________________________________________________________________________________

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
Form-------------------

FORM 20-F

(Mark One)(MARK ONE)

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

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended DecemberOR

FOR THE FISCAL YEAR ENDED DECEMBER 31, 19982001

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

For the transition period from ____ to ____

Commission File NumberFOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-26498

-------------------

NUR MACROPRINTERS LTD.
(Exact Name of Registrant as specified in its charter)

ISRAEL
(Jurisdiction of incorporation or organization)

5 David Navon Street
Moshav Magshimim 49001, Israel
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

-------------------

ISRAEL 12 ABBA HILEL SILVER ST.
(JURISDICTION OF INCORPORATION OR ORGANIZATION) P.O. BOX 1281, LOD 71111, ISRAEL
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(b) of the
Act:OF THE ACT:

None

Securities registered or to be registered pursuant to SectionSECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(g) of the
Act:

ORDINARY SHARES,OF THE ACT:

ordinary shares,
NIS 1.0 PAR VALUE
Title of Class

Securities for which there is a reporting obligation pursuant to Sectionpar value
TITLE OF CLASS

SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION 15(d)
of the Act:

ORDINARY SHARES,OF THE ACT:

ordinary shares,
NIS 1.0 PAR VALUE
Title of Classpar value
TITLE OF CLASS

Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of December 31, 1998:

ORDINARY2001:

ordinary shares,

NIS 1.0 par value 14,751,753
TITLE OF CLASS NUMBER OF SHARES
NIS 1.0 PAR VALUE 10,880,000
Title of Class Number of Shares

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. Yes [x] No X[ ]

Indicate by check mark which financial statement item the registrant has
elected to follow. Item 17 [ ] Item 18 X[x]

________________________________________________________________________________

In addition to historical information, this Annual Reportannual report on Form 20-F
contains forward-looking statements. The forward-looking statements contained
herein are subject to certain risks and uncertainties that could cause actual
results to differ materially from those reflected in the forward-looking
statements. Factors that might cause such difference include, but are not
limited to, those discussed in "Item 1: Description of Business--Risk Factors"'ITEM 3: Key Information -- Risk Factors' and
"Item
9: Management's Discussion'ITEM 5: Operating and Analysis of Financial ConditionReview and Results of
Operations" readersProspects.' Readers are cautioned
not to place undue reliance on these forward-looking statements, which reflect
management's analysis as of the date hereof. The company undertakesWe undertake no obligation to
publicly revise these forward-looking statements to reflect events or
circumstances that arise after the date hereof. In addition to the disclosure
contained herein, readers should carefully review any disclosure of risks and
uncertainties contained in other documents that the company fileswe file from time to time with
the Securities and Exchange Commission.

PART I

ITEM 1: DESCRIPTION1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not Applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

ITEM 3. KEY INFORMATION

Not Applicable except Items 3.A and 3.D, which are detailed below.

SELECTED FINANCIAL DATA

NUR MACROPRINTERS
CONSOLIDATED STATEMENTS OF OPERATIONS

1999(1) 2000(2)(3) 2001(5)(6)
------- ---------- ----------
(IN THOUSANDS OF U.S. DOLLARS EXCEPT
PER SHARE AND SHARE DATA)

Revenues:
Sales of printers and related products.................. $58,259 $121,924 $120,377
Sales of printed materials.............................. 2,460 -- --
------- -------- --------
60,719 121,924 120,377
------- -------- --------
Cost of revenues:
Cost of sales of printers and related products.......... 30,440 64,107 71,928
Cost of sales of printed materials...................... 1,344 -- --
Inventory write-off..................................... -- -- 3,989
------- -------- --------
31,784 64,107 75,917
------- -------- --------
Gross profit................................................ 28,935 57,817 44,460
------- -------- --------
Research and development expenses........................... 5,530 15,077 10,883
Less royalty-bearing grants................................. 721 451 649
------- -------- --------
Research and development expenses, net...................... 4,809 14,626 10,234
------- -------- --------
Selling and marketing expenses, net......................... 9,485 17,385 18,665
General and administrative expenses......................... 6,275 12,765 13,321
Amortization of goodwill and other intangible assets........ -- 1,452 2,904
Restructuring charges....................................... -- -- 3,237
------- -------- --------
15,760 31,602 38,127
------- -------- --------
Operating income (loss)..................................... 8,366 11,589 (3,901)
Financial expenses, net..................................... (616) (1,423) (3,336)
Other income (expenses), net................................ 176 25 (324)
------- -------- --------
Income (loss) before taxes on income........................ 7,926 10,191 (7,561)
Taxes on income (tax benefit)............................... 798 1,244 (191)
------- -------- --------
Income (loss) after taxes on income......................... 7,128 8,947 (7,370)
Minority interest in earnings of a subsidiary............... (28) -- --
Equity in gains (losses) of affiliates, net(4).............. 75 (454) 154
------- -------- --------
Net income (loss)........................................... $ 7,175 $ 8,493 $ (7,216)
------- -------- --------
Basic net earnings (loss) per share......................... $ 0.64 $ 0.65 $ (0.49)
------- -------- --------
Diluted net earnings (loss) per share....................... $ 0.56 $ 0.57 $ (0.49)
------- -------- --------
------- -------- --------
Weighted average number of shares used in computing basic
net earnings (loss) per share............................. 11,181,137 13,150,110 14,655,048
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of shares used in computing diluted
net earnings (loss) per share............................. 12,722,600 14,793,327 14,655,048
---------- ---------- ----------
---------- ---------- ----------

- ---------

(1) Represents financial information for NUR together with our subsidiaries NUR
Media Solutions, NUR America, NUR Europe, NUR Shanghai, NUR Asia Pacific and
NUR Germany (first six months). We owned 84% of NUR Germany; this subsidiary
was sold during the third quarter of 1999.

(2) Represents financial information for NUR together with our subsidiaries NUR
Media Solutions, NUR America, NUR Europe, NUR Shanghai, NUR Asia Pacific,
Salsa Digital Printers, NUR Hungary Trading and Software Licensing Limited
Liability Company, NUR DO Brazil Ltda., Encre Consumables B.V, and
NUR Japan.
(footnotes continued on next page)

(footnotes continued from previous page)

(3) In July 2000, we purchased substantially all of the assets and assumed
specified liabilities of Salsa Digital Ltd. and related entities. As part of
the asset purchase transaction, we also acquired all of the outstanding
capital stock of NUR Japan.

(4) Represents equity in Stillachem and NUR Pro Engineering.

