></H1>




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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
 consolidated  financial  statements are prepared  according to United States  generally
              accepted accounting principles ("U.S. GAAP").  </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>Use
of estimates: </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
preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results could differ
from those estimates.  </FONT></TD>
</TR>
</TABLE>
<BR>


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


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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>



<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2: &#150; SIGNIFICANT
ACCOUNTING POLICIES (Cont.) </FONT></H1>





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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>Financial
statements in U.S. dollars: </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>
A
substantial portion of the Company&#146;s revenues is generated in U.S. dollar (&#147;dollars&#148;).
In addition, most of the Company&#146;s costs are incurred in dollars. Company&#146;s
management believes that the dollar is the primary currency of the economic environment
in which the Company operates. Thus, the functional and reporting currency of the Company
is the dollar. </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>
Accordingly,
monetary accounts maintained in currencies other than the dollar are remeasured into U.S.
dollars in accordance with Statement 52 of the Financial Accounting Standards Board (&#147;FASB&#148;)
&#147;Foreign Currency Translation&#148;. All transactions gains and losses from the
remeasurement of monetary balance sheet items are reflected in the statement of
operations as financial income or expenses as appropriate. </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
financial statements of certain subsidiary, whose functional currency is other than
dollar, have been translated into U.S. dollars. All balance sheet accounts have been
translated using the exchange rates in effect at the balance sheet date. Statement of
operations amounts have been translated using the average exchange rate for the period.
The resulting translation adjustments are reported as a component of shareholders&#146;equity
in accumulated other comprehensive income (loss). </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>c. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Principles
of consolidation: </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
consolidated financial statements include the accounts of the Company and its
subsidiaries. Intercompany transactions and balances including profits from intercompany
sales not yet realized outside the Company have been eliminated upon consolidation. </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>d.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash
equivalents: </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>
Cash
equivalents are short-term highly liquid investments that are readily convertible to cash
purchased with original maturities of less than three months. </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>e. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inventories: </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>
Inventories
are valued at the lower of cost or market value. Cost is determined as moving average
cost method. </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>
Inventory
write-offs are provided to cover risks arising from slow-moving items or technological
obsolescence. As of December 31, 2008 and 2007, inventory is presented net of $1,059 and
$358, respectively, for technological obsolescence and slow moving items (see also Note
5). </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>f. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Grants
and royalty-bearing grants: </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>
Grants
and royalty-bearing grants from the Chief Scientist of the Ministry of Industry and Trade
in Israel for funding certain approved research and development projects are recognized
at the time the Company is entitled to such grants, on the basis of the related costs
incurred, and are presented as a deduction of research and development costs. </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>
There
were no grants in 2008, 2007 and 2006.  </FONT></TD>
</TR>
</TABLE>
<BR>





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


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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>





<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2: &#150; SIGNIFICANT
ACCOUNTING POLICIES (Cont.) </FONT></H1>


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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>g. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Investment
in 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>Investment
in NWB and QMX:  </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 accounts for its holdings
NWB shares as available for sale in accordance with Statement of Financial Accounting
Standard 115 &#147;Accounting for Certain Investments in Debt and Equity Securities&#148;.
Unrealized gains and losses, net of the related tax effect as of December 31, 2008, are
included in other comprehensive income. The investment in Qualmax, which is traded in the
Pink Sheet presented at cost according to APB 18 due to hardly no trading volume in share.
Management evaluates investments in other companies for evidence of other than temporary
declines in value. During 2008 and 2007, an impairment loss, due to other than temporary
decline, of $744 and $5,588 has been recorded, accordingly and presented in other
expenses, net in the consolidated statements of operations for both investments.  </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>
As
of December 31, 2008 the Company holds 17.87% of the issued and outstanding Common stock
of QMX and 2.38% of the issued and outstanding Common stock of NWB (see note 20a)  </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
accordance with the Company&#146;s policy, FASB Staff Position (FSP) No. SFAS 115-1 &#147;The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments&#148; and
SAB Topic 5M &#147;Other Than Temporary Impairment Of Certain Investments In Debt And
Equity Securities,&#148; the Company recognizes an impairment charge when a decline in
the fair value of its marketable securities below the cost basis is judged to be
other-than-temporary. The Company considers various factors in determining whether to
recognize an impairment charge, including the Company&#146;s intent and ability to hold
the marketable securities for a period of time sufficient to allow for any anticipated
recovery in market value, the length of time and extent to which the fair value has been
less than the cost basis and the financial condition and near-term prospects of the
issuers. If, after consideration of all available evidence to evaluate the realizable
value of its marketable securities, impairment is determined to be other than- temporary,
then an impairment loss should be recognized equal to the difference between the
marketable securities&#146; carrying amount and its fair value. Accordingly, during 2008
and 2007, an impairment loss, due to other than temporary decline, of $744 and $5,588 has
been recorded and presented in other expenses, net in the consolidated statements of
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>2. </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Investment
in Surf:  </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 holding in Surf as of December 31, 2008 is 6.1% of Surf&#146;s issued and
outstanding shares. The Company&#146;s investment in Surf is accounted for based on the
cost accounting method.  </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 investment in Surf is reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of the investment may not be
recoverable, in accordance with Accounting Principle Board Opinion 18 &#147;The Equity
Method of Accounting for Investments in Common Stock&#148; (&#147;APB 18&#148;). During
2008, an impairment of $712 has been recorded in &#147;other expenses&#148; in the
statement of operations.  </FONT></TD>
</TR>
</TABLE>
<BR>



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



<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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>





<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2: &#150; SIGNIFICANT
ACCOUNTING POLICIES (Cont.) </FONT></H1>




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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>h. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Property,
plant and equipment: </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>
Property,
plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is
calculated by using the straight line method over the estimated useful lives of the
assets, at the following annual rates: </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></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>%</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>
     <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="40%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Computers and software</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="2%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>20 - 33</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="30%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>(mainly 33%)</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>Office furniture 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="CENTER"><FONT FACE="Times New Roman" SIZE=2>6 - 15</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>(mainly 10%)</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>Leasehold improvements</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>10</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>(over the shorter of the period</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="CENTER"><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="CENTER"><FONT FACE="Times New Roman" SIZE=2>of the lease or the life of the assets)</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>Motor vehicles</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>15</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><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>Plant</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>4</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</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>i. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Impairment
of long-lived assets: </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 long-lived assets are reviewed for impairment in accordance with Statement
of Financial Accounting Standard 144 &#147;Accounting for the Impairment or Disposal of
Long-Lived Assets&#148; (&#147;SFAS 144&#148;) whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to the future undiscounted cash flows expected to be generated by the
assets. If such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the fair value
of the assets. During 2008, 2007 and 2006, no impairment losses have been identified. </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>j. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Goodwill: </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>
Goodwill represents excess of the
costs over the net assets of businesses acquired. Under SFAS 142 goodwill is not amortized
but instead is tested for impairment at least annually or between annual tests in certain
circumstances, and written-down when impaired. Goodwill attributable to each of the
reporting units is tested for impairment by comparing the fair value of each reporting
unit with its carrying value. The reporting units of the Company for purposes of the
impairment test are: the Company&#146;s Mobile and RFID operating segments, and the Supply
Chain segment, as these are the components of the business for which discrete financial
information is available and segment management regularly reviews the operating results of
those components. Fair value is determined using income and market approaches. Significant
estimates used in the methodologies include estimates of future cash flows, future
short-term and long-term growth rates, weighted average cost of capital and estimates of
market multiples for each of the reportable units. During 2008 impairment in the amount of
$1,873 was recorded attributable to the supply chain reporting unit. In years 2007 and
2006, no impairment losses have been identified. </FONT></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>F - 24</font></p>
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<page>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2: &#150; SIGNIFICANT
ACCOUNTING POLICIES (Cont.) </FONT></H1>




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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>k. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research
and development costs: </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>
Statement
of Financial Accounting Standards 86 &#147;Accounting for the Costs of Computer Software
to be Sold, Leased or Otherwise Marketed,&#148; (&#147;SFAS 86&#148;) requires
capitalization of certain software development costs subsequent to the establishment of
technological feasibility. Based on the Company&#146;s product development process,
technological feasibility is established upon completion of a working model. Research and
development costs incurred in the process of developing product improvements or new
products, are generally charged to expenses as incurred, net of royalty baring grants from the Office of the Chief Scientist of the
Israeli Ministry of Industry and Trade. Costs incurred by the Company between completion
of the working model and the point at which the product is ready for general releases are
insignificant. </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>l. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Severance
pay: </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 liability for severance pay for Israeli resident employees is calculated
pursuant to the Israeli severance pay law based on the most recent salary of the
employees multiplied by the number of years of employment as of the balance sheet date.
Employees are entitled to one month&#146;s salary for each year of employment or a
portion thereof. The Company&#146;s liability for its Israeli resident employees is
covered by insurance policies designed solely for distributing severance pay. The value
of these policies is recorded as an asset in the Company&#146;s balance sheet. </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>
The
insurance policies include profits accumulated up to the balance sheet date. The
insurance policies may be withdrawn only upon complying with the Israeli severance pay
law or labor agreements. The value of the deposited funds is based on the cash
surrendered value of these policies and includes profits. </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 payroll includes employees regarding whom its liability for severance pay
is calculated pursuant to article 14 of Israel&#146;s Severance Pay Law. The Company
currently deposits the corresponding amounts to the relevant pension funds. As a result,
the Company is released from the fulfillment of the obligation pursuant to Israel&#146;s
Severance Pay Law. The aforementioned deposited amounts are not reflected on the
financial statements due to the fact that they are not under the Company&#146;s control. </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>
Severance
expenses for 2008, 2007 and 2006 amounted to $593, $275 and $298, respectively. </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>m. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Revenue
recognition: </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>
The
Company sells its products through direct sales, distributors and resellers channels. </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>
The
Company derives its revenues from the sale of products, license fees for its products,
commissions, support and services. </FONT></TD>
</TR>
</TABLE>
<BR>



<p align=center>
<font size=2>F - 25</font></p>
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<page>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2: &#150; SIGNIFICANT
ACCOUNTING POLICIES (Cont.) </FONT></H1>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Revenues from product sales, related
to both supply chain and Mobile and RFID segments, are recognized in accordance with Staff
Accounting Bulletin 104 &#147;Revenue Recognition in Financial Statements&#148; (&#147;SAB
104&#148;) when delivery has occurred, persuasive evidence of an arrangement exists, the
vendor&#146;s fee is fixed or determinable, no further obligation exists, and
collectibility is reasonably assured. </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>
Most
of the Company&#146;s revenues are generated from sales of its products directly to
end-users and indirectly, mostly through independent distributors. Other than pricing
terms which may differ due to the volume of purchases between distributors and end-users,
there are no material differences in the terms and arrangements involving direct and
indirect customers. The majority of the Company&#146;s products sold through agreements
with independent distributors are non-exchangeable, non refundable, non-returnable
without any rights of price protection or stock rotation. Accordingly, the Company
considers the distributors as end-users. </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>
Revenue from license fees, related to
the Mobile and RFID segment, is recognized in accordance with Statement of Position
(&#147;SOP&#148;)&nbsp;97-2 &#147;Software Revenue Recognition&#148;, when persuasive
evidence of an agreement exists, delivery has occurred, no significant obligations with
regard to implementation remain, the fee is fixed or determinable, and collectibility is
probable. The Company generally does not grant a right of return to its customers. When a
right of return exists, the Company defers revenue until the right of return expires, at
which time revenue is recognized provided that all other revenue recognition criteria have
been met. </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>
Revenues
from maintenance and support are recognized ratably over the period of the support
contract. The fair value of the support is determined based on the price charged when it
is sold separately or renewed. </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>
With
regard to software arrangements involving multiple elements such as software product and
maintenance and support, the Company has adopted Statement of Position No. 98-9, &#147;Modification
of SOP No. 97-2, Software Revenue Recognition with Respect to Certain Transactions&#148; (&#147;SOP
No.&nbsp;98-9&#148;). According to SOP No. 98-9, revenues should be allocated to the
different elements in the arrangement under the &#147;residual method&#148; when Vendor
Specific Objective Evidence (&#147;VSOE&#148;) of fair value exists for all undelivered
elements and no VSOE exists for the delivered elements. Under the residual method, at the
outset of the arrangement with the customer, the Company defers revenue for the fair
value of its undelivered elements (maintenance and support) and recognizes revenue for
the remainder of the arrangement fee attributable to the elements initially delivered in
the arrangement (software product) when the basic criteria in SOP No. 97-2 have been met.
Any discount in the arrangement is allocated to the delivered element. Maintenance and
support revenue is deferred and recognized on a straight-line basis over the term of the
maintenance and support agreement. The VSOE of fair value of the undelivered elements
(maintenance and support) is determined based on the price charged for the undelivered
element when sold separately. </FONT></TD>
</TR>
</TABLE>
<BR>



<p align=center>
<font size=2>F - 26</font></p>
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<page>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2: &#150; SIGNIFICANT
ACCOUNTING POLICIES (Cont.) </FONT></H1>



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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>n. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income
taxes: </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 and its subsidiaries account for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, &#147;Accounting for Income Taxes&#148;(&#147;SFAS
No. 109&#148;). This Statement prescribes the use of the liability method whereby
deferred tax assets and liability account balances are determined based on the
differences between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. The Company and its subsidiaries provide a valuation allowance,
if necessary, to reduce deferred tax assets to the amounts that are more likely-than-not
to be realized. </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
June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48 (&#147;FIN
48&#148;), Accounting for Uncertainty in Income Taxes &#150; An interpretation of FASB
Statement No. 109. </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
Interpretation clarifies the accounting for uncertainties in income taxes recognized in
an enterprise&#146;s financial statements and prescribes a recognition threshold and
measurement attributes of income tax positions taken or expected to be taken on a tax
return. Under FIN 48, the impact of an uncertain tax position taken or expected to be
taken on an income tax return must be recognized in the financial statements at the
largest amount that is more-likely-than-not to be sustained upon audit by the relevant
taxing authority. An uncertain income tax position will not be recognized in the
financial statements unless it is more likely than not of being sustained. The Company
adopted the provisions of FIN 48 as of January 1, 2007. The impact of adopting FIN 48 was
insignificant to the Company&#146;s consolidated financial statements. </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>o. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Concentrations
of credit risk: </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>
Financial
instruments that potentially subject the Company to concentrations of credit risk consist
principally of cash and cash equivalents, trade receivables, other accounts receivable
and marketable securities. </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
trade receivables of the Company are derived from sales to customers located primarily in
Israel, South America, North America and Europe. The Company generally does not require
collateral; however, in certain circumstances, the Company may require letters of credit,
other collateral, additional guarantees or advanced payments. An allowance for doubtful
accounts is determined with respect to specific debts that are doubtful of collection. </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 has no off-balance-sheet concentrations of credit risk such as foreign exchange
contracts, option contracts or other foreign hedging arrangements. </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>p. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic
and diluted net earnings (loss) per share: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Basic
net earnings (loss) per share are calculated based on the weighted average number of
Ordinary shares outstanding during each year. Diluted net earnings (loss) per share is
calculated based on the weighted average number of Ordinary shares outstanding during
each year, plus dilutive potential Ordinary shares considered outstanding during the
year, in accordance with SFAS&nbsp;128, &#147;Earnings Per Share&#148;. </FONT></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>F - 27</font></p>
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<page>


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<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2: &#150; SIGNIFICANT
ACCOUNTING POLICIES (Cont.) </FONT></H1>

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<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
total number of shares related to the outstanding options and warrants excluded from the
calculations of diluted net earnings (loss) per share, since they would have an
anti-dilutive effect, were 4,013,309, 3,305,333 and 1,386,424 for the years ended
December 31, 2008, 2007 and 2006, respectively. </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>q. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accounting
for share-based compensation: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
January&nbsp;1, 2006, the Company adopted Statement of Financial Accounting Standards&nbsp;123
(revised 2004), &#147;Share-Based Payment&#148; (&#147;SFAS 123(R)&#148;) which requires
the measurement and recognition of compensation expense based on estimated fair values
for all share-based payment awards made to employees and directors. SFAS 123(R) supersedes Accounting Principles
Board Opinion&nbsp;25, &#147;Accounting for Stock Issued to Employees&#148; (&#147;APB 25&#148;),
for periods beginning in fiscal 2006. The Company has applied the provisions of Staff
Accounting Bulletin 107 (&#147;SAB 107&#148;) in its adoption of SFAS 123(R). </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
SFAS
123(R) requires companies to estimate the fair value of equity-based payment awards on
the date of grant using an option pricing model. The value of the portion of the award
that is ultimately expected to vest is recognized as an expense over the requisite
service periods in the Company&#146;s consolidated statement of operations. </FONT></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>
The
Company adopted SFAS 123(R) using the modified prospective transition method, which
requires the application of the Accounting Standard starting from January&nbsp;1, 2006,
the first day of the Company&#146;s fiscal year 2006. Under that transition method,
compensation cost recognized in the year ended December 31, 2006 includes: (a)
compensation cost for all share-based payments granted prior to, but not yet vested as of
January 1, 2006, based on the grant date fair value estimated in accordance with the
original provisions of SFAS 123, and (b) compensation cost for all share-based payments
granted subsequent to January 1, 2006, based on the grant date fair value estimated in
accordance with the provisions of SFAS 123(R). Results for prior periods have not been
restated. </FONT></TD>
</TR>
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<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company recognizes compensation expenses for the value of its awards granted based on the
straight line method over the requisite service period of each of the awards, net of
estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of
grant and revised, if necessary, in subsequent periods if actual forfeitures differ from
those estimates. Estimated forfeitures are based on actual historical pre-vesting
forfeitures. The Company considers many factors when estimating forfeitures, including
employee class and historical experience. </FONT></TD>
</TR>
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<BR>



<p align=center>
<font size=2>F - 28</font></p>
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<page>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2: &#150; SIGNIFICANT
ACCOUNTING POLICIES (Cont.) </FONT></H1>




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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company estimates the fair value of stock options granted using the Black-Scholes options
pricing model. The option-pricing model requires a number of assumptions, of which the
most significant are expected stock price volatility and the expected option term.
Expected volatility was calculated based upon actual historical stock price movements over the
most recent periods ending on the date of grant, equal to the expected option term. The
expected option term represents the period that the Company&#146;s stock options are
expected to be outstanding and was determined based on the simplified method permitted by
SAB 107 and extended by SAB 110 as the average of the vesting period and the contractual
term. The Company currently use the simplified method as adequate historical experience
is not available to provide a reasonable estimate. The Company adopted SAB 110 effective
January 1, 2008 and will continue to apply the simplified method until enough historical
experience is available to provide a reasonable estimate of the expected term for stock
option grants. The risk-free interest rate is based on the yield from U.S. Treasury
zero-coupon bonds with an equivalent term. The Company has historically not paid
dividends and has no foreseeable plans to pay dividends. </FONT></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>
The
fair value for options granted in 2008, 2007 and 2006 is estimated on the date of grant
using a Black-Scholes options pricing model with the following weighted average
assumptions: </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></FONT></TH>
     <TH COLSPAN=12><FONT FACE="Times New Roman" SIZE=1>Year ended December 31,</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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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></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>
     <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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="51%" 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="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="CENTER"><FONT FACE="Times New Roman" SIZE=2>1.52</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="9%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>4.62</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="9%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>4.91</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>0</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>0</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="CENTER"><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="CENTER"><FONT FACE="Times New Roman" SIZE=2>37</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>58</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>78</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 option term</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>3.43 years</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>5.68 years</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>3.44 years</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>Forfeiture rate</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="CENTER"><FONT FACE="Times New Roman" SIZE=2>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>&nbsp;</FONT></TD><TD ALIGN="CENTER"><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="CENTER"><FONT FACE="Times New Roman" SIZE=2>15</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>%</FONT></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>
During
2008, 2007 and 2006, the Company recognized stock-based compensation expense related to
employee stock options in the amount of $&nbsp;581, $516 and $ 727 respectively 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></FONT></TH>
     <TH COLSPAN=12><FONT FACE="Times New Roman" SIZE=1>Year ended December 31,</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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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></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>
     <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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="51%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Selling and marketing</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>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 169</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 296</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> 152</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>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>412</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>220</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>575</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>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</TD><TD></TD></TR>

<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Total Stock-based compensation expense</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 581</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 516</FONT></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> 727</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>
The
Company applies SFAS 123 &#147;Accounting for stock Based Compensation&#148; (&#147;SFAS
123&#148;) and EITF 96-18, &#147;Accounting for Equity Instruments that are Issued to
Other than Employees for Acquiring, or in Conjunction With, Selling, Goods or Services&#148;,
with respect to warrants issued to non-employees. SFAS 123 requires the use of option
valuation models to measure the fair value of the warrants at the date of grant. </FONT></TD>
</TR>
</TABLE>
<BR>



<p align=center>
<font size=2>F - 29</font></p>
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<page>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2: &#150; SIGNIFICANT
ACCOUNTING POLICIES (Cont.) </FONT></H1>




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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>r. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fair
value of financial instruments: </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>
The
following methods and assumptions were used by the Company in estimating fair value
disclosures for financial instruments:  </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>
The
carrying amounts of cash and cash equivalents, trade receivables, other accounts
receivable and trade payables approximate their fair value due to the short-term
maturities of such instruments. </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>
Effective
January 1, 2008, the Company adopted SFAS 157, &#147;Fair Value Measurements&#148; and,
effective October 10, 2008, adopted FSP No. SFAS 157-3, &#147;Determining the Fair Value
of a Financial Asset When the Market for That Asset Is Not Active&#148;, except as it
applies to the nonfinancial assets and nonfinancial liabilities subject to FSP 157-2.
SFAS 157 clarifies that fair value is an exit price, representing the amount that would
be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants. As such, fair value is a market-based measurement that
should be determined based on assumptions that market participants would use in pricing
an asset or a liability. As a basis for considering such assumptions, SFAS 157
establishes a three-tier value hierarchy, which prioritizes the inputs used in the
valuation methodologies in measuring fair value: </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>
Level
1 &#150; Observable inputs that reflect quoted prices (unadjusted) for identical assets
or liabilities in active markets. </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>
Level
2 &#150; Include other inputs that are directly or indirectly observable in the
marketplace. </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>
Level
3 &#150; Unobservable inputs which are supported by little or no market activity.  </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>
The
fair value hierarchy also requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. </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>s.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Impact of 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
March 2008, the FASB issued Statement 161 &#147;Disclosures about Derivative Instruments
and Hedging Activities&#148; (&#147;SFAS 161&#148;) an amendment to FASB No. 133.&nbsp;&nbsp;This
statement changes the disclosure requirements for derivative instruments and hedging
activities.&nbsp;&nbsp;Entities are required to provide enhanced disclosures about (a)
how and why and entity uses derivative instruments, (b) how derivative instruments and
related hedged items are accounted for under Statement 133 and its related
interpretations, and (c) how derivative instruments and related hedged items affect an
entity&#146;s financial position, financial performance, and cash flows.&nbsp;&nbsp;This
statement is effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008.&nbsp;&nbsp;Early application is encouraged.&nbsp;&nbsp;The
Company does not expect the adoption of SFAS 161 to have a material impact on its
financial position, results of operations or cash flows. </FONT></TD>
</TR>
</TABLE>
<BR>



<p align=center>
<font size=2>F - 30</font></p>
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<page>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2: &#150; SIGNIFICANT
ACCOUNTING POLICIES (Cont.) </FONT></H1>





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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
December 2007, the Financial Accounting Standards Board ratified a consensus opinion
reached by the Emerging Issues Task Force (&#147;EITF&#148;) on EITF Issue 07-1, &#147;Accounting
for Collaborative Arrangements&#148; (&#147;EITF 07-1&#148;). The guidance in EITF 07-1
defines collaborative arrangements and establishes presentation and disclosure
requirements for transactions within a collaborative arrangement (both with third parties
and between participants in the arrangement).&nbsp;&nbsp;The consensus in EITF 07-1 is
effective for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2008. The consensus requires retrospective application to all
collaborative arrangements existing as of the effective date, unless retrospective
application is impracticable. The impracticability evaluation and exception should be
performed on an arrangement-by-arrangement basis.&nbsp;&nbsp;The Company is evaluating
the impact EITF 07-1 will have on its financial statements. The Company currently does
not believe that the adoption of EITF 07-1 will have a significant effect on its
financial statements. </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
December&nbsp;2007, the FASB issued SFAS 160, &#147;Noncontrolling Interests in
Consolidated Financial Statements&#148; (&#147;SFAS 160&#148;). SFAS 160 amends ARB 51,
&#147;Consolidated Financial Statements&#148;, to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the deconsolidation of
a subsidiary. It also clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity in the
consolidated financial statements. SFAS 160 also changes the way the consolidated income
statement is presented by requiring consolidated net income to be reported at amounts
that include the amounts attributable to both the parent and the noncontrolling interest.
It also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the
noncontrolling interest. SFAS 160 requires that a parent recognize a gain or loss in net
income when a subsidiary is deconsolidated and requires expanded disclosures in the
consolidated financial statements that clearly identify and distinguish between the
interests of the parent owners and the interests of the noncontrolling owners of a
subsidiary. SFAS 160 is effective for fiscal periods, and interim periods within those
fiscal years, beginning on or after December&nbsp;15,&nbsp;2008. The adoption of SFAS 160
is not expected to have a material effect on accounting for current subsidiaries. </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
December&nbsp;2007, the FASB issued SFAS 141(R), &#147;Business Combinations&#148;(&#147;SFAS
141(R)&#148;). This Statement replaces SFAS No. 141, &#147;Business Combinations&#148;,
and requires an acquirer to recognize the assets acquired, the liabilities assumed,
including those arising from contractual contingencies, any contingent consideration and
any noncontrolling interest in the acquiree at the acquisition date, measured at their
fair values as of that date, with limited exceptions specified in the statement. SFAS&nbsp;141(R)
also requires the acquirer in a business combination achieved in stages (sometimes
referred to as a step acquisition) to recognize the identifiable assets and liabilities,
as well as the noncontrolling interest in the acquiree, at the full amounts of their fair
values (or other amounts determined in accordance with SFAS 141(R)). In addition, SFAS
141(R)&#145;s requirement to measure the noncontrolling interest in the acquiree at fair
value will result in recognizing the goodwill attributable to the noncontrolling interest
in addition to that attributable to the acquirer. </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>
SFAS
141(R) applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or after December&nbsp;15,&nbsp;2008. As such,  the  adoption of SFAS 141(R) is not  expected to have a material  effect on
                     accounting for the Company current subsidiaries.
</FONT></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>F - 31</font></p>
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<page>







<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 2: &#150; SIGNIFICANT
ACCOUNTING POLICIES (Cont.) </FONT></H1>













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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
April 2008, the FASB issued FSP 142-3, &#147;Determination of the Useful Life of
Intangible Assets&#148; (FSP 142-3). FSP 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the useful
life of a recognized intangible asset under SFAS No. 142, &#147;Goodwill and Other
Intangible Assets&#148;. FSP 142-3 is effective for fiscal years beginning after December
15, 2008. The Company does not expect the adoption of FSP 142-3 will have a material
impact on the Company&#146;s consolidated financial position, results of operations and
cash flows. </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
May 2008, the FASB issued SFAS No. 162, &#147;The Hierarchy of Generally Accepted
Accounting Principles&#148;. SFAS 162 identifies the sources of accounting principles and
the framework for selecting the principles to be used in the preparation of financial
statements of nongovernmental entities that are presented in conformity with generally
accepted accounting principles in the United States. It is effective 60 days following
the SEC&#146;s approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, &#147;The Meaning of Present Fairly in Conformity With Generally Accepted
Accounting Principles&#148;. The Company statements evaluated the impact of FAS No. 162
on the Company&#146;s financial statement and the adoption of the statement did not have
a material effect on the Company&#146;s financial statements. </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
February 2008, the FASB issued FASB Staff Position (&#147;FSP&#148;) FAS No. 157-2, &#147;Effective
Date of FASB Statement No. 157&#148; (&#147;FSP FAS 157-2&#148;), to delay the effective
date of FASB Statement 157 for one year for certain nonfinancial assets and nonfinancial
liabilities, excluding those that are recognized or disclosed in financial statements at
fair value on a recurring basis (that is, at least annually). For purposes of applying
the FSP FAS 157-2, nonfinancial assets and nonfinancial liabilities include all assets
and liabilities other than those meeting the definition of a financial asset or a
financial liability in FASB Statement 159. FSP FAS 157-2 defers the effective date of
Statement 157 to fiscal years beginning after November 15, 2008, and interim periods
within those fiscal years for items within the scope of this FSP FAS 157-2. The Company
does not expect the adoption of FAS 157 for certain nonfinancial assets and nonfinancial
liabilities, excluding those that are recognized or disclosed in the financial statements
at fair value on a recurring basis, to have a material impact on its financial position,
statements of operations or cash flows. </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
October 29, 2008, the FASB issued FSP No.132 (R)-a, &#147;Employers&#146; Disclosures
about Pensions and Other Postretirement Benefits,&#148; to require that an employer
disclose the following information about the fair value of plan assets: 1) the level
within the fair value hierarchy in which fair value measurements of plan assets fall; 2)
information about the inputs and valuation techniques used to measure the fair value of
plan assets; and 3) a reconciliation of beginning and ending balances for fair value
measurements of plan assets using significant unobservable inputs.&nbsp;&nbsp;The FSP
will be effective for fiscal years ending after December 15, 2009, with early application
permitted. Application of the FSP would not be required for earlier periods that are
presented for comparative purposes.&nbsp;&nbsp;The company is currently evaluating the potential impact of adopting this FSP on its disclosures in the financial
statements. </FONT></TD>
</TR>
</TABLE>
<BR>



<p align=center>
<font size=2>F - 32</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>




<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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>



<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 3: &#150; OTHER ACCOUNTS
RECEIVABLE AND PREPAID EXPENSES </FONT></H1>





<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=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>December 31,</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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="61%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Government authorities</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>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 283</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 363</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>Advances to suppliers</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>445</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>405</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>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>136</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>129</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>Deferred 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>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>241</FONT></TD>
        <TD ALIGN=LEFT><FONT 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> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>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>50</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>29</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,155</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 945</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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 4: &#150; FAIR VALUE OF
FINANCIAL INSTRUMENTS </FONT></H1>




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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
accordance with SFAS 157, the Company measures its investment in NWB and Surf at fair
value. Investment in NWB is classified within level 1 because it is valued using quoted
market prices in an active market. Investment in Qualmax is classified within level 2
because it is valued by other inputs that are directly or indirectly observable in the
marketplace. Investment in Surf is classified within Level 3, because it valued using
unobservable inputs which are not supported by market activity. </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 financial assets and liabilities measured at fair value on a recurring
basis, consisted of the following types of instruments as of December 31, 2008: </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></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Level 1</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Level 2</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Level 3</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></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>
     <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>
     <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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="51%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Investment in NWB</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>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 168</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</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></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>-</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>Investment in QMX</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>443</FONT></TD>
        <TD ALIGN=LEFT><FONT 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;</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>Investment in Surf</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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>271</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>Total</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 168</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 443</FONT></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> 271</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=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
 following  table  presents the changes in Level 3  instruments  measured on a recurring
              basis for the year ended December 31, 2008. The Company's  Level 3
instrument  consists of a               cost method  investment in Surf (see Note 6).  </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></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Investment in Surf</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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="74%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Balance, January 2008</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="10%" 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>
     <TD> </TD>
     <TD COLSPAN=3></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>Transfer to Level 3</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></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Total realized losses</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>(712</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></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>Balance, end of 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>  271</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></TR>
</TABLE>
<BR>













































<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE 5: &#150; INVENTORIES</B> </FONT></P>





<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=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>December 31,</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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="61%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Raw materials</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>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    586</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    206</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>9,760</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>8,061</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 10,346</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  8,321</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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<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
inventories are presented net of write-off for technological obsolescence and slow moving
items of $1,059 and $358 as of December 31, 2008 and 2007, respectively. </FONT></TD>
</TR>
</TABLE>
<BR>




<p align=center>
<font size=2>F - 33</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 6: &#150; INVESTMENT IN
OTHER COMPANIES </FONT></H1>




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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><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 BORDER=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>December 31,</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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="61%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Surf Communication Systems Ltd. (see note 2g)</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>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   271</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   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 1d and 2h)</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>443</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>819</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 1d and 2h)</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>168</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>692</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   882</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 2,494</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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 7: &#150; PROPERTY, PLANT
AND EQUIPMENT </FONT></H1>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=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>December 31,</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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="61%" 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="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>&nbsp;&nbsp;&nbsp;Computers and software</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 2,218</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,942</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;Office furniture 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>984</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>562</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;Leasehold improvements and plant</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>1,258</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>1,313</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;Vehicles</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>60</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>4,682</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>3,877</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></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Accumulated depreciation:</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;Computers and software</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>2,097</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>1,794</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;Office furniture 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>584</FONT></TD>
        <TD ALIGN=LEFT><FONT 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> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Leasehold improvements and plant</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>860</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>928</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;Motor vehicles</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>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>5</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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>3,554</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>3,158</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>Depreciated 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,128</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   719</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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<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>
Depreciation
expenses amounted to $261, $123 and $171 for the years ended December&nbsp;31, 2008, 2007
and 2006, respectively. </FONT></TD>
</TR>
</TABLE>
<BR>



<p align=center>
<font size=2>F - 34</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


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<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 8: &#150; OTHER
INTANGIBLE ASSETS </FONT></H1>








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<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>December 31,</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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="61%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;Cost:</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="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></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=10%> </TD>
     <TD WIDTH=61% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Backlog</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>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    82</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    55</FONT></TD>
        <TD WIDTH=2% 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;Non-competing rights</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>40</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>40</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;Technology</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>226</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>226</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;Brand name</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>674</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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;&nbsp;Customer list</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>2,618</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>2,177</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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>3,640</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>2,498</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>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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Backlog</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>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>55</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;Non-competing rights</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</FONT></TD>
        <TD ALIGN=LEFT><FONT 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</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;Technology</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>196</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>178</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;Brand name</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>70</FONT></TD>
        <TD ALIGN=LEFT><FONT 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> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Customer list</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>869</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>586</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>1,222</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>820</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 2,418</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 1,678</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=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Amortization
expenses amounted to $413, $439 and $207 for the years ended December 31, 2008, 2007 and
2006, respectively. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Estimated
amortization expenses for the years ended:  </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></FONT></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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="74%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>2009</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="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>413</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>2010</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>396</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</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>385</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</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>385</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>2013 and thereafter</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>839</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></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> 2,418</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></TR>
</TABLE>



<p align=center>
<font size=2>F - 35</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 9: &#150; GOODWILL </FONT></H1>




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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>
Goodwill
attributed to operating segments for the years ended December 31, 2008 and 2007 is 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></FONT></TH>
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1>Mobile and<BR>
RFID</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1>Supply<BR>
chain solutions</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN="3"><FONT FACE="Times New Roman" SIZE=1>Total</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></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">
     <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">
     <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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="51%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Balance as of January 1, 200$</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</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>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    952</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    952</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>Acquisition of Summit</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>1,909</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>1,909</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" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Balance as of December 31, 2007</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>  2,861</FONT></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>  2,861</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">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Acquisition of Summit</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>230</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>230</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>Acquisition of Dimex</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>4,143</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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>4,143</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">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Impairment</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>(1,873</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>(1,873</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>
     <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>Balance as of December 31, 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>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  4,143</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  1,218</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  5,361</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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<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
accordance with Statement of Financial Accounting Standards No. 142, (&#147;SFAS 142&#148;),
Goodwill and Other Intangible Assets, goodwill is not amortized, but instead is reviewed
and tested for impairment at least annually and whenever events or circumstances occur
which indicate that goodwill might be impaired. Impairment of goodwill is tested at the
Company&#146;s reporting unit level by comparing the carrying amount, including goodwill,
to the fair value. In performing the analysis, the Company uses the best information
available, including reasonable and supportable assumptions and projections. If the
carrying amount of the Company exceeds its implied fair value, goodwill is considered
impaired and a second step is performed to measure the amount of impairment loss, if any. </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
connection to the annual impairment test perform on December 31, of each year and due to
the decline of the Company&#146;s market capitalization as result of the overall global
economic conditions and its impact on the Company&#146;s business operations as of
December 31, 2008, it was determined that goodwill has been impaired. The Company assess
whether goodwill carried on the books need to be written down. </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 assets whether the goodwill carried in the books is in accordance with the
guidance set forth in paragraphs 19-22 of SFAS 142, which requires a two-step analysis.
The first step used the Discounted Cash flow approach to measure the fair value of the
reporting units of the Company, the result of which indicated that the carrying amount of
the Supply chain reporting unit, including goodwill, exceeded its fair value. The second
step was then conducted in order to measure the amount of impairment loss, by means of a
comparison between the implied fair value of the goodwill and the carrying amount of the
goodwill. In the second step, fair value of the supply chain reporting unit of the
Company, as determined in the first step, was assigned to the reporting unit&#146;s
individual assets and liabilities. The excess of the fair value of the reporting unit
over the amounts assigned to its assets and liabilities represented the amount of the
implied fair value of the goodwill. The excess of the current amount of goodwill over the
implied fair value of goodwill was identified as the amount of the impairment loss. </FONT></TD>
</TR>
</TABLE>
<BR>



<p align=center>
<font size=2>F - 36</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>




<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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>




<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 10: &#150; SHORT-TERM
BANK LOANS </FONT></H1>







<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN="3" ALIGN="Left"><FONT FACE="Times New Roman" SIZE=1>Loan currency</FONT><HR WIDTH=95% SIZE=1 COLOR=white NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Weighted<BR>
Interest<BR>
Rate as of<BR>
December<BR>
31, 2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>December 31,</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>%</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>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></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>
     <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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="51%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>NIS</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="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>4.38</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>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  4,449</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  1,380</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>Euro</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>5.00</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>557</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>590</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>$</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>2.92</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>4,622</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>2,415</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></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>
     <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></FONT></TD>

     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>9,628</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>4,385</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>Add 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>4.61</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>671</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>643</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></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>&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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 10,299</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  5,028</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></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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<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
repayment the Company&#146;s bank debt is secured by a first priority floating charge on
all of the Company&#146;s assets, and by a first priority fixed charge on all of the
Company&#146;s issued and unpaid-for share capital, its goodwill and its shares of the
subsidiaries. In addition, the Company and its subsidiaries entered into a series of
inter company guarantees in favor of its lenders. </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
Companies loan agreements also contain various covenants which require that the Company
maintains certain financial ratios related to shareholder&#146;s equity and operating
results. As of December 31 2008, the Company meet the Bank&#146;s covenants as revised
(see note 20g). </FONT></TD>
</TR>
</TABLE>
<BR>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 11: &#150; ACCRUED
EXPENSES AND OTHER LIABILITIES </FONT></H1>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=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>December 31,</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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="61%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Government of Israel - royalties and V.A.T</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>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   448</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   416</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>Professional services</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>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>342</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>Short term deferred 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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>69</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>75</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>Liability to Dimex sellers (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>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,811</FONT></TD>
        <TD ALIGN=LEFT><FONT 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> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>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>456</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>457</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 3,111</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,290</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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<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)
See Note 20c. </FONT></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>F - 37</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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>






<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 12: &#150; LONG-TERM BANK
LOANS </FONT></H1>






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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>Classified
by linkage terms and interest rates, the total amount of the loans           is as
follows: </FONT></TD>
</TR>
</TABLE>
<BR>





<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN="3" ALIGN="Left"><FONT FACE="Times New Roman" SIZE=1>Loan currency</FONT><HR WIDTH=95% SIZE=1 COLOR=white NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Weighted<BR>
Interest<BR>
Rate as of<BR>
December<BR>
31, 2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>December 31,</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <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><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <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>
     <TH> </TH>
     <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>
     <TH> </TH>
     <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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="51%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>NIS</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="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>5.60</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>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 1,927</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 1,479</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>$</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>2.70</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>1,000</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=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,450</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></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> </TD>
     <TD ALIGN="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>&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>2,927</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>3,929</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>Less - 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>4.61</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>671</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>643</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></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" 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>&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> 2,256</FONT></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> 3,286</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></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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<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
repayment of the Company&#146;s bank debt is secured by a first priority floating charge
on all of the Company&#146;s assets, present and future as they may be changing from time
to time, and by a first priority fixed charge on all of the Company&#146;s issued and
unpaid-for share capital, its goodwill and its shares of the subsidiaries. In addition,
the Company and its subsidiaries entered into a series of inter company guarantees in
favor of its lenders. </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 loan agreements
also contain various covenants which require that the Company maintain certain financial
ratios related to shareholder&#146;s equity and operating results. As of December 31 2008,
the Company meet the Bank&#146;s covenants as revised (see note 20g)