(5) Represents financial information for NUR together with our subsidiaries NUR
Media Solutions, NUR America, NUR Europe, NUR Shanghai, NUR Asia Pacific,
Salsa Digital Printers, NUR Hungary Trading and Software Licensing Limited
Liability Company, NUR DO Brazil Ltda., Encre Consumables B.V, NUR Japan and
Stillachem (last eight months).

(6) In May 2001, we purchased the remaining 49.9% of Stillachem. We previously
owned 50.1% of this subsidiary.

NUR MACROPRINTERS
CONSOLIDATED BALANCE SHEET DATA

1999(1) 2000(2)(3) 2001(4)(5)
------- ---------- ----------
(IN THOUSANDS OF U.S. DOLLARS)

Working capital............................................. $15,791 $ 55,186 $ 41,934
Total assets................................................ $39,648 $120,006 $111,096
Total liabilities........................................... $21,785 $ 72,081 $ 70,099
Total shareholders' equity.................................. $17,863 $ 47,925 $ 40,997

- ---------

(1) Represents financial information for NUR together with our subsidiaries
NUR Media Solutions, NUR America, NUR Europe, NUR Shanghai, NUR Asia Pacific
and NUR Germany (first 6 months). We owned 84% of NUR Germany; this
subsidiary was sold during the third quarter of 1999.

(3) In July 2000, we purchased substantially all of the assets and assumed
specified liabilities of Salsa Digital Ltd. and related entities. As part of
the transaction, we also acquired all of the outstanding capital stock of
Signtech Japan.

(4) Represents financial information for NUR together with our subsidiaries NUR
Media Solutions, NUR America, NUR Europe, NUR Shanghai, NUR Asia Pacific,
Salsa Digital Printers, NUR Hungary Trading and Software Licensing Limited
Liability Company, NUR DO Brazil Ltda., Encre Consumables B.V., NUR Japan
and Stillachem (last eight months).

(5) In May 2001, we purchased the remaining 49.9% of Stillachem. We previously
owned 50.1% of this subsidiary.

RISK FACTORS

Investing in our securities is very risky. You should be able to bear a
complete loss of your investment. To understand the level of risk, you should
carefully consider the following risk factors, as well as the other information
found in this form.

WE DEPEND ON A FEW KEY PRODUCTS IN A BUSINESS GeneralSUBJECT TO RAPID TECHNOLOGICAL
CHANGE. We are highly dependent upon the sale of our principal products -- the
NUR Blueboard printers, the NUR Fresco printers, the NUR Salsa printers and the
NUR FabriGraph Printers. Rapid changes in technology, customer preferences and
evolving industry standards increasingly characterize the market for our
printers. Our growth and future financial performance will depend upon our
ability to update our current products and develop and market new products to
keep pace with technological advances in the industry. During 1999, 2000 and
2001, we invested approximately $5.5 million, $15.0 million and $10.9 million,
respectively, in research and development projects, of which, in 2000, $4.3
million was related to the Salsa Digital asset purchase transaction that caused
a one-time write-off assigned to research and development. Salsa Digital
invested toward research and development approximately $1.8 million and $0.6
million in 1999 and the first six months of 2000, respectively. Our business
could seriously suffer if we fail to anticipate or respond adequately to changes
in technology and customer preferences, or if our products are delayed in their
development or introduction. We cannot assure you that we will successfully
develop any new products. If our competitors introduce new products, the sales
of our existing products and our financial results could be harmed.

WE CURRENTLY HAVE NO COMMITMENTS FOR ADDITIONAL FINANCING. We believe our
expected revenue from operations, capital resources and credit facilities will
be enough to fund our business activities at their current rate. We will need
additional funds, however, if we seek to expand our operations or if we do not
meet our expected revenues. If we are unable to raise funds through public or
private financing of debt or equity, we will be unable to increase expenditures
that could ultimately hurt our financial results, such as research and
development or production and marketing of our products. The amount of money we
will need depends on numerous factors, including the success of our marketing
and customer service efforts, our research and development activities and the
demand for our products and services. We currently have no commitments for
additional financing. We cannot guarantee that additional financing will be
available or that, if available, will be obtained on terms we find favorable.

WE MUST COMPLY WITH COVENANTS CONCERNING OUR LONG-TERM BANK LOANS. If we do
not meet certain covenants provided for in our long-term loan agreements with
Bank Hapoalim B.M ('Bank Hapoalim') and Bank Leumi Le Israel Ltd. ('Bank Leumi')
we may be required by the banks to immediately repay our long-term debts. In
February 2002, the Company signed amendments to its long-term loan agreements
with Bank Hapoalim and Bank Leumi providing for the rescheduling of the
repayment dates of remaining long-term loans. For more information see
'ITEM 10.C: Material Contracts -- Long Term Loan Agreements.' Under the
rescheduling amendments, the Company undertook, among other things, to maintain
four financial ratios. As a result of the decrease in revenues in the first
quarter of 2002, the Company did not meet one of the ratios relating to the
Company's earnings before income tax, depreciation and amortization and the
Company's overall long-term debt to financial institutions. The banks have
agreed in writing not to act upon their contractual rights pursuant to the
Company's default mentioned above, subject to the Company meeting certain future
financial targets as set forth in its business plan presented to the banks.
There can be no assurance, however, that the Company will be able to comply in
all cases with these targets or its other existing bank covenants. NUR's failure
to comply with the bank agreements could have a material adverse effect on our
business and financial results.

WE DEPEND ON SOLE SOURCE SUPPLIERS FOR THE INKJET PRINTHEADS FOR EACH OF OUR
PRINTERS AND ON A SINGLE INK SUPPLIER FOR OUR NUR BLUEBOARD. We currently
purchase all of the ink and ink-jet printheads used in our NUR Blueboard
printers from one supplier. We also purchase all of the inkjet printheads used
in the NUR Fresco printers and the NUR Salsa printers from a single supplier. If
any of these sole suppliers experience problems that result in production
delays, our sales to new customers and existing customers that rely on our ink
and/or ink jet components to operate their printers could be hurt. Production
delays could result from fire, flood or other casualty, work stoppages,
production problems or other unforeseen circumstances. Although we have not
experienced any major production delays to

date, there can be no assurance that such delays will not occur in the future.
Because the success of our business depends on the sale of our printers, supply
problems could have a material adverse effect on our financial results. Also, if
any of our sole suppliers reduce or change the credit or payment terms they
extend to us, our business could also be harmed.

WE RELY ON SUBCONTRACTORS TO HELP US MANUFACTURE OUR PRODUCTS. We employ a
limited number of unaffiliated subcontractors to manufacture components for our
printers. For example, components for our NUR Salsa printers are manufactured
mainly by an unaffiliated subcontractor. In addition, the assembly of our NUR
Blueboard and NUR Fresco printers is currently conducted by an affiliate of NUR.
Our subcontractors have, in the past, been late in delivering components. We
have, however, been able to obtain adequate supplies of the components and raw
materials necessary to produce our printers and we have not had any serious
problems with our subcontractors. Because we rely on subcontractors, we cannot
be sure that we will be able to maintain an adequate supply of components or
products. Moreover, we cannot be sure that any of the components we purchase
will satisfy our quality standards and be delivered on time. Our business could
suffer if we fail to maintain our relationships with our subcontractors or fail
to develop alternative sources for our printer components. We cannot guarantee
that we will develop alternative sources of production for our products.

THE MARKET FOR OUR PRINTERS IS VERY COMPETITIVE. The printing equipment
industry is extremely competitive and many of our competitors may have greater
management, financial, technical, manufacturing, marketing, sales, distribution
and other resources than we do. We compete against several companies that market
digital printing systems based on electrostatic, drop-on-demand inkjet, airbrush
and other technologies. Some of our principal competitors in this market include
Vutek and Scitex Vision Ltd. Our ability to compete depends on factors both
within and outside of our control, including the performance and acceptance of
our current printers and any products we develop in the future. We also face
competition from existing conventional wideformat and super wide format printing
methods, including hand painting, screen printing and offset printing. Our
competitors could develop new products, with existing or new technology, that
could be more competitive in our market than our printers. We cannot assure you
that we can compete effectively with any such products.

WE FACE STRONG COMPETITION IN THE MARKET FOR PRINTING SUPPLIES. We also
compete with independent manufacturers in the market for printer supplies. In
1999, 2000 and 2001, ink sales accounted for 23.1%, 20.0% and 26.1% of our total
sales, respectively. We cannot guarantee that we will be able to remain the
exclusive or even principal ink manufacturer for our printers. We also operate
in the substrate business, which is also highly competitive and characterized by
a large number of suppliers worldwide. We are developing substrates through
subcontractors that we believe have a high added value when used with our
printers. In 1999, 2000 and 2001 substrate sales accounted for 12.1%, 9.8% and
10.4% of our total sales, respectively. We cannot assure you that we will be
able to compete effectively or achieve significant revenues in the substrate
business.

WE DEPEND ON EREZ SHACHAR, OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER SINCE
1997, AND OTHER KEY EMPLOYEES. Our success depends to a significant extent upon
the contributions of key personnel and our senior executives, especially Erez
Shachar, our President and Chief Executive Officer. Our business could seriously
suffer if one or more of our key personnel or senior executives were to leave
our company. In addition, we do not have, and do not contemplate getting,
'key-man' life insurance for any of our key employees. Our future success will
also depend in part on our continuing ability to retain our key personnel and
senior executives and to attract other highly qualified employees. We cannot
assure our continued success in attracting or retaining highly qualified
personnel.

WE RELY ON TRADE SECRETS, PATENTS AND PROPRIETARY RIGHTS. We rely on a
combination of trade secrets, licenses, patents and non-disclosure and
confidentiality agreements to establish and protect our proprietary rights in
our products. We cannot guarantee that our existing patents or any future
patents will not be challenged, invalidated, or circumvented, or that our
competitors will not independently develop or patent technologies that are
substantially equivalent or superior to our technology. We cannot be sure that
we will receive further patent protection in Israel, the United States, or
elsewhere, for existing or new products or applications. Even if we do secure
further patent protection, we cannot guarantee it will be effective. Also,
although we take precautionary measures to protect our trade secrets, we cannot
guarantee that others will not acquire equivalent trade secrets or steal our
exclusive

technology. For example, in some countries, meaningful patent protection is not
available. We are not aware of any infringement claims against us involving our
proprietary rights. Third parties may assert infringement claims against us in
the future, and the cost of responding to such assertions, regardless of their
validity, could be significant. In addition, such claims could be found to be
valid and result in large judgments against us. Even if such claims are not
valid, the cost to protect our patent rights could be substantial.

WE MAY BE SUBJECT TO ENVIRONMENTAL RELATED LIABILITIES DUE TO OUR USE OF
HAZARDOUS MATERIALS SUCH AS METHYL ETHYL-KETONE SOLVENT. We mix the ink used in
some of our printers with a methyl ethyl-ketone solvent. Methyl ethyl-ketone
solvent is a hazardous substance and is subject to various government
regulations relating to its transfer, handling, packaging, use and disposal. We
store the ink at warehouses in Europe, the United States and Israel, and a
shipping company ships it at our direction. We face potential responsibility for
problems that may arise when we ship the ink to customers. We believe that we
are in material compliance with all applicable environmental laws and
regulations. If we fail to comply with these laws or an accident involving our
ink waste or methyl ethyl-ketone solvent occurs, then our business and financial
results could be harmed.

WE HAVE HISTORICALLY RELIED ON GOVERNMENT GRANTS, TAX BENEFITS AND OTHER
FUNDING FROM THIRD PARTIES. In the past, we have benefited from certain Israeli
and Belgian Government programs and tax legislation principally related to
research and development and sales and marketing grants and capital investment
incentives. Our operations could be adversely affected if these funding programs
and tax benefits are reduced or eliminated and not replaced with equivalent
benefits, or if our ability to meet the conditions to benefit from such funding
programs and tax benefits were significantly reduced. We cannot assure you that
favorable tax legislation will continue in the future or that the available
benefits will not be reduced or that we will continue to meet the conditions to
benefit from such programs and legislation.

WE MUST COMPLY WITH CONDITIONS TO RECEIVE GRANTS AND TAX BENEFITS. To
receive grants and tax benefits under Israeli law, Belgian law, or otherwise, we
must comply with a number of conditions. If we fail to comply with these
conditions, the grants and tax benefits that we receive could be partially or
fully canceled and we would be forced to refund the amount of the canceled
benefits received, in whole or in part, adjusted for inflation and interest. We
believe that we have operated and will continue to operate in compliance with
the required conditions, although we cannot be sure.