</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>The
loans mature in the following years subsequent to the balance sheet dates: </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></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="13%"> </TD>
     <TD WIDTH="71%" 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="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>671</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>2010</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>2,235</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</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>14</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</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</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>2013</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></TR>
</TABLE>
<BR>





<p align=center>
<font size=2>F - 38</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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>






<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 13: &#150; LONG-TERM
CONVERTIBLE NOTE </FONT></H1>

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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 September 2005, the Company
entered into a Second Securities Purchase Agreement (the &#147;Second Purchase
Agreement&#148;) with the Investor, under which the Company issued to the Investor in a
private placement (i) a Secured Convertible Term Note of a $1,500 principal amount, due
September 2008 (the &#147;Note&#148;), and (ii) a warrant to purchase 73,052 ordinary
shares at an exercise price of $4.04 per share (the &#147;Warrant&#148;). The Warrant is
exercisable, in whole or in part, until September 29, 2012. Pursuant to its undertaking in
the Registration Rights agreement with the Investor, the Company filed with the Securities
and Exchange Commission a registration statement on Form F-3 covering the resale of
Ordinary shares that is issuable upon conversion of the Note and/or exercise of the
Warrants, and/or issuable in payment of principal and interest on the Note.. The
registration statement became effective on February 8, 2006. </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>
On
August 17, 2006 the Company entered into a Third Securities Purchase Agreement (the &#147;Third
Agreement&#148;) with the Investor under which the Company issued to the Investor in a
private placement (i) a third Convertible Term Note of a $1,500 principal amount, due
August 2009 (the &#147;Note&#148;), and (ii) a warrant to purchase 73,052 Ordinary shares
at an exercise price of $4.04 per share (the &#147;Warrant&#148;). The Note is
convertible into Ordinary shares at a price of $3.08 per share for the first 500,000 and
$4.08 for any additional amount payable thereunder. </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
registration statement became effective on December 5, 2006.  </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>
On
June 21, 2007, the Company entered into an agreement with the Investor, pursuant to which
the Investor converted the entire outstanding principal amount of Convertible Note of the
Second and the Third Agreements of approximately $ 2,223 into 878,670 Ordinary Shares of
the Company at a conversion price of $2.53. As a result the Company recorded expenses
upon conversion of $611 in year 2007. </FONT></TD>
</TR>
</TABLE>
<BR>










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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 14: &#150; COMMITMENTS
AND CONTINGENT LIABILITIES </FONT></H1>






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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>Commitments: </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>Royalty
commitments:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a) </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under
the Company&#146;s research and development agreements with the Office of           the
Chief Scientist (&#147;OCS&#148;) and pursuant to applicable laws, the           Company
is required to pay royalties at the rate of 3.5% of sales of products           developed
with funds provided by the OCS, up to an amount equal to 100% of the           research
and development grants (dollar-linked) received from the OCS. The           obligation to
pay these royalties is contingent upon actual sales of the           products. Royalties
payable with respect to grants received under programs           approved by the OCS
after January 1, 1999, are subject to interest on the U.S.           dollar-linked value
of the total grants received at the annual rate of LIBOR           applicable to U.S.
dollar deposits at the time the grants are received. No           grants were received
during the years 2006 through 2008.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=20%>&nbsp;</TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
of December 31, 2008, the Company has an outstanding contingent obligation to pay
royalties, including interest, in the amount of approximately $3,474, in respect of these
grants.</FONT></TD>
</TR>
</TABLE>
<BR>




<p align=center>
<font size=2>F - 39</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 14: &#150; COMMITMENTS
AND CONTINGENT LIABILITIES (Cont.)</FONT></H1>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b) </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Israeli Government, through the Overseas Marketing Fund, awarded the           Company
grants for participation in expenses for overseas marketing. The Company           is
committed to pay royalties to the Fund for Encouragement of Marketing
          Activities at the rate of 3% of the increase in export sales, up to the amount
          of the grants received by the Company linked to the dollar and bearing
interest.           No grants were received during the years 2006 through 2008.  </FONT></TD>
</TR>
</TABLE>
<BR>





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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=20%>&nbsp;</TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
of December 31, 2008, the Company has an outstanding contingent obligation to pay
royalties including interest of $84 with respect to these grants.</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>Other
commitments:  </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
facilities of the Company are rented under operating lease agreements that expire on
various dates ending in 2012. Minimum future rental payments for 2009, 2010, 2011, and
2012 are $132, $63, $58 and $5 respectively. </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&#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
2009. The maximum breach of contract fees can amount to $71. </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>
Lease
payments for the facilities occupied by the Company and the Company&#146;s motor vehicles
in 2008, 2007 and 2006 amounted to $699, $407 and $343, respectively. </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>Litigation</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>In
January 2008, a former employee of the Company, filed a claim against the
               Company in the Labor Court in Tel Aviv, for severance payments in the
amount of                NIS 306 (approximately $80). The plaintiff also demands
compensation for delay                in payment of the said severance pay of NIS 207
(approximately $54). The Company                is yet to file its statement of defense.
The Company&#146;s financial statements                include a provision in this
respect.  </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>A
former employee of the Company claims before the Ministry of Defense Employment Committee
(which is a special tribunal) that the Company alleged breach the law by terminating his
employment. on The employee claims from the Company compensation in the amount of o $40
and additional amount of approximately $15. The Company assesses the prospect of claimant
as remote. The Company&#146;s financial statements do not include a provision in this
respect.  </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>3. </FONT></TD>
<TD WIDTH=85%><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 seeked an amount of approximately 3.3 million Euros
and additional remedies. In June 29, 2008, the parties entered into a settlement
agreement, pursuant to which they waive their respective claims against each other and
shall terminate the court proceedings they had initiated on the basis of these claims. In
connection with such settlement, the Company paid BOS&acirc;NOVA an amount of $20and offer
it a rebate of $40on future purchases.</FONT></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>F - 40</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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>







<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 15: &#150;
SHAREHOLDERS&#146; EQUITY </FONT></H1>




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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>Private
placements: </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
April 2007, the Company completed a right 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 and the
issuance costs amounted to $400.  </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>
On
June 21, 2007 Laurus Master Fund Ltd. converted the entire outstanding principal amount
under its Convertible Notes of approximately $2,223 into 878,670 Ordinary Shares of BOS.  </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>
On
June 26, 2007 the Company 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. Issuance costs amounted to $36.  </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>
On
July 1, 2007 the Company issued 5,594 shares of the Company as part of the consideration
paid for the purchasing the assets of Cyms Ltd. (See Note 1b).  </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>
On
October 1, 2007 the Company issued 8,000 shares of the Company as part of the
consideration paid for the purchasing of OptimizeIT assets (See Note 1b).  </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>
On
November 21, 2007 the Company issued 360,000 shares of the Company as part of the
consideration paid for the purchasing of Summit shares (See Note 1b).  </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>
On
December 31, 2007 the Company entered into a Share Purchase Agreement with Catalyst Fund
L.P. (&#147;Catalyst&#148;) and three subsidiaries of D.S. Apex Holdings Ltd. (&#147;Apex&#148;),
under which the Company issued 833,560 Ordinary Shares at a price of $2.40 per share
(reflecting an aggregate investment of approximately $2 million), and 541,814 warrants at
exercise price of $2.76, exercisable for four years from their date of issuance. The
Company has paid 3% placement fees in cash to Apex and 6% in 25,007 Ordinary Shares to
Catalyst. The Company also entered into a Registration Rights Agreement pursuant to which
the Company shall prepare and file with the Securities and Exchange Commission a
registration statement covering the resale of the Ordinary Shares issued to the
investors.  </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
March 2008, Dimex Solutions Ltd. purchased the assets and activities of Dimex Systems
Ltd., an Israeli private company and Dimex Hagalil Projects (2008) Ltd. purchased assets
and activities of Dimex Hagalil Ltd., a subsidiary of Dimex Systems Ltd. Portion of the
acquisition expenses were paid by issuance of 110,000 shares. </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>
On
July 9, 2008 the Company entered into a definitive private placement agreement with three
foreign investors. The agreement is for the issuance of an aggregate of 740,740 Ordinary
Shares at a price per share of $1.35 or $1,000in total. In addition, the Company issued
to the investor&#146;s 370,370 warrants. The exercise price of the warrants is $1.60 per
ordinary share, exercisable for two years from their date of issuance to purchase
ordinary shares at a purchase price of $1.60 per ordinary share. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 41</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>







<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<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 SUBSIDIARIES</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B> </FONT>
</TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD>
</TR>

<TR VALIGN=TOP>
<TD WIDTH=100%><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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 15: &#150;
SHAREHOLDERS&#146; EQUITY (Cont.) </FONT></H1>



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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>
On
August 25, 2008 the Company entered into a definitive private placement agreement with an
Australian investor. The agreement is for the issuance of an aggregate of 816,327
Ordinary Shares at a price per share of $1.225 or $1,000in total. In addition, the
Company issued to the investor&#146;s 408,164 warrants. The exercise price of the
warrants is $1.475 per ordinary share, exercisable for two years from their date of
issuance for purchase of ordinary shares at a price of $1.475 per share. </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 outstanding warrants to shareholders as of December 31, 2008 are as
follows: </FONT></TD>
</TR>
</TABLE>
<BR>










<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600" >
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Exercise<BR>
price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Outstanding<BR>
and<BR>
exercisable<BR>
warrants<BR>
as of<BR>
December 31,<BR>
2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Weighted average
exercise<BR>
Price of<BR>
outstanding<BR>
warrants</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>Weighted<BR>
average<BR>
exercise<BR>
price of<BR>
warrants<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></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>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="15%"> </TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="14%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 1.48</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="14%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>408,164</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="14%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 1.48</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="14%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1.67</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>$</FONT></TD><TD WIDTH="14%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 1.48</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1.60</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>370,370</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1.60</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1.50</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1.60</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="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 2.76</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>541,814</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 2.76</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>3.00</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 2.76</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,320,348</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 1.95</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>2.06</FONT></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> 1.95</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <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>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></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>Stock
option plans: </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
May 2003, the Company&#146;s shareholders approved the adoption of the 2003 Stock Option
Plan (the &#147;Plan&#148;), pursuant to which 625,000 Ordinary Shares are reserved for
purchase by employees, directors, consultants and service providers of the Company.
During 2005 &#150; 2007, the Company&#146;s shareholders approved an increase of the
number of Ordinary shares reserved for issuance under the Plan, to 2,600,000. Any option
which is canceled or forfeited before expiration will become available for future grants. </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>
As
of December 31, 2008 an aggregate of 150,988 of these options are still available for
future grants. Each option granted under the Plans expires between 3-10 years from the
date of the grant. The options vest gradually over a period of up to four years. </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>
A
summary of the Company&#146;s employees and director&#146;s stock option activity and
related information for the year ended December 31, 2008, is as follows: </FONT></TD>
</TR>
</TABLE>
<BR>






<p align=center>
<font size=2>F - 42</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>






<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TD 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"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO 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>


                                    <!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 15: &#150;
SHAREHOLDERS&#146; EQUITY (Cont.) </FONT></H1>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=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 of<BR>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>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Weighted-<BR>average<BR>remaining<BR>contractual<BR>term (in years)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Aggregate<BR>intrinsic<BR>value</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="42%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Outstanding at January 1, 2008</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="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,820,196</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>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 2.47</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>5.62</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       140</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 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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>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>597,500</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 0.86</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Exercised</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(2,669</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1.42</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>&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>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>(93,170</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 2.59</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Outstanding at December 31, 2008</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,321,857</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 2.05</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>4.77</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>        50</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Vested and expected to vest</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,932,832</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 2.05</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>4.77</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>        11</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Exercisable at December 31, 2008</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>736,982</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 2.41</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>3.46</FONT></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>        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=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>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></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
weighted-average grant-date fair value of options granted during the year ended December
31, 2008 2007 and 2006 was $&nbsp;0.38, $&nbsp;1.43 and $1.45 respectively. The aggregate
intrinsic value in the table above represents the total intrinsic value (the difference
between the fair market value of the Company Ordinary Shares on December 31, 2008 and the
exercise price, multiplied by the number of in-the-money options) that would have been
received by the option holders had all option holders exercised their options on December
31, 2008. </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>
Total
aggregate intrinsic value of options exercised for the year ended December 31, 2008 and
2007 was $ 4 and $&nbsp;14 respectively. The aggregated intrinsic value of options
outstanding for the year ended December 31, 2008 and 2007 was $368 and $277, respectively
(the difference between the fair market value of the Company Ordinary Shares on grant
date and the exercise price, multiplied by the number of in-the-money options). As of
December 31, 2008 there was $&nbsp;716 of total unrecognized compensation cost related to
non-vested share-based compensation arrangements granted under the Company&#146;s stock
option plans. That cost is expected to be recognized over a weighted-average period of 25
months. </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>
Cash
received from exercise of options for the years ended December 31, 2008, 2007 and 2006
were approximately $&nbsp;0, $ 46 and $135 respectively. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 43</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TD 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"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO 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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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>NOTE 15: &#150; SHAREHOLDERS&#146; EQUITY
(Cont.)</B> </FONT></P>



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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
options granted to employees and director outstanding as of December 31, 2008 have been
separated into ranges of exercise prices, 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>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>December 31,<BR>2008</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>December 31,<BR>2008</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 of<BR>options<BR>exercisable<BR>(years)</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></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>$ 0&nbsp;</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>220,331</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>5.20</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>70,331</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>5.20</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>$ 0.61&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>60,000</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=RIGHT><FONT FACE="Times New Roman" SIZE=2>4.88</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>-</FONT></TD>
        <TD ALIGN=LEFT><FONT 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> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$ 0.70&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>7,500</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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>4.88</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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>$ 1.04&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>7,500</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>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>4.39</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>-</FONT></TD>
        <TD ALIGN=LEFT><FONT 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> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$ 1.05&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>250,000</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="RIGHT"><FONT FACE="Times New Roman" SIZE=2>4.88</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>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>$ 1.47&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>7,500</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>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>4.34</FONT></TD>
        <TD ALIGN=LEFT><FONT 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> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$ 1.50&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>7,500</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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>4.50</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>$ 1.68&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>100,000</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=RIGHT><FONT FACE="Times New Roman" SIZE=2>9.24</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>-</FONT></TD>
        <TD ALIGN=LEFT><FONT 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> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$ 1.71&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>7,500</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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>4.34</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>$ 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>2,929</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>4.67</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>2,929</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>4.67</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&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>7,500</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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1.49</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>7,500</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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1.49</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>$ 2.39&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>400,000</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=RIGHT><FONT FACE="Times New Roman" SIZE=2>5.75</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>100,000</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=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> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$ 2.48&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>5,000</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="RIGHT"><FONT FACE="Times New Roman" SIZE=2>0.12</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>5,000</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="RIGHT"><FONT FACE="Times New Roman" SIZE=2>0.12</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>$ 2.52&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>667,000</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=RIGHT><FONT FACE="Times New Roman" SIZE=2>5.60</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>166,750</FONT></TD>
        <TD ALIGN=LEFT><FONT 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> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$ 2.57&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>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="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2.70</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>5,000</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="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>$ 2.58&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>67,261</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>0.13</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>33,631</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>0.13</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>$ 2.63&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>7,500</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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>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>5,000</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="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2.13</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>$ 2.68&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>420,976</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>2.38</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>280,648</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>2.38</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>$ 2.70&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>15,000</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="RIGHT"><FONT FACE="Times New Roman" SIZE=2>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>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="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2.39</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>$ 3.00&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>48,000</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=RIGHT><FONT FACE="Times New Roman" SIZE=2>3.65</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>47,333</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>3.65</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>$ 6.80&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>1,160</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>2.48</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>1,160</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>2.48</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>$ 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>450</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>0.86</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>450</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>0.86</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>$ 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>1,250</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>1.40</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>1,250</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>1.40</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>2,321,857</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>4.77</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>736,982</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>3.46</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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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>c. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Warrants
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=10%>&nbsp;</TD>
<TD WIDTH=90%><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. The fair value for these options was estimated at the date of grant using
Black-Scholes options pricing model with the following assumptions for the years ended
December&nbsp;31, 2006 and 2005: risk-free interest rate of 4.9% and 1.5%, respectively,
dividend yields of 0% and 0%, respectively, volatility of 77% and 70%, respectively, and
an expected life of 4.2 years and 2.5 years, respectively. No warrants were granted to
service provider during years 2008 and 2007. </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
compensation expenses that have been recorded in the consolidated financial statements
regarding these warrants for the years ended December 31, 2008, 2007 and 2006 were $0,
$43 and $116, respectively. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 44</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TD 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"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO 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>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 15: &#150;
SHAREHOLDERS&#146; EQUITY (Cont.) </FONT></H1>

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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 outstanding warrants to service providers as of December 31, 2008 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>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>Outstanding<BR>
and<BR>
exercisable<BR>
warrants<BR>
as of<BR>
December 31,<BR>
2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Warrants<BR>
outstanding<BR>
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 average<BR>
exercise<BR>
price of<BR>
warrants<BR>
exercisable</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></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="31%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>$ 2.3&nbsp;</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>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>10,000</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>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 2.30</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 2.30</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>2.00</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>$ 3.08&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>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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 3.08</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</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>-</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>$ 4.00&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>75,000</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 4.00</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 4.00</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>-</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>$ 4.04&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>227,403</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 4.04</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</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>3.10</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>$ 5.30&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>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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 5.30</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  5.3</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>4.63</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=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><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>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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 4.12</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 4.12</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>3.24</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><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 16: &#150; TAXES ON INCOME </FONT></H1>

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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>Reduction
in corporate tax rate: </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>
Generally,
Israeli companies are subject to &#147;Corporate Tax&#148; on their taxable income at the
rate of 27% for the 2008 tax year. Following an amendment to the Israeli Income Tax
Ordinance [New Version], 1961 (the &#147;Israeli Tax Ordinance&#148;), which came into
effect on January 1, 2006, the corporate tax rate is scheduled to decrease as follows:
26% for the 2009 tax year and 25% for the 2010 tax year and thereafter. Israeli companies
are generally subject to capital gains tax at a rate of 25% for capital gains (other than
gains deriving from the sale of listed securities) derived after January 1, 2003 </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>Loss
carryforward: </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>
Domestic
(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>
The
Company and its Israeli subsidiary have accumulated losses for Israel income tax purposes
as of December 31, 2008, in the amount of approximately $38,964. These losses may be
carryforward and offset against taxable income in the future for an indefinite period. </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>
Foreign: </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>
As
of December 31, 2008, the U.S. subsidiaries had U.S. Federal and State net operating loss
carryforward of approximately $8,847, which can be carried forward and offset against
taxable income for 15 to 20 years. Utilization of U.S. net operating losses may be
subject to substantial annual limitations due to the &#147;change in ownership&#148; provisions
of the Internal Revenue Code of 1986 and similar state law provisions. The annual
limitations may result in the expiration of net operating losses before utilization. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 45</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TD 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"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO 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>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 16: &#150; TAXES ON
INCOME (Cont.) </FONT></H1>

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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>c. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deferred
income taxes: </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>
Deferred
income taxes reflect the net tax effect of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. Significant components of the Company&#146;s deferred tax
liabilities and assets 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></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>December 31,</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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>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>&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="10%"> </TD>
     <TD WIDTH="60%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Assets in respect of:</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></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>&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>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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>       9</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>      21</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>Allowances and provisions</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>328</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>517</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>Net operating loss carry forward</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>12,337</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>11,445</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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>12,674</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>11,983</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>Liabilities in respect of intangible 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>(609</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>(441</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>Net deferred tax assets before valuation allowance</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>12,065</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>11,542</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>Valuation allowance (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>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(11,982</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>(11,922</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>Net deferred tax assets (liability)</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>      83</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    (380</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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<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>The
Company has provided valuation allowances on part of deferred tax assets
          resulting from tax loss carry forward and other reserves and allowances due to
          their history of operating losses and current uncertainty concerning their
          ability to realize these deferred tax assets in the future.  </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></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>December 31,</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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>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>&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="10%"> </TD>
     <TD WIDTH="59%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Presented in balance sheet:</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></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>&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>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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  241</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   19</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>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>452</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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</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>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>(69</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> </TD>
     <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>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(541</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>(366</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>Net deferred tax assets (liability)</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   83</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> (380</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>

<p align=center>
<font size=2>F - 46</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TD 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"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO 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>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 16: &#150; TAXES ON
INCOME (Cont.) </FONT></H1>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>d. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Taxes
on income (tax benefit) are comprised 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></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman" SIZE=1>Year ended December 31,</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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>&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>
     <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="44%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Current</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>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   22</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   80</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>   17</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>Prior 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>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>47</FONT></TD>
        <TD ALIGN=LEFT><FONT 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> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Deferred</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>385</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>(118</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>(106</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>
     <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> (403</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    9</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  (89</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>
     <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>Domestic</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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  246</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   16</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> (106</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Foreign</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>157</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(7</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>17</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> (403</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    9</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  (89</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>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></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>              e. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loss
before taxes is comprised 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></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman" SIZE=1>Year ended December 31,</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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>&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>
     <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="48%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Domestic</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>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> (4,896</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> (8,378</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>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> (1,682</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Foreign</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(1,647</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(76</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> (6,543</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> (8,454</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> (1,682</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>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>



































<p align=center>
<font size=2>F - 47</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TD 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"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO 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>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 16: &#150;  TAXES ON
INCOME (Cont.) </FONT></H1>













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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>              f. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective
tax</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></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>
     <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>
     <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>
     <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="52%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>loss before taxes on income from operating activities related to continuing operations</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>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> (6,543</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> (8,454</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>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> (1,682</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>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=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></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Statutory tax rate</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>%</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>29</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>31</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>
     <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> </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>Provision at statutory tax rate</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>(2,028</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>(2,452</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>(521</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>Non-deductible 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>1,565</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>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>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>21</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>Deferred taxes on losses reserves and allowances for which a valuation allowance was provided</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>&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>2,171</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>411</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> </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>Taxes on income (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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   (403</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>      9</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    (89</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>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></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>g. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tax
assessments: </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>
BOS
Dimex and Quasar have final assessments through 2003. Odem has final assessments through
2004. </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>h. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company adopted the provisions of FASB Interpretation No. 48, Accounting           for
Uncertainty in Income Taxes, on January 1, 2007. The impact of adopting FIN           48
was insignificant to the Company&#146;s consolidated financial statements. </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
accordance with the Company&#146;s accounting policy, both before and after adoption of
FIN 48, interest expense and potential penalties related to income taxes are included in
the tax expense line of the Company&#146;s consolidated statements of 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%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company and its subsidiaries files income tax returns in the U.S. federal jurisdiction,
and various states in the U.S. and Israel jurisdiction. BOS, Dimex Solutions and Quasar
may be subject to examination by the Israel tax authorities for fiscal years 2003 through
2008. Odem may be subjected to examination by the Israel tax authorities for fiscal years
2004 through 2008. Dimex Galil may be subjected to examination by the Israel tax
authorities for fiscal year 2008.Link USA (the U.S. subsidiary) may be subject to
examination by the U.S. Internal Revenue Service (&#147;IRS&#148;) for fiscal years 1998
through 2007. </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 believes that it has adequately provided for any reasonably foreseeable outcomes
related to tax audits and settlement. The final tax outcome of the Company&#146;s tax
audits could be different from that which is reflected in the Company&#146;s income tax
provisions and accruals. Such differences could have a material effect on the Company&#146;s
income tax provision and net loss in the period in which such determination is made. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 48</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TD 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"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO 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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 17: &#150; SUPPLEMENTARY
INFORMATION TO STATEMENTS OF OPERATIONS </FONT></H1>

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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>Financial
expenses, net: </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></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman" SIZE=1>Year ended December 31,</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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>&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>
     <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="47%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Financial income:</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></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>&nbsp;&nbsp;&nbsp;Interest on bank deposits and marketable</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;&nbsp;&nbsp;&nbsp;&nbsp;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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   35</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  122</FONT></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>   73</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" colspan=10><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Other (mainly foreign currency translation</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;&nbsp;&nbsp;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>92</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>65</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>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>127</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>122</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>138</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" BGCOLOR="#CCEEFF">
     <TD> </TD>
     <TD ALIGN="LEFT" colspan=10><FONT FACE="Times New Roman" SIZE=2>Financial 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>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;In respect of bank loans and convertible</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;&nbsp;&nbsp;&nbsp;&nbsp;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>(763</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>(585</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>(694</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" colspan=10><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Other (mainly foreign currency translation</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;&nbsp;&nbsp;losses)</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>(6</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> </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>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(763</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>(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>(764</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>
     <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> (636</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> (469</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> (626</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>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>


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

<!-- MARKER FORMAT-SHEET="Para Hang Lv 2-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                      1. </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Numerator: </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></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>
     <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>
     <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>
     <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="15%"> </TD>
     <TD WIDTH="42%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Numerator for basic and diluted net</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></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" BGCOLOR="#CCEEFF">
     <TD> </TD>
     <TD ALIGN="LEFT" colspan=10><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;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></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> (6,140</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> (8,463</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> (1,593</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" colspan=10><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Income (loss) 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" BGCOLOR="#CCEEFF">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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>(260</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>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=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>Net earnings (loss) available 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>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;Ordinary shareholders</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> (6,400</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> (8,396</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     92</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>




<!-- MARKER FORMAT-SHEET="Para Hang Lv 2-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                      2. </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Denominator
(in thousands): </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></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>
     <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>
     <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>
     <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="15%"> </TD>
     <TD WIDTH="43%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Basic weighted average Ordinary shares</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="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" BGCOLOR="#CCEEFF">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;outstanding (in thousands)</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>11,979</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>8,651</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>6,675</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>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Diluted weighted average Ordinary</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;&nbsp;&nbsp;Shares outstanding (in thousands)</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>11,979</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>11,783</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>6,793</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>
<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" colspan=10><FONT FACE="Times New Roman" SIZE=2>Basic and diluted net 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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       (0.51</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       (0.98</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       (0.24</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Basic and diluted net earnings (loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;per share from discontinued</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;operations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>       (0.02</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>        0.01</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</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>
     <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>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD> </TD>
     <TD ALIGN="LEFT" colspan=10><FONT FACE="Times New Roman" SIZE=2>Basic and diluted net earnings (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></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       (0.53</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       (0.97</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</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>
<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>

<p align=center>
<font size=2>F - 49</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TD 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"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO 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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 18: &#150; SEGMENTS AND
GEOGRAPHICAL INFORMATION </FONT></H1>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Commencing
2007 and subsequent to the acquisition of Summit, the Company manages its business in two
reportable segments, consisting of the Mobile and RFID Solutions segment and Supply Chain
Solutions segment. Amounts for fiscal year 2006 had been recast to conform with the
current management view. </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 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 and gross profit. </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>Revenues,
gross profit and assets for the operating segments for the years           2008, 2007 and
2006 were as follow: </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></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Mobile and RFID</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Supply<BR>
Chain<BR>
Solutions</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Not<BR>
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>
     <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="38%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>2008&nbsp;</B> </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>
     <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>&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>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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 12,379</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 38,470</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 50,849</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>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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  3,834</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  6,165</FONT></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>  9,999</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>
     <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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 20,918</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 15,545</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  1,258</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 37,721</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" colspan=13><FONT FACE="Times New Roman" SIZE="2"><B>2007&nbsp;</B> </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></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  2,673</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 21,101</FONT></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> 23,774</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>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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  1,436</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  3,239</FONT></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>  4,675</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>
     <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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  1,205</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 27,002</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  2,925</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 31,132</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" colspan=13><FONT FACE="Times New Roman" SIZE="2"><B>2006&nbsp;</B> </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></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  2,344</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 18,573</FONT></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> 20,917</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>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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  1,401</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  3,316</FONT></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>
     <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>

<p align=center>
<font size=2>F - 50</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TD 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"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO 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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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 18: &#150;  SEGMENTS AND
GEOGRAPHICAL INFORMATION (Cont.) </FONT></H1>

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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>The
following presents total revenues and long-lived assets for the years 2008,
          2007 and 2006 based on the location of customers: </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></FONT></TH>
     <TH COLSPAN=18><FONT FACE="Times New Roman" SIZE=1>Year ended December 31,</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=6><FONT FACE="Times New Roman" SIZE=1>2008</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>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>Total<BR>
revenues</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Long-lived<BR>
assets *)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Total<BR>
revenues</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Long-lived<BR>
assets *)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Total<BR>
revenues</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Long-lived<BR>
assets *)</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>
     <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>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="10%"> </TD>
     <TD WIDTH="27%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>America</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>$</FONT></TD><TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 12,671</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  1,097</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>$</FONT></TD><TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  5,420</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  2,225</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>$</FONT></TD><TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  2,848</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="7%" 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>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>1,342</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>964</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>2,019</FONT></TD>
        <TD ALIGN=LEFT><FONT 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> </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>7,490</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>1,511</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>1,173</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>&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>Israel and others</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>29,346</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>7,810</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>15,879</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>3,033</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>14,877</FONT></TD>
        <TD ALIGN=LEFT><FONT 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> </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>
     <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" 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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 50,849</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  8,907</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 23,774</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  5,258</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 20,917</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</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> </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>
     <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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<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>
Total
revenues are attributed to geographical areas based on the location of customers in
accordance with Statement of Financial Accounting 131, &#147;Disclosures about Segments
of an Enterprise and Related Information&#148; (&#147;SFAS 131&#148;). </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>*) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Long-lived
assets comprise of goodwill, intangible assets and property, plant           and
equipment.  </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>c. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Major
customer&#146;s data as a percentage of total revenues: </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></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman" SIZE=1>Year ended December 31,</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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>&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>
     <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="52%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Customer A (Mobile and RFID Segment)</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="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2</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>4</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>7</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>
<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>Customer B (Supply Chain 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>11</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>21</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>
     <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>
<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>Customer C (Supply Chain 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>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>3</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> </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>








<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR"  -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 19: &#150; RELATED PARTIES </FONT></H1>

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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>
Service
Agreement of Cukierman &amp; Co.: </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 audit committee and Board approved the engagement of Cukierman &amp; Co.
Investment House Ltd., to provide non-exclusive investment-banking services and business
development services to the Company, effective April 15, 2003. Cukierman &amp; Co. is a
company indirectly controlled by Mr. Edouard Cukierman. Since June&nbsp;26, 2003, Mr.
Cukierman serves as Chairman of the Company&#146;s Board, and he is also a co-manager of
the Catalyst Fund, the Company&#146;s largest shareholder. For its services, Cukierman
&amp; Co. is paid a monthly sum of $10 plus VAT, in addition to a success fee of 4%-6%
for a consummated private placement. According to its terms, the Company may terminate
the agreement at any time, by giving one month prior written notice. The agreement
provides that the success fees for securing M&amp;A transactions will be 3.5% of the
proceeds exchanged in such a transaction. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 51</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TD 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"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO 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>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 19: &#150; RELATED
PARTIES (Cont.) </FONT></H1>

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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
 payments  the  Company  paid  and  accrued  according  to the  Service  Agreement  with
              Cukierman &amp; Co. are: </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></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman" SIZE=1>Payments made in<BR>Year ended December 31,</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Accrued<BR>liability as<BR>of 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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></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>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2008</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="5%"> </TD>
     <TD WIDTH="47%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Business development</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>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 113</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  70</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>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 120</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  62</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>Success fee in respect of merger acquisitions</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>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>-</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>-</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" colspan=13><FONT FACE="Times New Roman" SIZE=2>Success fee in respect of issuance of</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>convertible loan</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>&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>120</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>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>&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>Success fee in respect of issuance of</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>investment in Summit</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>&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>28</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>&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>&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" colspan=13><FONT FACE="Times New Roman" SIZE=2>Success fee in respect of issuance of private</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>placements</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>120</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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="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></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>
     <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>Total</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 376</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 218</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 195</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  62</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>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></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>
*
Payment by 12,600 shares of the Company at a price of $2.28 per share (reflecting the
Company share price at the grant date). </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>
On
May 18, 2006 the shareholders approved a grant to Mr. Edouard Cukierman of 21,666
Ordinary Shares (for no consideration), and 233,876 options to purchase Ordinary Shares
of the Company, pursuant to the Company&#146;s 2003 Israeli Share Option Plan, at an
exercise price of $2.68. The options&#146; exercise price was equal to the average
closing price of the Company&#146;s shares on the Nasdaq Global Market on the 20 trading
days preceding the shareholders&#146; meeting date at which the grant was approved (the
&#147;Grant Date&#148;). The options vest in three equal parts on the first, second and
third anniversary of the Grant Date, and expire from May 2010 through May 2012. </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>
On
November 7, 2007 the shareholders approved the Agreement with Edouard Cukierman, the
Chairman of the Board, pursuant to which, Mr. Edouard Cukierman shall be granted options
(the &#147;Options&#148;) to purchase up to 100,000 Ordinary Shares of the Company per
each calendar year of service as the Company&#146;s Chairman of the Board of Directors
(the &#147;Service&#148;) in the years 2007-2010 (pro-rated for any part of the Calendar
year). The Options shall be in lieu of any compensation, fees or options otherwise
payable by the Company to Cukierman as a director. </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 shall vest on a quarterly basis. The exercise price of the Options is $2.385
which was equal to the weighted average of the closing prices of the Company&#146;s
Ordinary Shares on the Nasdaq Global Market during the thirty-day period preceding the
shareholders approval. Unexercised Options shall expire after five years from their
respective grant date. </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>
Pursuant
to the Agreement, if the Service is terminated by the Company for no Cause (as defined in
the Agreement) then: (i) any unvested Options shall be immediately vested in full as of
the date of the termination; (ii) the Company shall grant Cukierman such number of
Options amounting, together with Options previously granted, to 400,000 Options, and such
additional options shall be vested upon grant; and (iii) the Options shall be exercisable
for a period of twenty four (24) months from termination. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 52</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TD 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"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO 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>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 19: &#150; RELATED
PARTIES (Cont.) </FONT></H1>

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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>
If
the Service is terminated by Cukierman in circumstances not involving Cause, his vested
options shall be exercisable for six (6) months from the date of said termination. </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>
On
December 31, 2007 the Company entered into a Share Purchase Agreement with Catalyst Fund
L.P. (&#147;Catalyst&#148;) and three subsidiaries of D.S. Apex Holdings Ltd. (&#147;Apex&#148;),
under which the Company issued 833,560 Ordinary Shares at a price of $2.40 per share
(reflecting an aggregate investment of approximately $2 million), and 541,814 warrants at
exercise price of $2.76, exercisable for four years from their date of issuance. The
Company has paid 3% placement fees in cash to Apex and 6% in 25,007 Ordinary Shares to
Catalyst. The Company also entered into a Registration Rights Agreement pursuant to which
the Company shall prepare and file with the Securities and Exchange Commission a
registration statement covering the resale of the Ordinary Shares issued to the investors </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
payments the Company paid and accrued according to the Share Purchase Agreement are:  </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></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>Payments in Year ended<BR>
December 31,</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>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>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>&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>
     <TD WIDTH=5%> </TD>
     <TD WIDTH=55% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Catalyst</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% 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> 50</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>APEX</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</FONT></TD>
        <TD ALIGN=LEFT><FONT 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>
</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>* </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Payment
by 25,007 shares of the Company at a price of $1.90 per share (reflecting the Company
share price at the grant date).</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>On
January 30, 2009, New World Brands, Inc. and Qualmax, Inc. entered into a
               merger by which Qualmax Inc. merged with and into New World Brands, Inc.
and the                separate corporate existence of Qualmax Inc. ceased. As a result
BOS holds 15.6%                of the outstanding shares of New World Brands, Inc. </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>In
February 2009, the Company sold its OptimizeIT product and related IP in
               consideration for $70 plus contingent consideration based on future
revenues of                up to $1.5 million. . </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>c. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
March 2009, the Company entered into an agreement with Dimex Systems Ltd. and
               Dimex Hagalil Ltd. that revises the payment schedule of approximately NIS
10                million still owed by the Company under the Dimex Asset Purchase
Agreement dated                January 29, 2008. The aforementioned amount was payable in
three semi-annual                installments through March 2010. The amendment to the
agreement provides for a                NIS 3 million payment in March 2009, NIS 4
million will be paid in 6 equal                monthly installments each, starting on
January 15th, 2010, and the remaining                approximately NIS 2.5 million shall
be paid in two equal installments in March                and April 2010. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 53</font></p>
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<page>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TD 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"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTES TO 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>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTE 20: &#150; SUBSEQUENT
EVENTS (UNAUDITED) (Cont.) </FONT></H1>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
amendment further provides, that if the Company raises funds by way of a debt offering
meeting certain conditions, the last payment of approximately NIS 2.5 million shall be
converted into the same type of convertible debentures issued in the framework of such
offering, </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>d. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>


In February 2009, in order to
strengthen the BOS brand-name and as part of the Company group integration process, the
Company decided to implement name changes in its wholly owned subsidiaries. Lynk USA, Inc,
changed its name to BOS &#150; Supply Chain Solutions (Lynk) Inc. in March 2009 and the
following subsidiaries are in the process of the name change as follows:







</FONT></TD>
</TR>
</TABLE>
<BR>



<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>Previous Name</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>New Name</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>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="10%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="30%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Dimex Solutions Ltd.</FONT></TD>
     <TD WIDTH="60%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>BOS - RFID Solutions (Dimex) Ltd.</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>Odem Electronic Technologies 1992 Ltd.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>BOS - Supply Chain Solutions (Odem) Ltd.</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>Summit Radio Corp.</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>BOS - Supply Chain Solutions (Summit) Corp.</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>e. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On
February 11, 2009 the Company announced that it requested the Tel Aviv Stock
               Exchange (&#147;TASE&#148;) to delist its shares from trading in Tel Aviv.
Under                applicable Israeli law, the delisting will become effective in three
months from                the request, during such time the Company&#146;s ordinary
shares will continue                to trade on the TASE. The delisting of the Company&#146;s
ordinary shares from                trade on the TASE shall be effective on May 12, 2009.
The last day for trading                of the Company&#146;s ordinary shares on the TASE
is May 10, 2009. The delisting                of the ordinary shares from the TASE will
not affect the continued listing of                the ordinary shares on the Nasdaq
Global Market under the symbol BOSC. After the                delisting of the Company&#146;s
shares from the TASE, the Company will not be                subject to reporting
requirements in Israel. </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>f. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>



On March 23, 2009, the Company
and&nbsp;its Israeli subsidiaries executed&nbsp;revised loan&nbsp;documents, effective
December 31, 2008, governing the Company&#146;s and&nbsp;its Israeli subsidiaries&#146;
short term revolving credit line from&nbsp;Bank Leumi. In the revised and in the original
loan&nbsp;documents, the Company and its Israeli Subsidiaries undertook updated covenants
relating to, among other things,&nbsp;financial ratios&nbsp;of equity and EBIDTA, and
continue to provide Bank Leumi with various security interests and cross guarantees.&nbsp;
The loan terms continue to&nbsp;restrict substantial asset sales, cash dividends, and
certain inter-company and shareholders payments. The Company anticipate that it will meet
the covenants for year 2009.