POLITICAL INSTABILITY IN ISRAEL MAY DISRUPT OUR MOST IMPORTANT OPERATIONS
AND OUR BUSINESS. Some of our facilities, operations and subcontractors are
located in the State of Israel. Political and military conditions in Israel may
affect our operations. Although most of our sales are currently being made to
customers outside of Israel, we are nonetheless directly influenced by the
political, economic and military conditions affecting Israel. Recent political
turmoil, including the current unrest and violence in Israel, can be expected to
put pressure on economic conditions worldwide. Our business could be harmed 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 condition of Israel. The prospect of peace in the Middle East is
uncertain and has recently deteriorated due to violent conflicts between
Israelis and Palestinians. Furthermore, several countries restrict business with
Israeli companies. We could be adversely affected by further set-backs to the
peace process or by restrictive laws or policies directed toward Israel or
Israeli businesses. In addition, all nonexempt male adult citizens of Israel,
including some of our officers and employees, are obligated to perform military
reserve duty and are subject to being called for active duty 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 operations in Israel may be slowed and
our business may be harmed.

YOU MAY HAVE DIFFICULTY ENFORCING U.S. JUDGMENTS AGAINST US IN ISRAEL. We
are organized under the laws of Israel and our headquarters are in Israel. Most
of our officers and directors reside outside of the United States. Therefore,
you may not be able to enforce any judgment obtained in the U.S. against us or
any of such persons. You may not be able to enforce civil actions under U.S.
securities laws if you file a lawsuit in Israel. However, we have been advised
by our Israeli counsel that subject to certain limitations, Israeli courts may
enforce a final judgment of a U.S. court for liquidated amounts in civil

matters after a hearing in Israel. If a foreign judgment is enforced by an
Israeli court, it will be payable in Israeli currency.

OUR OPERATING RESULTS FLUCTUATE FROM PERIOD-TO-PERIOD. The results of our
operations for any quarter are not necessarily indicative of results to be
expected in future periods. Our operating results have in the past been, and
will continue to be, subject to quarterly fluctuations as a result of factors
such as the integration of people, operations and products from acquired
businesses and/or technologies, increased competition in the printing equipment
industry, the introduction and market acceptance of new technologies and
standards, changes in general economic conditions and changes in economic
conditions specific to our industry. Further, our revenues may vary
significantly from quarter to quarter as a result of, among other factors, the
timing of new product announcements and releases by our competitors and us. We
do not typically have a material backlog of orders at the beginning of each
quarter. We generally ship and record a significant portion of our revenues for
orders placed within the same quarter, primarily in the last month of the
quarter. We may not learn of shortfalls in sales until late in, or shortly after
the end of, such fiscal period. As a result, our quarterly earnings may be
subject to significant variations.

OUR BUSINESS IS SUBJECT TO RISKS FROM INTERNATIONAL OPERATIONS. We conduct
business globally. Accordingly, our future results could be materially adversely
affected by a variety of uncontrollable and changing factors including, among
others, foreign currency exchange rates, regulatory, political, or economic
conditions in a specific country or region, trade protection measures and other
regulatory requirements, business and government spending patterns, and natural
disasters. Any or all of these factors could have a material adverse impact on
our future international business.

CURRENCY FLUCTUATIONS ARE A RISK WE FACE ON A DAILY BASIS. Because we
generate revenues and expenses in various currencies, including the U.S. dollar,
the NIS and the Euro, our financial results are subject to the effects of
fluctuations of currency exchange rates. We cannot predict, however, when
exchange or price controls or other restrictions on the conversion of foreign
currencies could impact our business. Currency fluctuations could hurt our
profitability.

OUR STOCK PRICE MAY BE VOLATILE. Our ordinary shares have experienced
substantial price volatility, particularly as a result of variations between our
anticipated and actual financial results, the published expectations of
analysts, and announcements by our competitors and us. In addition, the stock
market has experienced extreme price and volume fluctuations that have affected
the market price of many technology and manufacturing companies, in particular,
and that have often been unrelated to the operating performance of these
companies. These factors, as well as general economic and political conditions,
may materially adversely affect the market price of our ordinary shares in the
future. Additionally, volatility or a lack of positive performance in our stock
price may adversely affect our ability to retain key employees, all of whom have
been granted stock options.

ITEM 4: INFORMATION ON NUR

HISTORY AND DEVELOPMENT OF NUR

The company's legal and commercial name is NUR Macroprinters Ltd. (the "Company")The main
office is located at 12 Abba Hilel Silver St., PO. Box 1281, Lod 71111, Israel.
The telephone number is (011) 972-8-914-5555. NUR's registered agent in the
United States is CT Corporation System located at 1633 Broadway, New York, New
York 10019.

NUR was incorporated as an Israeli corporation on July 29, 1987. On August
1, 1993, the Company changed its name from NUR Advertising Industry 1987 Ltd. to
NUR Advanced Technologies Ltd. and, on November 16, 1997, it again changed its
name from NUR Advanced Technologies Ltd. to NUR Macroprinters Ltd. Our corporate
governance is controlled by the Israeli Companies Law. Our ordinary shares have
been traded on the Nasdaq National Market since October 1995 and are currently
traded under the symbol 'NURM.' NUR is a world leader in the superwideleading supplier of wide format printing market. The Company develops, manufactures, sells, and
servicessuper wide format digital printing systems worldwide.

In September 1998, we purchased certain piezo drop-on-demand technology from
Meital Technologies Ltd. We purchased Meital's technology for on-demand, short-run,an aggregate
amount of $3.0 million. The Meital acquisition resulted in the recognition by us
of a one-time charge involving a write-off of technology assigned to research
and development of $1.95 million in the third quarter of 1998.

In September 1999, we sold our 84% interest in M.NUR Marketing &
Communications GmbH, (NUR Germany). This subsidiary engaged in the printing of
super wide format ("WF")digital graphics.

In October 1999, we established NUR Pro Engineering Ltd., a joint venture in
which we hold a 50% interest. We manufacture and superwide format ("SWF") printing.assemble the NUR Blueboard
printers and NUR Fresco printers through NUR Pro Engineering.

In July 2000, we acquired substantially all assets and assumed specified
liabilities of Salsa Digital Ltd. and related entities, previously one of our
competitors in the digital printing market. Under the terms of our agreement, we
acquired the assets for $30 million, which consisted of $20 million in cash and
666,667 ordinary shares valued at approximately $10 million, based upon the
closing price of the ordinary shares on the Nasdaq National Market on May 15,
2000. In 1997, 1998 and 1999, the business we acquired from Salsa Digital had
revenues of $13 million, $25 million and $33 million, respectively, compared
with our revenues during the same periods of $22 million, $36 million and $61
million.