</FONT></TD>
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<p align=center>
<font size=2>F - 54</font></p>
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end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.13
<SEQUENCE>5
<FILENAME>exhibit_4-13.htm
<TEXT>
<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        \\Backup\edgar filing\BOS better online solutions Ltd\96871\a96871.eep -->
     <!-- Control Number: 96871                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>






<HR WIDTH="100%" SIZE="4" NOSHADE STYLE="MARGIN-TOP: -5PX">
<HR WIDTH="100%" SIZE="1" NOSHADE STYLE="MARGIN-TOP: -10PX">

<P align=right><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 4.13</B></U> </FONT> </P>


<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="55%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="45%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><IMG SRC="img201.jpg" ALT="(CHASE LOGO)"></FONT></P>
 </TD>
 <TD VALIGN=MIDDLE><P ALIGN=RIGHT><FONT SIZE=2><B>Advised Line of Credit Note</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=2><B>$5,000,000.00</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=2><B>Date: May 8,
 2009 </B></FONT></P>
 </TD>
 </TR>
</TABLE>

<P><FONT SIZE=2><B>Promise to Pay.</B> On
or before September 30, 2009, for value received, BOS-Supply Chain Solutions
(Summit), Inc. (the &#147;Borrower&#148;) promises to pay to JPMorgan Chase Bank, N.A.,
whose address is 695 Route 46, 1st Floor, Fairfield, NJ 07004 (the &#147;Bank&#148;) or
order, in lawful money of the United States of America, the sum of Five Million
and 00/100 Dollars ($5,000,000.00) or so
much thereof as may be advanced and outstanding, plus interest on the
unpaid principal balance as provided below.</FONT></P>

<P><FONT SIZE=2><B>Interest Rate Definitions.</B>
As used in this Note, the following terms have the following respective
meanings:</FONT></P>

<P><FONT SIZE=2><B>&#147;Adjusted LIBOR Rate&#148;</B>
means, with respect to a LIBOR Rate Advance for the relevant Interest Period,
the sum of (i) the Applicable Margin plus (ii) the quotient of (a) the LIBOR
Rate applicable to such Interest Period, divided by (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Interest Period.</FONT></P>

<P><FONT SIZE=2><B>&#147;Adjusted One Month LIBOR Rate&#148;</B> means, with
respect to a CB Floating Rate Advance for any day, the sum of (i) 2.50% per
annum plus (ii) the quotient of (a) the interest rate determined by the Bank by
reference to the Page to be the rate at approximately 11:00 a.m. London time,
on such date or, if such date is not a Business Day, on the immediately
preceding Business Day for dollar deposits with a maturity equal to one (1)
month, divided by (b) one minus the Reserve Requirement (expressed as a
decimal) applicable to dollar deposits in the London interbank market with a
maturity equal to one (1) month.</FONT></P>

<P><FONT SIZE=2><B> &#147;Advance&#148;</B> means a
LIBOR Rate Advance or a CB Floating Rate Advance and <B>&#147;Advances&#148;</B> means all LIBOR Rate Advances and all CB Floating
Rate Advances under this Note.</FONT></P>

<P><FONT SIZE=2><B> &#147;Applicable Margin&#148;</B>
means with respect to any CB Floating Rate Advance, 0.00% per annum and with
respect to any LIBOR Rate Advance, 2.50% per annum.</FONT></P>

<P><FONT SIZE=2><B> &#147;Business Day&#148;</B> means
(i) with respect to the Adjusted One Month LIBOR Rate and any borrowing,
payment or rate selection of LIBOR Rate Advances, a day (other than a Saturday
or Sunday) on which banks generally are open in New Jersey and/or New York for
the conduct of substantially all of their commercial lending activities and on
which dealings in United States dollars are carried on in the London interbank
market and (ii) for all other purposes, a day other than a Saturday, Sunday or
any other day on which national banking associations are authorized to be
closed.</FONT></P>

<P><FONT SIZE=2><B>&#147;CB Floating Rate&#148;</B> means the Prime Rate; <I>provided</I> that the CB Floating Rate shall,
on any day, not be less than the Adjusted One Month LIBOR Rate. The CB Floating Rate is a variable rate and
any change in the CB Floating Rate due to any change in the Prime Rate or the
Adjusted One Month LIBOR Rate is effective from and including the effective
date of such change in the Prime Rate or the Adjusted One Month LIBOR Rate,
respectively.</FONT></P>

<P><FONT SIZE=2><B>&#147;CB Floating Rate Advance&#148;</B> means any
borrowing under this Note when and to the extent that its interest rate is
determined by reference to the CB Floating Rate.</FONT></P>

<P><FONT SIZE=2><B> &#147;Interest Period&#148;</B>
means, with respect to a LIBOR Rate Advance, a period of one (1), two (2) or
three (3) month(s) commencing on a Business Day selected by the Borrower
pursuant to this Note. Such Interest Period shall end on the day which corresponds
numerically to such date one (1), two (2) or three (3) month(s) thereafter, as
applicable, <I>provided, however,</I>
that if there is no such numerically corresponding day in such first, second or
third succeeding month(s), as applicable, such Interest Period shall end on the
last Business Day of such first, second or third succeeding month(s), as
applicable. If an Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall end on the next succeeding Business
Day, <I>provided, however,</I> that if
said next succeeding Business Day falls in a new calendar month, such Interest
Period shall end on the immediately preceding Business Day.</FONT></P>

<P><FONT SIZE=2><B> &#147;LIBOR Rate&#148;</B> means
with respect to any LIBOR Rate Advance for any Interest Period, the interest
rate determined by the Bank by reference to Reuters Screen LIBOR01, formerly
known as Page 3750 of the Moneyline Telerate Service (together with any
successor or substitute, the <B>&#147;Service&#148;</B>)
or any successor or substitute page of the Service, providing rate quotations
comparable to those currently provided on such page of the Service, as
determined by the Bank from time to time for purposes of providing quotations
of interest rates applicable to dollar deposits in the London interbank market)
(the <B>&#147;Page&#148;</B>) to be the rate at
approximately 11:00 a.m. London time, two Business Days prior to the
commencement of the Interest Period for dollar deposits with a maturity equal
to such Interest Period. If no LIBOR Rate is available to the Bank, the
applicable LIBOR Rate for the relevant Interest Period shall instead be the
rate determined by the Bank to be the rate at which the Bank offers to place
U.S. dollar deposits having a maturity equal to such Interest Period with
first-class banks in the London interbank market at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period.</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B> &#147;LIBOR Rate Advance&#148;</B>
means any borrowing under this Note when and to the extent that its interest
rate is determined by reference to the Adjusted LIBOR Rate.</FONT></P>

<P><FONT SIZE=2><B> &#147;Prime Rate&#148;</B> means
the rate of interest per annum announced from time to time by the Bank as its
prime rate. The Prime Rate is a variable rate and each change in the Prime Rate
is effective from and including the date the change is announced as being
effective. THE PRIME RATE IS A REFERENCE RATE AND MAY NOT BE THE BANK&#146;S LOWEST
RATE.</FONT></P>

<P><FONT SIZE=2><B> &#147;Principal Payment Date&#148; </B>is
defined in the paragraph entitled &#147;Principal Payments&#148; below.</FONT></P>

<P><FONT SIZE=2><B> &#147;Regulation D&#148;</B> means
Regulation D of the Board of Governors of the Federal Reserve System as from
time to time in effect and any successor thereto or other regulation or
official interpretation of said Board of Governors relating to reserve
requirements applicable to member banks of the Federal Reserve System.</FONT></P>

<P><FONT SIZE=2><B> &#147;Reserve Requirement&#148;</B>
means the maximum aggregate reserve requirement (including all basic,
supplemental, marginal and other reserves) which is imposed under Regulation D.</FONT></P>

<P><FONT SIZE=2><B>Interest Rates.</B> The
Advance(s) evidenced by this Note may be drawn down and remain outstanding as up
to five (5) LIBOR Rate Advances and/or a CB Floating Rate Advance. The Borrower
shall pay interest to the Bank on the outstanding and unpaid principal amount
of each CB Floating Rate Advance at the CB Floating Rate plus the Applicable
Margin and each LIBOR Rate Advance at the Adjusted LIBOR Rate. Interest shall
be calculated on the basis of the actual number of days elapsed in a year of
360 days. In no event shall the interest rate applicable to any Advance exceed
the maximum rate allowed by law. Any interest payment which would for any
reason be deemed unlawful under applicable law shall be applied to principal.</FONT></P>

<P><FONT SIZE=2><B>Bank Records.</B> The
Bank shall, in the ordinary course of business, make notations in its records
of the date, amount, interest rate and Interest Period of each Advance
hereunder, the amount of each payment on the Advances, and other information.
Such records shall, in the absence of manifest error, be conclusive as to the
outstanding principal balance of and interest rate or rates applicable to this
Note.</FONT></P>

<P><FONT SIZE=2><B>Notice and Manner of Electing Interest Rates
on Advances.</B> The Borrower shall give the Bank written
notice (effective upon receipt) of the Borrower&#146;s intent to draw down an
Advance under this Note no later than 2:00 p.m. Eastern time, on the date of
disbursement, if the full amount of the drawn Advance is to be disbursed as a
CB Floating Rate Advance and no later than 11:00 a.m. Eastern time three (3)
Business Days before disbursement, if any part of such Advance is to be
disbursed as a LIBOR Rate Advance. The Borrower&#146;s notice must specify: (a) the
disbursement date, (b) the amount of each Advance, (c) the type of each Advance
(CB Floating Rate Advance or LIBOR Rate Advance), and (d) for each LIBOR Rate
Advance, the duration of the applicable Interest Period;<I> provided</I>, <I>however</I>,
that the Borrower may not elect an Interest Period ending after the maturity
date of this Note. Each LIBOR Rate Advance shall be in a minimum amount
of Five Hundred Thousand and 00/100 Dollars ($500,000.00). All notices under this
paragraph are irrevocable. By the Bank&#146;s close of business on the disbursement
date and upon fulfillment of the conditions set forth herein and in any other
of the Related Documents, the Bank shall disburse the requested Advances in
immediately available funds by crediting the amount of such Advances to the
Borrower&#146;s account with the Bank.</FONT></P>

<P><FONT SIZE=2><B>Conversion and Renewals.</B>
The Borrower may elect from time to time to convert one type of Advance into
another or to renew any Advance by giving the Bank written notice no later than
2:00 p.m. Eastern time, on the date of the conversion into or renewal of a CB
Floating Rate Advance and 11:00 a.m. Eastern time three (3) Business Days
before conversion into or renewal of a LIBOR Rate Advance, specifying: (a) the
renewal or conversion date, (b) the amount of the Advance to be converted or
renewed, (c) in the case of conversion, the type of Advance to be converted
into (CB Floating Rate Advance or LIBOR Rate Advance), and (d) in the case of
renewals of or conversion into a LIBOR Rate Advance, the applicable Interest
Period, provided that (i) the minimum principal amount of each LIBOR Rate
Advance outstanding after a renewal or conversion shall be Five Hundred
Thousand and 00/100 Dollars ($500,000.00); (ii) a LIBOR Rate Advance can only
be converted on the last day of the Interest Period for the Advance; and (iii) the Borrower may not elect an Interest
Period ending after the maturity date of this Note. All notices given
under this paragraph are irrevocable. If the Borrower fails to give the Bank
the notice specified above for the renewal or conversion of a LIBOR Rate
Advance by 11:00 a.m. Eastern time three (3) Business Days before the end of
the Interest Period for that Advance, the Advance shall automatically be
converted to a CB Floating Rate Advance on the last day of the Interest Period
for the Advance.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>2</FONT></P>

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<P><FONT SIZE=2><B>Interest Payments.</B>
Interest on the Advances shall be paid as follows:</FONT></P>

<P><FONT SIZE=2>A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
each CB Floating Rate Advance, on the first day of each month beginning with
the first month following disbursement of the Advance or following conversion
of an Advance into a CB Floating Rate Advance, and at the maturity or
conversion of the Advance into a LIBOR Rate Advance;</FONT></P>

<P><FONT SIZE=2>B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
each LIBOR Rate Advance, on the last day of the Interest Period for the Advance
and, if the Interest Period is longer than three months, at three-month
intervals beginning with the day three months from the date the Advance is
disbursed.</FONT></P>

<P><FONT SIZE=2><B>Principal Payments.</B>
All outstanding principal and interest is due and payable in full on September
30, 2009, which is defined herein as the &#147;Principal Payment Date&#148;.</FONT></P>

<P><FONT SIZE=2><B>Default Rate of
Interest.</B> After a
default has occurred under this Note, whether or not the Bank elects to
accelerate the maturity of this Note because of such default, all Advances
outstanding under this Note, shall bear interest at a per annum rate equal to
the interest rate being charged on each such Advance plus three percent (3.00%)
from the date the Bank elects to impose such rate. Imposition of this rate
shall not affect any limitations contained in this Note on the Borrower&#146;s right
to repay principal on any LIBOR Rate Advance before the expiration of the Interest Period for each such Advance.</FONT></P>

<P><FONT SIZE=2><B>Prepayment/Funding Loss Indemnification.</B>
The Borrower may prepay all or any part of any CB Floating Rate Advance at any
time without premium or penalty.</FONT></P>

<P><FONT SIZE=2>The Borrower
shall pay the Bank amounts sufficient (in the Bank&#146;s reasonable opinion) to
compensate the Bank for any loss, cost, or expense incurred as a result of:</FONT></P>

<P><FONT SIZE=2>A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
payment of a LIBOR Rate Advance on a date other than the last day of the
Interest Period for the Advance, including, without limitation, acceleration of
the Advances by the Bank pursuant to this Note or the other Related Documents;
or</FONT></P>

<P><FONT SIZE=2>B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
failure by the Borrower to borrow or renew a LIBOR Rate Advance on the date
specified in the relevant notice from the Borrower to the Bank.</FONT></P>

<P><FONT SIZE=2><B>Additional Costs.</B> If
any applicable domestic or foreign law, treaty, government rule or regulation now
or later in effect (whether or not it now applies to the Bank) or the
interpretation or administration thereof by a governmental authority charged
with such interpretation or administration, or compliance by the Bank with any
guideline, request or directive of such an authority (whether or not having the
force of law), shall (a) affect the basis of taxation of payments to the Bank
of any amounts payable by the Borrower under this Note or the other Related
Documents (other than taxes imposed on the overall net income of the Bank by
the jurisdiction or by any political subdivision or taxing authority of the
jurisdiction in which the Bank has its principal office), or (b) impose, modify
or deem applicable any reserve, special deposit or similar requirement (including,
without limitation, Federal Deposit Insurance Corporation deposit insurance
premiums or assessments) against assets of, deposits with or for the account
of, or credit extended by the Bank, or (c) impose any other condition with
respect to this Note or the other Related Documents and the result of any of
the foregoing is to increase the cost to the Bank of extending, maintaining or
funding any LIBOR Rate Advance or to reduce the amount of any sum receivable by
the Bank on any Advance, or (d) affect the amount of capital required or
expected to be maintained by the Bank (or any corporation controlling the Bank)
and the Bank determines that the amount of such capital is increased by or
based upon the existence of the Bank&#146;s obligations under this Note or the other
Related Documents and the increase has the effect of reducing the rate of
return on the Bank&#146;s (or its controlling corporation&#146;s) capital as a
consequence of the obligations under this Note or the other Related Documents
to a level below that which the Bank (or its controlling corporation) could
have achieved but for such circumstances (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by the Bank to
be material, then the Borrower shall pay to the Bank, from time to time, upon
request by the Bank, additional amounts sufficient to compensate the Bank for
the increased cost or reduced sum receivable. Whenever the Bank shall learn of
circumstances described in this section which are likely to result in additional
costs to the Borrower, the Bank shall give prompt written notice to the
Borrower of the basis for and the estimated amount of any such anticipated
additional costs. A statement as to the amount of the increased cost or reduced
sum receivable, prepared in good faith and in reasonable detail by the Bank and
submitted by the Bank to the Borrower, shall be conclusive and binding for all
purposes absent manifest error in computation.</FONT></P>

<P><FONT SIZE=2><B>Illegality.</B> If any
applicable domestic or foreign law, treaty, rule or regulation now or later in
effect (whether or not it now applies to the Bank) or the interpretation or
administration thereof by a governmental authority charged with such
interpretation or administration, or compliance by the Bank with any guideline,
request or directive of such an authority (whether or not having the force of
law), shall make it unlawful or impossible for the Bank to maintain or fund the
LIBOR Rate Advances, then, upon notice to the Borrower by the Bank, the
outstanding principal amount of the LIBOR Rate Advances, together with accrued
interest and any other amounts payable to the Bank under this Note or the other
Related Documents on account of the LIBOR Rate Advances shall be repaid (a)
immediately upon the Bank&#146;s demand if such change or compliance with such
requests, in the Bank&#146;s judgment, requires immediate repayment, or (b) at the
expiration of the last Interest Period to expire before the effective date of
any such change or request provided, however, that subject to the terms and
conditions of this Note and the other Related Documents the Borrower shall be
entitled to simultaneously replace the entire outstanding balance of any LIBOR
Rate Advance repaid in accordance with this section with a CB Floating Rate
Advance in the same amount.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>3</FONT></P>


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<P><FONT SIZE=2><B>Inability to Determine Interest Rate.</B>
If the Bank determines that (a) quotations of interest rates for the relevant
deposits referred to in the definition of Adjusted LIBOR Rate are not being
provided for purposes of determining the interest rate on a LIBOR Rate Advance
as provided in this Note, or (b) the relevant interest rates referred to in the
definition of Adjusted LIBOR Rate do not accurately cover the cost to the Bank
of making, funding or maintaining LIBOR Rate Advances, then the Bank shall at
the Bank&#146;s option, give notice of such circumstances to the Borrower, whereupon
(i) the obligation of the Bank to make LIBOR Rate Advances shall be suspended
until the Bank notifies the Borrower that the circumstances giving rise to the
suspension no longer exists, and (ii) the Borrower shall repay in full the then
outstanding principal amount of each LIBOR Rate Advance, together with accrued
interest, on the last day of the then current Interest Period applicable to the
LIBOR Rate Advance, provided, however, that, subject to the terms and
conditions of this Note and the other Related Documents, the Borrower shall be
entitled to simultaneously replace the entire outstanding balance of any LIBOR
Rate Advance repaid in accordance with this section with an Advance bearing
interest at the CB Floating Rate plus the Applicable Margin for CB Floating
Rate Advances in the same amount. If the Bank determines on any day that
quotations of interest rates for the relevant deposits referred to in the
definition of Adjusted One Month LIBOR Rate are not being provided for purposes
of determining the interest rate on any CB Floating Rate Advance on any day,
then each CB Floating Rate Advance shall bear interest at the Prime Rate plus
the Applicable Margin for CB Floating Rate Advances until the Bank determines
that quotations of interest rates for the relevant deposits referred to in the
definition of Adjusted One Month LIBOR Rate are being provided.</FONT></P>

<P><FONT SIZE=2><B>Obligations Due on Non-Business Day.</B>
Whenever any payment under this Note becomes due and payable on a day that is
not a Business Day, if no default then exists under this Note, the maturity of
the payment shall be extended to the next succeeding Business Day, except, in
the case of a LIBOR Rate Advance, if the result of the extension would be to
extend the payment into another calendar month, the payment must be made on the
immediately preceding Business Day.</FONT></P>

<P><FONT SIZE=2><B>Matters Regarding Payment.</B>
The Borrower will pay the Bank at the Bank&#146;s address shown above or at such
other place as the Bank may designate. Payments shall be allocated among
principal, interest and fees at the discretion of the Bank unless otherwise
agreed or required by applicable law. Acceptance by the Bank of any payment
which is less than the payment due at the time shall not constitute a waiver of
the Bank&#146;s right to receive payment in full at that time or any other time.</FONT></P>

<P><FONT SIZE=2><B>Authorization for Direct Payments (ACH
Debits).</B> To effectuate any payment due under this Note
or under any other Related Documents, the Borrower hereby authorizes the Bank
to initiate debit entries to Account Number 117008443 at the Bank and to debit
the same to such account. This authorization to initiate debit entries shall
remain in full force and effect until the Bank has received written notification
of its termination in such time and in such manner as to afford the Bank a
reasonable opportunity to act on it. The Borrower represents that the Borrower
is and will be the owner of all funds in such account. The Borrower
acknowledges: (1) that such debit entries may cause an overdraft of such
account which may result in the Bank&#146;s refusal to honor items drawn on such
account until adequate deposits are made to such account; (2) that the Bank is
under no duty or obligation to initiate any debit entry for any purpose; and
(3) that if a debit is not made because the above-referenced account does not
have a sufficient available balance, or otherwise, the payment may be late or
past due.</FONT></P>

<P><FONT SIZE=2><B>Late Fee</B>. Any principal or interest which is not
paid within 10 days after its due date (whether as stated, by acceleration or
otherwise) shall be subject to a late payment charge of five percent (5.00%) of
the total payment due, in addition to the payment of interest, up to the
maximum amount of One Thousand Five Hundred and 00/100 Dollars ($1,500.00) per
late charge. The Borrower agrees to pay and stipulates that five percent
(5.00%) of the total payment due is a reasonable amount for a late payment
charge. The Borrower shall pay the
late payment charge upon demand by the Bank or, if billed, within the time
specified.</FONT></P>

<P><FONT SIZE=2><B>Purpose of Loan.</B> The
Borrower acknowledges and agrees that this Note evidences a loan for a
business, commercial, agricultural or similar commercial enterprise purpose,
and that no advance shall be used for any personal, family or household
purpose. The proceeds of the loan shall be used only for the Borrower&#146;s general
corporate purposes.</FONT></P>

<P><FONT SIZE=2><B>Uncommitted Line of Credit.</B>
<B>Uncommitted Line of Credit.</B> <B>The Bank has approved an uncommitted line of credit to
the Borrower in a principal amount not to exceed the lesser of (i) the
Borrowing Base; and (ii) $5,000,000.00. The line of credit is in the form of
advances made from time to time by the Bank in its sole and absolute discretion
to the Borrower. This Note evidences the Borrower&#146;s obligation to repay those
advances. Bank may refuse to make any loan at any time notwithstanding that no
event of default has occurred or exists or that Bank has made loans hereunder
under similar circumstances. Bank may, for any reason or no reason at all,
refuse to make any loan under this Note. The execution and delivery of this
Note and the acceptance by the Bank of this Note shall not be deemed or
construed to create any contractual commitment to lend by the Bank to the
Borrower.</B> The Borrower has executed and delivered this Note to
provide for the terms that must be met before Bank will consider making an
advance to Borrower and for ease of administering advances that Bank may in its
sole discretion make to Borrower. The aggregate outstanding principal amount of
debt evidenced by this Note is the amount so reflected from time to time in the
records of the Bank.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>4</FONT></P>


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<P><FONT SIZE=2><B>General Definitions. </B>As
used in this Note, the following terms have the following respective meanings:</FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="95%" VALIGN=TOP>
 <P >&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>1.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>&#147;Affiliate&#148;</B> means any Person which,
 directly or indirectly, Controls or is Controlled by or under common Control
 with, another Person, and any director or officer thereof. The Bank is under
 no circumstances to be deemed an Affiliate of the Borrower or any of its
 Subsidiaries.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>2.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>&#147;Borrowing Base&#148;</B> means the amount stated
 as the net available amount on the most recent Borrowing Base Certificate
 submitted by Borrower to Bank, subject to verification by the Bank and
 determination by the Bank at any time and calculated using the eligibility
 criteria, borrowing base factors, dollar ceilings for various components and
 any deductions specified in the Borrowing Base Certificate. The Bank may in
 its sole discretion decline to make an advance when requested even if net
 availability under the Borrowing Base then exists.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>3.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>&#147;Borrowing Base Certificate&#148;</B> means the
 report periodically submitted by the Borrower to the Bank in form acceptable
 to the Bank.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>4.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>&#147;Collateral&#148;</B> means all Property, now or in
 the future subject to any Lien in favor of the Bank, securing or intending to
 secure, any of the Liabilities.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>5.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>&#147;Control&#148;</B> as used with respect to any
 Person, means the power to direct or cause the direction of, the management
 and policies of that Person, directly or indirectly, whether through the
 ownership of Equity Interests, by contract, or otherwise. &#147;Controlling&#148; and
 &#147;Controlled&#148; have meanings correlative thereto.</FONT></P>
 </TD>
 </TR>

<TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>

 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>6.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>&#147;Equity Interests&#148;</B> means shares of capital
 stock, partnership interests, membership interests in a limited liability
 company, beneficial interests in a trust or other equity ownership interests
 in a Person, and any warrants, options or other rights entitling the holder
 thereof to purchase or acquire any such equity interest. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>7.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>&#147;GAAP&#148;</B> means generally accepted accounting
 principles in effect from time to time in the United States of America,
 consistently applied. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>8.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>&#147;Liabilities&#148;</B> means all debts,
 obligations, and liabilities of every
 kind and character of the Borrower, whether individual, joint and several,
 contingent or otherwise, now or hereafter existing in favor of the Bank, including
 without limitation, all liabilities, interest, costs and fees, arising under
 or from any note, open account, overdraft, credit card, lease, Rate
 Management Transaction, letter of credit application, endorsement, surety
 agreement, guaranty, acceptance, foreign exchange contract or depository
 service contract, whether payable to the Bank or to a third party and
 subsequently acquired by the Bank, any monetary obligations (including
 interest) incurred or accrued during the pendency of any bankruptcy,
 insolvency, receivership or other similar proceedings, regardless of whether
 allowed or allowable in such proceeding, and all renewals, extensions,
 modifications, consolidations, rearrangements, restatements, replacements or
 substitutions of any of the foregoing. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>9.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>&#147;Lien&#148;</B> means any mortgage, deed of trust,
 pledge, charge, encumbrance, security interest, collateral assignment or
 other lien or restriction of any kind.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>10.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>&#147;Obligor&#148;</B> means any Borrower, guarantor,
 surety, co-signer, endorser, general partner or other Person who may now or
 in the future be obligated to pay any of the Liabilities. </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>11.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>&#147;Person&#148;</B> means any individual,
 corporation, partnership, limited liability company, joint venture, joint
 stock association, association, bank, business trust, trust, unincorporated
 organization, any foreign governmental authority, the United States of
 America, any state of the United States and any political subdivision of any
 of the foregoing or any other form of entity.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>&#147;Pledgor&#148;</B> means any Person providing
 Collateral.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>13.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>&#147;Property&#148;</B> means any interest in any kind
 of property or asset, whether real, personal or mixed, tangible or
 intangible.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>14.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>&#147;Rate Management Transaction&#148;</B>
 means any transaction (including an agreement with respect thereto) that is a
 rate swap, basis swap, forward rate transaction, commodity swap, commodity
 option, equity or equity index swap, equity or equity index option, bond
 option, interest rate option, foreign exchange transaction, cap transaction,
 floor transaction, collar transaction, forward transaction, currency swap
 transaction, cross-currency rate swap transaction, currency option,
 derivative transaction or any other similar transaction (including any option
 with respect to any of these transactions) or any combination thereof,
 whether linked to one or more interest rates, foreign currencies, commodity
 prices, equity prices or other financial measures.</FONT></P>

</TD>
</TR>
</TABLE>
<P ALIGN=CENTER><FONT SIZE=2>5</FONT></P>


<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="95%" VALIGN=TOP>
 <P >&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>15.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>&#147;Related Documents&#148;</B> means this Note, all
 loan agreements, credit agreements, reimbursement agreements, security
 agreements, mortgages, deeds of trust, pledge agreements, assignments,
 guaranties, and any other instrument or document executed in connection with
 this Note or in connection with any of the Liabilities.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>16.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>&#147;Subsidiary&#148;</B> means, as to any particular
 Person (the &#147;parent&#148;), a Person the accounts of which would be consolidated
 with those of the parent in the parent&#146;s consolidated financial statements if
 such financial statements were prepared in accordance with GAAP as of the
 date of determination, as well as any other Person of which fifty percent
 (50%) or more of the Equity Interests is at the time of determination
 directly or indirectly owned, Controlled or held, by the parent or by any
 Person or Persons Controlled by the parent, either alone or together with the
 parent.</FONT></P>
 </TD>
 </TR>
</TABLE>

<P><FONT SIZE=2><B>Financial Reports.</B>
Furnish to the Bank whatever information, statements, books and records the
Bank may from time to time reasonably request, including at a minimum:</FONT></P>

<P><FONT SIZE=2><B>A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Within
forty-five (45) days after each quarterly period, the consolidated financial
statements of the Borrower and its Subsidiaries prepared and presented in
accordance with GAAP, including a balance sheet as of the end of that period, and
income statement for that period, and, if requested at any time by the Bank,
statements of cash flow and retained earnings for that period, all certified as
correct by one of its authorized agents.</FONT></P>

<P><FONT SIZE=2><B>B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Within one
hundred and twenty (120) days after and as of the end of each of its fiscal
years, the consolidated financial statements of the Borrower and its Subsidiaries
prepared and presented in accordance with GAAP, including a balance sheet and
statements of income, cash flow and retained earnings, such financial
statements to be audited by an independent certified public accountant of
recognized standing satisfactory to the Bank.</FONT></P>

<P><FONT SIZE=2><B>C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Within
thirty (30) days after and as of the end of each calendar month, the following
lists, each certified as correct by one of its authorized agents:</FONT></P>

<P STYLE='MARGIN-RIGHT:0IN; MARGIN-LEFT:1.0IN; '><FONT SIZE=2><B>(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>a
list of Accounts, aged from date of invoice, and<BR><B>(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>a
list of Inventory, valued at the lower of cost (determined using the first-in,
first-out method of inventory accounting) or wholesale market value.</FONT></P>

<P><FONT SIZE=2><B>D.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Within one
hundred and twenty (120) days after and as of the end of each fiscal year of
BOS &#150; Supply Chain Solutions (Lynk) Inc., the consolidated financial statements
of BOS &#150; Supply Chain Solutions (Lynk) Inc. and its Subsidiaries prepared and
presented in accordance with GAAP, including a balance sheet and statements of
income, cash flow and retained earnings, such financial statements to be
audited by an independent certified
public accountant of recognized standing satisfactory to the Bank.</FONT></P>

<P><FONT SIZE=2><B>E.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>A Borrowing
Base Certificate, along with such supporting documentation as the Bank may
request, at the following times: (A)
within thirty (30) days after and as of the end of each calendar month in which
there was an outstanding advance of principal under this Note on the last day
of such month, and (B) if no Borrowing Base Certificate has been provided or is
otherwise due as of the end of the immediately preceding month, with any
request for an advance under this uncommitted advised line of credit.</FONT></P>

<P><FONT SIZE=2><B>Bank&#146;s Right of Setoff.</B>
The Borrower grants to the Bank a security interest in the Deposits, and the
Bank is authorized to setoff and apply, all Deposits, Securities and Other
Property, and Bank Debt against any and all Liabilities. This right of setoff
may be exercised at any time and from time to time after the occurrence of any
default, without prior notice to or demand on the Borrower and regardless of
whether any Liabilities are contingent, unmatured or unliquidated. In this
paragraph: (a) the term &#147;Deposits&#148; means any and all accounts and deposits of
the Borrower (whether general, special, time, demand, provisional or final) at
any time held by the Bank (including all Deposits held jointly with another,
but excluding any IRA or Keogh Deposits, or any trust Deposits in which a
security interest would be prohibited by law); (b) the term &#147;Securities and
Other Property&#148; means any and all securities and other personal property of the
Borrower in the custody, possession or control of the Bank, JPMorgan Chase &amp;
Co. or their respective Subsidiaries and Affiliates (other than Property held
by the Bank in a fiduciary capacity); and (c) the term &#147;Bank Debt&#148; means all
indebtedness at any time owing by the Bank, to or for the credit or account of
the Borrower and any claim of the Borrower (whether individual, joint and
several or otherwise) against the Bank now or hereafter existing.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>6</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>Representations by Borrower.</B>
The Borrower represents and warrants that each of the following is and will
remain true and correct until the later of maturity or the date on which all
Liabilities evidenced by this Note are paid in full: (a) the execution and
delivery of this Note and the performance of the obligations it imposes do not
violate any law, conflict with any agreement by which it is bound, or require
the consent or approval of any other Person; (b) this Note is a valid and
binding agreement of the Borrower, enforceable according to its terms, except
as may be limited by bankruptcy, insolvency or other laws affecting the
enforcement of creditor&#146;s rights generally and by general principles of equity;
(c) all balance sheets, profit and loss statements, other financial statements
and applications for credit furnished to the Bank in connection with the
Liabilities are accurate and fairly reflect the financial condition of the
Persons to which they apply on their effective dates, including contingent
liabilities of every type, which financial condition has not materially and
adversely changed since those dates; and, if the Borrower is not a natural
Person: (i) it is duly organized, validly existing and in good standing under
the laws of the state where it is organized and in good standing in each state
where it is doing business; and (ii) the execution and delivery of this Note
and the performance of the obligations it imposes (A) are within its powers and
have been duly authorized by all necessary action of its governing body, and
(B) do not contravene the terms of its articles of incorporation or
organization, its by-laws, regulations or any partnership, operating or other
agreement governing its organization and affairs.</FONT></P>

<P><FONT SIZE=2><B>Events of Default/Acceleration.</B>
If any of the following events occurs, this Note shall become due immediately,
without notice, at the Bank&#146;s option:</FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="95%" VALIGN=TOP>
 <P >&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>1.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Any Obligor
 fails to pay when due any of the Liabilities or any other debt to any Person,
 or any amount payable with respect to any of the Liabilities, or under this
 Note, any other Related Document, or any agreement or instrument evidencing
 other debt to any Person.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>2.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Any Obligor
 or any Pledgor: (a) fails to observe or perform or otherwise violates any
 other term, covenant, condition or agreement of any of the Related Documents;
 (b) makes any materially incorrect or misleading representation, warranty, or
 certificate to the Bank; (c) makes any materially incorrect or misleading
 representation in any financial statement or other information delivered to
 the Bank; or (d) defaults under the terms of any agreement or instrument
 relating to any debt for borrowed money (other than the debt evidenced by the
 Related Documents) and the effect of such default will allow the creditor to
 declare the debt due before its stated maturity.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>3.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>In the event
 (a) there is a default under the terms of any Related Document, (b) any
 Obligor terminates or revokes or purports to terminate or revoke its guaranty
 or any Obligor&#146;s guaranty becomes unenforceable in whole or in part, (c) any
 Obligor fails to perform promptly under its guaranty, or (d) any Obligor
 fails to comply with, or perform under any agreement, now or hereafter in
 effect, between the Obligor and the Bank,
 or any Affiliate of the Bank or their respective successors and assigns.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>4.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>There is any
 loss, theft, damage, or destruction of any Collateral not covered by
 insurance.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>5.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Any event
 occurs that would permit the Pension Benefit Guaranty Corporation to
 terminate any employee benefit plan of any Obligor or any Subsidiary of any
 Obligor.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>6.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Any Obligor
 or any of its Subsidiaries or any Pledgor: (a) becomes insolvent or unable to
 pay its debts as they become due; (b) makes an assignment for the benefit of
 creditors; (c) consents to the appointment of a custodian, receiver, or
 trustee for itself or for a substantial part of its Property; (d) commences
 any proceeding under any bankruptcy, reorganization, liquidation, insolvency
 or similar laws; (e) conceals or removes any of its Property, with intent to
 hinder, delay or defraud any of its creditors; (f) makes or permits a
 transfer of any of its Property, which may be fraudulent under any
 bankruptcy, fraudulent conveyance or similar law; or (g) makes a transfer of
 any of its Property to or for the benefit of a creditor at a time when other
 creditors similarly situated have not been paid.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>7.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>A custodian,
 receiver, or trustee is appointed for any Obligor or any of its Subsidiaries
 or any Pledgor or for a substantial part of their respective Property.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>8.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Any Obligor
 or any of its Subsidiaries, without the Bank&#146;s written consent: (a)
 liquidates or is dissolved; (b) merges or consolidates with any other Person;
 (c) leases, sells or otherwise conveys a material part of its assets or
 business outside the ordinary course of its business; (d) leases, purchases,
 or otherwise acquires a material part of the assets of any other Person,
 except in the ordinary course of its business; or (e) agrees to do any of the
 foregoing; provided, however, that any Subsidiary of an Obligor may merge or
 consolidate with any other Subsidiary of that Obligor, or with the Obligor,
 so long as the Obligor is the survivor.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>9.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Proceedings
 are commenced under any bankruptcy, reorganization, liquidation, or similar
 laws against any Obligor or any of its Subsidiaries or any Pledgor and remain
 undismissed for thirty (30) days after commencement; or any Obligor or any of
 its Subsidiaries or any Pledgor consents to the commencement of those
 proceedings.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>10.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Any judgment
 is entered against any Obligor or any of its Subsidiaries, or any attachment,
 seizure, sequestration, levy, or garnishment is issued against any Property
 of any Obligor or any of its Subsidiaries or of any Pledgor or any
 Collateral.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>11.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Any
 individual Obligor or Pledgor dies, or a guardian or conservator is appointed
 for any individual Obligor or Pledgor or all or any portion of their
 respective Property, or the Collateral.</FONT></P>
 </TD>
 </TR>


 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Any material
 adverse change occurs in: (a) the reputation, Property, financial condition,
 business, assets, affairs, prospects, liabilities, or operations of any
 Obligor or any of its Subsidiaries; (b) any Obligor&#146;s or Pledgor&#146;s ability to
 perform its obligations under the Related Documents; or (c) the Collateral. </FONT></P>
 </TD>
 </TR>
</TABLE>


<P ALIGN=CENTER><FONT SIZE=2>7</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>


<P><FONT SIZE=2><B>Remedies.</B> If this
Note is not paid at maturity, whether by acceleration or otherwise, the Bank
shall have all of the rights and remedies provided by any law or agreement, in
equity or otherwise. The Bank is authorized to cause all or any part of the
Collateral to be transferred to or registered in its name or in the name of any
other Person, with or without designating the capacity of that nominee. Without
limiting any other available remedy, the Borrower is liable for any deficiency
remaining after disposition of any Collateral. The Borrower is liable to the
Bank for all reasonable costs and expenses of every kind incurred (or charged
by internal allocation) in connection with the negotiation, preparation,
execution, filing, recording, modification, supplementing and waiver of this
Note or the other Related Documents and the making, servicing and collection of
this Note or the other Related Documents and any other amounts owed under this
Note or the other Related Documents, including without limitation reasonable
attorneys&#146; fees and court costs. These costs and expenses include without
limitation any costs or expenses incurred by the Bank in any bankruptcy,
reorganization, insolvency or other similar proceeding.</FONT></P>

<P><FONT SIZE=2><B>Waivers.</B> Each
Obligor waives: (a) to the extent not prohibited by law, all rights and
benefits under any laws or statutes regarding sureties, as may be amended; (b)
any right to receive notice of the following matters before the Bank enforces
any of its rights: (i) the Bank&#146;s acceptance of this Note, (ii) any credit that
the Bank extends to the Borrower, (iii) the Borrower&#146;s default, (iv) any
demand, diligence, presentment, dishonor and protest, or (v) any action that the
Bank takes regarding the Borrower, anyone else, any Collateral, or any of the
Liabilities, that it might be entitled to by law, under any other agreement, in
equity or otherwise; (c) any right to require the Bank to proceed against the
Borrower, any other Obligor, or any Collateral, or pursue any remedy in the
Bank&#146;s power to pursue; (d) any defense based on any claim that any endorser&#146;s
or other Obligor&#146;s obligations exceed or are more burdensome than those of the
Borrower; (e) the benefit of any statute of limitations affecting liability of
any endorser or other Obligor or the enforcement hereof; (f) any defense
arising by reason of any disability or other defense of the Borrower or by
reason of the cessation from any cause whatsoever (other than payment in full)
of the obligation of the Borrower for the Liabilities; and (g) any defense
based on or arising out of any defense that the Borrower may have to the
payment or performance of the Liabilities or any portion thereof. Each Obligor
consents to any extension or postponement of time of its payment without limit
as to the number or period, to any substitution, exchange or release of all or
any part of the Collateral, to the addition of any other Person, and to the
release or discharge of, or suspension of any rights and remedies against, any
Obligor. The Bank may waive or delay enforcing any of its rights without losing
them. Any waiver affects only the specific terms and time period stated in the
waiver. No modification or waiver of any provision of this Note is effective
unless it is in writing and signed by the Person against whom it is being
enforced. </FONT></P>

<P><FONT SIZE=2><B>Cooperation</B>. The
Borrower agrees to fully cooperate with the Bank and not to delay, impede or
otherwise interfere with the efforts of the Bank to secure payment from the
Collateral including actions, proceedings, motions, orders, agreements or other
matters relating to relief from automatic stay, abandonment of Property, use of
cash Collateral and sale of the Collateral free and clear of all Liens.</FONT></P>

<P><FONT SIZE=2><B>Rights of Subrogation.</B>
Each Obligor waives and agrees not to enforce any rights of subrogation,
contribution or indemnification that it may have against the Borrower, any
other Obligor, or the Collateral, until the Borrower and such Obligor have
fully performed all their obligations to the Bank, even if those obligations
are not covered by this Note.</FONT></P>

<P><FONT SIZE=2><B>Reinstatement.</B> The
Borrower agrees that to the extent any payment or transfer is received by the
Bank in connection with the Liabilities evidenced by this Note, and all or any
part of the payment or transfer is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be transferred or repaid
by the Bank or transferred or paid over to a trustee, receiver or any other
Person, whether under any bankruptcy act or otherwise (any of those payments or
transfers is hereinafter referred to as a &#147;Preferential Payment&#148;), then this
Note shall continue to be effective or shall be reinstated, as the case may be,
even if all those Liabilities have been paid in full and whether or not the
Bank is in possession of this Note, or whether the Note has been marked paid,
released or canceled, or returned to the Borrower and, to the extent of the
payment, repayment or other transfer by the Bank, the Liabilities or part
intended to be satisfied by the Preferential Payment shall be revived and
continued in full force and effect as if the Preferential Payment had not been
made.</FONT></P>

<P><FONT SIZE=2><B>Governing Law and Venue.</B>
This Note shall be governed by and construed in accordance with the laws of the
State of New Jersey (without giving effect to its laws of conflicts). The
Borrower agrees that any legal action or proceeding with respect to any of its
obligations under this Note may be brought by the Bank in any state or federal court
located in the State of New Jersey, as the Bank in its sole discretion may
elect. By the execution and delivery of this Note, the Borrower submits to and
accepts, for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of those courts. The Borrower
waives any claim that the State of New Jersey is not a convenient forum or the
proper venue for any such suit, action or proceeding. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>8</FONT></P>


<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>Miscellaneous.</B> If
more than one Borrower executes this Note: (i) each Borrower is liable jointly
and severally for the Liabilities evidenced by this Note; (ii) the term
&#147;Borrower&#148; means any one or more of them; and (iii) the receipt of value by any
one of them constitutes the receipt of value by the others. This Note binds the
Borrower and its successors, and benefits the Bank, its successors and assigns.
Any reference to the Bank includes any holder of this Note. Section headings
are for convenience of reference only and do not affect the interpretation of
this Note. Any notices and demands under or related to this Note shall be in
writing and delivered to the intended party at its address stated herein, and
if to the Bank, at its main office if no other address of the Bank is specified
herein, by one of the following means: (a) by hand; (b) by a nationally
recognized overnight courier service; or (c) by certified mail, postage
prepaid, with return receipt requested. Notice shall be deemed given: (a) upon
receipt if delivered by hand; (b) on the Delivery Day after the day of deposit
with a nationally recognized courier service; or (c) on the third Delivery Day
after the notice is deposited in the mail. &#147;Delivery Day&#148; means a day other
than a Saturday, a Sunday, or any other day on which national banking
associations are authorized to be closed. Any party may change its address for
purposes of the receipt of notices and demands by giving notice of such change
in the manner provided in this provision. This Note and the other Related
Documents embody the entire agreement between the Borrower and the Bank
regarding the terms of the loan evidenced by this Note and supercede all oral
statements and prior writings relating to that loan. No delay on the part of
the Bank in the exercise of any right or remedy waives that right or remedy. No
single or partial exercise by the Bank of any right or remedy precludes any
other future exercise of it or the exercise of any other right or remedy. No
waiver or indulgence by the Bank of any default is effective unless it is in
writing and signed by the Bank, nor shall a waiver on one occasion bar or waive
that right on any future occasion. The rights of the Bank under this Note and
the other Related Documents are in addition to other rights (including without
limitation, other rights of setoff) the Bank may have contractually, by law, in
equity or otherwise, all of which are cumulative and hereby retained by the
Bank. If any provision of this Note cannot be enforced, the remaining portions
of this Note shall continue in effect. The Borrower agrees that the Bank may
provide any information or knowledge the Bank may have about the Borrower or
about any matter relating to this Note or the Related Documents to JPMorgan Chase &amp; Co., or any of its
Subsidiaries or Affiliates or their successors, or to any one or more
purchasers or potential purchasers of this Note or the Related Documents. The Borrower agrees that the Bank may at any time
sell, assign or transfer one or more interests or participations in all or any
part of its rights and obligations in this Note to one or more purchasers
whether or not related to the Bank. </FONT></P>

<P><FONT SIZE=2><B>Government Regulation</B>.
The Borrower shall not (a) be or
become subject at any time to any law, regulation, or list of any government
agency (including, without limitation, the U.S. Office of Foreign Asset Control
list) that prohibits or limits the Bank from making any advance or extension of
credit to the Borrower or from
otherwise conducting business with the
Borrower, or (b) fail to provide documentary and other evidence of the Borrower&#146;s identity as may be
requested by the Bank at any time to enable the Bank to verify the Borrower&#146;s identity or to comply with
any applicable law or regulation, including, without limitation, Section 326 of
the USA Patriot Act of 2001, 31 U.S.C. Section 5318.</FONT></P>

<P><FONT SIZE=2><B>USA PATRIOT ACT NOTIFICATION</B>.
The following notification is provided to the
Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31
U.S.C. Section 5318:</FONT></P>

<P><FONT SIZE=2>IMPORTANT
INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government
fight the funding of terrorism and money laundering activities, Federal law
requires all financial institutions to obtain, verify, and record information
that identifies each Person that opens an account, including any deposit
account, treasury management account, loan, other extension of credit, or other
financial services product. What this means for the Borrower: When the
Borrower opens an account, if the
Borrower is an individual, the Bank will ask for the Borrower&#146;s name, taxpayer identification number, residential
address, date of birth, and other information that will allow the Bank to
identify the Borrower, and if the Borrower is not an individual, the
Bank will ask for the Borrower&#146;s
name, taxpayer identification number, business address, and other information
that will allow the Bank to identify the
Borrower. The Bank may also ask, if the
Borrower is an individual, to see the
Borrower&#146;s driver&#146;s license or other identifying documents, and if the Borrower is not an individual, to see the Borrower&#146;s legal organizational
documents or other identifying documents.</FONT></P>

<P><FONT SIZE=2><B>WAIVER OF SPECIAL DAMAGES.</B>
THE BORROWER WAIVES, TO THE <B>MAXIMUM</B>
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR
RECOVER FROM THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES. </FONT></P>

<P><FONT SIZE=2><B>JURY WAIVER.</B> THE
BORROWER AND THE BANK (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY,
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) BETWEEN
THE BORROWER AND THE BANK ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE OR
THE OTHER RELATED DOCUMENTS. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE
BANK TO PROVIDE THE FINANCING EVIDENCED BY THIS NOTE. </FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="9%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="41%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="30%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="15%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>

 <TD VALIGN=TOP colspan=2>
 <P><FONT SIZE=2><B>Borrower:</B></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Address:</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>1008 Teaneck
 Road</FONT></P>
 </TD>

 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=2>BOS-Supply
 Chain Solutions (Summit), Inc.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Teaneck, NJ
 07666</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>By:</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=TOP>

 <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>

 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=TOP>

 <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>

 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>Printed Name</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=1>Title</FONT></P>
 </TD>
 </TR>
</TABLE>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
 <TD WIDTH="50%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="11%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="39%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM NOWRAP>
 <P><FONT SIZE=2>Date Signed:</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>

<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>

 </TD>
 </TR>
</TABLE>
<P ALIGN=CENTER><FONT SIZE=2>9</FONT></P>


<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="52%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="47%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><IMG SRC="img201.jpg" ALT="(CHASE LOGO)"></FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2><B>Continuing Security Agreement</B></FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="20%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="80%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>Name of Debtor:</B></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>BOS-Supply Chain Solutions (Summit), Inc. </B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>Debtor&#146;s Address:</B></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>1008 Teaneck Road, Teaneck, NJ 07666</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>Tax Payer&#146;s ID:</B></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><B>22-1911284</B></FONT></P>
 </TD>
 </TR>
</TABLE>

<P><FONT SIZE=2>Dated as of May 8, 2009</FONT></P>

<P><FONT SIZE=2><B>Grant of Security Interest. </B>BOS-Supply
Chain Solutions (Summit), Inc. (whether one or more, the &#147;Debtor&#148;, individually
and collectively if more than one) grants to JPMorgan Chase Bank, N.A., whose
address is 695 Route 46, 1st Floor, Fairfield, NJ 07004 (together with its
successors and assigns, the &#147;Bank&#148;) a continuing security interest in, pledges
and assigns to the Bank all of the &#147;Collateral&#148; (as hereinafter defined) owned
by the Debtor, all of the collateral in which the Debtor has rights or power to
transfer rights and all Collateral in which the Debtor later acquires
ownership, other rights or rights or power to transfer rights to secure the
payment and performance of the Liabilities.</FONT></P>

<P><FONT SIZE=2><B>Borrower.</B> &#147;Borrower&#148; means each and all of BOS-Supply
Chain Solutions (Summit), Inc.</FONT></P>

<P><FONT SIZE=2><B>Liabilities.</B>
&#147;Liabilities&#148; means all obligations, indebtedness and liabilities of the Borrower whether individual, joint and several,
absolute or contingent, direct or indirect, liquidated or unliquidated, now or
hereafter existing in favor of the Bank,
including without limitation, all liabilities, all interest, costs and fees
arising under or from any note, open account, overdraft, letter of credit
application, endorsement, surety agreement, guaranty, credit card, lease, Rate
Management Transaction, acceptance, foreign exchange contract or depository
service contract, whether payable to the Bank or to a third party and
subsequently acquired by the Bank, any monetary obligations (including
interest) incurred or accrued during the pendency of any bankruptcy,
insolvency, receivership or other similar proceedings, regardless of whether
allowed or allowable in such proceeding, and all renewals, extensions,
modifications, consolidations, rearrangements, restatements, replacements or
substitutions of any of the foregoing. &#147;Rate
Management Transaction&#148; means any transaction (including an agreement with
respect thereto) that is a rate swap, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap, equity or equity
index option, bond option, interest rate option, foreign exchange transaction,
cap transaction, floor transaction, collar transaction, forward transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option, derivative transaction or any other similar transaction (including any
option with respect to any of these transactions) or any combination thereof,
whether linked to one or more interest rates, foreign currencies, commodity
prices, equity prices or other financial measures. The Debtor and the Bank
specifically contemplate that Liabilities include indebtedness hereafter
incurred by the Borrower to the Bank.</FONT></P>

<P><FONT SIZE=2><B>Collateral.</B>
Accounts; Chattel Paper; Deposit Accounts and other payment obligations of a
financial institution (including the Bank); Documents; Equipment; General
Intangibles; Instruments; Inventory; Investment Property; and Letter of Credit
Rights. </FONT></P>

<P><FONT SIZE=2><B>Description of Collateral.</B>
As used in this agreement, the term &#147;Collateral&#148; means all of the Debtor&#146;s
property whether owned individually or jointly with others of the types
indicated above and defined below, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located, including but
not limited to any items listed on any schedule or list attached hereto. In
addition, the term &#147;Collateral&#148; includes all &#147;proceeds,&#148; &#147;products&#148; and
&#147;supporting obligations&#148; (as such terms are defined in the &#147;UCC,&#148; meaning the
Uniform Commercial Code of New Jersey, as in effect from time to time) of the
Collateral indicated above, including but not limited to all stock rights,
subscription rights, dividends, stock dividends, stock splits, or liquidating
dividends, and all cash, accounts, chattel paper, &#147;instruments,&#148; &#147;investment
property,&#148; &#147;financial assets,&#148; and &#147;general intangibles&#148; (as such terms are
defined in the UCC) arising from the sale, rent, lease, casualty loss or other
disposition of the Collateral, and any Collateral returned to, repossessed by
or stopped in transit by the Debtor, and all insurance claims relating to any
of the Collateral (defined above). The term &#147;Collateral&#148; further includes all
of the Debtor&#146;s right, title and interest in and to all books, records and data
relating to the Collateral identified above, regardless of the form of media
containing such information or data, and all software necessary or desirable to
use any of the Collateral identified above or to access, retrieve, or process
any of such information or data. Where the Collateral is in the possession of
the Bank or the Bank&#146;s agent, the Debtor agrees to deliver to the Bank any
property that represents an increase in the Collateral or profits or proceeds
of the Collateral.</FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="95%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>1.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&#147;Accounts&#148; means all of the Debtor&#146;s &#147;accounts&#148; as defined in Article
 9 of the UCC.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>2.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&#147;Chattel Paper&#148; means all of the Debtor&#146;s &#147;chattel paper&#148; as defined
 in Article 9 of the UCC.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>3.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&#147;Deposit
 Accounts&#148; means all of the Debtor&#146;s &#147;deposit accounts&#148; as defined in Article
 9 of the UCC and other payment obligations of a financial institution
 (including the Bank) to the Debtor.</FONT></P>
 </TD>
 </TR>
</TABLE>

<BR>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>


<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="95%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>4.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&#147;Documents&#148; means all of the Debtor&#146;s &#147;documents&#148; as defined in
 Article 9 of the UCC.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>5.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&#147;Equipment&#148;
 means all of the Debtor&#146;s &#147;equipment&#148; as defined in Article 9 of the UCC. In
 addition, &#147;Equipment&#148; includes any &#147;documents&#148; (as defined in Article 9 of
 the UCC) issued with respect to any of the Debtor&#146;s &#147;equipment&#148; (as defined
 in Article 9 of the UCC) and certificates of title relating to the foregoing.
 Without limiting the security interest granted, the Debtor represents and
 warrants that the Debtor&#146;s Equipment is presently located at the address set
 forth in this agreement or in a separate Collateral Location Schedule
 delivered to the Bank.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>6.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&#147;General
 Intangibles&#148; means all of the Debtor&#146;s &#147;general intangibles&#148; as defined in
 Article 9 of the UCC. In addition, &#147;General Intangibles&#148; further includes any
 right to a refund of taxes paid at any time to any governmental entity.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>7.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&#147;Instruments&#148; means all of the Debtor&#146;s &#147;instruments&#148; as defined in
 Article 9 of the UCC.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>8.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&#147;Inventory&#148;
 means all of the Debtor&#146;s &#147;inventory&#148; as defined in Article 9 of the UCC. In
 addition, &#147;Inventory&#148; includes any &#147;documents&#148; and certificates of title
 issued with respect to any of the Debtor&#146;s &#147;inventory&#148; (as defined in Article
 9 of the UCC). Without limiting the security interest granted, the Debtor
 represents and warrants that the Debtor&#146;s Inventory is presently located at
 the address set forth in this agreement or in a separate Collateral Location
 Schedule delivered to the Bank.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>9.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&#147;Investment
 Property&#148; means all of the Debtor&#146;s &#147;investment property&#148; as defined in
 Article 9 of the UCC and all of the Debtor&#146;s &#147;financial assets,&#148; as defined
 in Article 8 of the UCC.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>10.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>&#147;Letter of
 Credit Rights&#148; means all of the Debtor&#146;s &#147;letter of credit rights&#148; as defined
 in Article 9 of the UCC.</FONT></P>
 </TD>
 </TR>
</TABLE>

<P><FONT SIZE=2><B>Collateral Location Schedule</B>.
&#147;Collateral Location Schedule&#148; means a schedule in the form attached to this
agreement. The Debtor agrees to complete, execute and deliver a Collateral
Location Schedule to the Bank with respect to any Collateral for which the
Debtor has identified a location in this agreement: (i) concurrently with the
execution of this agreement, if the initial location of the Collateral is other
than the address of the Debtor set forth above; and (ii) within ten (10) days
prior to the relocation of any Collateral to any place other than the address
of the Debtor set forth above or the location identified in any previously
submitted Collateral Location Schedule. </FONT></P>

<P><FONT SIZE=2><B>Representations, Warranties and Covenants. </B>The
Debtor represents and warrants to, and covenants and agrees with the Bank that
each of the following is true and will remain true until termination of this
agreement and full and final payment of all Liabilities:</FONT>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="95%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>1.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Its
 principal residence or chief executive office is at the address shown above;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>2.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>The Debtor&#146;s
 name as it appears in this agreement is its exact name as it appears in the
 Debtor&#146;s organizational documents, as amended, including any trust documents;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>3.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>It is or
 will become the owner of the Collateral free from any liens, encumbrances or
 security interests, except for this security interest and existing liens
 disclosed to and accepted by the Bank in writing, and it will defend the
 Collateral against all claims and demands of all persons at any time claiming
 any interest in the Collateral;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>4.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>It will keep
 the Collateral free of liens, encumbrances and other security interests,
 except for this security interest, maintain the Collateral in good repair,
 not use it illegally and exhibit the Collateral to the Bank on demand;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>5.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>At its own
 expense, the Debtor will maintain comprehensive casualty insurance on the
 Collateral against such risks, in such amounts, with such deductibles and
 with such companies as may be satisfactory to the Bank. Each insurance policy
 shall contain a lender&#146;s loss payable endorsement in form and substance
 satisfactory to the Bank and a prohibition against cancellation or amendment
 of the policy or removal of the Bank as loss payee without at least thirty
 (30) days&#146; prior written notice to the Bank. In all events, the amounts of
 such insurance coverages shall conform to prudent business practices and
 shall be in such minimum amounts that the Debtor will not be deemed a
 co-insurer. The policies and certificates evidencing them, shall, if the Bank
 so requests, be deposited with the Bank. The Debtor authorizes the Bank to
 endorse on the Debtor&#146;s behalf and to negotiate drafts reflecting proceeds of
 insurance of the Collateral, provided that the Bank shall remit to the Debtor
 such surplus, if any, as remains after the proceeds have been applied, at the
 Bank&#146;s option, to the satisfaction of all of the Liabilities (in such order
 of application as the Bank may elect) or to the establishment of a cash
 collateral account for the Liabilities;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>6.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>It will not
 sell, lease, license or offer to sell, lease, license or otherwise transfer
 the Collateral or any rights in or to the Collateral, without the written
 consent of the Bank, except in the ordinary course of business;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>7.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>It will not
 change the location of the Collateral from the locations of the Collateral
 described in this agreement and any separate Collateral Location Schedule
 provided to the Bank, without providing at least ten (10) days&#146; prior written
 notice to the Bank by means of submitting a Collateral Location Schedule;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>8.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>It will pay
 promptly when due all taxes and assessments upon the Collateral, or for the
 use or operation of the Collateral;</FONT></P>
 </TD>
 </TR>
</TABLE>
<P ALIGN=CENTER><FONT SIZE=2>2</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>


<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="95%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>9.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>No financing
 statement covering all or any part of the Collateral or any proceeds is on
 file in any public office, unless the Bank has approved that filing. From
 time to time at the Bank&#146;s request, the Debtor will execute one or more
 financing statements or similar record and a control agreement with respect
 to the proceeds in form satisfactory to the Bank and will pay the cost of
 filing them in all public offices where filing is deemed by the Bank to be
 necessary or desirable. In addition, the Debtor shall execute and deliver, or
 cause to be executed and delivered, such other documents as the Bank may from
 time to time request to perfect or to further evidence the security interest
 created in the Collateral by this agreement including, without limitation:
 (a) any certificate or certificates of title to the Collateral with the
 security interest of the Bank noted thereon or executed applications for such
 certificates of title in form satisfactory to the Bank; (b) any assignments
 of claims under government contracts which are included as part of the
 Collateral, together with any notices and related documents as the Bank may
 from time to time request; (c) any assignment of any specific account
 receivable as the Bank may from time to time request; (d) a notice of and
 acknowledgment of the Bank&#146;s security interest and a control agreement with
 respect to any Collateral, all in form and substance satisfactory to the
 Bank; (e) a notice to and acknowledgment from any person holding or in
 possession of any Collateral that such persons holds the Collateral as a
 bailee for the Bank&#146;s benefit, all in form and substance satisfactory to the
 Bank; and (f) any consent to the assignment of proceeds of any letter of
 credit, all in form and substance satisfactory to the Bank; </FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>10.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>It will not,
 without the Bank&#146;s prior written consent, change the Debtor&#146;s name, the
 Debtor&#146;s business organization, the jurisdiction under which the Debtor&#146;s
 business organization is formed or organized, or the Debtor&#146;s chief executive
 office, or of any additional places of the Debtor&#146;s business;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>11.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>It will
 provide any information that the Bank may reasonably request and will permit
 the Bank or the Bank&#146;s agents to inspect and copy its books, records, data
 and the Collateral at any time during normal business hours;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>The Bank
 shall have the right now, and at any time in the future in its sole and
 absolute discretion, without notice to the Debtor, to (a) prepare, file and
 sign the Debtor&#146;s name on any proof of claim in bankruptcy or similar
 document against any owner of the Collateral and (b) prepare, file and sign
 the Debtor&#146;s name on any financing statement, notice of lien, assignment or
 satisfaction of lien or similar document in connection with the Collateral.
 The Debtor hereby authorizes the Bank to file financing statements covering
 Collateral or such lesser amount of assets as the Bank may determine, or the
 Bank may, at its option, file financing statements or similar records
 containing any collateral description which reasonably describes the
 Collateral in which a security interest is granted under this agreement;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>13.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Immediately
 upon the Debtor&#146;s receipt of any Collateral evidenced by an agreement,
 &#147;instrument,&#148; &#147;chattel paper,&#148; certificated &#147;security&#148; or &#147;document&#148; (as such
 terms are defined in the UCC) (collectively, &#147;Special Collateral&#148;), the
 Debtor shall mark the Special Collateral to show that it is subject to the
 Bank&#146;s security interest and shall deliver the original to the Bank together
 with appropriate endorsements and other specific evidence of assignment or
 transfer in form and substance satisfactory to the Bank;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>14.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>The Debtor
 shall keep all tangible Collateral in good order and repair and shall not
 waste or destroy any of the Collateral, nor use any of the Collateral in
 violation of any applicable law or any policy of insurance thereon. To the
 extent that the Collateral consists of &#147;farm products&#148; (as defined in the
 UCC), the Debtor shall attend to and care for the crops and livestock in
 accordance with the best practices of good husbandry, and do, or cause to be
 done, any and all acts that may at any time be appropriate or necessary to
 grow, raise, harvest, care for, preserve and protect the farm products;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>15.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Except as
 may be otherwise disclosed in writing by the Debtor to the Bank, none of the
 Collateral is attached to real estate so as to constitute a &#147;fixture&#148; (as
 defined in the UCC) and none of the Collateral shall at any time hereafter be
 attached to real estate so as to constitute a fixture. If any of the
 Collateral is now or at any time hereafter becomes so attached to real estate
 so as to constitute a fixture, the Debtor shall, at any time upon the Bank&#146;s
 request, furnish the Bank with a disclaimer of interest in the Collateral
 executed by each person or entity having an interest in such real estate.</FONT></P>
 </TD>
 </TR>
</TABLE>

<P><FONT SIZE=2><B>Accounts; Chattel Paper; General Intangibles
and Instruments. </B>If the Collateral includes the
Debtor&#146;s &#147;Accounts, Chattel Paper, General Intangibles and Instruments&#148; and
until the Bank gives notice to the Debtor to the contrary, the Debtor will, in
the usual course of its business and at its own expense, on the Bank&#146;s behalf
but not as the Bank&#146;s agent, demand and receive and use its best efforts to
collect all moneys due or to become due with respect to the Collateral. Until
the Bank gives notice to the Debtor to the contrary or until the Debtor is in
default, it may use the funds collected in its business. Upon notice from the
Bank or upon default, the Debtor agrees that all sums of money it receives on
account of or in payment or settlement of the Accounts, Chattel Paper, General
Intangibles and Instruments shall be held by it as trustee for the Bank without
commingling with any of the Debtor&#146;s other funds, and shall immediately be
delivered to the Bank with endorsement to the Bank&#146;s order of any check or
similar instrument. It is agreed that, at any time the Bank so elects, the Bank
shall be entitled, in its own name or in the name of the Debtor or otherwise,
but at the expense and cost of the Debtor, to collect, demand, receive, sue for
or compromise any and all Accounts, Chattel Paper, General Intangibles, and Instruments,
and to give good and sufficient releases, to endorse any checks, drafts or
other orders for the payment of money payable to the Debtor and, in the Bank&#146;s
discretion, to file any claims or take any action or proceeding which the Bank
may deem necessary or advisable. It is expressly understood and agreed,
however, that the Bank shall not be required or obligated in any manner to make
any demand or to make any inquiry as to the nature or sufficiency of any
payment received by it or to present or file any claim or take any other action
to collect or enforce the payment of any amounts which may have been assigned
to the Bank or to which the Bank may be entitled at any time or times. All
notices required in this paragraph will be immediately effective when sent.
Such notices need not be given prior to the Bank&#146;s taking action. The Debtor
appoints the Bank or the Bank&#146;s designee as the Debtor&#146;s attorney-in-fact to do
all things with reference to the Collateral as provided for in this section
including without limitation (1) to notify the post office authorities to
change the Debtor&#146;s mailing address to one designated by the Bank, (2) to
receive, open and dispose of mail addressed to the Debtor, (3) to sign the
Debtor&#146;s name on any invoice or bill of lading relating to any Collateral, on
assignments and verifications of account and on notices to the Debtor&#146;s
customers, and (4) to do all things necessary to carry out this agreement or to
perform any of the obligations of the Debtor under this agreement. The Debtor
ratifies and approves all acts of the Bank as attorney-in-fact. The Bank shall
not be liable for any act or omission, nor any error of judgment or mistake of
fact or law, but only for its gross negligence or willful misconduct. This
power being coupled with an interest is irrevocable until all of the
Liabilities have been fully satisfied and shall survive the death or disability
of the Debtor.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>3</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>Pledge.</B> If the
Debtor is not liable for all or any part of the Liabilities, then the Debtor
agrees that:</FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="95%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>1.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>If any
 moneys become available from any source other than the Collateral that the
 Bank can apply to the Liabilities, the Bank may apply them in any manner it
 chooses, including but not limited to applying them against obligations,
 indebtedness or liabilities which are not secured by this agreement.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>2.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>The Bank may
 take any action against the Borrower, the Collateral or any other collateral
 for the Liabilities, or any other person or entity liable for any of the
 Liabilities.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>3.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>The Bank may
 release the Borrower or anyone else from the Liabilities, either in whole or
 in part, or release the Collateral in whole or in part or any other
 collateral for the Liabilities, and need not perfect a security interest in
 the Collateral or any other collateral for the Liabilities.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>4.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>The Bank
 does not have to exercise any rights that it has against the Borrower or
 anyone else, or make any effort to realize on the Collateral or any other
 collateral for the Liabilities, or exercise any right of setoff.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>5.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Without notice
 or demand and without affecting the Debtor&#146;s obligations hereunder, from time
 to time, the Bank is authorized to: (a) renew, modify, compromise, rearrange,
 restate, consolidate, extend, accelerate or otherwise change the time for
 payment of, or otherwise change the terms of the Liabilities or any part
 thereof, including increasing or decreasing the rate of interest thereon; (b)
 release, substitute or add any one or more sureties, endorsers, or
 guarantors; (c) take and hold other collateral for the payment of the
 Liabilities, and enforce, exchange, substitute, subordinate, impair, waive or
 release any such collateral; (d) proceed against the Collateral or any other
 collateral for the Liabilities and direct the order or manner of sale as the
 Bank in its discretion may determine; and (e) apply any and all payments
 received by the Bank in connection with the Liabilities, or recoveries from
 the Collateral or any other collateral for the Liabilities, in such order or
 manner as the Bank in its discretion may determine.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>6.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>The Debtor&#146;s
 obligations hereunder shall not be released, diminished or affected by (a)
 any act or omission of the Bank, (b) the voluntary or involuntary
 liquidation, sale or other disposition of all or substantially all of the
 assets of the Borrower, or any receivership, insolvency, bankruptcy,
 reorganization, or other similar proceedings affecting the Borrower or any of
 its assets or any other obligor on the Liabilities or that obligor&#146;s assets,
 (c) any change in the composition or structure of the Borrower or any other
 obligor on the Liabilities, including a merger or consolidation with any
 other person or entity, or (d) any payments made upon the Liabilities.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>7.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>The Debtor
 expressly consents to any impairment of any other collateral for the
 Liabilities, including, but not limited to, failure to perfect a security
 interest and release of any other collateral for the Liabilities and any such
 impairment or release shall not affect the Debtor&#146;s obligations hereunder.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>8.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>The Debtor
 waives and agrees not to enforce any rights of subrogation, contribution or
 indemnification that it may have against the Borrower, any person or entity
 liable on the Liabilities, or the Collateral, until the Borrower and the
 Debtor have fully performed all their obligations to the Bank, even if those
 obligations are not covered by this agreement.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>9.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>The Debtor
 waives (a) to the extent not prohibited by applicable law, all rights and
 benefits under any laws or statutes regarding sureties, as may be amended,
 (b) any right the Debtor may have to receive notice of the following matters
 before the Bank enforces any of its rights: (i) the Bank&#146;s acceptance of this
 agreement, (ii) incurrence or acquisition of any Liabilities, any credit that
 the Bank extends to the Borrower, (iii) the Borrower&#146;s default, (iv) any
 demand, diligence, presentment, dishonor and protest, or (v) any action that
 the Bank takes regarding the Borrower, anyone else, any other collateral for
 the Liabilities, or any of the Liabilities, which it might be entitled to by
 law or under any other agreement, (c) any right it may have to require the
 Bank to proceed against the Borrower, any guarantor or other obligor on the
 Liabilities, the Collateral or any other collateral for the Liabilities, or
 pursue any remedy in the Bank&#146;s power to pursue, (d) any defense based on any
 claim that the Debtor&#146;s obligations exceed or are more burdensome than those
 of the Borrower, (e) the benefit of any statute of limitations affecting the
 Debtor&#146;s obligations hereunder or the enforcement hereof, (f) any defense
 arising by reason of any disability or other defense of the Borrower or by
 reason of the cessation from any cause whatsoever (other than payment in
 full) of the obligation of the Borrower for the Liabilities, and (g) any defense
 based on or arising out of any defense that the Borrower may have to the
 payment or performance of the Liabilities or any portion thereof. The Bank
 may waive or delay enforcing any of its rights without losing them. Any
 waiver affects only the specific terms and time period stated in the waiver.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>10.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>The Debtor
 agrees that to the extent any payment or transfer is received by the Bank in
 connection with the Liabilities, and all or any part of such payment or
 transfer is subsequently invalidated, declared to be fraudulent or
 preferential, set aside or required to be transferred or repaid by the Bank
 or paid over to a trustee, receiver or any other person or entity, whether
 under any bankruptcy act or otherwise (any of those payments or transfers is
 hereinafter referred to as a &#147;Preferential Payment&#148;), then this agreement
 shall continue to be effective or shall be reinstated, as the case may be,
 even if all Liabilities have been paid in full, and whether or not the Bank
 is in possession of this agreement or whether this agreement has been marked
 paid, cancelled, released or returned to the Debtor, and, to the extent of
 the payment or repayment or other transfer by the Bank, the Liabilities or
 part intended to be satisfied by the Preferential Payment shall be revived
 and continued in full force and effect as if the Preferential Payment had not
 been made. If this agreement must be reinstated, the Debtor agrees to execute
 and deliver to the Bank any new security agreements and financing statements,
 if necessary or if requested by the Bank, in form and substance acceptable to
 the Bank, covering the Collateral.</FONT></P>
 </TD>
 </TR>
</TABLE>
<P ALIGN=CENTER><FONT SIZE=2>4</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>


<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="95%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>11.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>The Debtor agrees to fully cooperate with the Bank
 and not to delay, impede or otherwise interfere with the efforts of the Bank
 to secure payment from the assets which secure the Liabilities including
 actions, proceedings, motions, orders, agreements or other matters relating
 to relief from automatic stay, abandonment of property, use of cash
 collateral and sale of the Bank&#146;s collateral free and clear of all liens.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>12.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>The Debtor has (a) without reliance on the Bank or any information received from the Debtor and based upon the
records and information the
 Debtor deems appropriate, made an
 independent investigation of the Borrower, the Borrower&#146;s business, assets, operations, prospects and
 condition, financial or otherwise, and any circumstances that may bear upon
 those transactions, the Borrower or the obligations, liabilities and risks
 undertaken pursuant to this agreement; (b) adequate means to obtain from the
 Borrower on a continuing basis information concerning the Borrower and the Bank
 has no duty to provide any information
 concerning the Borrower or other obligor on the Liabilities to the Debtor; (c) full and complete access to the Borrower
 and any and all records relating to any Liabilities now or in the future
 owing by the Borrower; (d) not relied and will not rely upon any
 representations or warranties of the Debtor not embodied in this agreement or any acts taken by the Debtor prior to or after the
execution or other
 authentication and delivery of this agreement (including but not limited to
 any review by the Debtor of the
 business, assets, operations, prospects and condition, financial or
 otherwise, of the Borrower); and (e) determined that the Debtor will receive benefit, directly or indirectly,
 and has or will receive fair and reasonably equivalent value, for the
 execution and delivery of this agreement and the rights provided to the Bank. By entering into this agreement, the Debtor does not
intend: (i) to incur or believe that
 the Debtor will incur debts that
 would be beyond the Debtor&#146;s
 ability to pay as those debts mature; or (ii) to hinder, delay or defraud any
 creditor of the Debtor. The Debtor is neither engaged in nor about to engage in
 any business or transaction for which the remaining assets of the Debtor are unreasonably small in relation to the
 business or transaction, and any property remaining with the Debtor after the execution or other authentication of
 this agreement is not unreasonably small capital.</FONT></P>
 </TD>
 </TR>
</TABLE>

<P><FONT SIZE=2><B>Default; Remedies.</B>
If any of the Liabilities are not paid at maturity, whether by acceleration or
otherwise, or if a default by anyone occurs under the terms of any agreement
related to any of the Liabilities, then the Bank shall have the rights and
remedies provided by law or this agreement, including but not limited to the
right to require the Debtor to assemble the Collateral and make it available to
the Bank at a place to be designated by the Bank which is reasonably convenient
to both parties, the right to take possession of the Collateral with or without
demand and with or without process of law, and the right to sell and dispose of
it and distribute the proceeds according to law. Should a default occur, the
Debtor will pay to the Bank all costs reasonably incurred by the Bank for the
purpose of enforcing its rights hereunder, to the extent not prohibited by law,
including, without limitation: costs of foreclosure; costs of obtaining money
damages; and a reasonable fee for the services of internal and outside
attorneys employed or engaged by the Bank or its affiliates for any purpose
related to this agreement, including, without limitation, consultation,
drafting documents, sending notices or instituting, prosecuting or defending
litigation or any proceeding. The Debtor agrees that upon default the Bank may
dispose of any of the Collateral in its then present condition, that the Bank
has no duty to repair or clean the Collateral prior to sale, and that the
disposal of the Collateral in its present condition or without repair or
clean-up shall not affect the commercial reasonableness of such sale or
disposition. The Bank&#146;s compliance with any applicable state or federal law
requirements in connection with the disposition of the Collateral will not
adversely affect the commercial reasonableness of any sale of the Collateral.
The Bank may disclaim warranties of title, possession, quiet enjoyment, and the
like, and the Debtor agrees that any such action shall not affect the commercial
reasonableness of the sale. In connection with the right of the Bank to take
possession of the Collateral, the Bank may take possession of any other items
of property in or on the Collateral at the time of taking possession, and hold
them for the Debtor without liability on the part of the Bank. The Debtor
expressly agrees that the Bank may enter upon the premises where the Collateral
is believed to be located without any obligation of payment to the Debtor, and
that the Bank may, without cost, use any and all of the Debtor&#146;s &#147;equipment&#148;
(as defined in the UCC) in the manufacturing or processing of any &#147;inventory&#148;
(as defined in the UCC) or in growing, raising, cultivating, caring for,
harvesting, loading and transporting of any of the Collateral that constitutes
&#147;farm products&#148; (as defined in the UCC). If there is any statutory requirement
for notice, that requirement shall be met if the Bank sends notice to the
Debtor at least ten (10) days prior to the date of sale, disposition or other
event giving rise to the required notice, and such notice shall be deemed
commercially reasonable. The Debtor is liable for any deficiency remaining
after disposition of the Collateral.</FONT></P>

<P><FONT SIZE=2><B>Miscellaneous.</B></FONT>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="95%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>1.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Where the
 Collateral is located at, used in or attached to a facility leased by the
 Debtor, the Debtor will obtain from the lessor a consent to the granting of
 this security interest and a release or subordination of the lessor&#146;s
 interest in any of the Collateral, in form and substance satisfactory to the
 Bank.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>2.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>At its
 option the Bank may, but shall be under no duty or obligation to, discharge
 taxes, liens, security interests or other encumbrances at any time levied or
 placed on the Collateral, pay for insurance on the Collateral, and pay for
 the maintenance and preservation of the Collateral, and the Debtor agrees to
 reimburse the Bank on demand for any payment made or expense incurred by the
 Bank, with interest at the highest rate at which interest may accrue under
 any of the instruments or documents evidencing the Liabilities.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>3.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>No delay on
 the part of the Bank in the exercise of any right or remedy waives that right
 or remedy, no single or partial exercise by the Bank of any right or remedy
 precludes any other exercise of it or the exercise of any other right or
 remedy, and no waiver or indulgence by the Bank of any default is effective
 unless it is in writing and signed by the Bank, nor does a waiver on one
 occasion waive that right on any future occasion.</FONT></P>
 </TD>
 </TR>
</TABLE>
<P ALIGN=CENTER><FONT SIZE=2>5</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>



<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="95%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>4.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>If any
 provision of this agreement is invalid, it shall be ineffective only to the
 extent of its invalidity, and the remaining provisions shall be valid and
 effective.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>5.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Except as
 provided in the Accounts; Chattel Paper; General Intangibles; and Instruments
 paragraph above, any notices and demands under or related to this document
 shall be in writing and delivered to the intended party at its address stated
 herein, and if to the Bank, at its main office if no other address of the
 Bank is specified herein, by one of the following means: (a) by hand, (b) by
 a nationally recognized overnight courier service, or (c) by certified mail,
 postage prepaid, with return receipt requested. Notice shall be deemed given:
 (a) upon receipt if delivered by hand, (b) on the Delivery Day after the day
 of deposit with a nationally recognized courier service, or (c) on the third
 Delivery Day after the notice is deposited in the mail. &#147;Delivery Day&#148; means
 a day other than a Saturday, a Sunday, or any other day on which national
 banking associations are authorized to be closed. Any party may change its
 address for purposes of the receipt of notices and demands by giving notice
 of such change in the manner provided in this provision.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>6.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>All rights
 of the Bank benefit the Bank&#146;s successors and assigns; and all obligations of
 the Debtor bind the Debtor&#146;s heirs, executors, administrators, successors and
 assigns. If more than one person or entity signs as the Debtor, their
 obligations are joint and several and each agreement, representation,
 warranty and covenant shall be individual, joint and several and the
 &#147;Collateral&#148; includes any property that is owned by any Debtor individually
 or jointly with any other.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>7.</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>A carbon,
 photographic or other reproduction of this agreement is sufficient as, and
 can be filed as, a financing statement. The Bank is irrevocably appointed the
 Debtor&#146;s attorney-in-fact to execute any financing statement on the Debtor&#146;s
 behalf covering the Collateral. The Debtor authorizes the Bank to file one or
 more financing statements or similar records related to the security
 interests created by this agreement, and further authorizes the Bank, as
 secured party herein, instead of the Debtor, to sign such financing
 statements and other similar records.</FONT></P>
 </TD>
 </TR>
</TABLE>

<P><FONT SIZE=2><B>Indemnification. </B>The
Debtor agrees to indemnify, defend and hold the Bank, its parent companies,
subsidiaries, affiliates, their respective successors and assigns and each of
their respective shareholders, directors, officers, employees and agents
(collectively the &#147;Indemnified Persons&#148;) harmless from and against any and all
loss, liability, obligation, damage, penalty, judgment, claim, deficiency,
expense, interest, penalties, attorneys&#146; fees (including the fees and expenses
of attorneys engaged by the Indemnified Person at the Indemnified Person&#146;s
reasonable discretion) and amounts paid in settlement (&#147;Claims&#148;) to which any
Indemnified Person may become subject arising out of or relating to this
agreement or the Collateral, except to the limited extent that the Claims are
proximately caused by the Indemnified Person&#146;s gross negligence or willful
misconduct. The indemnification provided for in this paragraph shall survive
the termination of this agreement and shall not be affected by the presence,
absence or amount of or the payment or nonpayment of any claim under, any
insurance.</FONT></P>

<P><FONT SIZE=2><B>Governing Law and Venue.</B>
This agreement shall be governed by and construed in accordance with the laws
of the State of New Jersey (without giving effect to its laws of conflicts),
and to the extent applicable, federal law, except to the extent that the laws
regarding the perfection and priority of security interests of the state(s) in
which either the Debtor or any property securing the Liabilities is located,
are applicable. The Debtor agrees that any legal action or proceeding with
respect to any of its obligations under this agreement may be brought by the
Bank in any state or federal court located in the State of New Jersey, as the
Bank in its sole discretion may elect. By the execution and delivery of this
agreement, the Debtor submits to and accepts, for itself and in respect of its
property, generally and unconditionally, the non-exclusive jurisdiction of
those courts. The Debtor waives any claim that the State of New Jersey is not a
convenient forum or the proper venue for any such suit, action or proceeding. </FONT></P>

<P><FONT SIZE=2><B>Additional Representations, Warranties and
Covenants. </B>The Debtor represents, warrants and
covenants to the Bank that each of the following is true and will remain true
until termination of this agreement and payment in full of all Liabilities: (a)
the execution and delivery of this agreement and the performance of the
obligations it imposes do not violate any law, do not conflict with any
agreement by which it is bound, and do not require the consent or approval of
any governmental authority or any third party; (b) this agreement is a valid
and binding agreement, enforceable according to its terms; and (c) all balance
sheets, profit and loss statements, and other financial statements furnished to
the Bank in connection with the Liabilities are accurate and fairly reflect the
financial condition of the organizations and persons to which they apply on
their effective dates, including contingent liabilities of every type, which
financial condition has not changed materially and adversely since those dates.
The Debtor, other than a natural person, further represents that: (a) it is
duly organized, validly existing and in good standing under the laws of the
state where it is organized and in good standing in each state where it is
doing business; and (b) the execution and delivery of this agreement and the
performance of the obligations it imposes (i) are within its powers and have
been duly authorized by all necessary action of its governing body; and (ii) do
not contravene the terms of its articles of incorporation or organization, its
by-laws, or any agreement or document governing its affairs.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>THIS
SPACE HAS BEEN INTENTIONALLY LEFT BLANK</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>6</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>WAIVER OF SPECIAL DAMAGES.</B>
THE DEBTOR WAIVES, TO THE <B>MAXIMUM</B>
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR
RECOVER FROM THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES. </FONT></P>