In December 2000, we relocated our main facilities in Israel to a building
consisting of approximately 50,000 square feet in a high-tech industrial zone in
Lod, Israel. We use this facility as our headquarters and for research and
development. We have invested a total of approximately $2 million in building
out these facilities. The initial five-year lease of the Lod facility, which
commenced November 20, 2000, provides for monthly rent of approximately $63,000.
The lease agreement grants NUR an option to continue the lease term for two
consecutive periods of 2.5 years each.

In April 2001, we commenced implementation of a multiple phase restructuring
plan in order to align our cost structure to more conservative growth rates. The
restructuring actions were primarily related to the reorganization of operating
activities, such as the centralization of certain research and development
operations, the relocation of certain ink manufacturing activities, a reduction
in workforce and a reduction in other administrative costs. The restructuring
plan was initiated with the consolidation of our U.S. operations. NUR America,
Inc. in Boston, MA and Salsa Digital Printers Ltd. in San Antonio, TX were
integrated into a single large facility in San Antonio, TX. The two wholly owned
subsidiaries operate side-by-side and share administrative and other resources.
In October 2001, we continued with phase two of the overall restructuring plan
by consolidating and streamlining our ink manufacturing operations. Our ink
research and development operations then located in Israel, Belgium and San
Antonio, TX were consolidated into a single facility in Louvain-la-Neuve,
Belgium. Total restructuring costs in 2001 amounted to $3.2 million. In
addition, we incurred one-time inventory write-offs of approximately $4.0
million in the first quarter of 2001. We associate the inventory write-offs with
more efficient product rationalization, such as, among other things, the
decrease of spare parts inventory.

In January 2002, we raised $7 million through the private placement of
2,333,333 of our ordinary shares to the Investment Corp. of United Mizrahi Bank
Ltd. at a price of $3.00 per share. The Investment Corp. of United Mizrahi Bank
Ltd. also received warrants to purchase additional 612,500 ordinary shares at an
exercise price of $4.50 per warrant share, exercisable until January 17, 2006.

During the first quarter of 2002, we entered into agreements with Bank
Hapoalim and Bank Leumi pursuant to which the banks agreed to reschedule the
repayment of our long-term loans. As part of these agreements, the Company
agreed to certain covenants including the maintenance of four financial ratios.
The Company is currently not in compliance with one of these covenants; however,
the banks have agreed in writing, subject to certain conditions, not to act upon
their contractual rights with respect to the Company's non-compliance. For more
information, see 'ITEM 10.C: Material Contracts -- Long Term Loan Agreements.'

In May 2002, in response to a decline in the sales of our products in the
first quarter of 2002, we initiated a three-phase growth-renewal program, which
includes a corporate reorganization plan, a further workforce reduction of
approximately 15% of our employees and salary cuts for most of the remaining
employees, and expansion of our product portfolio. We began implementation of
the program in the second quarter of 2002. See 'ITEM 5: Operating and Financial
Review and Prospects -- Trend Information -- Restructuring Plans.'

On May 17, 2002, we filed a tender offer with the Securities and Exchange
Commission pursuant to which option holders had the right to cancel and exchange
certain options granted to them under the Company's 2000 Stock Option Plan, 1997
Stock Option Plan and 1995 Israel Stock Option Plan. Pursuant to the terms and
conditions of the tender offer, the new options are to be granted six months and
one day from the date the old options are canceled, at an exercise price equal
to the market price on the date of the new grant. In order to receive the new
options, option holders must continue to have a service relationship with the
Company or any of its subsidiaries until the new grant date. 2,027,166 ordinary
shares, representing 93% of the outstanding options under the Company's 2000
Stock Option Plan, 1997 Stock Option Plan and 1995 Israel Stock Option Plan,
were available for exchange under the tender offer. The tender offer expired on
June 15, 2002 and resulted in the cancellation of 1,245,316 options with varying
exercise prices.

For a historical view of our financing activities, including capital
expenditures and divestitures, please refer to 'ITEM 5: Operating and Financial
Review and Prospects.'

BUSINESS OVERVIEW

NUR Macroprinters Ltd. is a leading supplier of wide format and super wide
format digital printing systems worldwide. We develop, manufacture, sell and
service digital color printers for the printing of large images such as
billboards, posters and banners, point of purchase displays, exhibition and
trade show displays as well as decorations and backdrops for construction
scaffolding covers, showrooms, television and film studios, museums and
exhibits. We also suppliessupply our customers with inks and solvents for use with our
printers and print substrates essential to the operationfor use with all brands of wide and super wide
format digital printers.

In July 2000, we purchased substantially all of the Company's printers.

In early 1997,assets and assumed
certain liabilities of Salsa Digital Ltd. and related entities, previously one
of our competitors in the Company introduceddigital printing market. As part of this asset
purchase transaction, we acquired the rights to manufacture and sell their line
of printers -- the NUR BlueboardSalsa'TM' printers. These printers complement the NUR
line of products by offering a full range of entry-level printers.

The integrated company now consists of two research and development centers,
including facilities for research and development of printing equipment in Lod,
Israel and a facility for the development of inks in Louvain-la-Neuve, Belgium.
We have worldwide marketing, sales and service subsidiaries in Europe, North
America, Brazil and the Asia Pacific regions.

Our super wide products are headed by the NUR Blueboard'TM' family of super
wide format printers. The NUR Blueboard'TM' printer, a second generation SWFof
super wide format printers, was introduced by NUR in early 1997. The Blueboard
printer which printscan print on substrates of variable widths from 0.9 to 5.05 meters
(approximately 3 to 16.416 feet). The NUR Blueboard printer is based on continuous
inkjet

digital printing technology and is designed for high throughput, high print
quality, reliability and ease of use.

In April 1998,2000, we introduced the Company introduced a fasterfourth and latest version of the NUR Blueboard
printer,printers, the NUR Blueboard 2,HIQ+'TM'. The NUR Blueboard HIQ+ offers two optional
packages for multiple roll printing or double-sided printing for outdoor
backlight applications and a digital calibration system providing for ease of
use.

The NUR Salsa Ultima'TM'5000, the super wide format printer in responseour NUR Salsa
Ultima family of printers, offers production flexibility by allowing for both
super wide print jobs (up to demand5 meters or approximately 16 feet) and wide format
jobs. Its piezo drop-on-demand technology provides the photorealistic printing
quality needed for both super wide and wide jobs that require up-close viewing.
The NUR Salsa Ultima printers are an enhanced version of the Salsa product line
acquired in the SWF printing industry for
increased productivity. In February 1999, the Company introducedJuly 2000.

Our wide format printers are headed by the NUR Blueboard HiQ, which produces higher quality prints with higher resolution than
the market leading NUR Blueboard and NUR Blueboard 2Fresco'TM' family of wide
format printers. The NUR BlueboardFresco'TM' printer was commercially released in
February 2000. The NUR Fresco printers are designed to provide a digital
alternative to conventional screen printing on short and medium run jobs. The
NUR Fresco printers use piezo continuous drop-on-demand inkjet technology to
produce high quality graphics for a wide range of applications. These include
point-of-purchase displays, banners, billboards, bus shelter graphics, posters,
shopping mall displays, airport terminal displays and many more.

The NUR Fresco printers print on a wide variety of substrates in
roll-to-roll or roll-to-sheet modes. The 1800 model outputs in widths up to 1.83
meters (approximately 6 feet). The 3200 model outputs in widths up to 3.2 meters
(approximately 10 feet).

In September 2001, we introduced a new and improved version of the Fresco
series, the NUR Blueboard 2 printer,Fresco HiQ'TM' printers, which are designed to provide enhanced
image quality, enhanced color gamut and text sharpness, operational ease, and
improved uptime and productivity. The NUR Fresco HiQ printers also offer
double-density printing for printing backlit graphics.

In April 2002, we announced the latest version of the Fresco series -- the
NUR BlueboardFresco HiQ and their upgrades
are referred8C models. The NUR Fresco HiQ 8C is based on the previous model
which has been modified to herein collectively as the "NUR Blueboard Printers." Eachprint using eight colors instead of the standard
4-color inkset. Modifications to the printer include changes to the ink system
to accommodate eight colors and a new switch box that enables fast and easy
switching between the 4-color and the 8-color printing modes. NUR's software has
also been modified to support 8-color printing. The 8-color printers have
entered a beta-site testing period of approximately six months following which
they will be available both as an upgrade to existing NUR Blueboard Printers is designed specifically for SWF applicationsFresco 4-color
printers and usesas a new product delivered from the Company's piezo continuous ink-jet technology.

Before the introduction ofmanufacturer.

We also offer NUR Salsa Ultima'TM' wide format printers. The NUR Salsa
Ultima wide format digital printers include the NUR Blueboard printer, the Company's
principal products were its first generation SWF printers, the Outboard and
Wideboard printers. The Outboard printer, which is capableSalsa Ultima line of
32-head, piezo technology digital printing in widths
of up to 1.6 meters (approximately 5 feet), was manufactured until the fourth
quarter of 1995. In the fourth quarter of 1995, the Company introduced the
Wideboard printer, which issystems. These systems are capable of
printing on substrates of variable widths from 1.5 to 3.2 meters (approximately 5 to 10 feet).

In November 2001 we introduced our new family of upprinters, the NUR
FabriGraph'TM' printers. NUR FabriGraph is a series of production wide format
inkjet printers designed specifically for textile applications. The NUR
FabriGraph series include the NUR FabriGraph DS3200, a 3.5 meters wide
(approximately 11 feet) printer and the NUR FabriGraph DS1500, a 1.5 meters wide
(approximately 5 feet) printer. NUR FabriGraph printers use piezo drop-on-demand
inkjet technology to 5 meters (16.4 feet).print onto standard dye sublimation carrier substrates, for
subsequent transfer by conventional heat press to textile fabrics containing a
minimum of 50% polyester, as well as a range of rigid and flexible
polyester-coated materials.

The NUR Blueboard Printersprinters, the NUR Fresco, the NUR Salsa and the NUR
Fabrigraph printers are sometimes referred to collectively herein as the
'Company Printers'.

We also sell specialized inks and substrates for use continuous ink-jet
technology which involveswith our printers. The
inks sold by NUR to our customers for use with the continuous flow of electrically conductive ink
within a closed loop that is deflected to a specific location on a sheet of
paper or other medium.

The NUR Blueboard, PrintersNUR Fresco and
the NUR Salsa Ultima printers are marketedresistant to water and ultraviolet rays and
are well suited for indoor and outdoor use without lamination. The specialized
inks for use with the NUR Fabrigraph are mainly suitable for indoor

applications and do not offer outdoor durability without lamination. The
substrates we sell to our customers are also suitable for indoor and outdoor use
and are made of vinyl, PVC and various textiles.

We sell our printers and related products primarily to commercial printers,
design and service firms, screen printers, commercial photo labs, outdoor media
companies and graphic
trade shops. They are used for a variety of SWF format printing applications
including billboards, fleet graphics, wall murals, scaffolding coverings, museum
and trade show exhibits, shopping mall and airport displays and more. Because
superwide format applications are normally viewed from a distance outdoors,
printed images measure tens to thousands of square feet on outdoor durable
substrates. The superwide width of the NUR Blueboard printers helps reduce the
number of sections or "tiles" necessary to complete such large graphics.

In September 1998, the Company acquired from Meital Technologies Ltd.
("Meital") all rights (including all related assets) to Meital's piezo
drop-on-demand inkjet technologies for application in WF digital printers for
approximately $3.0 million. Drop-on-demand technology ("D-O-D") involves the
firing of ink drops when needed on the substrate while the printing head travels
across the substrate. Subsequently, the Company recently introduced the NUR
Fresco, a new printing system, which is still in beta testing, targeted at the
WF (widths of up to 1.8 meters (6 feet)) screen printing environment. The NUR
Fresco is a high quality digital production press, bringing a

combination of speed and productivity to the WF market. The Company believes
that the NUR Fresco offers for the first time a more cost-effective digital
alternative to screen printing presses.

The NUR Fresco will be marketed primarily to WF screen printers as a
technological replacement to the screen printing press. Using the NUR Fresco,
screen printers can now produce WF graphics on demand in considerably less time
and at a lower cost for most shorter runs. Images produced on the NUR Fresco are
typically much smaller than the SWF applications of the NUR Blueboard printers
and include posters, banners, point-of-purchase displays, transit advertising,
vehicular graphics, airport and mall displays, etc. The shorter viewing
distances of these graphics require the higher resolution capability of the
piezo D-O-D inkjet technology on which the NUR Fresco is based. The Outboard
printer, Wideboard printer, the NUR Blueboard printers and the NUR Fresco are
referred to collectively herein as the "Company's Printers."