<P><FONT SIZE=2><B>JURY WAIVER.</B> THE
DEBTOR AND THE BANK (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY,
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) BETWEEN
OR AMONG THE DEBTOR AND THE BANK ARISING OUT OF OR IN ANY WAY RELATED TO THIS
DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO PROVIDE THE
FINANCING DESCRIBED HEREIN. </FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="44%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="4%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="7%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="39%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="6%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=TOP>
 <P><FONT SIZE=2><B>Debtor:</B></FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=4 VALIGN=TOP>
 <P><FONT SIZE=2>BOS-Supply
 Chain Solutions (Summit), Inc.</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=4 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>By:</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>

 <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>

 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
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 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=3 VALIGN=TOP>

 <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>

 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=TOP>
 <P><FONT SIZE=1>Printed Name</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN="RIGHT"><FONT SIZE=1>Title</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=TOP>
 <P><FONT SIZE=2>Date Signed:</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD COLSPAN=2 VALIGN=TOP>

 <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>

 </TD>
 </TR>
</TABLE>



<P ALIGN=CENTER><FONT SIZE=2>7</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>


<P><FONT SIZE=2><B>Collateral Location Schedule</B></FONT></P>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD style="border-bottom:1px solid black" WIDTH="10%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD style="border-bottom:1px solid black" WIDTH="40%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD style="border-bottom:1px solid black" WIDTH="50%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD style="border-left:1px solid black" COLSPAN=2 VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2><B>Date:
 ___________________________________________</B></FONT></P>
 </TD>
 <TD style="border-left:1px solid black;border-right:1px solid black" VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2><B>Debtor:
 ________________________________________</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD style="border-left:1px solid black" VALIGN=TOP nowrap>
 <P STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2><B>Check one</B>:&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP >
 <P><FONT SIZE=2 FACE=WINGDINGS><b>o</b></FONT> <font size=2><B>
 Designation of initial location of Collateral</B></FONT></P>
 </TD>
 <TD style="border-left:1px solid black;border-right:1px solid black" VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2><B>Date of Continuing Security
 Agreement:&nbsp;____________</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD style="border-bottom:1px solid black;border-left:1px solid black" VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD style="border-bottom:1px solid black" VALIGN=TOP>
 <P><FONT SIZE=2 FACE=WINGDINGS><b>o</b></FONT> <font size=2><B>
 Notice of intent to relocate Collateral</B></FONT></P>
 </TD>
 <TD style="border-bottom:1px solid black;border-left:1px solid black;border-right:1px solid black" VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD style="border-bottom:1px solid black;border-left:1px solid black;border-right:1px solid black" COLSPAN=3 VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2><B><I>Instructions:</I></B><I> This schedule should be
 completed by the Debtor (the owner of the Collateral) described in the
 Continuing Security Agreement to which this form is attached, if the
 Collateral is located at or will be relocated to, any place other than the
 Debtor&#146;s address set forth in the Continuing Security Agreement. The Debtor
 is required to notify the Bank in writing at <U>least ten (10) days&#146; prior</U>
 to changing the location of any Collateral. The Debtor represents and
 warrants that the Collateral is located or stored at the location(s)
 described below and if any location(s) is leased or used for storage and not
 owned by the Debtor, the name, address and the phone number of the Landlord
 or owner of the warehouse (&#147;Warehouseman&#148;) and contact name is set forth
 below with respect to the leased or storage premises.</I></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD style="border-bottom:1px solid black;border-left:1px solid black;border-right:1px solid black" COLSPAN=3 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2><B>Please PRINT or TYPE the following information.</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD style="border-bottom:1px solid black;border-left:1px solid black" COLSPAN=2 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2><B>Collateral Location</B></FONT></P>
 </TD>
 <TD style="border-bottom:1px solid black;border-left:1px solid black;border-right:1px solid black" VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2><B>Landlord/Warehouseman Information</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD style="border-bottom:1px solid black;border-left:1px solid black" COLSPAN=2 VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2><BR>
 Address:
 ________________________________________<BR>
 <BR>
 City, State: ______________________________________<BR>
 <BR>
 Zip Code: _______________________________________<BR>
 <BR>Collateral:
 _______________________________________<BR><BR></FONT></P>
 </TD>
 <TD style="border-bottom:1px solid black;border-left:1px solid black;border-right:1px solid black" VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2 FACE=WINGDINGS><b>o</b></FONT> <font size=2><B></B>&nbsp;Check if Collateral Location is owned
 by the Debtor, otherwise, check applicable box and complete information
 below. </FONT>
 <div ALIGN=CENTER><FONT SIZE=2 FACE=WINGDINGS><b>o</b></FONT> <font size=2><B></B><B>&nbsp;</B>Landlord&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 <FONT FACE=WINGDINGS><B>o</B></FONT><B>&nbsp;</B>Warehouseman</FONT></div>
 <div STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2>Name:
 _________________________________________<BR>
 Address:
 _______________________________________<BR>Suite Number:&nbsp;&nbsp;__________________________________<BR>City, State:
 _____________________________________<BR>Zip Code: ______________________________________<BR>Contact Name:
 __________________________________<BR>Phone Number:&nbsp;&nbsp;_________________________________<BR><BR></FONT></div>
 </TD>
 </TR>
 <TR>
 <TD style="border-bottom:1px solid black;border-left:1px solid black" COLSPAN=2 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2><B>Collateral Location</B></FONT></P>
 </TD>
 <TD style="border-bottom:1px solid black;border-left:1px solid black;border-right:1px solid black" VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2><B>Landlord/Warehouseman Information</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD style="border-bottom:1px solid black;border-left:1px solid black" COLSPAN=2 VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2><BR>
 Address:
 ________________________________________<BR>
 <BR>
 City, State: ______________________________________<BR>
 <BR>
 Zip Code: _______________________________________<BR>
 <BR>Collateral:
 _______________________________________<BR><BR></FONT></P>

 </TD>
 <TD style="border-bottom:1px solid black;border-left:1px solid black;border-right:1px solid black" VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2 FACE=WINGDINGS><b>o</b></FONT> <font size=2><B></B><B>&nbsp;</B>Check if Collateral Location is owned by the
 Debtor, otherwise, check applicable box and complete information below.
 </FONT>
 <div ALIGN=CENTER><FONT SIZE=2 FACE=WINGDINGS><b>o</b></FONT> <font size=2><B></B><B>&nbsp;</B>Landlord&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT
FACE=WINGDINGS><B>o</B></FONT><B>&nbsp;</B>Warehouseman</FONT></div>
 <div STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2>Name:
 _________________________________________<BR>
 Address:
 _______________________________________<BR>Suite Number:&nbsp;&nbsp;__________________________________<BR>City, State:
 _____________________________________<BR>Zip Code: ______________________________________<BR>Contact Name:
 __________________________________<BR>Phone Number:&nbsp;&nbsp;_________________________________<BR><BR></FONT></div>
 </TD>
 </TR>
 <TR>
 <TD style="border-bottom:1px solid black;border-left:1px solid black" COLSPAN=2 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2><B>Collateral Location</B></FONT></P>
 </TD>
 <TD style="border-bottom:1px solid black;border-left:1px solid black;border-right:1px solid black" VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2><B>Landlord/Warehouseman Information</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD style="border-bottom:1px solid black;border-left:1px solid black" COLSPAN=2 VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2><BR>
 Address:
 ________________________________________<BR>
 <BR>
 City, State: ______________________________________<BR>
 <BR>
 Zip Code: _______________________________________<BR>
 <BR>Collateral:
 _______________________________________<BR><BR></FONT></P>

 </TD>
 <TD style="border-bottom:1px solid black;border-left:1px solid black;border-right:1px solid black" VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2 FACE=WINGDINGS><b>o</b></FONT> <font size=2><B></B><B>&nbsp;</B>Check if Collateral Location is owned by the
 Debtor, otherwise, check applicable box and complete information below.
 </FONT>
 <div ALIGN=CENTER><FONT SIZE=2 FACE=WINGDINGS><b>o</b></FONT> <font size=2><B></B><B>&nbsp;</B>Landlord&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 <FONT FACE=WINGDINGS><B>o</B></FONT><B>&nbsp;</B>Warehouseman</FONT></div>
 <div STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2>Name:
 _________________________________________<BR>
 Address:
 _______________________________________<BR>Suite Number:&nbsp;&nbsp;__________________________________<BR>City, State:
 _____________________________________<BR>Zip Code: ______________________________________<BR>Contact Name:
 __________________________________<BR>Phone Number:&nbsp;&nbsp;_________________________________<BR><BR></FONT></div>
 </TD>
 </TR>
 <TR>
 <TD style="border-bottom:1px solid black;border-left:1px solid black" COLSPAN=2 VALIGN=TOP>
 <P ALIGN=CENTER><FONT SIZE=2><B>Collateral Location</B></FONT></P>
 </TD>
 <TD style="border-bottom:1px solid black;border-left:1px solid black;border-right:1px solid black" VALIGN=TOP>
 <P ALIGN="CENTER"><FONT SIZE=2><B>Landlord/Warehouseman
 Information</B></FONT></P>
 </TD>
 </TR>
 <TR>
 <TD style="border-bottom:1px solid black;border-left:1px solid black" COLSPAN=2 VALIGN=TOP>
  <P STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2><BR>
 Address:
 ________________________________________<BR>
 <BR>
 City, State: ______________________________________<BR>
 <BR>
 Zip Code: _______________________________________<BR>
 <BR>Collateral:
 _______________________________________<BR><BR></FONT></P>

 </TD>
 <TD style="border-bottom:1px solid black;border-left:1px solid black;border-right:1px solid black" VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2 FACE=WINGDINGS><b>o</b></FONT> <font size=2><B></B> Check if Collateral Location is owned by
 the Debtor, otherwise, check applicable box and complete information below.
 </FONT>
 <div ALIGN=CENTER><FONT SIZE=2 FACE=WINGDINGS><b>o</b></FONT> <font size=2><B></B>Landlord&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 <FONT FACE=WINGDINGS><B>o</B></FONT> Warehouseman</FONT></div>
 <div STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2>Name:
 _________________________________________<BR>
 Address:
 _______________________________________<BR>Suite Number:&nbsp;&nbsp;__________________________________<BR>City, State:
 _____________________________________<BR>Zip Code: ______________________________________<BR>Contact Name:
 __________________________________<BR>Phone Number:&nbsp;&nbsp;_________________________________<BR><BR></FONT></div>
 </TD>
 </TR>
 <TR>
 <TD style="border-bottom:1px solid black;border-left:1px solid black;border-right:1px solid black" COLSPAN=3 VALIGN=TOP>
 <P STYLE='MARGIN-LEFT:.1IN'><FONT SIZE=2>DEBTOR:&nbsp;&nbsp;______________________________________________<BR>
 By:&nbsp;&nbsp;____________________________________________________<BR>

 Name: __________________________________________________<BR>

 Title: ___________________________________________________<BR><BR></FONT></P>
 </TD>
 </TR>
</TABLE>


<P ALIGN=CENTER><FONT SIZE=2>8</FONT></P>
<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
 <TD WIDTH="29%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="70%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2><IMG SRC="img201.jpg" ALT="(CHASE LOGO)"></FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P ALIGN=RIGHT><FONT SIZE=2><B>Continuing Guaranty</B></FONT></P>
 </TD>
 </TR>
</TABLE>

<P><FONT SIZE=2>Dated as of
May 8, 2009</FONT></P>

<P ><FONT SIZE=2><B>Guaranty.</B> To induce
JPMorgan Chase Bank, N.A., whose address is 695 Route 46, 1st Floor, Fairfield,
NJ 07004 (together with its successors and assigns, the &#147;Bank&#148;), at its option,
to make financial accommodations, make or acquire loans, extend or continue
credit or some other benefit, including letters of credit and foreign exchange
contracts, present or future, direct or indirect, and whether several, joint or
joint and several, to BOS-Supply Chain Solutions (Summit), Inc. (whether one or
more, the &#147;Borrower&#148;, individually and collectively, if more than one), and
because the undersigned (the &#147;Guarantor&#148;) has determined that executing this
Guaranty is in its interest and to its financial benefit, the Guarantor
absolutely and unconditionally guarantees to the Bank, as primary obligor and
not merely as surety, the performance of and full and prompt payment of the
Liabilities when due, whether at stated maturity, by acceleration or otherwise.
The Guarantor will not only pay the Liabilities, but will also reimburse the
Bank for any fees, charges, costs and expenses, including reasonable attorneys&#146;
fees (including fees and expenses of counsel for the Bank that are employees of
the Bank or its affiliates) and court costs, that the Bank may pay in
collecting from the Borrower or the Guarantor, and for liquidating any
Collateral (collectively, &#147;Collection Amounts&#148;). The Guarantor&#146;s obligations
under this Guaranty shall be payable in lawful money of the United States of America.</FONT></P>

<P ><FONT SIZE=2><B>Liabilities</B>. The
term &#147;Liabilities&#148; in this Guaranty means all debts, obligations, indebtedness
and liabilities of every kind and character of the Borrower, whether
individual, joint and several, contingent or otherwise, now or hereafter
existing in favor of the Bank, including, without limitation, all liabilities,
interest, costs and fees, arising under or from any note, open account,
overdraft, credit card, lease, Rate Management Transaction, letter of credit
application, endorsement, surety agreement, guaranty, acceptance, foreign
exchange contract or depository service contract, whether payable to the Bank
or to a third party and subsequently acquired by the Bank, any monetary
obligations (including interest) incurred or accrued during the pendency of any
bankruptcy, insolvency, receivership or other
similar proceedings, regardless of whether allowed or allowable in such
proceedings, and all renewals, extensions, modifications, consolidations,
rearrangements, restatements, replacements or substitutions of any of the
foregoing. The Guarantor and the Bank specifically contemplate that Liabilities
include indebtedness hereafter incurred by the Borrower to the Bank. The term
&#147;Rate Management Transaction&#148; in this Guaranty means any transaction (including
an agreement with respect thereto) that is a rate swap, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity index
swap, equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option, derivative transaction or any other similar transaction (including any
option with respect to any of these transactions) or any combination thereof,
whether linked to one or more interest rates, foreign currencies, commodity
prices, equity prices or other financial measures.</FONT></P>

<P ><FONT SIZE=2><B>Limitation.</B> The
Guarantor&#146;s obligation under this Guaranty is UNLIMITED.</FONT></P>

<P ><FONT SIZE=2><B>Continued Reliance.</B>
This Guaranty shall remain in effect until payment
in full of the Remaining Liabilities, as defined below, following
termination of this Guaranty by the Guarantor in accordance with this paragraph<B>. </B>This Guaranty will continue to be in
effect until final payment and performance in full of all Liabilities and the
termination of any commitment of the Bank to make loans or other financial
accommodations to the Borrower. The Guarantor may terminate the Guarantor&#146;s
liability for Liabilities not in existence or for which the Bank has no
commitment to advance or acquire by delivering written notice to the Bank as
set forth in the paragraph below captioned &#147;Notice.&#148; After the Guarantor&#146;s
termination of this Guaranty, the Guarantor will continue to be liable for the
following amounts (the &#147;Remaining Liabilities&#148;): (i) all Liabilities existing
on the effective date of termination, (ii) all Liabilities to which the Bank
has committed to advance or acquire prior to the effective termination date
(whether or not the Bank is contractually obligated to advance or acquire the
loans or extensions of credit), (iii) all subsequent renewals, extensions,
modifications, consolidations, rearrangements, restatements, replacements and
amendments (but not increases) of those
Liabilities, (iv) all interest
accruing on those Liabilities after the effective termination date and (v) all Collection Amounts incurred with respect to
those Liabilities, on or after the effective termination date. The Bank
may continue to permit the Borrower to incur Liabilities and to issue
commitments to the Borrower to advance or acquire Liabilities in reliance on
this Guaranty until the effective date of termination, regardless of whether at
any time or from time to time there are no existing Liabilities nor commitment
by the Bank to advance or acquire Liabilities.</FONT></P>

<P ><FONT SIZE=2><B>Security.</B> The term &#147;Collateral&#148; in this Guaranty means all
real or personal property described in all security agreements, pledge
agreements, mortgages, deeds of trust, assignments, or other instruments now or
hereafter executed in connection with any of the Liabilities. If applicable,
the Collateral secures the payment of the Liabilities.</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P ><FONT SIZE=2><B>Bank</B>&#146;<B>s Right of Setoff.</B> In addition to the
Collateral, if any, the Guarantor grants to the Bank a security interest in the
Accounts, and the Bank is authorized to setoff and apply, all Accounts,
Securities and Other Property, and Bank Debt against any and all Liabilities of
the Borrower and all obligations of the Guarantor under this Guaranty. This right
of setoff may be exercised at any time and from time to time, and without prior
notice to the Guarantor. This security interest in the Accounts and right of
setoff may be enforced or exercised by the Bank regardless of whether or not
the Bank has made any demand under this paragraph or whether the Liabilities
are contingent, matured, or unmatured. Any delay, neglect or conduct by the
Bank in exercising its rights under this paragraph will not be a waiver of the
right to exercise this right of setoff or enforce this security interest in the
Accounts. The rights of the Bank under this paragraph are in addition to other
rights the Bank may have by law. In this paragraph: (a) the term &#147;Accounts&#148;
means any and all accounts and deposits of the Guarantor (whether general,
special, time, demand, provisional or final) at any time held by the Bank
(including all Accounts held jointly with another, but excluding any IRA or
Keogh Account, or any trust Account in which a security interest would be
prohibited by law); (b) the term &#147;Securities and Other Property&#148; means any
securities entitlements, securities accounts, investment property, financial
assets and all securities and other property of the Guarantor in the custody,
possession or control of the Bank, JPMorgan Chase &amp; Co. and their
respective subsidiaries and affiliates (other than property held by the Bank in
a fiduciary capacity); and (c) the term &#147;Bank Debt&#148; means all indebtedness at
any time owing by the Bank to or for the credit or account of the Guarantor and
any claim of the Guarantor (whether individual, joint and several or otherwise)
against the Bank now or hereafter existing.</FONT></P>

<P ><FONT SIZE=2><B>Remedies/Acceleration.</B>
If the Guarantor fails to pay any amount owing under this Guaranty, the Bank
shall have all of the rights and remedies provided by law or under any other
agreement. The Bank is authorized to cause all or any part of the Collateral to
be transferred to or registered in its name or in the name of any other person
or business entity with or without designation of the capacity of that nominee.
The Guarantor is liable for any deficiency in payment of any Liabilities
whether of principal, interest, fees, costs or expenses remaining after the
disposition of any Collateral. The Guarantor is liable to the Bank for all reasonable
costs and expenses of any kind incurred in the making and collection of this
Guaranty, including without limitation reasonable attorneys&#146; fees and court
costs. These costs and expenses include without limitation any costs or
expenses incurred by the Bank in any bankruptcy, reorganization, insolvency or
other similar proceeding. All obligations of the Guarantor to the Bank under
this Guaranty, whether or not then due or absolute or contingent, shall, at the
option of the Bank, without notice or demand, become due and payable
immediately upon the occurrence of any default or event of default under the
terms of any of the Liabilities or otherwise with respect to any agreement
related to the Liabilities (or any other event that results in acceleration of
the maturity of any Liabilities, including without limitation, demand for
payment of any Liabilities constituting demand obligations or automatic
acceleration in a legal proceeding) or the occurrence of any default under this
Guaranty.</FONT></P>

<P ><FONT SIZE=2><B>Permissible Actions.</B>
If any monies become available from any source other than the Guarantor that
the Bank can apply to the Liabilities, the Bank may apply them in any manner it
chooses, including but not limited to applying them against obligations,
indebtedness or liabilities which are not covered by this Guaranty. The Bank
may take any action against the Borrower, the Collateral, or any other person
liable for any of the Liabilities. The Bank may release the Borrower or anyone
else from the Liabilities, either in whole or in part, or release the
Collateral, and need not perfect a security interest in the Collateral. The
Bank does not have to exercise any rights that it has against the Borrower or
anyone else, or make any effort to realize on the Collateral or any other collateral
for the Liabilities, or exercise any right of set-off. The Guarantor authorizes
the Bank, without notice or demand and without affecting the Guarantor&#146;s
obligations hereunder, from time to time, to: (a) renew, modify, compromise,
rearrange, restate, consolidate, extend, accelerate, postpone, grant any
indulgence or otherwise change the time for payment of, or otherwise change the
terms of the Liabilities or any part thereof, including increasing or
decreasing the rate of interest thereon; (b) release, substitute or add any one
or more endorsers, sureties, Guarantor or other guarantors; (c) take and hold
Collateral for the payment of this Guaranty or the Liabilities, and enforce,
exchange, impair, substitute, subordinate, waive or release any Liabilities or
any Collateral for the Liabilities; (d) proceed against such Collateral and
direct the order or manner of sale of such Collateral as the Bank in its
discretion may determine; (e) apply any and all payments from the Borrower, the
Guarantor or any other obligor on the Liabilities, or recoveries from such
Collateral, in such order or manner as the Bank in its discretion may
determine; and (f) to accept any partial payment of Liabilities or collateral
for the Liabilities. The Guarantor&#146;s obligations under this Guaranty shall not
be released, diminished or affected by (i) any act or omission of the Bank,
(ii) the voluntary or involuntary liquidation, sale or other disposition of all
or substantially all of the assets of the Borrower, or any receivership, insolvency,
bankruptcy, reorganization, or other similar proceedings affecting the
Borrower, any other obligor or any of their respective assets, (iii) any change
in the composition or structure of the Borrower, the Guarantor or any other
obligor on the Liabilities, including a merger or consolidation with any other
person or entity, or (iv) any payments made upon the Liabilities. The Guarantor
hereby expressly consents to any impairment of Collateral, including, but not
limited to, failure to perfect a security interest and release Collateral and
any such impairment or release shall not affect the Guarantor&#146;s obligations
hereunder.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>2</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P ><FONT SIZE=2><B>Nature of Guaranty.</B>
This Guaranty is an absolute guaranty of payment and performance and not of
collection. Therefore, the Bank may insist that the Guarantor pay immediately,
and the Bank is not required to attempt to collect first from the Borrower, the
Collateral, or any other person liable for the Liabilities. The obligation of
the Guarantor shall be unconditional and absolute even if all or any part of
any agreement between the Bank and the Borrower is unenforceable, void,
voidable or illegal or uncollectible due to incapacity, lack of power or
authority, discharge or for any reason whatsoever, and regardless of the existence
of any defense, setoff, discharge or counterclaim (in any case, whether based
on contract, tort or any other theory) which the Borrower may assert. If the
Borrower is a corporation, limited liability company, partnership or trust, it
is not necessary for the Bank to inquire into the powers of the Borrower or the
officers, directors, members, managers, partners, trustees or agents acting or
purporting to act on its behalf, and any of the Liabilities made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder. Without limiting the foregoing, the Guarantor&#146;s liability is
absolute and unconditional irrespective of and shall not be released,
diminished or affected by: (a) any present or future law, regulation or order of
any jurisdiction (whether of right or in fact) or of any agency thereof
purporting to reduce, amend, restructure, render unenforceable or otherwise
affect any term of any Liabilities; or (b) any war, riot or revolution
impacting multinational companies or any act of expropriation, nationalization
or currency inconvertibility or nontransferability arising from governmental,
legislative or executive measures affecting any obligor or the property of any
obligor on the Liabilities.</FONT></P>

<P ><FONT SIZE=2><B>Other Guarantors.</B> If
there is more than one Guarantor, the obligations under this Guaranty are joint
and several. In addition, each Guarantor under this Guaranty shall be jointly
and severally liable with any other guarantor of the Liabilities. If the Bank
elects to enforce its rights against fewer than all guarantors of the
Liabilities, that election does not release the Guarantor from its obligations
under this Guaranty. The compromise or release of any of the obligations of any
of the other guarantors or the Borrower shall not serve to impair, waive, alter
or release the Guarantor&#146;s obligations.</FONT></P>

<P ><FONT SIZE=2><B>Rights of Subrogation.</B>
The Guarantor waives and agrees not to enforce any rights of subrogation,
contribution or indemnification that it may have against the Borrower, any
person liable on the Liabilities, or the Collateral, until the Borrower and the
Guarantor have fully performed all their obligations to the Bank, even if those
obligations are not covered by this Guaranty.</FONT></P>

<P ><FONT SIZE=2><B>Waivers.</B> The
Guarantor waives (a) to the extent not prohibited by applicable law, all rights
and benefits under any laws or statutes regarding sureties, as may be amended,
and (b) any right the Guarantor may have to receive notice of the following
matters before the Bank enforces any of its rights: (i) the Bank&#146;s acceptance
of this Guaranty, (ii) incurrence or acquisition of any Liabilities, any credit
that the Bank extends to the Borrower, Collateral received or delivered,
default by any party to any agreement related to the Liabilities or other
action taken in reliance on this Guaranty, and all notices and other demands of
any description, (iii) diligence and promptness in preserving liability against
any obligor on the Liabilities, and in collecting or bringing suit to collect
the Liabilities from any obligor on the Liabilities or to pursue any remedy in
the Bank&#146;s power to pursue; (iv) notice of extensions, renewals, modifications,
rearrangements, restatements and substitutions of the Liabilities or any
Collateral for the Liabilities; (v) notice of failure to pay any of the
Liabilities as they mature, any other default, adverse change in the financial
condition of any obligor on the Liabilities, release or substitution of any
Collateral, subordination of the Bank&#146;s rights in any Collateral, and every
other notice of every kind that may lawfully be waived; (vi) the Borrower&#146;s
default, (vii) any demand, diligence, presentment, dishonor and protest, or
(viii) any action that the Bank takes regarding the Borrower, anyone else, the
Collateral, or any of the Liabilities, which it might be entitled to by law or
under any other agreement, (c) any right it may have to require the Bank to
proceed against the Borrower, any other obligor or guarantor of the
Liabilities, or the Collateral for the Liabilities or the Guarantor&#146;s obligations
under this Guaranty, or pursue any remedy in the Bank&#146;s power to pursue, (d)
any defense based on any claim that the Guarantor&#146;s obligations exceed or are
more burdensome than those of the Borrower, (e) the benefit of any statute of
limitations affecting the Guarantor&#146;s obligations hereunder or the enforcement
hereof, (f) any defense arising by reason of any disability or other defense of
the Borrower or by reason of the cessation from any cause whatsoever (other
than payment in full) of the obligation of the Borrower for the Liabilities,  and (g) any defense based on or arising
out of any defense that the Borrower may have to the payment or performance of
the Liabilities or any portion thereof. The Bank may waive or delay enforcing
any of its rights without losing them. Any waiver affects only the specific
terms and time period stated in the waiver. No modification or waiver of this
Guaranty is effective unless it is in writing and signed by the party against
whom it is being enforced.</FONT></P>

<P ><FONT SIZE=2><B>Cooperation.</B> The Guarantor
agrees to fully cooperate with the Bank and not to delay, impede or otherwise
interfere with the efforts of the Bank to secure payment from the assets which
secure the Liabilities including actions, proceedings, motions, orders,
agreements or other matters relating to relief from automatic stay, abandonment
of property, use of cash collateral and sale of the Bank&#146;s collateral free and
clear of all liens. </FONT></P>

<P ><FONT SIZE=2><B>Reinstatement.</B> The
Guarantor agrees that to the extent any payment or transfer is received by the
Bank in connection with the Liabilities, and all or any part of the payment or
transfer is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be transferred or repaid by the Bank or transferred or paid over to a
trustee, receiver or any other entity, whether under any bankruptcy act or
otherwise (any of those payments or transfers is hereinafter referred to as a
&#147;Preferential Payment&#148;), then this Guaranty shall continue to be effective or
shall be reinstated, as the case may be, and whether or not the Bank is in
possession of this Guaranty, or whether the Guaranty has been marked paid,
released or canceled, or returned to the Guarantor and, to the extent of the
payment, repayment or other transfer by the
Bank, the Liabilities or part intended to be satisfied by the
Preferential Payment shall be revived and continued in full force and effect as
if the Preferential Payment had not been made.</FONT></P>

<P ><FONT SIZE=2><B>Information.</B> The
Guarantor assumes all responsibility for being and keeping itself informed of
the Borrower&#146;s financial condition and assets, and of all other circumstances
bearing upon the risk of nonpayment of the Liabilities and the nature, scope
and extent of the risks that the Guarantor assumes and incurs under this Guaranty,
and agrees that the Bank does not have any duty to advise the Guarantor of
information known to it regarding those circumstances or risks.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>3</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P ><FONT SIZE=2><B>Financial Information.</B>
The Guarantor further agrees that the Guarantor shall provide to the Bank the
financial statements and other information relating to the financial condition,
properties and affairs of the Guarantor as the Bank requests from time to time.</FONT></P>

<P ><FONT SIZE=2><B>Severability.</B> The
provisions of this Guaranty are severable, and in any action or proceeding
involving any state corporate law, or any state, federal or foreign bankruptcy,
insolvency, reorganization or other law affecting the rights of creditors
generally, if the obligations of the Guarantor under this Guaranty would
otherwise be held or determined to be avoidable, invalid or unenforceable on
account of the amount of the Guarantor&#146;s liability under this Guaranty, then,
notwithstanding any other provision of this Guaranty to the contrary, the
amount of such liability shall, without any further action by the Guarantor or
the Bank, be automatically limited and reduced to the highest amount that is
valid and enforceable as determined in such action or proceeding.</FONT></P>

<P ><FONT SIZE=2><B>Representations and Warranties by Guarantor. </B>The
Guarantor represents and warrants that the following statements are true and
will remain true until termination of this Guaranty and payment in full of all
Liabilities: (a) the execution and delivery of this Guaranty and the
performance of the obligations it imposes do not violate any law, do not
conflict with any agreement by which it is bound, or require the consent or
approval of any governmental authority or any third party; (b) this Guaranty is
a valid and binding agreement, enforceable according to its terms; (c) all
balance sheets, profit and loss statements, and other financial statements
furnished to the Bank in connection with the Liabilities are accurate and
fairly reflect the financial condition of the organizations and persons to
which they apply on their effective dates, including contingent liabilities of
every type, which financial condition has not changed materially and adversely
since those dates; (d) the Guarantor has filed all federal and state tax
returns that are required to be filed, has paid all due and payable taxes and
assessments against the property and income of the Guarantor and all payroll,
excise and other taxes required to be collected and held in trust by the
Guarantor for any governmental authority; (e) the Guarantor has determined that
this Guaranty will benefit the Guarantor directly or indirectly; (f) the
Guarantor has (i) without reliance on the Bank or any information received from
the Bank and based upon the records and information the Guarantor deems
appropriate, made an independent investigation of the Borrower, the Borrower&#146;s
business, assets, operations, prospects and condition, financial or otherwise,
and any circumstances that may bear upon those transactions, the Borrower or
the obligations, liabilities and risks undertaken in this Guaranty with respect
to the Liabilities; (ii) adequate means to obtain from the Borrower on a
continuing basis information concerning the Borrower and the Bank has no duty to
provide any information concerning the Borrower or any other obligor to the Guarantor; (iii) full and complete
access to the Borrower and any and all records relating to any Liabilities now
and in the future owing by the Borrower; (iv) not relied and will not rely upon
any representations or warranties of the Bank not embodied in this Guaranty or
any acts taken by the Bank prior to and after execution or other authentication
and delivery of this Guaranty (including
but not limited to any review by the Bank of the business, assets, operations,
prospects and condition, financial or otherwise, of the Borrower); and (v) determined that the Guarantor will
receive benefit, directly or indirectly, and has or will receive fair and
reasonably equivalent value for, the execution and delivery of this Guaranty;
(g) by entering into this Guaranty, the Guarantor does not intend to incur or
believe that the Guarantor will incur debts that would be beyond the
Guarantor&#146;s ability to pay as those debts mature; (h) the execution and
delivery of this Guaranty are not intended to hinder, delay or defraud any
creditor of the Guarantor; and (i) the Guarantor is neither engaged in nor
about to engage in any business or transaction for which the remaining assets
of the Guarantor are unreasonably small in relation to the business or
transaction, and any property remaining with the Guarantor after the execution
or other authentication of this Guaranty is not unreasonably small capital.
Each Guarantor, other than a natural person, further represents that: (1) it is duly organized, validly existing and in
good standing under the laws of the state where it is organized and in good
standing in each state where it is doing business; and (2) the execution
and delivery of this Guaranty and the performance of the obligations it imposes
(A) are within its powers and have been duly authorized by all necessary action
of its governing body, and (B) do not contravene the terms of its articles of
incorporation or organization, its by-laws, or any agreement or document
governing its affairs.</FONT></P>

<P ><FONT SIZE=2><B>Notice.</B> Except as
otherwise provided in this Guaranty, any notices and demands under or related
to this document shall be in writing and delivered to the intended party at its
address stated herein, and if to the Bank, at its main office if no other
address of the Bank is specified herein, by one of the following means: (a) by
hand, (b) by a nationally recognized overnight courier service, or (c) by
certified mail, postage prepaid, with return receipt requested. Notice shall be
deemed given: (i) upon receipt if delivered by hand, (ii) on the Delivery Day
after the day of deposit with a nationally recognized courier service, or (iii)
on the third Delivery Day after the notice is deposited in the mail. &#147;Delivery
Day&#148; means a day other than a Saturday, a Sunday, or any other day on which
national banking associations are authorized to be closed. Any party may change
its address for purposes of the receipt of notices and demands by giving notice
of such change in the manner provided in this provision. Notice of
terminations, as provided above, will not be deemed received until actually received
by the Manager of Commercial Loan Documentation Division, KY1-4340, P.O. Box
33035, Louisville, KY 40232-3035, Attn: Manager of Commercial Loan
Documentation Division under written receipt and shall be effective at the
opening of the Bank for business on the third Delivery Day after receipt of the
notice.</FONT></P>

<P ><FONT SIZE=2><B>Governing Law and Venue.</B>
This agreement shall be governed by and construed in accordance with the laws
of the State of New Jersey (without giving effect to its laws of conflicts).
The Guarantor agrees that any legal action or proceeding with respect to any of
its obligations under this agreement may be brought by the Bank in any state or
federal court located in the State of New Jersey, as the Bank in its sole
discretion may elect. By the execution and delivery of this agreement, the
Guarantor submits to and accepts, for itself and in respect of its property,
generally and unconditionally, the non-exclusive jurisdiction of those courts.
The Guarantor waives any claim that the State of New Jersey is not a convenient
forum or the proper venue for any such suit, action or proceeding. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>4</FONT></P>

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<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P ><FONT SIZE=2><B>Miscellaneous.</B> The
Guarantor&#146;s liability under this Guaranty is independent of its liability under
any other guaranty previously or subsequently executed by the Guarantor or any
one of them, singularly or together with others, as to all or any part of the
Liabilities, and may be enforced for the full amount of this Guaranty
regardless of the Guarantor&#146;s liability under any other guaranty. This Guaranty
binds the Guarantor&#146;s heirs, successors and assigns, and benefits the Bank and
its successors and assigns. The Bank may assign this Guaranty in whole or in
part without notice. The Guarantor agrees that the Bank may provide any
information or knowledge the Bank may have about the Guarantor or about any
matter relating to this Guaranty to JPMorgan
Chase &amp; Co., or any of its subsidiaries or affiliates or their
successors, or to one or more purchasers or potential purchasers of this
Guaranty or the Liabilities guaranteed hereby. The use of headings does not
limit the provisions of this Guaranty.</FONT></P>

<P ><FONT SIZE=2><B>WAIVER OF SPECIAL DAMAGES.</B>
THE GUARANTOR WAIVES, TO THE <B>MAXIMUM</B>
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR
RECOVER FROM THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES. </FONT></P>

<P ><FONT SIZE=2><B>JURY WAIVER.</B> THE
GUARANTOR AND THE BANK (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY,
KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR
OTHERWISE) BETWEEN THE GUARANTOR AND THE BANK ARISING OUT OF OR IN ANY WAY
RELATED TO THIS DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK
TO PROVIDE THE FINANCING DESCRIBED HEREIN. </FONT></P>



<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR STYLE="FONT-SIZE:1PX">
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 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="41%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="5%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="30%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 <TD WIDTH="15%" VALIGN=TOP>
 <P>&nbsp;</P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP colspan=2>
 <P><FONT SIZE=2><B>Guarantor:</B></FONT></P>
 </TD>

 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
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 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
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 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Address:</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>2711 Centerville Road, Ste. 400 </FONT></P>
 </TD>
 <TD VALIGN=TOP colspan=3>
 <P><FONT SIZE=2>BOS-Supply
 Chain Solutions (Lynk), Inc.</FONT></P>
 </TD>

 </TR>
 <TR>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>Wilmington, DE 19808</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
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 </TD>
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 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=2>By:</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
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 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
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 <P><FONT SIZE=1>&nbsp;</FONT></P>
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 <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>

 </TD>
 </TR>
 <TR>
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 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
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 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
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 </TD>
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 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P><FONT SIZE=1>Printed Name</FONT></P>
 </TD>
 <TD VALIGN=TOP>
 <P ALIGN=RIGHT><FONT SIZE=1>Title</FONT></P>
 </TD>
 </TR>
</TABLE>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
 <TD WIDTH="50%" VALIGN=BOTTOM>
 <P>&nbsp;</P>
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 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM NOWRAP>
 <P><FONT SIZE=2>Date Signed:</FONT></P>
 </TD>
 <TD VALIGN=BOTTOM>
 <P><FONT SIZE=1>&nbsp;</FONT></P>
 </TD>
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</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>5</FONT></P>

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`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.15
<SEQUENCE>7
<FILENAME>exhibit_4-15.htm
<TEXT>
<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        \\Backup\edgar filing\BOS better online solutions Ltd\96871\a96871.eep -->
     <!-- Control Number: 96871                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>

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

<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Workstation" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 4.15</B></U> </FONT> </P>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>SUPPLY AGREEMENT </FONT></H1>

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

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


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


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

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

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

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>***&#146;S AIRCRAFT
PROGRAMS </FONT></H1>

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

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;***&#148;</FONT></H1>

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

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

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This Supply Agreement, effective as
of ***, ***, ***, is made and entered into by and between ***, a corporation
existing under the laws of the ***, having its principal place of business at ***
(&#147;***&#148;), and <B><I>Summit Aviation Supply</I></B>, a company existing
under the laws of New Jersey, United States of America having its principal place of
business at 1008 Teaneck Road, Teaneck, N.J. U.S, is in regard to the supply of certain
aeronautical products for ***&#146;s aircraft programs. </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>WHEREAS,</B> *** is an aircraft
manufacturer, and is in the business of designing, manufacturing and selling aircraft
and aircraft parts; </FONT> </P>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>WHEREAS,</B> *** issued a request
for proposal inviting bidders to submit proposals for the supply of certain electrical
hardware to support *** aircraft programs (&#147;Programs&#148;); </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>WHEREAS,</B> Supplier sent *** a
proposal indicating Supplier&#146;s desire to participate in such Programs; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>WHEREAS,</B> Supplier shall
provide certain electrical hardware, as more specifically described herein, to *** and to
third parties expressly indicated by *** (***); </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>NOW, THEREFORE,</B> in
consideration of the mutual covenants and agreements herein set forth, and for good and
valuable consideration which is acknowledged by each Party hereto, the Parties hereto
agree as follows: </FONT></P>

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

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>PART
1 &#150; DEFINITIONS AND EXHIBITS</B> </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Definitions </FONT></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.2  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibits </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>PART
2 &#150; OBJECT OF AGREEMENT</B> </FONT></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.1  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subject
of Agreement </FONT></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.2  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.3  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>PART
3 &#150; PRICES AND PAYMENT</B> </FONT></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.1  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>General
Terms </FONT></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.2  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Adjustment </FONT></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.3  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.4  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.5  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Payment </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>PART
4 &#150; PURCHASE ORDERS, DELIVERY AND ACCEPTANCE</B> </FONT></TD>
</TR>
</TABLE>

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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>4.1  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Purchase
Orders </FONT></TD>
</TR>
</TABLE>

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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>4.2  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Delivery </FONT></TD>
</TR>
</TABLE>

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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>4.3  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Acceptance
and Rejection </FONT></TD>
</TR>
</TABLE>

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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>4.4  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Return </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>PART
5 &#150; TECHNICAL REQUIREMENTS</B> </FONT></TD>
</TR>
</TABLE>

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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>5.1  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Technical
Specifications</FONT></TD>
</TR>
</TABLE>

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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>5.2  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interchangeability </FONT></TD>
</TR>
</TABLE>

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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>5.3  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>

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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>5.4  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>PART
6 &#150; QUALITY ASSURANCE</B> </FONT></TD>
</TR>
</TABLE>

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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>6.1  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Quality
Requirements </FONT></TD>
</TR>
</TABLE>

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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>6.2  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Source
Inspection </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>PART
7 &#150; FURTHER OPERATIONAL PROCEDURES</B> </FONT></TD>
</TR>
</TABLE>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.1  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>

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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>7.2  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subcontracting </FONT></TD>
</TR>
</TABLE>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.3  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Program
Surveillance </FONT></TD>
</TR>
</TABLE>

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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>7.4  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Procurement
Offset Credits </FONT></TD>
</TR>
</TABLE>

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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>7.5  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>

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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>7.6  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>PART
8 &#150; SUSPENSION, TERMINATION, *** AND ***</B> </FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.1  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Suspension </FONT></TD>
</TR>
</TABLE>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.2  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>***</FONT></TD>
</TR>
</TABLE>

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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>8.3  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>

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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>8.4  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>

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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>8.5  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Right
to Set Off </FONT></TD>
</TR>
</TABLE>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.6  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>Page 3 of 21</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=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

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<TD WIDTH=100%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>PART
9 &#150; MISCELLANEOUS</B> </FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.1  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>

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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>9.2  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supplier
Representations </FONT></TD>
</TR>
</TABLE>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.3  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>

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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>9.4  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>

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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>9.5  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>

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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>9.6  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Insurance </FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.7  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>

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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>9.8  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Publicity </FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.9  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Customer
Contact </FONT></TD>
</TR>
</TABLE>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.10  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Taxes
and Duties </FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.11  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Survival</FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.12  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amendment </FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.13  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Assignment </FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.14  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Compliance
With Laws </FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.15  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Headings </FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.16  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Severability </FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.17  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Export
Control </FONT></TD>
</TR>
</TABLE>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.18  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nonwaiver </FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.19  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Applicable
Law </FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.20  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dispute
Resolution </FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.21  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Remedies
not Exclusive </FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.22  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Independent
Contractors </FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.23  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Changes
to Supplier Ownership or Affiliation </FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.24  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notices,
Requests and Language</FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.25  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Term
of Agreement </FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.26  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Entire
Agreement </FONT></TD>
</TR>
</TABLE>

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

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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit  A</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                 ***</FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit  B</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                 ***</FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit  C</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                ***</FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit  D</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                 ***</FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit  E</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                 ***</FONT></TD>
</TR>
</TABLE>

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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit  F</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                 ***</FONT></TD>
</TR>
</TABLE>


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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit  G</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                 ***</FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>Page 4 of 21</font></p>
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<page>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART 1 &#150;
DEFINITIONS AND EXHIBITS </FONT></H1>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>1.1</I></B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Definitions</I></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For purposes of this Agreement, the
following terms shall be defined as set forth below. As required by the context, defined
terms expressed in the singular form shall be deemed to refer to the plural form and vice
versa. The words &#147;Clause&#148;, &#147;Paragraph&#148;, &#147;Article&#148;,
&#147;Section&#148;, &#147;Exhibit&#148; and like references are references to this
Agreement, unless otherwise specified. Any references herein to this Agreement or to any
other agreement, exhibit, instrument or document will include any and all amendments,
modifications, supplements or substitutions that may be made from time to time to this
Agreement or to any such agreement, exhibit, instrument or document, all as permitted by
this Agreement, unless otherwise specified. </FONT></P>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.1  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Agreement&#148;,
&#147;hereof&#148;, &#147;hereto&#148;, &#147;herein&#148; and similar terms shall mean
and/or refer to this Supply Agreement and its respective Exhibits and other documents
attached to this Supply Agreement, as well as all amendments, modifications and
supplements hereto; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.2  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>"Aircraft"
 shall mean the aircraft  which are or will be designed and  manufactured  by
***.
</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>1.1.3  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Airworthiness
Authorities&#148; shall mean the ***, EASA (European Aviation Safety Agency), FAA (United
States Federal Aviation Administration) or such other airworthiness authority by which
the Products may be certified, pursuant to the Technical Specification; </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>1.1.4  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;AOG&#148; shall
mean &#147;Aircraft on Ground&#148;, and that such Aircraft is unable to continue or be
returned to service until appropriate action is taken; </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>1.1.5  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Agreement&#148;,
&#147;hereof&#148;, &#147;hereto&#148;, &#147;herein&#148; and similar terms shall mean
and/or refer to this Supply Agreement and its respective Exhibits and other documents
attached to this Supply Agreement, as well as all amendments, modifications and
supplements hereto; </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>1.1.6  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Aircraft&#148; shall
mean any and all aircraft designed and manufactured, or to be designed and manufactured,
by *** ; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.7  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>***; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.8  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>***; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.9  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>"Critical
 Order"  shall mean a Purchase  Order placed on an urgent basis to prevent the
           occurrence of an AOG;</FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>Page 5 of 21</font></p>
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<P ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.10  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>"Customer"
shall mean any owner,  lessee or operator of an Aircraft,  or an appointee of
           such owner, lessee or operator;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.11  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>***
; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.12  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>"***'s
Logistics  Provider" shall mean the logistics service provider  contracted by ***
           for the transport of all Products;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.13  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>"Exhibit"
 shall mean those  documents,  individually  or jointly,  as listed in Section
           1.2 hereof;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.14  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>***; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.15  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>"Parties"
shall mean *** and Supplier, taken collectively;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.16  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>"Party"
shall mean each of *** and Supplier, individually;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.17  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Price&#148; shall
mean the total amount paid by *** to Supplier in accordance with Section *** of this
Agreement; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.18  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Product&#148; shall
mean all goods, including pieces, parts and components (if applicable) thereof for the
Aircraft to be provided by Supplier under this Agreement, as further described in Exhibit
*** attached hereto as may be amended from time to time and shall include those goods
provided by the Supplier under this Agreement which are intended for ***&#146;s use,
Customer&#146;s use, or for sale as spare parts or production replacements; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.19  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Program&#148; shall
mean all activities related to the design, development, certification, manufacturing,
sales and after-sales support of an Aircraft including, but not limited to Customer
Support; </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>1.1.20  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Proprietary
Information&#148; shall mean all information or data, whether or not marked or otherwise
specified as proprietary or confidential, related to the Program which concerns a Party&#146;s
technology, trade secrets, know-how, existing or future products or financial or
corporate information. This information may include, but is not limited to, information
relating to: inventions, computer software programming and technology, research,
development of new products, engineering, manufacturing processes, purchasing data,
make-or-buy plans, business plans, accounting, marketing, sales or pricing data. Such
information or data may be contained in materials such as drawings, designs, engineering
releases, tools, master tools, models, samples, databases, datasets, specifications,
algorithms, manuals, reports, compilations, research, patent applications, computer
programs, machine-readable data (such as electronic files) and marketing and financial
information and plans, and any information derived or compiled in whole or in part
therefrom. Such information and data includes but is not limited to information received
by a Party which the Party is obligated, contractually or otherwise, to hold in
confidence; </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>Page 6 of 21</font></p>
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<page>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

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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>1.1.21  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Purchase
Order&#148; shall mean any purchase order issued by *** to Supplier, for supply of
Products in accordance with this Agreement; </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>1.1.22  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>***;</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>1.1.23  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Shipset&#148; shall
mean the necessary quantity of a group of Products to be utilized on the
production/assembly of one Aircraft. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.24  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Stop
Work Notice&#148; shall mean the notice *** is entitled to give to Supplier pursuant to
Section 8.1 herein; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.25  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Subcontractor&#148; shall
mean any manufacturer and/or supplier, excluding Supplier, which manufactures and/or
supplies any portion or part of the Products, pursuant to the instructions and/or
contract of Supplier; </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>1.1.26  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>"Supplier"
shall mean SUMMIT AVIATION SUPPLY</FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1.27  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>***; </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>1.1.28  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Technical
Specification&#148; shall mean the Product technical requirements necessary for Supplier
to design and/or manufacture the Product. </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"><B><I>1.2</I></B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Exhibits</I></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%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit  A</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                 ***</FONT></TD>
</TR>
</TABLE>

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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>Exhibit  B</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                 ***</FONT></TD>
</TR>
</TABLE>

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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>Exhibit  C</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                ***</FONT></TD>
</TR>
</TABLE>

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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>Exhibit  D</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                 ***</FONT></TD>
</TR>
</TABLE>

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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>Exhibit  E</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                 ***</FONT></TD>
</TR>
</TABLE>

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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>Exhibit  F</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                 ***</FONT></TD>
</TR>
</TABLE>

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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>Exhibit  G</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                 ***</FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the event any conflict exists
between the terms and conditions set forth in the Exhibits hereto and those terms and
conditions set forth in this Agreement, the terms and conditions of this Agreement shall
prevail. A conflict shall not be deemed to exist when this Agreement and an Exhibit hereto
address different or specific situations or activities. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART 2 &#150; OBJECT OF
AGREEMENT </FONT></H1>

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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"><B><I>2.1</I></B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Subject
of Agreement</I></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>According to the terms and conditions
of this Agreement, Supplier agrees to manufacture, test, supply, ship and provide logistic
support to the Products for use or installation into an Aircraft or an Aircraft part. </FONT></P>

<p align=center>
<font size=2>Page 7 of 21</font></p>
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<page>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** does not guarantee to Supplier:
(i) any minimum amounts of Products to be purchased by ***; (ii) any minimum amount of
Products to be purchased by *** in any Purchase Order; (iii) any minimum amount of money
to be paid by *** pursuant to this Agreement; (iv) any constant or fixed number of
Purchase Orders to be placed by *** with Supplier in any given period of time; and/or (v)
the use of Products in any of its Customer programs. No financial obligation of *** to pay
any amount of money to Supplier will arise before the delivery of conforming Products
following the issuance of a valid Purchase Order, according to the terms and conditions of
this Agreement, and the placement of Purchase Orders by *** will be within ***&#146;s sole
discretion. The parties agree that ***, at any time during the life of this Agreement and
in its sole discretion, may purchase similar or comparable products and/or services from
other suppliers. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supplier agrees to supply Products to
any ***&#146;s subsidiary, branch or affiliate company, with no restrictions, under the
same terms and conditions set forth hereunder through solely the placement of the Purchase
Order as provided in Section 4.1 herein below. </FONT></P>

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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"><B><I>2.2</I></B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>***</I></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><B><I>2.3</I></B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>***</I></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART 3 &#150; PRICES AND
PAYMENT </FONT></H1>

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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"><B><I>3.1</I></B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>General
Terms</I></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All prices and payments referred to
in this Agreement are set forth in *** (***). *** </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Price of the Products is set
forth in the Exhibit *** to this Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All Prices set forth in this
Agreement *** and/or in accordance with this Agreement and with the Purchase Orders. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><B><I>3.2</I></B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Adjustment</I></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><B><I>3.3</I></B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>***</I></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><B><I>3.4</I></B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>***</I></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><B><I>3.5</I></B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Payment</I></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

<p align=center>
<font size=2>Page 8 of 21</font></p>
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<page>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART 4 &#150; PURCHASE
ORDERS, DELIVERY AND ACCEPTANCE </FONT></H1>

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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"><B><I>4.1</I></B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Purchase
Orders</I></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>           4.1.1 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>General</FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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>4.1.2 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Purchase
Orders Standard Lead Time </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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>4.1.3 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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>           4.1.4 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>***</FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><B><I>4.2</I></B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Delivery</I></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>4.2.1 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>General </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supplier shall deliver the Products
on the dates set forth in the Purchase Orders, ***, in the *** condition, according to
ICC&#146;s INCOTERMS 2000, ***. Supplier will comply with the provisions of *** set forth
in Exhibit ***. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supplier shall deliver any Product
required to be delivered pursuant to this Agreement and necessary for ***, ***, ***, ***,
and *** condition set forth in the preceding paragraph. </FONT></P>

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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>4.2.2 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Procedures </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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>4.2.3 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Packing
and Shipping </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><B><I>4.3</I></B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Acceptance
and Rejection</I></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><B><I>4.4</I></B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Return</I></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>PART 5 &#150; TECHNICAL
REQUIREMENTS</B> </FONT> </P>

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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"><I><B>5.1</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Technical
Specifications</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Products are based on Technical
Specifications, which may be standard of the market or issued by Supplier or by ***, as
set forth in Exhibit ***. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

<p align=center>
<font size=2>Page 9 of 21</font></p>
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<page>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>5.2</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Interchangeability</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supplier agrees to maintain its
Products competitive in the marketplace and to use the most appropriate techniques and
technologies available in the industry. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supplier shall ensure that any
improvement or upgrade of the Products is fully interchangeable (same fit, form and
function) with former versions of the Products, unless otherwise previously and
specifically agreed in writing by ***. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Even if an improvement or upgrade of
the Product does not affect the form, fit, function and/or part number of the Product,
Supplier shall submit information on such improvement or up grade to ***&#146;s approval,
within *** (***) *** before such modification, detailing the technical differences with
the current Products. Supplier shall make all efforts to provide information necessary to
*** analyses and approvals (including, but not limited to, qualification tests reports and
audits). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>5.3</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>***</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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>           5.3.1 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>***</FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><B><I>5.4</I></B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>***</I></B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART 6 &#150; Quality
Requirements </FONT></H1>

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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"><I><B>6.1</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Quality
Requirements</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supplier shall comply with ***&#146;s
quality requirements (&#147;Quality Requirements&#148;) made available through ***. For
informational purposes only, such Quality Requirements are attached hereto as Exhibit ***. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><I><B>6.2</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Source
Inspection</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At any time, *** may, at its sole
discretion, elect to inspect Products, Spare Parts, Technical Publications and/or
processes related to commercial, engineering, quality and material processing control
relating to Supplier&#146;s performance under this Agreement at source, including all
Product packing and accompanying documentation at the delivery point, by providing
Supplier with a prior written notice at least *** (***) *** before the date of the
intended inspection. </FONT></P>

<p align=center>
<font size=2>Page 10 of 21</font></p>
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<page>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supplier agrees that the
Airworthiness Authority representatives shall be entitled to inspect and evaluate Supplier
including, but not limited to, Supplier&#146;s facilities, systems, data, equipment,
personnel, testing and all work-in-process and completed work. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supplier shall cause its
Subcontractors to authorize *** and/or Airworthiness Authority to conduct such inspections
on the same basis. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supplier shall be responsible for the
payment or reimbursement to ***, as the case may be, of any and all costs and expenses
incurred by *** in connection with source inspections and any other actions that may be
necessary, at ***&#146;s discretion, as a result of Supplier&#146;s recurring
non-compliance with the terms of this Section 6, including costs incurred by *** with air
ticket and lodging to carried out inspection arising out of Supplier&#146;s
non-compliance. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>PART 7 &#150; FURTHER
OPERATIONAL PROCEDURES</B> </FONT> </P>

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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"><I><B>7.1</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>***</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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>7.1.1 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><I><B>7.2</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Subcontracting</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** may, at any time during the
performance of this Agreement, review Supplier&#146;s make-or-buy plan and source
selection for Products and/or tooling considered critical by *** because of process
requirements or manufacturing complexity, and veto Subcontractors. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supplier agrees that it shall not
subcontract any other aircraft manufacturer or respective subsidiaries, branches or
affiliated companies for the performance of this Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supplier is responsible for its
supply chain process, including, but not limited to its suppliers manufacturing process. </FONT></P>

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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"><I><B>7.3</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Program
Surveillance</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subject to Section 6.2, Supplier
hereby grants, and shall cause Subcontractors to grant, to *** and Customers the right to
visit the Supplier or Subcontractors&#146; facilities during operating hours to review
progress and performance of production, schedule, cost, quality and protection of
***&#146;s Proprietary Information. Supplier agrees and shall cause Subcontractors to
agree that any *** or Customer authorized representative shall be allowed access to all
areas used for the performance of this Agreement. Such access shall be subject to the
regulations of any governmental agency regarding admissibility and movement of personnel
on Supplier&#146;s or Subcontractors&#146; premises. </FONT></P>

<p align=center>
<font size=2>Page 11 of 21</font></p>
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<page>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Each Party (the &#147;Indemnifying
Party&#148;) hereby agrees to indemnify and hold the other Party and the other
Party&#146;s officers, employees and agents (collectively the &#147;Indemnified
Party&#148;), harmless from and against all actions, claims, demands, liability, losses,
costs and expenses (including the reasonable costs of defending and the actual costs of
settling any action, claim or demand) for personal injury, death or property loss which
may be brought or made against or suffered or incurred by the Indemnified Party, solely
caused by the Indemnifying Party&#146;s representatives while upon the Indemnified
Party&#146;s property and while carrying out their activities under the Program. </FONT></P>

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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"><I><B>7.4</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Procurement
Offset Credits</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>With respect to work covered by this
Agreement, Supplier agrees to use its best reasonable efforts to cooperate with *** in the
fulfillment of any offset obligation that *** may have accepted as a condition for the
sale of any Product or Aircraft. </FONT></P>

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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"><I><B>7.5</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>***</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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>7.5.1 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>***</FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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>           7.5.2 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>***</FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><I><B>7.6</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>***</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>PART 8 &#150; SUSPENSION,
TERMINATION, ***, AND ***</B> </FONT> </P>

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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"><I><B>8.1</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Suspension</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** may at any time, by written
notice to Supplier (a &#147;Stop Work Notice&#148;), require Supplier to stop all or any
part of the work called for by this Agreement. Upon receipt of a Stop Work Notice,
Supplier shall promptly comply with its terms and take all reasonable steps to minimize
the costs arising from the work covered by the Stop Work Notice. Within the period
specified in the Stop Work Notice, *** shall either (i) cancel the Stop Work Notice or
(ii) terminate this Agreement in whole or part, or (iii) cancel the work covered by the
Stop Work Notice. In the event *** cancels the Stop Work Notice Supplier shall promptly
resume work in accordance with the terms of this Agreement. </FONT></P>

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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"><I><B>8.2</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>***</B></I> </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>           8.2.1 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>General
Terms</FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the case of a total termination,
Supplier shall immediately upon said termination stop all work in any way related to this
Agreement and return to *** any and all equipment, and documentation, technical or not,
including, but not limited to Proprietary Information, drawings and blueprints which are
the property of ***. </FONT></P>

<p align=center>
<font size=2>Page 12 of 21</font></p>
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<page>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR"  -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Within *** (***) *** of the effective
date of the Termination Notice, each Party hereto shall issue to the other a termination
statement (&#147;Termination Statement&#148;). Any Termination Statement, whether from ***
or Supplier, shall contain sufficient details, verifiable by third party audit, to support
the amount being claimed. Supplier&#146;s Subcontractors shall not submit termination
claims directly to ***. </FONT></P>

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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>           8.2.2 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Payments</FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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>8.2.3 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><I><B>8.3</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>***</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><I><B>8.4</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>***</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><I><B>8.5</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Right
to Set-Off</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notwithstanding the foregoing and
without prejudice to other rights and remedies, *** will have the right, at its option, to
set off any amounts due by *** to Supplier against any amounts due by Supplier to ***,
including but not limited to damages recoverable by ***. </FONT></P>

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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"><I><B>8.6</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>***</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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>           8.6.1 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>***</FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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>           8.6.2 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>***</FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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>           8.6.3 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>***</FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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>           8.6.4 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>***</FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>PART 9 &#150;
Miscellaneous</B> </FONT> </P>

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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"><I><B>9.1</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>***</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

<p align=center>
<font size=2>Page 13 of 21</font></p>
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<page>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

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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"><I><B>9.2</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Supplier
Representations</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supplier represents that it is fully
competent and maintains adequate resources to perform all the work required for providing
the Products in accordance with the terms of this Agreement. *** and Customers are
entitled to rely upon Supplier as an expert. Supplier hereby further represents that all
requirements of the Airworthiness Authorities, in regard to the Products have been or
shall timely be complied with by Supplier. Such representations in this Section shall
survive *** (***) *** following the termination of this Agreement. </FONT></P>

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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"><I><B>9.3</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>***</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><I><B>9.4</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>***</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><I><B>9.5</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>***</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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>           9.5.1 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Intellectual
Property Infringement Indemnification</FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supplier hereby indemnifies, and
shall defend and hold harmless *** and all of ***&#146;s subsidiaries and all officers,
agents and employees of *** and any Customer from and against all claims, suits, actions,
awards, judgments, settlements (including, but not limited to, awards based on intentional
infringement of patents or copyrights known to Supplier), liabilities, damages, costs and
attorney&#146;s fees related to the actual or alleged infringement of any intellectual
property rights as defined by ***, United States or other nation&#146;s intellectual
property laws arising out of the manufacture, sale or use of Products, technical
publications or services by either Supplier, *** or any Customer. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** and/or any Customer shall duly
notify Supplier of any such claim, suit or action, and Supplier agrees to, at its own
expense, fully defend such claim, suit or action on behalf of *** and all of ***&#146;s
subsidiaries and all officers, agents and employees of *** and/or any Customer, provided,
however, that Supplier shall keep *** well-informed with respect to any and all actions to
be taken by Supplier; *** shall have the right to interfere in such actions whenever ***
believes that such action may prejudice itself; and Supplier shall not settle, compromise
or discharge, or admit any liability with respect to, any such claim without the prior
written consent of ***. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notwithstanding the foregoing,
Supplier shall have no obligation under this Agreement with regard to any infringement
arising from: (i) Supplier&#146;s compliance with formal specifications issued by ***
where infringement could not be avoided in complying with such specifications or (ii) use
or sale of Products in combination with other items when such infringement would not have
occurred from the use or sale of those Products solely for the purpose for which they were
designed and sold by Supplier. </FONT></P>

<p align=center>
<font size=2>Page 14 of 21</font></p>
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<page>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

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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"><I><B>9.6</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Insurance</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Supplier hereby represents that:
Supplier has and agrees to maintain comprehensive Products liability and Grounding
coverage through a rated insurance company for the amount of *** per occurrence; and (ii)
Supplier will cause Supplier&#146;s main supplier in terms of Product part numbers
described in the Exhibit *** of this Agreement (***) will maintain comprehensive Products
liability and Grounding coverage through a rated insurance company for the amount of ***
per occurrence, both throughout the term of this Agreement. Supplier shall also maintain
*** Insurance, covering incidents, risks and other situations, as it might be required by
law or agreed upon between the Parties. </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The insurance policies shall in all
cases be in form and amounts above mentioned, and issued by insurance companies of
reasonably known capacity reasonably known capacity, satisfactory to ***, which will not
unreasonably refuse its approval. In the event ***&#146;s insurance company requires an
increase in such amounts, Supplier and *** will mutually agree on the amount in good
faith. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** may request, at any time during
this Agreement, copies of the above mentioned policies and/or material evidence that the
insurance coverage&#146;s are in full force end effect. </FONT></P>

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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"><I><B>9.7</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>***</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** </FONT></P>

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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"><I><B>9.8</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Publicity</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>No information relating to the
subject matter of this Agreement including, without limitation, news releases,
photographs, films, advertisements, public announcements and denials or confirmations of
such public announcements, shall be disclosed or otherwise made available by Supplier to
any third party without ***&#146;s prior written consent. Supplier agrees to reasonably
assist in advertising campaigns and promotion for the Aircraft as directed by ***. Without
prejudice to the terms of this section 9.8, *** agrees that Supplier can announce the
execution of this Agreement. </FONT></P>

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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"><I><B>9.9</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Customer
Contact</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** is the only responsible for all
contact with Customers regarding the Program and the Aircraft, as well as any other ***
model aircraft programs. Supplier shall not make any contact with actual or potential
Customers on the subject of the Program or without ***&#146;s prior written consent; and
Supplier shall respond to any inquiry from actual or potential Customers regarding the
Program and the Aircraft by requesting that the inquiry be directed to ***. Supplier
shall, concurrently with such response, advise *** of such inquiry. </FONT></P>

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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"><I><B>9.10</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Taxes
and Duties</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Each Party will be responsible for
all taxes, fees, levies, imposts, penalties, excises, surcharges and import and export
charges and other duties imposed by any governmental authority or subdivision thereof
which may be assessed against or incurred by such Party as a result of its performance
under this Agreement; provided, however, that Supplier agrees to pay and be responsible
for, and to hold *** harmless, on an after-tax basis, from: </FONT></P>



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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i)&nbsp;&nbsp;&nbsp;&nbsp;
          All taxes, fees and duties associated with the manufacture of Products and
          passage of title and delivery of said Products to ***, except that Supplier
          shall not be responsible for any customs duties, tariffs or sales or use taxes
          assessed in *** in regard to any Product for which *** has accepted title other
          than those duties which may be assessed pursuant to the item (ii) below; and </FONT></P>

<p align=center>
<font size=2>Page 15 of 21</font></p>
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<page>

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

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii)&nbsp;&nbsp;&nbsp;&nbsp;
          All taxes, fees and duties on any property furnished by *** to Supplier
          including but not limited to data, information, materials, parts or tools, and
          Supplier agrees to, when required by the property owner in a timely manner,
          declare, file, register and/or pay all such taxes on behalf of *** and keep ***
          informed of all such activities and provide supporting documentation as
          requested. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii)&nbsp;&nbsp;&nbsp;&nbsp;
          In any case in which a penalty, tax, fee, duty, impost, levy, excise, surcharge
          or import / export charge is charged or claimed against *** by the *** customs
          or other competent authorities due to the non-compliance by Supplier with
          ***&#146;s Shipping Policy, Supplier shall reimburse *** the corresponding
          values so charged or claimed against ***. </FONT></P>

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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>9.10.1 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Labor
Taxes </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Each Party shall be responsible for
all tax reports and tax payments and for the payment of social welfare contributions and
compliance with all social welfare or other applicable regulations required to be made or
discharged by employers under the laws of the other Party&#146;s central or local
government, where applicable, with respect to its employees stationed at the other
Party&#146;s locations. </FONT></P>

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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"><I><B>9.11</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Survival</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Without limiting any other survival
provision contained herein and notwithstanding any other provision of this Agreement to
the contrary, the representations, covenants, agreements and obligations of the Parties
set forth in this Agreement, shall survive any cancellation, termination, expiration
and/or any assignment of this Agreement, or of any payment and performance of any or all
of the other obligations of the Parties hereunder, including those obligations contained
in the following provisions: (i) Applicable Law, (ii) Assignment, (iii) Compliance with
Laws, (iv) Dispute Resolution, (v) Export Control Compliance, (vi) Independent
Contractor&#146;s, (vii) Indemnification, (viii) Intellectual Property, (ix) Intellectual
Property Infringement Indemnification, (x) Insurance, (xi) Nonwaiver, (xii) Proprietary
Information, (xiii) Remedies, (xiv) Remedies Not Exclusive, (xv) Severability, (xvi)
Supplier Representations, (xvii) Restrictions, (xiii) Surplus Products, (xix) Survival of
Warranties, (xx) Survival and (xxi) Obsolescence. </FONT></P>

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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"><I><B>9.12</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Amendment</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This Agreement may only be altered,
amended or supplemented by a written instrument executed by the Parties, except where
otherwise provided herein. </FONT></P>

<p align=center>
<font size=2>Page 16 of 21</font></p>
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<page>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>9.13</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Assignment</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Neither Party shall assign any of its
rights hereunder, including, without limitation, rights to monies due or to become due
hereunder, or delegate any of its duties hereunder without the prior written consent of
the other. </FONT></P>

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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"><I><B>9.14</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Compliance
With Laws</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Each Party shall be responsible for
complying with all laws, including, but not limited to, any statute, rule, regulation,
judgment, decree, order or permit applicable to its performance under this Agreement and
agrees to indemnify and to hold harmless the other Party from any failure by the former to
comply with any provisions of such laws. Each Party further agrees (i) to notify the other
of any obligation under this Agreement which is or may become prohibited under applicable
law, at the earliest opportunity but in all events, where applicable, sufficiently in
advance of the former&#146;s performance of such obligation so as to enable the other to
identify alternative methods of performance that will comply with applicable law, (ii) to
notify the other at the earliest possible opportunity if the former&#146;s performance of
any aspect of its obligations under the Agreement will subject the other to liability
under applicable laws, and (iii) to notify the other at the earliest possible opportunity
of any aspect of the former&#146;s performance which becomes or which the former
reasonably believes will become subject to additional regulation after the date of
execution of this Agreement. </FONT></P>

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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"><I><B>9.15</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Headings</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Headings used in this Agreement are
for convenience of reference only and shall not affect the interpretation of this
Agreement. </FONT></P>

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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"><I><B>9.16</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Severability</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If any provision in this Agreement is
or becomes void or unenforceable by force or operation of law, the other provisions shall
remain valid and enforceable. </FONT></P>

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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"><I><B>9.17</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Export
Control</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.17.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Supplier
represents and warrants that it will comply with all applicable laws related to the
export, re-export and transfer of the Product and its associated software and technology
under this Agreement. Without limiting the generality of the foregoing, Supplier further
represents and warrants that:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;it
shall ensure that any Product and its associated software and technology that
          is subject to the jurisdiction of the United States Export Administration
          Regulations (&#147;EAR&#148;), the International Traffic In Arms Regulations
          (&#147;ITAR&#148;), or other applicable export control or economic sanctions
          laws, is not (i) exported, transferred or released from the United States or by
          United States persons or (ii) exported, re-exported, transferred or released
          from countries other than the United States, without first complying with all
          requirements of the EAR, ITAR, or other applicable export control or economic
          sanctions laws including the requirement for obtaining an export license, if
          applicable;  </FONT></P>

<p align=center>
<font size=2>Page 17 of 21</font></p>
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<P ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;it
will timely inform *** in writing and in good faith of the existence and           nature
of any restriction that the government of Supplier&#146;s country and/or           the
government of the United States imposes or may impose on the export,           re-export,
transfer or release of the Product and its associated software and           technology.  </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.17.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon
execution of this Agreement, and at anytime upon ***&#146;s request, Supplier shall
deliver the Product export control classification sheet attached hereto as Exhibit ***,
completed and signed by a duly authorized officer of Supplier. Supplier shall also submit
the Product export control classification sheet to *** immediately following any changes
to the information previously provided.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.17.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If
an export license is required for the export, re-export, transfer, or release of any
Product and associated software and technology supplied under this Agreement, Supplier
shall timely obtain such license and shall provide *** with copies of the license,
license application, and related export control documentation (transmittal letter, etc).
Denial of a license will only be construed as excusable delay under this Agreement if the
license is denied for reasons not attributable to Supplier and after Supplier has
demonstrated to ***&#146;s satisfaction that (a) Supplier filed with the proper
governmental authorities the license application and documents in support of the license
application pursuant to the applicable laws and regulations, including a comprehensive
and complete letter to the relevant governmental agency explaining the details of the
export, re-export, transfer, or release and (b) Supplier used its best efforts to obtain
approval of the license application. *** may, in its sole discretion, request a legal
opinion from Supplier&#146;s counsel, acceptable to *** and at Supplier&#146;s expense,
confirming that Supplier has complied with the above. Denials of licenses in all other
circumstances will not be construed as excusable delay.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.17.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Supplier
shall immediately notify *** if Supplier is, or becomes, listed on any U.S. or other
government list of restricted or prohibited persons, or if Supplier&#146;s export
privileges are otherwise denied, suspended or revoked in whole or in part by any
government entity or agency.  </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>Page 18 of 21</font></p>
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<P ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

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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"><I><B>9.18</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Nonwaiver</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>No failure on the part of either
Party in exercising any right or remedy hereunder, or as provided by law or in equity,
shall impair, prejudice or constitute a waiver of any such right or remedy, or shall be
construed as a waiver of any event of default or as acquiescence therein. No single or
partial exercise of any such right or remedy shall preclude any other or further exercise
thereof or the exercise of any other right or remedy. No acceptance of partial payment or
performance of any of Supplier&#146;s or ***&#146;s obligations hereunder shall constitute
a waiver of any event of default or a waiver or release of payment or performance in full
by Supplier or *** of any such obligation. </FONT></P>

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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"><I><B>9.19</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Applicable
Law</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This Agreement shall be subject to
and governed by the laws of the United States and the State of New York, excluding their
choice-of-law principles (other than section 5-1401 and 5-1402 of the New York General
Obligations Law). The United Nations Convention on Contracts for the International Sale of
Goods, 1980, and any successor thereto, will not apply. Any suit must be brought to the
arbitration panel mentioned in Section 8.20, and the Parties irrevocably consent to
personal and exclusive jurisdiction and forum of, and agree to be bound by any arbitration
award rendered by these arbitrators. </FONT></P>

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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"><I><B>9.20</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Dispute
Resolution</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*** and Supplier hereby agree to
attempt to resolve through negotiation any and all disputes between *** and Supplier,
arising out of or in connection with this Agreement or its performance, including, but not
limited to, any questions regarding the existence, validity or termination hereof. At any
time, however, if a Party decides not to pursue negotiations any longer, said dispute
shall be finally settled by binding arbitration. If arbitration is so initiated, it will
be conducted in the English language, will take place in New York, USA and will be
conducted in accordance with the Rules of Arbitration of the International Chamber of
Commerce of Paris, as they may be modified by this Section (the &#147;Rules&#148;), by
three arbitrators appointed in accordance with said Rules. Arbitrators must have
experience in deciding complex commercial cases, and should preferably have aircraft
industry background. </FONT></P>

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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"><I><B>9.21</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Remedies
not Exclusive</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The rights and remedies set forth in
this Agreement are not exclusive, except in case the remedy is indicated herein as
exclusive, and nothing contained in this Agreement shall be deemed to diminish or
eliminate any right or remedy which *** may have at law or in equity. </FONT></P>

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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"><I><B>9.22</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Independent
Contractors</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The relationship between *** and
Supplier shall be that of independent contractors and not of an agent for or partner of
the other for any purpose whatsoever. Neither Party shall represent itself as the agent or
legal partner of the other Party or do any act or thing which might result in other
persons believing that it has authority to contract or in any other way to enter in
commitments on behalf of the other. </FONT></P>

<p align=center>
<font size=2>Page 19 of 21</font></p>
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<P ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

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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"><I><B>9.23</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Changes
to Supplier Ownership or Affiliation</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If at any time Supplier becomes owned
or controlled by or merges with any person or entity which competes with *** aircraft or
enters into a substantial risk sharing arrangement which risk sharing arrangement is
involved in a undertaking which competes with *** aircraft, Supplier shall notify *** in
advance, and *** may terminate this Agreement by providing written notice to Supplier.
Further, in the event that transfer of <I>de facto control</I>, or of a material part, of
Supplier&#146;s business to a third party is contemplated, Supplier shall give timely
notice to ***, but no less than within *** (***) *** prior to any such transfer or, in the
event Supplier does not have knowledge of such transfer prior to its occurrence, Supplier
agrees to give notice to *** within *** (***) *** after said occurrence. Upon such
notification, *** may, at its sole discretion, renegotiate with Supplier mutually
acceptable terms to continue this Agreement or terminate this Agreement without any
liability to ***, other than the payment by each party of the amounts specified in Section
8.2 of this Agreement. </FONT></P>

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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"><I><B>9.24</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Notices,
Requests and Language</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All notices and requests in connection
with this Agreement shall be given in English and in writing and may be given by airmail,
facsimile or any other customary means of communication to the contract administrators of
the Program that each Party shall indicate to the other at the appropriate time. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The effective date of any notice or
request given in connection with this Agreement shall be *** (***) *** after the receipt
by the addressee. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The language of this Agreement and
all other documents in any way relating to this Agreement is the English language. In the
event this Agreement or any other document in any way relating to this Agreement is
translated into another language or is issued in more than one language, the version which
shall prevail for all purposes whatsoever is the version written in the English language. </FONT></P>

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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"><I><B>9.25</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Term
of Agreement</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Unless earlier terminated in
accordance with the provisions of this Agreement, or renewed by written agreement of the
Parties prior to the expiration this Agreement shall be valid and effective between the
Parties until December 31st, 2012, and at ***&#146;s discretion may be renewed for
additional periods of *** (***) ***. *** shall formalize to Supplier, at least *** ***
prior to the end of the Agreement, intention to extend such Agreement for an additional
*** *** period. </FONT></P>

<p align=center>
<font size=2>Page 20 of 21</font></p>
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<P ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE REDACTED PORTIONS OF THIS DOCUMENT WHICH ARE MARKED AS FOLLOWS: [*], AND
THE REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC. </FONT></P>

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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"><I><B>9.26</B></I> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><B>Entire
Agreement</B></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This Agreement, including all
attachments hereto, constitutes the final, complete and exclusive agreement between the
Parties relating to the subject matter hereof and cancels and supersedes all previous
agreements between the Parties relating thereto, whether written or oral. Furthermore, the
terms and conditions contained in this Agreement do not create or represent a precedent
for the interpretation of any other agreements that have been or will be executed between
the Parties not relation to the subject matter hereof. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>IN WITNESS WHEREOF, the Parties have
caused this Agreement to be duly executed and delivered by their proper and duly
authorized officers, and to be effective as of the day and year first above written. </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><B>***</B><BR><BR>
<BR>***<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Name:&nbsp;&nbsp;&nbsp;***<BR>Title:&nbsp;&nbsp;&nbsp;***</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><I>Summit Aviation Supply</I></B><BR><BR>
<BR>/s/ Andrew Levi<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Name:&nbsp;&nbsp;&nbsp;Andrew Levi<BR>Title:&nbsp;&nbsp;&nbsp;President </FONT></TD>
</TR>
</TABLE>
<BR>