The Company also sells specialized inks and substrates for use in the
Company's Printers. The inks are manufactured by a subcontractor and the result
of extensive development and continuous testing by the Company to ensure their
purity, optical density, lightfastness and water-resistancy on a variety of
substrates. The substrates are developed by the Company's wholly-owned
subsidiary, NUR Media Solutions S.A. ("NUR Media Solutions"), and are
manufactured for the Company by several different suppliers. The Company sells
NUR-branded substrates that have outdoor durability and image quality warranties
on their performance when used with the Company's Printers are installed in more than 600
sites throughout Europe, North and inks.

The Company was incorporated as an Israeli corporation on July 29, 1987.
The Company's Ordinary Shares have been traded on the NASDAQ National Market
since October 1995. The Company's trading symbol is NURM.

Industry BackgroundSouth America, Africa and Asia.

INDUSTRY BACKGROUND

The market for printed applications requiring WFwide format and SWFsuper wide
format printing has expanded overduring the last few years. WFWide format and SWFsuper
wide format printing applications include billboards, flags, posters and
banners;banners, special event and trade show displays;displays, point of purchase displays;displays,
fleet graphics;graphics, decorations and backdrops. For example, the retail, automotive, cigarette and tobacco,
restaurant, travel and gasoline industries use outdoor advertising to promote
their products in numerous locations including roadside billboards and posters
displayed on streets and buildings, as well as the outside of buses, vans,
trucks and trains, so-called vehicular graphics. WFWide format and SWFsuper wide
format prints can also be found in theaters as stage decorations, in museums and
exhibitions as backdrops or displays and on construction sites as building site
coverings. Prior to the introduction of digital printing systems, WFwide format
and SWFsuper wide format short-run prints were produced either by hand painting,
which is relatively slow and expensive, and produces lesser quality images, or
by screen or offset printing, both of which are relatively expensive and time
consuming processes.

With the cost of digital printing expected to decrease and the ability of
digital technology expected to produce shorter runs more economically, the
Company believeswe
believe that the use of WFwide format and SWFsuper wide format prints, such as those
produced by the Company's Printers, should grow, and that the portion of the
market serviced by digital printing shouldwill continue to increase. The ability to
produce WFwide format and SWFsuper wide format images digitally has also opened new
media opportunities for advertisers, such as mural printing, carpet printing and
new forms of fleet graphics printing. The growth in demand for WFwide format and
SWFsuper wide format digital printers is fueled by both the replacement of
conventional print methods and by the development of new printing applications.

Traditional WF and SWF Printing MethodsTRADITIONAL WIDE FORMAT AND SUPER WIDE FORMAT PRINTING METHODS

Conventional methods of WFwide format and SWFsuper wide format printing have
included hand painting, screen printing and offset printing. Generally,
producing WFwide format and SWFsuper wide format color prints by traditional methods
in relatively short runs from a few copies to a few hundred copies, depending on
the application, has either been relatively slow and expensive or of limited
quality. Because of the inherent limitations of the traditional WFwide format and
SWFsuper wide format printing methods, quality WFwide format and SWFsuper wide format
prints produced by these methods are generally limited to long runs of identical
prints, designed and prepared well in advance or, in the case of hand painting,
to single print applications. As a result, traditional methods of producing WFwide
format and SWFsuper wide format prints have not provided timely and economic
solutions for the needs of the short run printing market.

Hand Painting. Hand painting involves either the projection of an image onto
a substrate, which is then drawn onto the substrate and subsequently painted by
hand, or the spraying of paint onto material covered by a template that has been
cut to the desired shape. The process of hand painting is an alternative mainly
in developing countries where labor costs are significantly lower and where the
significantly lower image quality is tolerated by the local marketmarket.

Screen Printing. The screen printingscreen-printing process is distinguished by its ability
to print finely detailed images on practically any surface, including paper,
plastics, metals and three-dimensional surfaces. However, the process requires
significant set-up time and investment in materials cost before the image can be sent
to press. This cost constrains the minimum number of copies the screen printer
can produce economically. As screen printingscreen-printing is a highly labor-intensive
process, it is best suited for run lengths between 5020 to 400 copies. Hence, this
market is a clear target in which the Company believes itswe believe our digital printers can be highly
competitive.

Offset Printing. Offset color printing generally produces very high quality
images compared to hand painting or screen printing.screen-printing. However, because of the
complex steps involved in offset color printing, each printing job, whether
small or large, involves substantial setupset-up time and costs. In addition, much
like hand painting and screen printing,screen-printing, alterations and customizations are not
economically feasible unless the entire offset color printing process is
repeated. Another drawback is that the variety of substrate materials and widths
suitable for use with offset printing machinery is limited. In general, offset
color printing is best suited for long print runs.

WF and SWF Digital PrintingWIDE FORMAT AND SUPER WIDE FORMAT DIGITAL PRINTING

The introduction of digital printing is aiding in the transformation of the
WFwide format and SWFsuper wide format printing industry by lowering setupset-up costs,
shortening turnaround time and reducing labor requirements. The Company believesWe believe that the
availability of WFwide format and SWFsuper wide format digital printing should lead
to an increase in demand for limited runs forof customized and localized
advertising campaigns. In addition, the Company believeswe believe that single use applications,
such as the use of banners, displays and backdrops for trade shows, theme parks,
entertainment and special events, should become more popular. The Company believesWe believe that
the market for WFwide format and SWFsuper wide format printing should increase as
current applications gain market acceptance and as new applications are
developed.

Digital printing involves the production of hard-copy images and text from
digital data that is either generated on a computer at the printing site or
originated by a customer on the customer's computer system. The digital data is
then transferred directly from an electronic pre-press or desktop publishing
system to the digital printer. There are currently several digital printing
technologies available, including electrostatic, airbrush, D-O-D,drop-on-demand,
thermal transfer and continuous ink-jetinkjet printing.

Electrostatic Printing. Electrostatic printing is a non-impact printing
technique that employs an array of metal styli, selectively pulsed to a high
potential to generate a charged latent image on dielectric-coated paper, which
is then toned to develop the latent image into a visible image. The achievable
printing resolution is up to 400 dots per square inch ("DPI").inch. The main drawback of the
technology is the need for special and expensive substrates and toners. This
requirement inflatesincreases the cost of consumables considerably.

Thermal Transfer Printing. Thermal transfer printing is a contact printing
technology that employs arrays of heated needles and pressure to melt and
transfer wax based inks from a carrier roll onto a restricted variety of
substrates. Like electrostatic printing, thermal transfer printing requires
relatively expensive consumables.