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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><BR>***<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Name:&nbsp;&nbsp;&nbsp;***<BR>Title:&nbsp;&nbsp;&nbsp;***</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><BR>/s/  Paul Cooperman<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Name:&nbsp;&nbsp;&nbsp;Paul Cooperman<BR>Title:&nbsp;&nbsp;&nbsp;Manager</FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>WITNESSES </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><BR>***<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Name:&nbsp;&nbsp;&nbsp;***<BR>ID:&nbsp;&nbsp;&nbsp;***</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><BR>&nbsp;<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Name:&nbsp;<BR>ID:&nbsp;</FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>Page 21 of 21</font></p>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.16
<SEQUENCE>8
<FILENAME>exhibit_4-16.htm
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     <!-- Control Number: 96871                                                            -->
     <!-- Rev Number:     1                                                                -->
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     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 4.16</B></U> </FONT> </P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS
<B>LOAN AGREEMENT</B> (the &#147;<B>Agreement</B>&#148;) is made as of the __th day of
_______, 2009, by and among B.O.S Better Online Solutions Ltd. (the
&#147;<B>Company</B>&#148;), and each of the lenders listed on <U>Schedule A</U> hereto,
severally (the <B>&#147;Lender(s)&#148;</B>). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>W I T N E S S E T H: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
the Company wishes to borrow from each Lender, severally, and the Lenders wish to extend
to the Company loans in the aggregate amount of up to US$3,750,000 (the
&#147;<B>Loan</B>&#148;); </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Lenders hereby agrees as follows: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;  Section 1.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U><B>Loan and Warrant</B></U>.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;1.1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Disbursement</U>.
Upon the terms and subject to the conditions set forth in           this Agreement and on
the basis of the Company representations and warranties           hereinafter set forth
in Section 4 hereto, subject to the fulfillment of the           condition precedent
listed in Section 6 below each Lender hereby undertakes           within 3 Business Days
from the date hereof (the &#147;<B>Closing           Date</B>&#148;) to deliver to the
Company the amount listed next to such           Lender&#146;s name on <U>Schedule A</U>,
(without deduction of any fees or           taxes) by means of a wire transfer of
immediately available funds to the           Company&#146;s bank account, Account
___________, at ___________, Routing no:           ___________, Business Branch No.
___________, Swift Code: ___________. For           purposes of this Agreement, the term
&#147;Business Day&#148; means any day on           which banks in Israel are open and
execute foreign exchange transactions. It is           expressly agreed that <U>Schedule A</U> may
be unilaterally amended by the           Company from time to time, to include additional
Lenders, which shall execute a           copy of the Agreement.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;1.2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Issuance
of Warrant</U>. On the Closing Date, the Company shall issue and           deliver to
each Lender who delivered its applicable amount listed on <U>Schedule           A</U>, a
Warrant in the form attached hereto as <U>Schedule B</U> (the           &#147;<B>Warrant</B>&#148;)
to purchase the amount of Ordinary Shares of the           Company, nominal value NIS
4.00 each (each, a &#147;<B>Share</B>&#148; and           collectively, the &#147;<B>Shares</B>&#148;)
equal to the number of Shares           issuable upon conversion of the entire Loan
extended by such Lender (100%           warrant coverage), all as listed next to such
Lender&#146;s name in <U>Schedule           A</U> (the &#147;<B>Warrant Shares</B>&#148;).
Each Warrant shall be exercisable           for a period of 18 months commencing on the
date that is 18 months from the           Closing Date and shall expire on the Maturity
Date (as defined below). Each           Warrant&#146;s exercise price shall be $0.55 per
Share (subject to adjustment in           the event of share splits or consolidations,
issuance of bonus shares, and           similar recapitalization events).  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; Section 2.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U><B>Loan Terms</B></U>. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;2.1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Term
of Loan</U>. The term of the Loan shall commence on the Closing Date and           shall
terminate, upon payment in full of all outstanding principal and interest
          hereunder or conversion in full pursuant to Section 2.4 hereof, on the date
that           is 36 months from the Closing Date (the &#147;<B>Maturity Date</B>&#148;),
          unless, as a result of Default (as defined in Section 3 herein) or subject to
          the prior written consent of the Lender, paid in full prior to such date, in
          which event the term shall expire immediately upon such payment, in full (the
          &#147;<B>Term</B>&#148;).  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;2.2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Interest</U>.
The annual rate of interest on the Loan shall be 8% (the           &#147;<B>Interest</B>&#148;).
Interest on the Loan shall accrue starting from           the Closing Date, shall be
compounded annually and will be calculated on the           basis of a 360-day year and
pro rated with respect to any portion thereof,           respectively to the actual date
of payment.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;2.3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Payment</U>.
The principal and Interest on the Loan, together with applicable           value added
tax and subject to any tax withholding, applicable with respect to           the
Interest, shall be paid to each Lender&#146;s account, as stated next to           such
Lender&#146;s name in <U>Schedule A</U>, on the Maturity Date.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;2.4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Conversion</U>.
Any Lender may, at any time until the Maturity Date, by           giving at least 30-days
prior written notice to the Company , or upon the           occurrence of a Default event
listed in Section 3 below, convert the principal           amount plus Interest (subject
to applicable withholding tax) accrued on its           portion of the Loan to Shares at
a conversion price of $0.65 per Share (subject           to adjustment in the event of
share splits or combinations, consolidations,           mergers, issuance of bonus
shares, reclassifications and similar           recapitalization events) (the &#147;<B>Conversion
Shares</B>&#148;).  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; Section 3.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U><B>Default</B></U>. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Without derogating from the
generality of the provisions of this Loan Agreement, each Lender shall be entitled to
demand the immediate repayment of its respective portion of the Loan Amount, upon the
occurrence of any one of the events enumerated below (a &#147;Default&#148;), in which
case the Company undertakes to pay the Lender(s) all of the Loan Amount due to it and any
accrued Interest, and each Lender shall be entitled to take whatever steps it deems fit
for the collection of the Loan and Interest as provided under this Agreement </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;3.1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
Company is unable to pay its debts as they come due, makes a general           assignment
for the benefit of its creditors, or files for voluntary liquidation;  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;3.2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
filing against the Company of any petition in liquidation or any petition           under
the provisions of applicable law for the relief of creditors or a           liquidator or
receiver is appointed for or over all of or a substantial part of           the assets of
the Company, if such petition or appointment is not dismissed or           stayed within
sixty (60) days;  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;3.3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
representation made by the Company in this Agreement was false or materially
          inaccurate, subject to receipt of 5 Business Days prior notice;  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;3.4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
Company fails to duly perform or comply with any of its covenants or other
          obligations under this Agreement and (if capable of remedy) such failure is not
          remedied within 21 Business Days, after the Lenders provide written notice
          thereof to the Company.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;3.5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
Company adopts a resolution for a merger with and into a third party, where           the
Company is not the surviving entity (excluding, for the avoidance of doubt,
          reorganization among the Company and its subsidiaries) or a sale of all or
          substantially all of the Company&#146;s assets, in each case where such event
          may reasonably be deemed to have a material adverse effect on the Lenders
          ability to receive the Loan repayment hereunder.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; Section 4.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U><B>Representations and Warranties by the Company.</B></U> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company hereby represents and warrants to the Lenders that: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Corporate
Organization</U>. The Company is a public corporation traded on           NASDAQ and duly
incorporated and validly existing under the laws of Israel, and           has the
corporate power to own its property and to carry on its business as now           being
conducted.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Due
Authorization and Valid Issuance</U>. The Company has the corporate power           to
enter into this Agreement and the Registration Rights Agreement (the           &#147;<B>Transaction
Documents</B>&#148;). The Transaction Documents have been           duly approved by the
necessary corporate bodies, executed and delivered by the           Company. The
Conversion Shares and Warrant Shares will, upon issuance and           payment therefore
pursuant to the terms hereof, be duly authorized, validly           issued, fully-paid
and nonassessable, free of any preemptive rights and are free           and clear of any
liens, claims, encumbrances or third party rights of any kind.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Binding Agreement</U>. The Transaction Documents constitute a valid and
          legally binding obligation of the Company enforceable against the Company in
          accordance with their terms, except as (i) such enforceability may be limited
by           bankruptcy, insolvency, reorganization, arrangement, moratorium or similar
laws           relating to or affecting the rights of creditors and contracting parties
          generally, (ii) the remedy of specific performance and injunctive and other
          forms of equitable relief may be subject to equitable defenses and to the
          discretion of the court before which any proceeding therefore may be brought,
          and (iii) rights to indemnity and contribution may be limited by Israeli or
U.S.           state or federal securities laws applicable to the Company or by the
public           policy underlying such laws.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Non-Contravention</U>.
Neither the execution and delivery of the Transaction           Documents, nor the
consummation of the transactions or the performance of the           obligations
contemplated hereby will result in any violation or breach of the           Company&#146;s
articles of association, by-laws, board resolutions or           shareholders
resolutions.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>No
Consent</U>. In reliance on the representations of the Lenders given in           Section
5 hereof, except for reporting obligations and approvals required under
          applicable security laws and market regulations in Israel and the United States
          and for notices (coupled with customary undertakings by foreign Lenders) to or
          approvals by the Office of the Chief Scientist and the Investment Center of the
          Ministry of Industry, Trade and Labor (if required), no consent of any
          governmental body or third party is required to be made or obtained by the
          Company in connection with the execution and delivery of the Transaction
          Documents by the Company or the consummation by the Company of the transactions
          or the performance of the obligations contemplated therein by the Company.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.6. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Capitalization</U>.
The authorized share capital of the Company consists of           35,000,000 Ordinary
Shares, nominal value NIS 4.00 per share, of which, as of           May 31, 2009,
___________ Ordinary Shares are issued and outstanding. <U>Schedule A</U> sets forth, to
the Company&#146;s knowledge, the Lenders           holdings assuming the full conversion
of the aggregate Loan amount and exercise           of the Warrants.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.7. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Financial
Statements</U>. The audited consolidated financial statements of           the Company as
of December 31, 2008 and the related notes thereto, as filed by           the Company
with the Securities and Exchange Commission (&#147;<B>SEC</B>&#148;)           under Form
6-K on March 31, 2009, fairly present the financial position of the           Company as
of their respective dates, and have been prepared in accordance with           the books
and records of the Company as at the applicable dates and for the           applicable
periods. Such financial statements have been prepared in accordance           with
generally accepted accounting principles applied on a consistent basis
          throughout the periods therein specified, except as may be disclosed in the
          notes to such financial statements, or as may be permitted by the Securities
and           Exchange Commission and except as disclosed in the filings the Company made
in           connection with such statements, if any. To the Company&#146;s knowledge,
the           unaudited consolidated financial statements of the Company as of March 31,
2009,           as filed by the Company with the SEC under Form 6-K on May 18, 2009,
fairly           present the financial position of the Company as of their respective
dates, and           have been prepared in accordance with the books and records of the
Company as at           the applicable dates and for the applicable periods.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.8. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Legal
Proceedings</U>. Except as disclosed in the Company&#146;s public           filings,
there is no material legal or governmental proceeding pending or, to           the
knowledge of the Company, threatened to which the Company is or may be a           party.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.9. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Intellectual
Property</U>. (i) The Company, either directly or through its           subsidiaries,
owns or possesses sufficient rights to use all material patents,           patent rights,
trademarks, copyrights, licenses, inventions, trade secrets,           trade names and
know-how (collectively, &#147;Intellectual Property&#148;)           described or
referred to in the Company&#146;s public filings as owned or           possessed by it,
except where the failure to own or possess would not have a           material adverse
effect on the Company, (ii) to the knowledge of the Company,           the Company is not
infringing, nor has it received any notice of, any asserted           infringement of,
any rights of a third party with respect to any Intellectual           Property that,
individually or in the aggregate, would have a material adverse           effect on the
Company.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.10. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Compliance
with Law</U>. To the knowledge of the Company, the business of the           Company is
conducted in accordance with applicable laws, except to the extent           that,
individually or in the aggregate, would not have a material adverse effect           on
the Company.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.11. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Disclosure</U>.
The representations and warranties of the Company contained           in this Section 4
as of the date hereof and as of the Closing Date, and in the           Company&#146;s
public filings with the SEC, do not contain any untrue statement           of a material
fact or omit to state a material fact necessary to make the           statements herein,
in light of the circumstances under which they are made, not           misleading. The
Company understands and confirms that the Lenders will rely on           the foregoing
representations in effecting the transaction contemplated in the           Transaction
Documents and other transactions in securities of the Company.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; Section 5.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U><B>Representations and Warranties by the Lenders</B></U>. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Lender represents severally to the Company that: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Enforceability</U>.
(i) Each Lender is authorized and qualified and has full           right and power to
become an lender to and an investor in the Company, is           authorized to loan its
portion of the Loan to the Company, to convert its           portion of the Loan into
Shares in the event of a conversion pursuant to Section           2.4 hereof, to exercise
its Warrant, and to perform its obligations pursuant to           the provisions hereof,
(ii) the person signing the Transaction Documents and any           other instrument
executed and delivered therewith on behalf of each Lender has           been duly
authorized by such entity and has full power and authority to do so,           and (iii)
no Lender has been formed for the specific purpose of extending the           Loan or of
acquiring an interest in the Company.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Restrictions
on Transferability and Hedging</U>.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.2.1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Lender understands that, in the absence of an effective registration           statement
or an opinion of the Company&#146;s counsel that registration under           the
Securities Act of 1933 (the &#147;<B>Act</B>&#148;) is not required: (i) the
          Conversion Shares and Warrant Shares, when issued, shall not be registered
under           the Act, or under the laws of any other jurisdiction; (ii) such shares
cannot be           sold, transferred or otherwise disposed of unless they are
subsequently           registered under the Securities Act and, where required, under the
laws of other           jurisdictions or unless an exemption from registration is then
available; (iii)           there is now no registration statement on file with the
Securities and Exchange           Commission with respect to such shares.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.2.2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Lender acknowledges and agrees that the certificates representing the
          Conversion Shares and the Warrant Shares shall bear restrictive legends,
          substantially as follows, or as may be required in order to comply with
          applicable securities rules and regulations:  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;The
shares represented by this certificate have not been registered under the Securities Act
of 1933. The shares have been acquired for investment and may not be sold, transferred,
assigned or otherwise disposed of in the absence of an effective registration statement
with respect to the shares evidenced by this certificate, filed and made effective under
the Securities Act of 1933, or an opinion of the Company&#146;s counsel that registration
under such Act is not required.&#148; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.2.3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company will not register any transfer of Conversion Shares or Warrant           Shares
not made pursuant to registration under the Securities Act, or pursuant           to an
available exemption from registration.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.2.4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Lender agrees not to engage in hedging transactions with regard to the
          Conversion Shares or the Warrant Shares.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Offshore
Transaction</U>. Each Lender represents that it is not a &#147;U.S.           Person&#148;,
as such term is defined in Regulation S under the Securities Act           of 1933 (&#147;<B>Reg.
S</B>&#148;), its principal address is outside the United           States and it has no
present intention of becoming a resident of (or moving its           principal place of
business to) the United States. Each Lender was located           outside the United
States at the time any offer in connection with this           Agreement was made to such
Lender and at the time that the Lender accepted any           such offer. The Conversion
Shares and the Warrant Shares if issued, will be           acquired solely for each Lender&#146;s
own account, and in no event and without           derogating from the foregoing, for the
account or the benefit of a U.S. person.           Each Lender shall comply with the
applicable distribution compliance periods           pursuant to Reg. S.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Investment
Purposes</U>. The Conversion Shares and Warrant Shares, if issued           will be
acquired for investment purposes. Such Shares will not be acquired with           a view
to, or for sale in connection with, any distribution or other disposition
          thereof. No Lender has any present plans to enter into any contract,
          undertaking, agreement or arrangement for any such resale, distribution or
other           disposition, and it will not divide its interest in the Company&#146;s
Shares           with others, resell or otherwise distribute the Company Shares in
violation of           federal or state U.S. Securities laws or the Israeli Securities
Law.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Information
and Advice</U>.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.5.1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Lender has carefully reviewed and understands the risks of extending the           Loan
and of the acquisition of the Conversion Shares and Warrant Shares. In
          connection with such Lender&#146;s extension of the Loan and, if applicable,
          investment in the Company, it has obtained the advice of its own investment
          advisors, counsel and accountants (the &#147;<B>Advisors</B>&#148;). Each
Lender           and its Advisors have reviewed the Company&#146;s public filings and
have been           furnished with all materials relating to the Company or the Company
Shares that           they have requested. The Lender and its Advisors have been afforded
the           opportunity to ask questions of the Company concerning the financial and
other           affairs of the Company and to obtain any additional information necessary
to           verify the accuracy of any representations or information set forth herein.  </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.5.2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has answered all reasonable inquiries that any Lender or its           Advisors
have made concerning the Company or any other matters relating to the           creation
and operations of the Company and the terms and conditions of the Loan.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.6. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Sophistication
and Risk</U>. Each Lender represents that:  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.6.1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
has such knowledge and experience in financial and business matters, that it           is
capable of evaluating, and has evaluated, the merits and risks of the Loan           and
the acquisition of the Conversion Shares and Warrant Shares.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.6.2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
understands that no Israeli or U.S. federal or state agency has passed upon           the
Shares or made any finding or determination as to the fairness of the
          transactions contemplated in the Transaction Documents.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.6.3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without
derogating from any of the Companies representations and warranties           contained
herein, it understands that the Loan and any acquisition of the Shares           involves
a high degree of risk, including the risk that such Lender might lose           its
entire amount invested in the Company.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.6.4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
understands that any tax benefits that may be available to the Lenders may be
          lost through adoption of new laws, amendments to existing laws or regulations,
          or changes in the interpretation of existing laws and regulations.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.6.5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is an &#147;Accredited Investor&#148; as such term is defined in Rule 501 of
          Regulation D under the Securities Act of 1933.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.7. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>No
solicitation</U>. At no time was any Lender presented with or solicited by           any
leaflet, public promotional meeting, newspaper or magazine article, radio or
          television advertisement or any other form of general advertising or general
          solicitation concerning the Loan or any investment in the Shares. The Lender is
          aware of the Company&#146;s proxy statement in respect of its Special General
          Shareholders Meeting publicly filed by the Company with the SEC, in which the
          Company sought approval for a framework of a private placement of convertible
          debt securities.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.8. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Broker-Dealer</U>.
No Lender is a broker-dealer, nor is it an affiliate of           any broker-dealer.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.9. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Further
Indebtedness</U>. Each Lender acknowledges that no provision of the           Transaction
Documents executed and delivered by the Company restricts, or shall           be
construed to restrict, in any way the ability of the Company to incur
          indebtedness or to issue share capital or other equity securities (or
securities           convertible into equity securities) of the Company or to grant liens
on its           property and assets.  </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.10. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Voting
and/or Investment Control over the Lenders</U>. Each Lender has made           available
to the Company a list of individuals who have or share voting and/or           investment
control over such Lender. Each Lender shall update such list as           reasonably
requested by the Company in order to comply with its public filing           obligations
or requests for such information from any regulatory body.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.11. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Independent
Investment</U>. Each Lender is acting independently with respect           to its
extension of the Loan and its entering into the Transaction Documents.           For the
avoidance of doubt, each Lender&#146;s rights, obligations,           representations and
warranties hereunder stand severally from any other           Lender&#146;s rights and
obligations hereunder.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.12. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Holdings</U>.
<U>Schedule A</U> attached hereto reflects the holdings of the           Company&#146;s
shares by each Lender and its affiliates as of the date hereof,           and as of the
Closing Date.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.13. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Availability
of Exemptions</U>. Each Lender understands that the Conversion           Shares and the
Warrant Shares if issued will be issued in reliance on a           transactional
exemption or exemptions from the registration requirements of           Israeli and U.S.
Federal and state securities laws, and the Company is relying           upon the truth
and accuracy of the representations, warranties, agreements,           acknowledgments
and understandings of the Lenders set forth herein in order to           determine the
applicability of such exemptions and the suitability of each           Lender to acquire
the Shares.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.14. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Disclosure</U>.
The representations and warranties of each Lender contained           in this Section 5
as of the date hereof and as of the Closing Date, do not           contain any untrue
statement of a material fact or omit to state a material fact           required to be
stated herein or necessary to make the statements herein, in           light of the
circumstances under which they are made, not misleading. Each           Lender
understands and confirms that the Company will rely on the foregoing
          representations in effecting the transaction contemplated in the Transaction
          Documents and other transactions in securities of the Company.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; Section 6.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U><B>Conditions Precedent to Closing and Funding of Loan</B></U>. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
obligations of each Lender to extend the Loan is subject to the fulfillment at or before
the Closing Date, of the following conditions precedent, any one or more of which may be
waived in whole or in part by such Lender: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;6.1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Representations
and Warranties</U>. The representations and warranties of the           Company under
this Agreement shall be true in all material respects as of the           Closing Date,
with the same effect as though made on and as of such date.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;6.2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Compliance
with Agreements</U>. The Company shall have performed and complied           with all
agreements or conditions required by this Agreement to be performed and
          complied with by it prior to or as of the Closing Date.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;6.3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>No
Injunction</U>. No statute, rule, regulation, executive order, decree,           ruling
or injunction shall have been enacted, entered, promulgated or endorsed           by any
court or governmental authority of competent jurisdiction which prohibits           the
consummation of any of the transactions contemplated by this Agreement.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;6.4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Registration
Rights Agreement</U>. As of the Closing, the Registration Rights           Agreement in
the form attached hereto as <U>Schedule C</U> (the           &#147;Registration Rights
Agreement&#148;) shall have been executed and           delivered by the Company and each
Lender.  </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;6.5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Notices
to SEC and Nasdaq</U>. The Company shall have made all filings or           notices with
the SEC and/or Nasdaq, required to be made prior to the Closing           Date.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;6.6. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bank
Approval. The Company has obtained a notice form Bank Leumi of the           exclusion of
the Loan repayment from the Company&#146;s subordination letter.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp; Section 7.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <B><U>Conditions Precedent to Obligations of the Company</U></B><U></U>.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Closing is subject to the fulfillment or waiver by the Company prior to or on the Closing
Date of the conditions set forth in this Section 7. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;7.1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Representations
and Warranties</U>. The representations and warranties of           each Lender under
this Agreement shall be true in all material respects as of           the Closing Date,
with the same effect as though made on and as of such date.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;7.2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Compliance
with Agreements</U>. Each Lender shall have performed and complied           in all
respects with all agreements or conditions required by this Agreement to           be
performed and complied with by it prior to or as of the Closing Date.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;7.3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>No
Injunction</U>. No statute, rule, regulation, executive order, decree,           ruling
or injunction shall have been enacted, entered, promulgated or endorsed           by any
court or governmental authority of competent jurisdiction which prohibits           the
consummation of any of the transactions contemplated by this Agreement.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;7.4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Delivery
of Loan Amount</U>. Each Lender shall have delivered to the Company           its portion
of the Loan on or prior to the Closing Date.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;7.5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Government
Approvals</U>. The Company shall have received all necessary           governmental
approvals with respect to the transactions contemplated hereby.           Each Lender
shall have executed any confirmations required by the Office of           Chief
Scientist, if applicable.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp; Section 8.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><U>Confidentiality</U></B><U></U>. Any information disclosed to any Lender or its
Advisors, which has not previously been made available to the general public by the
Company or which has not become public knowledge otherwise (except as a result of breach
of Lender hereunder), if any, shall be considered Confidential Information. Each Lender
acknowledges the confidential nature of the Confidential Information it may have
received, and agrees that the Confidential Information is the valuable property of the
Company. Each Lender agrees that it and its Advisors shall not reproduce any of the
Confidential Information without the prior written consent of the Company, nor shall they
use any Confidential Information for any purpose except as permitted by and for the
purpose of the performance of this Agreement, or divulge all or any part of the
Confidential Information to any third party. The confidentiality obligations undertaken
by each Lender hereunder will remain in full force and effect regardless of the execution
and consummation or termination of this Agreement.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; Section 9.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U><B>Miscellaneous</B></U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;9.1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Fees</U>.
Upon the Closing, the Company shall pay the Lenders&#146;          reasonable legal fees
of one counsel to the Lenders.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;9.2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Amendments</U>.
This Agreement may be modified, supplemented or amended only           by a written
instrument executed by the Company and the respective Lender solely           with
respect to such Lenders rights and obligations.  </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;9.3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Notices</U>.
Any notice that is required or provided to be given under this           Agreement shall
be deemed to have been sufficiently given and received for all           purposes, (i)
when delivered in writing by hand, upon delivery; (ii) if sent via           facsimile or
email, upon transmission and electronic confirmation of receipt           (and if
transmitted and received on a non-business day, on the first Business           Day
following transmission and electronic confirmation of receipt), (iii) three           (3)
Business Days (and ten (10) Business Days for international mail) after           being
sent by certified or registered mail, postage and charges prepaid, return
          receipt requested, or (iv) three (3) Business Days after being sent by
          internationally overnight delivery providing receipt of delivery, to the
          following addresses:  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>if to the Company, B.O.S Better
Online Solutions Ltd., 20 Freiman Street, Rishon Lezion, 75101 Israel Attn: Mr. Eyal
Cohen, CFO, facsimile: (972) 3 954-1003, with a copy to Amit, Pollak Matalon &amp; Co.,
Nitzba Tower, 17 Yitzhak Sadeh St., Tel-Aviv 67775 Israel attn: Shlomo Landress, Adv. Fax:
(972) 3 568-9001; or at any other address designated by the Company to the Lenders in
writing; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>if to a Lender, to its address listed
in <U>Schedule A</U> for such Lender or at any other address designated by such Lender to
the Company in writing. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;9.4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Survival
of Representations and Warranties</U>. All representations and           warranties
contained herein or in any Transaction Document or in any other           certificate
delivered hereunder or thereunder shall survive after the execution           and
delivery of this Agreement or such certificate or document, as the case may           be,
during the Term and for a period of 6 months thereafter. All covenants and
          agreements in the Transaction Documents shall survive in accordance with their
          terms. This Section shall survive the termination of this Agreement for any
          reason.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;9.5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Delays
or Omissions</U>; Waiver. Except as expressly provided herein, no           delay or
omission to exercise any right, power or remedy accruing to any party           under
this Agreement shall impair any such right, power or remedy of such party           nor
shall it be construed to be a waiver of any breach or default, or an
          acquiescence thereto, or of a similar breach or default thereafter occurring;
          nor shall any waiver of any single breach or default be deemed a waiver of any
          other breach or default theretofore or thereafter occurring. Any waiver,
permit,           consent or approval of any kind or character on the part of any party
hereto of           any breach or default under this Agreement, or any waiver on the part
of any           party of any provisions or conditions of this Agreement, must be in
writing and           shall be effective only to the extent specifically set forth in
such writing.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;9.6. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Other
Remedies</U>. Any and all remedies herein expressly conferred upon a           party
shall be deemed cumulative with, and not exclusive of, any other remedy
          conferred hereby or by law on such party, and the exercise of any one remedy
          shall not preclude the exercise of any other.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;9.7. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Entire
Agreement</U>. This Agreement and the exhibits and schedules hereto,           constitute
the entire understanding and agreement of the parties hereto with           respect to
the subject matter hereof and thereof and supersede all prior and
          contemporaneous agreements or understandings, inducements or conditions,
express           or implied, written or oral, between the parties with respect hereto
and           thereto.  </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;9.8. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Headings</U>.
All section headings herein are inserted for convenience only           and shall not
modify or affect the construction or interpretation of any           provision of this
Agreement.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;9.9. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Severability</U>.
Should any one or more of the provisions of this Agreement           (including its
exhibits and schedules) or of any agreement entered into pursuant           to this
Agreement be determined to be illegal or unenforceable, all other           provisions of
this Agreement and of each other agreement entered into pursuant           to this
Agreement, shall be given effect separately from the provision or           provisions
determined to be illegal or unenforceable and shall not be affected           thereby.
The parties further agree to replace such void or unenforceable           provision of
this Agreement with a valid and enforceable provision, which will           achieve, to
the extent possible, the economic, business and other purposes of           the void or
unenforceable provision.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;9.10. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Assignment</U>.
This Agreement may not be assigned in whole or in part by any           Lender without
the prior written consent of the Company.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;9.11. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Governing
Law and Venue</U>. This Agreement shall be construed in accordance           with and
governed by the internal laws of the State of Israel, without regard to
          conflict of laws provisions. Any dispute arising under or in relation to this
          Agreement shall be adjudicated in the competent court of Tel Aviv-Jaffa
district           only, and each of the parties hereby submits irrevocably to the
exclusive           jurisdiction of such court.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;9.12. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Counterparts</U>.
This Agreement may be executed concurrently in any number           of counterparts, each
of which shall be deemed an original, but all of which           together shall
constitute one and the same instrument.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;9.13. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Further
Actions</U>. At any time and from time to time, each party agrees,           without
further consideration, to take such actions and to execute and deliver           such
documents as may be reasonably necessary to effectuate the purposes of this
          Agreement.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>IN WITNESS WHEREOF the parties have
signed this Loan Agreement in one or more counterparts as of the date first appearing
above. </FONT></P>


<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></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>B.O.S BETTER ONLINE SOLUTIONS LTD.</B> </FONT></TD>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>[Lenders] [Duplicate for each Lender]</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>By:___________________________</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>By:____________________________</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Name:_________________________</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Name:__________________________</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Title:__________________________</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Title:___________________________</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>

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










<TABLE CELLPADDING=3 CELLSPACING=0 BORDER=1 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH ROWSPAN="2"><FONT FACE="Times New Roman" SIZE=1>LENDER'S NAME<BR>AND ADDRESS</FONT></TH>
     <TH ROWSPAN="2"><FONT FACE="Times New Roman" SIZE=1>ACCOUNT<BR>INFORMATION</FONT></TH>
     <TH ROWSPAN="2"><FONT FACE="Times New Roman" SIZE=1>LOAN AMOUNT</FONT></TH>
     <TH ROWSPAN="2"><FONT FACE="Times New Roman" SIZE=1>NO. OF<BR>CONVERSION SHARES</FONT></TH>
     <TH ROWSPAN="2"><FONT FACE="Times New Roman" SIZE=1>NO. OF<BR>WARRANT<BR>SHARES</FONT></TH>
     <TH colspan=2><FONT FACE="Times New Roman" SIZE=1>PRE-LOAN HOLDINGS</FONT></TH>
     <TH colspan=2><FONT FACE="Times New Roman" SIZE=1>POST-LOAN<BR>HOLDINGS<BR>(ASSUMING<BR>CONVERSION OF<BR>LOAN AND EXERCISE<BR>OF WARRANT)</FONT></TH>
</TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1>Amount</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Percent</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Amount</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Percent</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=15% 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=10% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>$________</FONT></TD>
     <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% 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;&nbsp;&nbsp;TOTAL</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>
     <TD ALIGN=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>
</TABLE>
<BR>



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


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

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FORM OF WARRANT </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
THIS
WARRANT AND THE ORDINARY SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
THIS WARRANT AND THE ORDINARY SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO B.O.S. BETTER ONLINE
SOLUTIONS LTD. THAT SUCH REGISTRATION IS NOT REQUIRED. </FONT></TD>
<TD WIDTH=10%>&nbsp;</TD>
</TR>
</TABLE>
<BR>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Right to Purchase up to ________ Ordinary Shares of</FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>B.O.S. Better Online
Solutions Ltd.</U> </FONT> <BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">(subject to adjustment
as provided herein) </FONT> <BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ORDINARY SHARES
PURCHASE WARRANT</B> </FONT> </p>


<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></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=54% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>No. _________________</FONT></TD>
     <TD WIDTH=46% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>Issue Date: _________&nbsp;</FONT></TD></TR>
</TABLE>
<BR>


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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B.O.S.
          BETTER ONLINE SOLUTIONS LTD. a company incorporated under the laws of the State
          of Israel hereby certifies that, for value received, ______________or assigns
          (the &#147;Holder&#148;), is entitled, subject to the terms set forth below, to
          purchase from the Company (as defined herein) from and after the Issue Date of
          this Warrant and at any time or from time to time before 5:00 p.m., New York
          time, through the close of business ___________ (the &#147;Expiration
          Date&#148;), up to _________fully paid and nonassessable Ordinary Shares (as
          hereinafter defined), NIS 4.00 nominal value per share, at the exercise price of
          $0.55 per Ordinary Share (the &#147;Exercise Price&#148;). The number and
          character of such Ordinary Shares and the Exercise Price per share are subject
          to adjustment as provided herein. </FONT></P>

<p align=center>
<font size=2>1</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>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
used herein the following terms, unless the context otherwise requires, have the following
respective meanings: </FONT></P>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=5%></TD>
               <TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               The term &#147;Company&#148; shall include B.O.S. Better Online Solutions Ltd.
               and any corporation which shall succeed, or assume the obligations of B.O.S.
               Better Online Solutions Ltd. hereunder. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=5%></TD>
               <TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               The term &#147;Other Securities&#148; refers to any securities of the Company or
               any other person (corporate or otherwise) which the Holder of the Warrant at any
               time shall be entitled to receive, or shall have received, on the exercise of
               the Warrant, in lieu of or in addition to Ordinary Shares, or which at any time
               shall be issuable or shall have been issued in exchange for or in replacement of
               Ordinary Shares or Other Securities pursuant to Section 3 or otherwise. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capitalized
terms used herein without definition shall have the meanings ascribed to such terms in
that Loan Agreement dated as of the date hereof by and among the Company and the Lenders
(as defined therein). </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Exercise of Warrant</U>. </FONT> </P>

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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>1.1. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Number
of Shares Issuable upon Exercise</U>. From and after the date hereof
                    through and including the Expiration Date, the Holder shall be
entitled to                     receive, upon exercise of this Warrant in whole or in
part, by delivery of an                     original or fax copy of an exercise notice in
the form attached hereto as <U>Exhibit A</U> (the &#147;Exercise Notice&#148;) and
payment in accordance                     with Section 2.2 below, Ordinary Shares of the
Company (the &#147;Warrant                     Shares&#148;), subject to adjustment
pursuant to Section 4. </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>1.2. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Company
Acknowledgment</U>. The Company will, at the time of the partial
                    exercise of the Warrant, upon the request of the Holder hereof
acknowledge in                     writing its continuing obligation to afford to such
Holder any rights to which                     such Holder shall continue to be entitled
after such partial exercise in                     accordance with the provisions of this
Warrant. If the Holder shall fail to make                     any such request, such
failure shall not affect the continuing obligation of the                     Company to
afford to such Holder any such rights. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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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>1.3. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Delivery
of Share Certificates, Etc., on Exercise</U>. The Company agrees                     that
the Warrant Shares purchased upon exercise of this Warrant shall be deemed
                    to be issued to the Holder as the record owner of such shares as of
the close of                     business on the date on which this Warrant shall have
been surrendered and                     payment made for such shares in accordance
herewith. As soon as practicable                     after the exercise of this Warrant
in full or in part, and in any event within                     three (3) business days
thereafter, the Company at its expense (including the                     payment by it
of any applicable issue taxes) will cause to be issued in the name                     of
and delivered to the Holder, or as such Holder (upon payment by such Holder
                    of any applicable transfer taxes) may direct in compliance with
applicable                     securities laws, a certificate or certificates for the
number of duly and                     validly issued, fully paid and nonassessable
Warrant Shares (or Other                     Securities) to which the Holder shall be
entitled on such exercise. </FONT></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>

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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>1.4. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Exercise</U>. </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>
Payment
shall be made in cash, by wire transfer to a bank account the details of which shall have
been provided by the Company to the Holder in writing or by certified or official bank
check payable to the order of the Company, of the amount equal to the applicable aggregate
Exercise Price for the number of Ordinary Shares specified in the Exercise Notice (as such
exercise number shall be adjusted to reflect any adjustment in the total number of Warrant
Shares issuable to the Holder per the terms of this Warrant) and the Holder shall
thereupon be entitled to receive the applicable number of duly authorized, validly issued,
fully-paid and non-assessable Warrant Shares (or Other Securities) determined as provided
herein. </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>1.5. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Fractional
Shares</U>. This Warrant may not be exercised for fractional                     shares.
In lieu of fractional shares the Company shall make a cash payment
                    therefor based upon the Exercise Price then in effect. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Effect of Reorganization, Etc.;
Adjustment of Exercise Price</U>. </FONT></P>

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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>1.6. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Reorganization,
Consolidation, Merger, Etc</U>. In case at any time or from                     time to
time, the Company shall (a) effect a reorganization, (b) consolidate
                    with or merge into any other person, including the sale of
substantially all of                     the Company&#146;s outstanding share capital to
a corporate third party, in                     consideration for such third party&#146;s
securities, or (c) transfer all or                     substantially all of its
properties or assets to any other person under any plan                     or
arrangement contemplating the dissolution of the Company, then, in each such
                    case, as a condition to the consummation of such a transaction,
proper and                     adequate provision shall be made by the Company whereby
the Holder of this                     Warrant, on the exercise hereof as provided in
Sections 1 and 2 at any time                     after the consummation of such
reorganization, consolidation or merger or the                     effective date of such
dissolution, as the case may be, shall receive, in lieu                     of the
Ordinary Shares issuable on such exercise prior to such consummation or
                    such effective date, the shares and Other Securities and property
(including                     cash) to which such Holder would have been entitled upon
such consummation or in                     connection with such dissolution, as the case
may be, if such Holder had so                     exercised this Warrant, immediately
prior thereto, all subject to further                     adjustment thereafter as
provided in Section 4. </FONT></TD>
</TR>
</TABLE>
<BR>


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

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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>1.7. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Extraordinary
Events Regarding Ordinary Shares</U>. In the event that the                     Company
shall (a) issue additional Ordinary Shares as a dividend or other
                    distribution on outstanding Ordinary Shares, (b) subdivide its
outstanding                     Ordinary Shares, or (c) combine its outstanding Ordinary
Shares into a smaller                     number of Ordinary Shares, then, in each such
event, the Exercise Price shall,                     simultaneously with the happening of
such event, be adjusted by multiplying the                     then Exercise Price by a
fraction, the numerator of which shall be the number of                     Ordinary
Shares outstanding immediately prior to such event and the denominator
                    of which shall be the number of Ordinary Shares outstanding
immediately after                     such event, and the product so obtained shall
thereafter be the Exercise Price                     then in effect. The Exercise Price,
as so adjusted, shall be readjusted in the                     same manner upon the
happening of any successive event or events described                     herein in this
Section 3.2. The number of Ordinary Shares that the Holder of                     this
Warrant shall thereafter, on the exercise hereof be entitled to receive
                    shall be increased or decreased, as the case may be, to a number
determined by                     multiplying the number of Ordinary Shares that would
otherwise (but for the                     provisions of this Section 3.2) be issuable on
such exercise by a fraction of                     which (a) the numerator is the
Exercise Price that would otherwise (but for the                     provisions of this
Section 3.2) be in effect, and (b) the denominator is the                     Exercise
Price in effect on the date of such exercise. </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>1.8. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Good
Faith</U>. All determinations with respect to adjustments by the Company
                    hereunder shall be made by the Board of Directors in good faith. </FONT></TD>
</TR>
</TABLE>
<BR>

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

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Certificate
as to Adjustments</U>. In each case of any adjustment or readjustment in the Ordinary Shares
(or Other Securities) issuable on the exercise of the Warrant, the Company at its expense
will promptly cause its Chief Financial Officer or other appropriate designee to compute
such adjustment or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Reservation
of Shares, Etc., Issuable on Exercise of Warrant</U>. The Company will at all times
reserve and keep available, solely for issuance and delivery on the exercise of the
Warrant, Ordinary Shares (or Other Securities) from time to time issuable on the exercise
of the Warrant. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Representations
of the Company</U>. The Company represents that (i) all corporate actions on the part of
the Company, its officers, directors and shareholders necessary for the sale and issuance
of the Warrant Shares pursuant hereto and the performance of the Company&#146;s
obligations hereunder were taken prior to and are effective as of the issue date of this
Warrant; (ii) the Warrant Shares are duly authorized and reserved for issuance by the
Company and, when issued in accordance with the terms hereof, will be validly issued,
fully paid and nonassessable and not subject to any preemptive rights, and (iii) the
execution and delivery of this Warrant are not, and the issuance of the Warrant Shares
upon exercise of this Warrant in accordance with the terms hereof will not be,
inconsistent with the Company&#146;s Articles of Association, do not and will not
contravene any law, governmental rule or regulation, or, to the Company&#146;s knowledge,
any judgment or order applicable to the Company, and, except except as would not have a
Material Adverse Effect, do not and will not conflict with or contravene any provision of,
or constitute a default under, any indenture, mortgage, contract or other instrument of
which the Company is a party or by which it is bound, or require the consent or approval
of, the giving of notice to, the registration with or the taking of any action in respect
of or by any government authority or agency or other person. As used herein,
&#147;Material Adverse Effect&#148; means any material adverse effect on the business,
properties, assets, operations, prospects, results of operations or condition (financial
or otherwise) of the Company and its subsidiaries, taken as a whole. </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>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Representations
and Warranties by the Holder</U>. The Holder represents and warrants to the Company as
follows: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.1. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Holder
understands that the Warrant is being offered and sold pursuant to an
                    exemption or exemptions from registration requirements of Israeli and
US Federal                     and state securities laws and that the Company is relying
upon the truth and                     accuracy of Holder&#146;s representations
contained in that Loan Agreement of                     even date herewith, including,
without limitation, that the Holder is an                     &#147;Accredited Investor&#148; within
the meaning of Regulation D under the                     Securities Act of 1933. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.2. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Holder
has substantial experience in evaluating and investing in private
                    placement transactions of securities in companies similar to the
Company so that                     it is capable of evaluating the merits and risks of
its investment in the                     Company and has the capacity to protect its own
interests. Holder is able to                     bear the economic risk of this
investment. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.3. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Holder
is acquiring the Warrant and the Ordinary Shares issuable upon exercise
                    of the Warrant for its own account for investment only, and not as a
nominee or                     agent and not with a view towards or for resale in
connection with their                     distribution. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Assignment;
Exchange of Warrant</U>. Subject to compliance with applicable securities laws, this
Warrant, and the rights evidenced hereby, may be transferred in whole by any registered
Holder hereof (a &#147;Transferor&#148;) in whole or in part. On the surrender for
exchange of this Warrant, with the Transferor&#146;s endorsement in the form of <U>Exhibit
B</U> attached hereto (the &#147;Transferor Endorsement Form&#148;) and together with
evidence reasonably satisfactory to the Company demonstrating compliance with applicable
securities laws, which shall include, without limitation, a legal opinion from the
Transferor&#146;s counsel that such transfer is exempt from the registration requirements
of applicable securities laws, the Company at its expense (but with payment by the
Transferor of any applicable transfer taxes) will issue and deliver a new Warrant of like
tenor, in the name of the transferee specified in such Transferor Endorsement Form (each a
&#147;Transferee&#148;), calling in the aggregate on the face thereof for the number of
Ordinary Shares called for on the face of the Warrant so surrendered by the Transferor.
Notwithstanding the foregoing, no opinion of counsel or &#147;no-action&#148; letter shall
be necessary for a transfer without consideration by a Holder to any other entity which
controls, is controlled by or is under common control with the Holder. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Replacement
of Warrant</U>. On receipt of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft
or destruction of this Warrant, on delivery of an indemnity agreement or security
reasonably satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor. </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Registration
Rights</U>. The Holder of this Warrant has been granted certain registration rights by the
Company. These registration rights are set forth in a Registration Rights Agreement
entered into by the Company and the Holder dated as of even date of this Warrant. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Rights
of Shareholders</U>. No Holder shall be entitled, in its capacity as a Warrant holder
only, to vote or receive dividends or be deemed the holder of the Ordinary Shares or any
Other Securities of the Company, which may at any time be issuable upon the exercise of
this Warrant for any purpose, nor shall anything contained herein be construed to confer
upon the Holder, as such, any of the rights of a shareholder of the Company or any right
to vote for the election of directors or upon any other matter submitted to shareholders
at any meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of shares, reclassification of shares, change of
nominal value, consolidation, merger, conveyance, or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until the Warrant
shall have been exercised and the Ordinary Shares issuable upon the exercise hereof shall
have become deliverable, as provided herein. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Transfer
on the Company&#146;s Books</U>. Until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder hereof as the absolute owner hereof
for all purposes, notwithstanding any notice to the contrary. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Notices,
Etc</U>. All notices and other communications from the Company to the Holder of this
Warrant shall be deemed to have been sufficiently given and received for all purposes, (i)
when delivered in writing by hand, upon delivery; (ii) if sent via facsimile or email,
upon transmission and electronic confirmation of receipt (and if transmitted and received
on a non-business day, on the first business day following transmission and electronic
confirmation of receipt), (iii) seven (7) business days (and fourteen (14) business days
for international mail) after being sent by certified or registered mail, postage and
charges prepaid, return receipt requested, or (iv) three (3) business days after being
sent by internationally overnight delivery providing receipt of delivery, to the address
as may have been furnished to the Company in writing by such Holder or, until any such
Holder furnishes to the Company an address, then to, and at the address of, the last
Holder of this Warrant who has so furnished an address to the Company. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Miscellaneous</U>.
          This Warrant and any term hereof may be changed, waived, discharged or
          terminated only by an instrument in writing signed by the party against which
          enforcement of such change, waiver, discharge or termination is sought. This
          Warrant shall be governed by and construed in accordance with the laws of the
          State of Israel without regard to principles of conflicts of laws. Any dispute
          arising under or in relation to this Agreement shall be adjudicated in the
          competent court of Tel Aviv-Jaffa district only, and each of the parties hereby
          submits irrevocably to the exclusive jurisdiction of such court. In the event
          that any provision of this Warrant is invalid or unenforceable under any
          applicable statute or rule of law, then such provision shall be deemed
          inoperative to the extent that it may conflict therewith and shall be deemed
          modified to conform with such statute or rule of law. Any such provision, which
          may prove invalid or unenforceable under any law shall not affect the validity
          or enforceability of any other provision of this Warrant. The headings in this
          Warrant are for purposes of reference only, and shall not limit or otherwise
          affect any of the terms hereof. The invalidity or unenforceability of any
          provision hereof shall in no way affect the validity or enforceability of any
          other provision.  </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, this Warrant is executed as of the date first written above. </FONT></P>


<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></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2">B.O.S BETTER ONLINE SOLUTIONS LTD. </FONT> </TD>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2">[LENDER] </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>By:___________________________</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>By:____________________________</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Name:_________________________</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Name:__________________________</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Title:__________________________</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Title:___________________________</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>


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

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<p ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>FORM OF SUBSCRIPTION</B> </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>(To Be Signed Only On Exercise
Of Warrant) </FONT></P>

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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>To:  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B.O.S.
Better Online Solutions Ltd.</FONT></TD>
</TR>
</TABLE>
<BR>



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


<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR"  -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
undersigned, pursuant to the provisions set forth in the attached Warrant (No.____),
hereby irrevocably elects to purchase (check applicable box): </FONT></P>

<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></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>________</FONT></TD>
     <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>________</FONT></TD>
     <TD WIDTH=80% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Ordinary Shares covered by such Warrant;</FONT></TD></TR>
</TABLE>
<BR>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT size="3" face="Wingdings">o
</font>&nbsp;&nbsp; The undersigned herewith makes
payment of the full Exercise Price for such shares at the price per share provided for in
such Warrant, which is $___________. Such payment takes the form of (check applicable box
or boxes): </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>             <FONT size="3" face="Wingdings">o
</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$__________
by wire transfer of lawful money of the United States; and/or</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>             <FONT size="3" face="Wingdings">o
</font> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$__________
by certified or official bank check payable to the order of the Company</FONT></TD>
</TR>
</TABLE>
<BR>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
 undersigned  requests  that the  certificate  for such  shares be issued in the name of,
and delivered       to       ______________________________________________       whose
      address       is
______________________________________________________________________. </FONT></P>



<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
undersigned represents and warrants that all offers and sales by the undersigned of the
securities issuable upon exercise of the within Warrant shall be made pursuant to
registration of the Ordinary Shares under the Securities Act of 1933, as amended (the
&#147;Securities Act&#148;) or pursuant to an exemption from registration under the
Securities Act. </FONT></P>


<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></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=30% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Dated: ___________________________</FONT></TD>
     <TD WIDTH=70% 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>(Signature must conform to name of Holder as</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>specified on the face of the Warrant)</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>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Address:____________________________________</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;____________________________________</FONT></TD></TR>
</TABLE><BR>

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


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

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>FORM OF TRANSFEROR
ENDORSEMENT</B> </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>(To Be Signed Only on
Transfer of Warrant) </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For value received, the undersigned
hereby sells, assigns, and transfers unto the person named below under the heading
&#147;Transferee&#148; the right represented by the within Warrant to purchase the number
of Ordinary Shares of B.O.S Better Online Solutions Ltd. into which the within Warrant
relates and appoints each such person attorney-at-fact to transfer its respective right on
the books of B.O.S. Better Online Solutions Ltd. with full power of substitution. </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=800>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE="2"><B><U>NAME OF TRANSFEREE</U></B> </FONT> </TD>
     <TD WIDTH="50%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE="2"><B><U>ADDRESS</U></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"><B>DATED:</B> _____________________________ </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"><B>(SIGNATURE MUST CONFORM TO NAME</B> </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"><B>OF HOLDER AS SPECIFIED ON THE FACE</B> </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"><B>OF THE WARRANT)</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>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>ADDRESS:</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>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;________________________</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="CENTER"><FONT FACE="Times New Roman" SIZE="2"><B>ACCEPTED AND AGREED:</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE="2"><B>[TRANSFEREE]</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>By: ______________________________</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Name: ____________________________</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Title: ___________________________</FONT></TD></TR>
</TABLE>
<BR>

<p align=center>
<font size=2>B - 1</font></p>
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<page>

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

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>REGISTRATION RIGHTS
AGREEMENT</U> </FONT> </H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Registration Rights Agreement is made and entered into as of _________, 2009 by and among
B.O.S. Better Online Solutions Ltd., an Israeli company (the &#147;<B>Company</B>&#148;),
and the entities listed in <B><U>Schedule 1</U></B><U></U>,<B><U> </U></B><U></U>as may be
unilaterally amended from time to time by the Company, to reflect the inclusion of
additional Lenders (collectively, the &#147;Lenders&#148; and each, a
&#147;<B>Lender</B>&#148;). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>WHEREAS, the Company and the
respective Lender have entered into that certain Loan Agreement (the <B>&#147;Loan
Agreement</B>&#148;) dated as of ________, 2009; and </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>WHEREAS, pursuant to the Loan
Agreement and in accordance with the terms thereof, the Loan extended by the Lender is
convertible into Ordinary Shares, each with a nominal value of NIS 4.00 per share, of the
Company (&#147;<B>Ordinary Shares</B>&#148;); </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>WHEREAS, the Company has also issued
to the Lenders Warrants (the &#147;<B>Warrants</B>&#148;) for the purchase of Ordinary
Shares of the Company, each with a nominal value of NIS 4.00; and </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
the parties desire to set forth certain matters regarding ownership of the Company Shares
(as defined below), as more fully set forth herein. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, the parties hereto agree as follows: </FONT></P>

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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>1.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>DEFINITIONS. </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>
For
purposes of this Agreement, the following terms shall have the meanings set forth below:  </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>1.1 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;<B>Holders</B>&#148; means
any Lender, transferee or assignee to whom any of the Lenders assigns its rights, in
whole or in part, and any transferee or assignee thereof to whom a transferee or assignee
assigns its rights, in accordance with Section 9. </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>1.2 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;<B>ISA</B>&#148; means
the Israel Securities Authority or any similar or successor agency of Israel
administering the Israel Securities Law. </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>1.3 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;<B>Israel
Securities Law</B>&#148; means the Israel Securities Law, 5728-1968 (including the
regulations promulgated thereunder), as amended. </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>1.4 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>"1933
Act"</B> means the U.S. Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute. </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>1.5 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>"1934
Act"</B> means the U.S. Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder, or any similar successor statute. </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>1.6 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;<B>Person</B>&#148; means
an individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any department
or agency thereof. </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>1.7 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;<B>Permitted
Transferee</B>&#148; means with respect to any Holder: (i) a transferee by operation of
law; (ii) a spouse or child of the Holder; (iii) in the case of a transfer by a Holder
that is a limited partnership, any affiliated limited partnership managed by the same
management company or to the partners of the limited partnership; (iv) in the case of a
transfer by a Holder that is a limited liability company, any affiliated limited
liability company managed by the same management company, and the members of such limited
liability company; and (v) an entity Controlling the Holder, under the Control of the
Holder or under common Control with the Holder or any Permitted Transferee set forth in
(i) &#150; (iv) of this definition. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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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>1.8 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;<B>Register</B>&#148;,
&#147;<B>registered</B>&#148;, and &#147;<B>registration</B>&#148; refer to a
registration effected by preparing and filing a registration statement in compliance with
the 1933 Act and the effectiveness of such registration statement in accordance with the
1933 Act or the equivalent actions under the laws of another jurisdiction. </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>1.9 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;<B>Registrable
Securities</B>&#148; means any Shares (as defined below) held by the Lender and any other
securities issued by the Company to the Lender in respect of such Shares by means of
exchange, reclassification, dividend, distribution, split-up, combination, subdivision,
recapitalization, merger, spin-off, reorganization, contractual obligation or otherwise,
prior to the date the Registration Statement was filed with the SEC, except that Shares
that can be sold without restriction pursuant to Rule 144 under the 1933 Act shall not be
deemed Registrable Securities. </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>1.10 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;<B>Registration
Statement</B>&#148; means a registration statement or registration statements of the
Company covering Registrable Securities filed with the SEC under the 1933 Act on Form
F-3, so as to allow the Holder to freely resell the Registrable Securities on the
exchange on which securities of the Company of the same class or series are then listed. </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>1.11 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;<B>SEC</B>&#148; means
the United States Securities and Exchange Commission or any similar or successor agency
of the United States administering the 1933 Act. </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>1.12 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>"Shares"
</B>means the Ordinary Shares issued to the Lenders upon conversion of the Loan and any
Warrant Shares . </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>1.13 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>"Warrant
Shares"</B> means Ordinary Shares purchased by the Lenders pursuant to the exercise of the
Warrant. </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>1.2 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capitalized
terms used herein without definition shall have the meanings ascribed to them in the Loan
Agreement. </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>2.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>LISTING
&amp; REGISTRATION OF THE SHARES </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>2.1 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company shall prepare and, no later than 12 months following the closing of the Loan
Agreement, file with the SEC a Registration Statement on Form F-3 covering the resale of
all of the then Registrable Securities that are not already registered. The Company shall
use commercially reasonable efforts to have the Registration Statement declared effective
by the SEC as soon as possible after such filing with the SEC. Notwithstanding the above,
each Lender acknowledges that the SEC may mandate a limit on the number of Registrable
Securities that can be included in the Registration Statement and in such case the
Company shall be required to register only such amount of Registrable Securities as shall
not exceed the aforementioned limit, pro-rated amongst the Lenders. </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>2.2 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
the event that Form F-3 shall not be available for the registration of the resale of
Registrable Securities hereunder, the Company shall promptly register the resale of the
Registrable Securities on another appropriate form in accordance with its undertakings
hereunder, to the extent&nbsp;such registration is permitted under&nbsp;the rules and
regulations of the SEC&nbsp;and in compliance with the SEC&#146;s requirements therefore<B>.</B></FONT></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>

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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>2.3 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company represents and warrants to the Lenders that the Company is not a party to any
agreement that conflicts in any manner with the Lenders&#146; rights to cause the Company
to register Registrable Shares pursuant to this Agreement. </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>3.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>RELATED
OBLIGATIONS. </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>3.1 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Following
the filing and effectiveness of each Registration Statement with the SEC pursuant to
Section 2.1, the Company shall use commercially reasonable efforts to keep the
Registration Statement effective pursuant to Rule 415 of the 1933 Act at all times until
the earlier of (i) the date as of which all of the Registrable Securities covered by such
Registration Statement may be sold without restriction pursuant to Rule 144(k) under the
1933 Act (ii) the date on which the Holders shall have sold all the Registrable
Securities covered by such Registration Statement; or (iii) the fifth anniversary of the
date hereof (the &#147;<B>Registration Period</B>&#148;). The Company shall ensure that
such Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, subject to Section 3.5 below. </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>3.2 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company shall prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus used in
connection with such Registration Statement, as may be necessary to keep such
Registration Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act and the Israel Securities Law
with respect to the disposition of all Registrable Securities of the Company covered by
such Registration Statement. In the case of amendments and supplements to a Registration
Statement which are required to be filed pursuant to the Agreement (including pursuant to
this Section&nbsp;3.2 by reason of the Company filing a report on Form 20-F, Form 6-K or
any analogous report under the 1934 Act), the Company shall have incorporated such report
by reference into the Registration Statement, if applicable, or shall file such
amendments or supplements with the SEC as may be required to maintain the Registration
Statement effective during the Registration Period. </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>3.3 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company shall furnish such Holder whose Registrable Securities are included in any
Registration Statement, without charge, (i) a copy of such Registration Statement and any
amendment(s) thereto, including financial statements and schedules, all documents
incorporated therein by reference, all exhibits and each preliminary prospectus, (ii)
upon the effectiveness of any Registration Statement, a copies of the prospectus included
in such Registration Statement and all amendments and supplements thereto and (iii) such
other documents, as such Holder may reasonably request from time to time in order to
facilitate the disposition of the Registrable Securities owned by such Holder. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>3</font></p>
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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>3.4 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company shall use its commercially reasonable efforts to (i) register and qualify, unless
an exemption from registration and qualification applies, the resale by the Holders of
the Registrable Securities covered by a Registration Statement under such other
securities or &#147;blue sky&#148; laws of all the states of the United States, (ii)
prepare and file in those jurisdictions, such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be necessary
to maintain the effectiveness thereof during the Registration Period, (iii) take such
other actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other actions
reasonably necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (x) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 3.4, or (y) file
a general consent to service of process in any such jurisdiction. The Company shall
promptly notify each Holder who holds Registrable Securities of the receipt by the
Company of any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the securities or &#147;blue
sky&#148;laws of any jurisdiction in the United States or its receipt of actual notice of
the initiation or threatening of any proceeding for such purpose. </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>3.5 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company shall notify each Holder in writing of the happening of any event, (a <B>&#147;Discontinuation
Event</B>&#148;) as promptly as practicable after becoming aware of such event, as a
result of which the prospectus included in a Registration Statement, as then in effect,
includes an untrue statement of a material fact or an omission to state a material fact
required to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Company shall use its
commercially reasonable efforts to minimize the period of time during which a
Registration Statement includes an untrue statement of a material fact or omission to
state a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading. The
Company shall promptly notify each Holder in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed so that the Registration
Statement does not include an untrue statement of a material fact or an omission to state
a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading, and
when a Registration Statement or any post-effective amendment has become effective, (ii)
of any request by the SEC for amendments or supplements to a Registration Statement or
related prospectus or related information, and (iii) of the Company&#146;s reasonable
determination that a post-effective amendment to a Registration Statement would be
appropriate. </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>3.6 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company shall use its commercially reasonable efforts to prevent the issuance of any stop
order or other suspension of effectiveness of a Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any jurisdiction
(each, a &#147;<B>Suspension Event</B>&#148;) and, if such an order or suspension is
issued, to promptly obtain the withdrawal of such order or suspension and to notify each
Holder who holds Registrable Securities being sold of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or threat of any
proceeding for such purpose. </FONT></TD>
</TR>
</TABLE>
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<p align=center>
<font size=2>4</font></p>
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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>3.7 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company shall use its commercially reasonable efforts to cause all the Registrable
Securities covered by a Registration Statement to be listed on each securities exchange
on which securities of the same class or series issued by the Company are then listed. </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>3.8 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company shall cooperate with the Holders who hold Registrable Securities being offered
and, to the extent applicable, facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the Registrable Securities
to be offered pursuant to the effective Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the Holders
may reasonably request and registered in such names as the Holders may request. </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>3.9 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company shall provide a transfer agent and registrar of all Registrable Securities and a
CUSIP number not later than the effective date of the applicable Registration Statement. </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>3.10 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If
requested by a Holder, the Company shall, to the extent necessary for compliance with the
Securities Act of 1933: (i) as soon as practicable incorporate in a prospectus supplement
or post-effective amendment such information as a Holder requests to be included therein,
information with respect to the number of Registrable Securities being offered or sold,
the purchase price being paid therefor and any other terms of the offering of the
Registrable Securities to be sold in such offering; (ii) as soon as practicable make all
required filings of such prospectus supplement or post-effective amendment after being
notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and (iii) as soon as practicable, supplement or make amendments
to any Registration Statement if reasonably requested by a Holder of such Registrable
Securities. </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>3.11 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company shall comply with all applicable securities laws and rules and regulations of the
SEC and the ISA. </FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>OBLIGATIONS
OF THE HOLDERS. </FONT></TD>
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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Each
Holder agrees that, upon receipt of any notice from the Company of the happening of a
Discontinuation Event (as defined in Section 3.5) or a Suspension Event (as defined in
Section 3.6), such Holder will immediately discontinue disposition of Registrable
Securities pursuant to any Registration Statement(s) covering such Registrable Securities
until such Holder&#146;s receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3.5 or receipt of notice that no supplement or amendment is
required or that the Suspension Event was removed. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>EXPENSES
OF REGISTRATION. </FONT></TD>
</TR>
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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
All
expenses, other than underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3, including, without
limitation, all registration, listing and qualifications fees, printers and accounting
fees, fees and disbursements of one counsel to the Lenders and counsel to the Company<B>
</B>shall be paid by the Company. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>5</font></p>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>INDEMNIFICATION. </FONT></TD>
</TR>
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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
the event any Registrable Securities are included in a Registration Statement under this
Agreement: </FONT></TD>
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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>6.1 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">To
the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold
harmless and defend each Holder, the directors, officers, partners, employees, agents,
representatives of, and each Person, if any, who controls any Holder within the meaning
of the 1933 Act or 1934 Act (each, an <B>&#147;Indemnified Person&#148;</B>), against any
losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs,
reasonable attorneys&#146; fees, amounts paid in settlement or expenses, joint or
several, (collectively, <B>&#147;Claims&#148;</B>) incurred in defending any action,
claim, suit, inquiry, proceeding, investigation by or before any court or governmental,
administrative or other regulatory agency, body or the SEC or the ISA, whether pending or
threatened, whether or not a Person to be indemnified is or may be a party thereto (<B>&#147;Indemnified
Damages&#148;</B>), to which any of them may become subject insofar as such Claims
(or actions or proceedings, whether commenced or threatened, in respect thereof) arise
out of or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement, preliminary prospectus, final prospectus or
&#147;free writing prospectus&#148; (as such term is defined in Rule 405 under the 1933
Act) or any post-effective amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other &#147;blue sky&#148; laws of
any jurisdiction in which Registrable Securities are offered (<B>&#147;Blue Sky Filing&#148;</B>),
or the omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (ii) any violation
by the Company of the 1933 Act, the 1934 Act, the Israel Securities Law or other federal
or state or Israeli securities law applicable to the Company and relating to any action
or inaction required of the Company in connection with such registration (&#147;<B>Violations</B>&#148;).
Subject to Section 6.3, the Company shall reimburse the Indemnified Persons promptly as
such expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or defending any
such Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6.1: shall not apply: (i) to a Claim
by an Indemnified Person arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the Company by
such Indemnified Person expressly for inclusion in any such Registration Statement,
preliminary prospectus, final prospectus or free writing prospectus or any such amendment
thereof or supplement thereto; (ii) to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which consent
shall not be unreasonably withheld; and (iii) to the use of the Registration Statement or
the related Prospectus following a Discontinuation Event or a Suspension Event, provided
the Indemnified Person received prior notice of such event; or (iv) if the Indemnified
Person fails to deliver a prospectus, as then amended or supplemented, provided that the
Company shall have delivered to the Indemnified Person such prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Holders pursuant to Section 9. </FONT> </TD>
</TR>
</TABLE>
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<p align=center>
<font size=2>6</font></p>
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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>6.2 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
connection with any Registration Statement in which a Holder is participating, each such
Holder agrees, severally and not jointly, to indemnify, hold harmless and defend, to the
same extent and in the same manner as is set forth in Section 6.1, the Company, each of
its directors, each of its officers, employees, agents. Representatives and each Person,
if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act (each
an <B>&#147;Indemnified Party&#148;</B>), against any Claim or Indemnified Damages to
which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such Violation occurs
in reliance upon and in conformity with written information furnished to the Company by
such Holder expressly for inclusion in Registration Statement, preliminary prospectus,
final prospectus or free writing prospectus and, subject to Section 6.3, such Holder will
reimburse any legal or other expenses reasonably incurred by an Indemnified Party in
connection with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6.2 and the agreement with respect to
contribution contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such Holder,
which shall not be unreasonably withheld; provided, further, however, that the Holder
shall be liable under this Section 6 for only that amount of a Claim or Indemnified
Damages as does not exceed the higher of: (i) the net proceeds to such Holder as a result
of the sale of Registrable Securities pursuant to such Registration Statement and (ii)
the aggregate Conversion Price (as defined in the Loan Agreement) and the aggregate
Exercise Price (as defined in the Warrant) paid by the applicable Holder for the Ordinary
Shares and the Warrant Shares. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Holders pursuant to Section 9. </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>6.3 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section 6 of
notice of the commencement of any action or proceeding (including any governmental action
or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall
deliver to the indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party similarly
noticed, to assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying party and the Indemnified Person or the Indemnified Party, as the case
may be; provided, however, that an Indemnified Person or Indemnified Party shall have the
right to retain its own counsel with the fees and expenses of not more than one counsel
for such Indemnified Person or Indemnified Party to be paid by the indemnifying party, if
the representation by such counsel of the Indemnified Person or Indemnified Party
together with the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any other
party represented by such counsel in such proceeding. In the case of an Indemnified
Person, legal counsel referred to in the immediately preceding sentence shall be selected
by the Holders holding a majority in interest of the Registrable Securities included in
the Registration Statement to which the Claim relates. The Indemnified Party or
Indemnified Person shall cooperate with the indemnifying party in connection with any
negotiation or defense of any such action or Claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the Indemnified
Party or Indemnified Person which relates to such action or Claim. The failure to deliver
written notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the extent that
the indemnifying party is prejudiced in its ability to defend such action, but the
omission to so notify the indemnifying party will not relieve such indemnifying party of
any liability that it may have to any Indemnified Person or Indemnified Party otherwise
than under this Section 6.3, including pursuant to Section 6.5. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>7</font></p>
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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>6.4 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
indemnification required by this Section 6 shall be made by periodic payments of the
amount thereof during the course of the investigation or defense, as and when bills are
received or Indemnified Damages are incurred. </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>6.5 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
indemnity agreements contained herein shall be in addition to (i) any cause of action or
similar right of the Indemnified Party or Indemnified Person against the indemnifying
party or others, and (ii) any liabilities the indemnifying party may be subject to
pursuant to the law. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONTRIBUTION. </FONT></TD>
</TR>
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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
To
the extent any indemnification by an indemnifying party is prohibited or limited by law or
insufficient to hold an Indemnified Person or an Indemnified Party, as the case may be,
harmless, then the indemnifying party, in lieu of indemnifying such Indemnified Person or
Indemnified Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Person or Indemnified Party as a result of such Claims and Indemnified Damages
(each as defined in Section 6.1 above) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the Indemnified Person or
Indemnified Party, as the case may be, on the other hand in connection with the statements
or omissions that resulted in such loss, liability, claim, damage, or expense as well as
any other relevant equitable considerations. The relative fault of the indemnifying party
and of the Indemnified Person or Indemnified Party, as the case may be, shall be
determined by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the Indemnified Person or Indemnified
Party, as the case may be, and the parties&#146; relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or omission. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>8</font></p>
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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Notwithstanding
the foregoing, (i) no Person involved in the sale of Registrable Securities, which Person
is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) in connection with such sale, shall be entitled to contribution from any Person
involved in such sale of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be
limited in amount to the net amount of proceeds received by such seller from the sale of
such Registrable Securities pursuant to such Registration Statement. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>REPORTS
UNDER THE 1934 ACT. </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>
With
a view to making available to the Holders the benefits of Rule 144 promulgated under the
1933 Act or any other similar rule or regulation of the SEC that may at any time permit
the Holders to sell securities of the Company to the public without registration (<B>&#147;Rule
144&#148;</B>), the Company agrees to:  </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>8.1 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>make
and keep public  information  available,  as those terms are  understood and defined in
Rule                   144;</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>8.2 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>file
with the SEC in a timely manner all reports and other documents required by the Company
under the 1993 Act and the 1934 Act so long as the Company remains subject to such
requirements and the filing of such reports and other documents is required for the
applicable provisions of Rule 144; and </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>8.3 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>furnish
to each Holder so long as such Holder owns Registrable Securities, promptly upon request,
(i) a written statement by the Company that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably requested to permit
the Holders to sell such securities pursuant to any rule or regulation of the SEC
allowing the Holder to sell any securities without registration. </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>9.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ASSIGNMENT
OF REGISTRATION RIGHTS. </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>
Subject
to the prior approval of the Company, at any time prior to the time the Registration
Statement was filed with the SEC, the rights under this Agreement shall be assignable by
each Lender to any transferee of all or any portion of such Lender&#146;s respective
portion of the Loan together with its Registrable Securities or the Warrant if: (i) the
Lender agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time after such
assignment; (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such transferee
or assignee, and (b) the securities with respect to which such registration rights are
being transferred or assigned; (iii) immediately following such transfer or assignment
the further disposition of such securities by the transferee or assignee is restricted
under the 1933 Act and applicable state securities laws; (iv) at or before the time the
Company receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of the
provisions contained herein; and (v) such transfer shall have been made in accordance
with the applicable requirements of the Loan Agreement and applicable securities laws.  </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>

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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>
Notwithstanding
the above, any Holder may assign its right to cause the Company to register Shares
pursuant to this Agreement to (i) a Permitted Transferee of all or any part of its
Shares, or (ii) an acquirer of no less than twenty percent (20%) of the Holder&#146;s
Shares if: (a) the transferor shall, within 14 (fourteen) days after such transfer,
furnish the Company with written notice of the name and address of such transferee, the
securities with respect to which such registration rights are being assigned, and the
transferee&#146;s written agreement to be bound by this Agreement; (b) immediately
following such transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the 1933 Act and applicable state securities
laws; and (c) such transfer shall have been made in accordance with the applicable
securities laws.  </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>10.  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MISCELLANEOUS </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>10.1 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Amendments;
Waivers</U>. This Agreement may not be amended, changed, supplemented, waived or
otherwise modified or terminated, except upon the execution and
delivery of a written agreement executed by the Company and the applicable
Lender(s). </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>10.2 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Entire
Agreement. This Agreement constitutes the entire agreement between the parties hereto
pertaining to its subject matter, and supersedes and replaces all prior agreements and
understandings of the parties in connection with such subject matter. </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>10.3 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notices.
All notices and other communications required or permitted hereunder to be given to a
party to this Agreement shall be in writing and shall be faxed or mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger in
accordance with the provisions of the Loan Agreement. </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>10.4 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Governing
Law; Jurisdiction. This Agreement shall be governed by and construed according to the
internal laws of the State of Israel without regard to the provisions relating to
conflicts of law. Any dispute arising under or in relation to this Agreement shall be
resolved exclusively by the competent courts of Tel-Aviv Jaffa district, and the parties
hereto irrevocably submit to the exclusive jurisdiction of such court for such purposes. </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>10.5 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Successors
and Assigns. Except as otherwise expressly limited herein, the provisions of this
Agreement shall inure to the benefit of, and shall be binding upon, the successors and
permitted assigns of the parties hereto. This Agreement may not be assigned by any party
without the prior written consent of the other party hereto. </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>10.6 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Severability.
If any provision of this Agreement is held by a court of competent jurisdiction to be
unenforceable under applicable law, then such provision shall be excluded from this
Agreement and the remainder of this Agreement shall be interpreted as if such provision
were so excluded and shall be enforceable in accordance with its terms; provided,
however, that in such event this Agreement shall be interpreted so as to give effect, to
the greatest extent consistent with and permitted by applicable law, to the meaning and
intention of the excluded provision as determined by such court of competent
jurisdiction. </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>10.7 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>No
Waiver. The failure of any party hereto to exercise any right, power or remedy provided
under this Agreement or otherwise available in respect hereof at law or in equity, or to
insist upon compliance by any other party hereto with its obligations hereunder, and any
custom or practice of the parties at variance with the terms hereof, shall not constitute
a waiver by such party of its right to exercise any such or other right, power or remedy
or to demand such compliance. </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>

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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>10.8 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Headings.
The section and paragraph headings in this Agreement are for convenience of reference
only and are not intended to be a part of this Agreement or to affect the meaning or
interpretation of this Agreement. </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>10.9 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Counterparts.
This Agreement may be executed in one or more counterparts (including facsimile
counterparts), all of which taken together shall constitute one agreement. </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>10.10 </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Equitable
Relief. The parties hereto agree that legal remedies may be inadequate to enforce the
provisions of this Agreement and that equitable relief, including specific performance
and injunctive relief, may be used to enforce the provisions of this Agreement. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>IN WITNESS WHEREOF, the parties
hereto have executed this Registration Rights Agreement as of the date first set forth
above. </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">B.O.S. Better Online Solutions Ltd. .
<BR>
<BR>By: ___________________________
<BR>Name: _________________________
<BR>Title: _________________________
<BR>
<BR><B>[LENDER]
</B><BR><I>By:____________________________
<BR>Name: ______________________
<BR>Title: _______________________
<BR>
<BR>______________________ .
<BR>By:____________________________
<BR>Name: ______________________
<BR>Title:</I> _______________________ </FONT>
</P>

<p align=center>
<font size=2>11</font></p>
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</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11
<SEQUENCE>9
<FILENAME>exhibit_11.htm
<TEXT>
<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        \\Backup\edgar filing\BOS better online solutions Ltd\96871\a96871.eep -->
     <!-- Control Number: 96871                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>

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<H1 ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 11</B></U> </FONT> </H1>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Statement of Computation
of Earnings per Share (in thousands)</U> </FONT> </H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Following is the data relating to the
weighted average number of shares used in the computation of diluted earning (loss) per
share: </FONT></P>


<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>Year ended<BR>
December 31,<BR>
2008</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,<BR>
2007</FONT><HR WIDTH=95% SIZE=1 COLOR=black NOSHADE></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>
     <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="70%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Weighted average number of shares used in the</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></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" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;computation of basic earning (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>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 11,979</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  8,651</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>Add: Net additional shares from the anticipated</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;exercise of stock options</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>3,132</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" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" colspan=7><FONT FACE="Times New Roman" SIZE=2>Weighted average number of shares used in the</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;computation of diluted earning 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>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>11,979</FONT></TD>
        <TD ALIGN="LEFT"><FONT 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>11,783</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>Options which were not included in the computation</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;of diluted earning (loss) per share due to anti</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;dilutive effect</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  2,322</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</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></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></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">

</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>10
<FILENAME>exhibit_12-1.htm
<TEXT>
<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        \\Backup\edgar filing\BOS better online solutions Ltd\96871\a96871.eep -->
     <!-- Control Number: 96871                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>

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<H1 ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Exhibit 12.1</U> </FONT> </H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Certification Pursuant to Rule
13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.</B> </FONT></P>

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

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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>1. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I
have reviewed this annual report on Form 20-F of B.O.S. Better Online           Solutions
Ltd. (the &#147;registrant&#148;); </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>2. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based
on my knowledge, this report does not contain any untrue statement of a
          material fact or omit to state a material fact necessary to make the statements
          made, in light of the circumstances under which such statements were made, not
          misleading with respect to the period covered by this report; </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based
on my knowledge, the financial statements, and other financial information
          included in this report, fairly present in all material respects the financial
          condition, results of operations and cash flows of the registrant as of, and
          for, the periods presented in this report; </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>4. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
registrant&#146;s other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
          reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
          registrant and have: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)
Designed
such disclosure controls and procedures, or caused such disclosure
                    controls and procedures to be designed under our supervision, to
ensure that                     material information relating to the registrant,
including its consolidated                     subsidiaries, is made known to us by
others within those entities, particularly                     during the period in which
this report is being prepared;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)
Designed
such internal control over financial reporting, or caused such
                    internal control over financial reporting to be designed under our
supervision,                     to provide reasonable assurance regarding the
reliability of financial reporting                     and the preparation of financial
statements for external purposes in accordance                     with generally
accepted accounting principles;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c)
Evaluated
the effectiveness of the registrant&#146;s disclosure controls and
                    procedures and presented in this report our conclusions about the
effectiveness                     of the disclosure controls and procedures, as of the
end of the period covered                     by this report based on such evaluation;
and  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(d)
Disclosed
in this report any change in the registrant&#146;s internal control
                    over financial reporting that occurred during the period covered by
the report                     that has materially affected, or is reasonably likely to
materially affect, the                     Company&#146;s internal control over financial
reporting.  </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>5. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
registrant&#146;s other certifying officers and I have disclosed, based on           our
most recent evaluation of internal control over financial reporting, to the
          registrant&#146;s auditors and the audit committee of registrant&#146;s board
of           directors (or persons performing the equivalent function): </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>All
significant deficiencies and material weaknesses in the design or operation
               of internal control over financial reporting which are reasonably likely
to                adversely affect the registrant&#146;s ability to record, process,
summarize and                report financial information; and </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>Any
fraud, whether or not material, that involves management or other employees
               who have a significant role in the registrant&#146;s internal control over
               financial reporting. </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>Date: June 30, 2009</FONT></P>

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<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Shalom Daskal
<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Shalom Daskal, Chief Executive Officer</FONT></TD>
<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>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2></font></p>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.2
<SEQUENCE>11
<FILENAME>exhibit_12-2.htm
<TEXT>
<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        \\Backup\edgar filing\BOS better online solutions Ltd\96871\a96871.eep -->
     <!-- Control Number: 96871                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>

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<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Exhibit 12.2</U> </FONT> </H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Certification Pursuant to Rule
13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.</B> </FONT></P>

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

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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>1. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I
have reviewed this annual report on Form 20-F of B.O.S. Better Online           Solutions
Ltd. (the &#147;registrant&#148;); </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based
on my knowledge, this report does not contain any untrue statement of a
          material fact or omit to state a material fact necessary to make the statements
          made, in light of the circumstances under which such statements were made, not
          misleading with respect to the period covered by this report; </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based
on my knowledge, the financial statements, and other financial information
          included in this report, fairly present in all material respects the financial
          condition, results of operations and cash flows of the registrant as of, and
          for, the periods presented in this report; </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>4. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
registrant&#146;s other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
          reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
          registrant and have: </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)
Designed
such disclosure controls and procedures, or caused such disclosure
                    controls and procedures to be designed under our supervision, to
ensure that                     material information relating to the registrant,
including its consolidated                     subsidiaries, is made known to us by
others within those entities, particularly                     during the period in which
this report is being prepared;  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)
Designed
such internal control over financial reporting, or caused such
                    internal control over financial reporting to be designed under our
supervision,                     to provide reasonable assurance regarding the
reliability of financial reporting                     and the preparation of financial
statements for external purposes in accordance                     with generally
accepted accounting principles;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c)
Evaluated
the effectiveness of the registrant&#146;s disclosure controls and
                    procedures and presented in this report our conclusions about the
effectiveness                     of the disclosure controls and procedures, as of the
end of the period covered                     by this report based on such evaluation;
and  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(d)
Disclosed
in this report any change in the registrant&#146;s internal control
                    over financial reporting that occurred during the period covered by
the report                     that has materially affected, or is reasonably likely to
materially affect, the                     Company&#146;s internal control over financial
reporting.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
registrant&#146;s other certifying officers and I have disclosed, based on           our
most recent evaluation of internal control over financial reporting, to the
          registrant&#146;s auditors and the audit committee of registrant&#146;s board
of           directors (or persons performing the equivalent function): </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All
significant deficiencies and material weaknesses in the design or operation
               of internal control over financial reporting which are reasonably likely
to                adversely affect the registrant&#146;s ability to record, process,
summarize and                report financial information; and </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Any
fraud, whether or not material, that involves management or other employees
               who have a significant role in the registrant&#146;s internal control over
               financial reporting. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>Date: June 30, 2009<BR><BR>/s/ Eyal Cohen<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Eyal Cohen, Chief Financial Officer</FONT></TD>
<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>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2></font></p>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.1
<SEQUENCE>12
<FILENAME>exhibit_13-1.htm
<TEXT>
<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        \\Backup\edgar filing\BOS better online solutions Ltd\96871\a96871.eep -->
     <!-- Control Number: 96871                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>

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<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Exhibit 13.1</U> </FONT> </H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Certification Pursuant to Rule
13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934. </B>&nbsp; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the Annual Report on Form 20-F of B.O.S. Better Online Solutions Ltd., a
company organized under the laws of the State of Israel (the &#147;<B>Company</B>&#148;),
for the period ending December 31, 2008 as filed with the Securities and Exchange
Commission on the date hereof (the &#147;<B>Report</B>&#148;), each of the undersigned
officers of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, to such officer&#146;s knowledge, that:  </FONT></P>


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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>1. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
Report fully complies, in all material respects, with the requirements of
               Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and </FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
information contained in the Report fairly presents, in all material
               respects, the financial condition and results of operations of the Company
as                of, and for, the periods presented in the Report. </FONT></TD>
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<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>By: /s/ Shalom Daskal<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Shalom Daskal<BR>Chief Executive Officer</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><BR>By: /s/ Eyal Cohen<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Eyal Cohen<BR>Chief Financial Officer</FONT></TD>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: June 30, 2009 </FONT></P>

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<TYPE>EX-23.1
<SEQUENCE>13
<FILENAME>exhibit_23-1.htm
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     <!-- Project:        \\Backup\edgar filing\BOS better online solutions Ltd\96871\a96871.eep -->
     <!-- Control Number: 96871                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 23.1</B></U> </FONT> </P>


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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONSENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We consent to the incorporation by
reference in the Registration Statements on Form F-3 (Nos. 333-130048 and No. 333-152020)
and related prospectus and in the Registration Statements on Form S-8 (Nos. 333-148318,
333-136957, 333-110696, 333-100971 and 333-11650) of B.O.S Better Online Solutions Ltd.
(&#147;BOS&#148;) of our report dated March 29, 2009, with respect to the consolidated
financial statements of BOS, included in this Annual Report on Form 20-F for the year
ended December 31, 2008. </FONT></P>


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     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=50% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2"><U>/s/ KOST, FORER GABBAY &amp; KASIERER</U> </FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Tel Aviv Israel</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>KOST, FORER GABBAY &amp; KASIERER</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>June 29, 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>A Member of Ernst &amp; Young Global</FONT></TD></TR>
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<TYPE>EX-23.2
<SEQUENCE>14
<FILENAME>exhibit_23-2.htm
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     <!-- Project:        \\Backup\edgar filing\BOS better online solutions Ltd\96871\a96871.eep -->
     <!-- Control Number: 96871                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    BOS better online solutions Ltd                                  -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 23.2</B></U> </FONT> </P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>CONSENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We consent to the incorporation by
reference into the Registration Statements on Form F-3 and related prospectus of B.O.S
Better Online Solutions Ltd. (&#147;BOS&#148;) (Nos. 333-130048 and 333-152020) and into
the Registration Statements of BOS on Form S-8 (Nos. 333-148318, 333-136957, 333-110696,
333-100971 and 333-11650) of our report dated March 29, 2009, with respect to the
consolidated financial statements of BOS&nbsp;- Supply Chain Solutions (Lynk) Inc.
(formally known as Lynk USA Inc.) included in this Annual Report on Form 20-F for the year
ended December 31, 2008. </FONT></P>


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<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><BR>/s/ ARIK ESHEL, CPA &amp; ASSOC., PC<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
ARIK ESHEL, CPA &amp; ASSOC., PC</FONT></TD>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>June 29, 2009 </FONT></P>


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