Airbrush Printing. Airbrush printing is accomplished by forcing a low
viscosity colored fluid through small aperture nozzles, thus creating a spray
jet. Computer driven modulation of the spray jets depositscauses an image-wise colored
layer to be deposited onto the substrate. The strongest feature of airbrush
technology is the printer's ability to cover large areas with uniform color. One
manufacturer of airbrush printers produces a printer that can alsosimultaneously
print on both sides of a poster, at the same time, which is important for signs that are
rear-illuminated.

Piezo Continuous Ink-JetInkjet Printing. Continuous ink-jetinkjet printing technology
involves the continuous flow of electrically conductive ink within a closed loop
that is deflected toonto a specific location on a sheet of paper or other medium.
The ink is separated into uniform micro-drops and the micro-drops are
electronically directed to be printed 4
onto a selected area of the medium.
Continuous ink-jetinkjet printing technology allows for high speedhigh-speed printing and
produces images with good resolutions sufficient for viewing from distances of
beyond five feet. Continuous ink-jetUnlike airbrush printers, continuous inkjet printers also
produce multiple copies with consistent color quality, unlike airbrush printers.quality. The cost of equipment
using continuous ink-jetinkjet printing technology is relatively high in comparison to
printers using electrostatic technology. However, the cost of the output
produced with continuous ink-jetinkjet printers is lower than that of electrostatic
printers. Although the printer and printing costs of continuous ink-jetinkjet printing
and airbrush technology are comparable, continuous ink-jetinkjet printers produce
higher quality prints at higher speeds and with more consistent color. NUR's
Blueboard printers all use piezo continuous inkjet printing technology.

Piezo D-O-D Ink-Jet Printing ("D-O-D"). D-O-DDrop-On-Demand Inkjet Printing. Drop-on-demand technology involves the
intermittent firing of ink drops when needed on the substrate whilesubstrate. It provides high
resolution and enables use of a

variety of inks, for home, office and industrial use. In September 1998, we
acquired from Meital Technologies Ltd. all rights (including all related assets)
to Meital's piezo drop-on-demand inkjet technologies for application in wide
format digital printers. To address the printing head travels
acrossneeds of the substrate. Until recently, thiswide format market for
higher resolution images for use with shorter viewing distances, we utilize
continuous drop-on-demand technology in the NUR Fresco printers and
drop-on-demand inkjet technology in the NUR Salsa Ultima printers.

Drop-on-demand technology was limited to dye-based
inks that are not suitableprimarily developed for outdoor use. However, several new D-O-D printers
thatoffice use pigment inks, which are suitable for outdoor use, are now available.
The Company has chosen to implement the D-O-D technology in its NUR Fresco,
intended for the WF market which requiresand is
characterized by a shorter viewing distancerelatively higher resolution and a higher resolution image.selected range of
substrates. In Comparison, continuous inkjet printing technology was developed
mainly for use in industrial applications, and therefore, shows a more uniform
and stable color output, and the ability to print on a wide selection of
substrates.

Dye Sublimation Printing. Dye-sublimation is a process that uses
heat-sensitive inks to print on coated inkjet paper. The Company believesimage is then
transferred using a heat press onto a polyester coated substrate. The image
becomes an inherent part of the material. The NUR FabriGraph printers utilize
the dye-sublimation technology to allow for textile applications of wide format
digital printing.

We believe that itsour NUR Blueboard printers are currently the only
commercially available SWFsuper wide format digital printers using piezo continuous
inkjet technology. Although not the only D-O-D printer available for the WF market, the
Company believes that the NUR Fresco is not the best suitedonly continuous
drop-on-demand printer available in the wide format market, we believe that its
productivity makes it particularly attractive to screen printers. Our NUR Salsa
Ultima printers complement our product line by offering a full-range of printers
at entry-level prices. Our most recent commercial release, the WF screenNUR FabriGraph,
rounds-out our equipment line with production oriented printers designed for the
short run, on demand, digital printing market. The Company believesof signage textiles such as flags,
banners and tradeshow exhibits. We believe that the Company's Printers have been
designed and engineered to fit the overall needs of their respective WFwide format
and SWFsuper wide format printing markets.

The Company'sNUR's strategy is to:

o strengthen itsour position as a world leader in the SWFwide format and super wide
format digital printing marketmarkets by supplying the most productive and
cost-effective wide format and super wide format digital SWF printers;

o introduce WF digital ink jet printers toand
totally digitally-based printing solutions for the out-of-home advertising
market;

replace a significant portion of the WFexisting large format screen printer process;

oprinters with
our large format digital inkjet printers;

be theour customers' vendor of choice for all its customers'of their ink and substrate
needs;

o enable itsour customers to develop new ways to profit from the
Company'sour printing
systems; and

o provide itsour customers with highly responsive and capable support, service
and supplies.

Products

Printers

The Outboard printer, which was introduced in 1992, wasPRODUCTS

NUR's revenues are derived primarily from the sale and service of the
Company's first product,Printers and until the endsale of 1995, its principal product. The Outboard
printer is capable of producing WF prints in widths of up to 1.6 meters. In the
fourth quarter of 1995, the Company introduced the Wideboard printer, which wasconsumables used with the Company's first generation SWF printerPrinters.
The consumables consist primarily of ink and its principal product in 1996.
The Wideboard printer is capablesubstrates. See 'ITEM 5: Operating
and Financial Review and Prospects -- Geographic Breakdown of producing printsRevenues' for more
information on the breakdown of widthsrevenues by category of 5 meters. The
Company has discontinued the manufacture of the Outboard printeractivity and of the
Wideboard printer. The Company plans, however, to provide further enhancements
and upgrades to its Outboard and Wideboard installed base.into
geographic markets.

PRINTERS

Super Wide Format Digital Printers

Since the beginning of 1997, the CompanyNUR has been marketing and selling the NUR
Blueboard Printer,printer, a second-generation SWFsuper wide format printer that is also capable
of producing prints of up to 5 meters (approximately 16 feet) in width with
practically no limit on the length of the print. The NUR Blueboard is designed
for high throughput, high print quality, reliability and ease of use. When wider
widths of prints are required, the NUR Blueboard Printer, asprinter, (as is the case with
the other Company's Printers,our other

printers), creates a print layout in sections that, when sealedseamed and placed
together, create a continuous image due to the NUR Blueboard Printer'sprinter's high
level of color consistency and accuracy.

In April 1998,2000, we introduced the Company introduced a faster versionfourth and the latest of the NUR Blueboard
printer,printers the NUR Blueboard 2 printer, in response to demand in the SWF
printing industry for increased productivity. In addition, the Company announced
that all NUR Blueboard Printers are upgradable to the new double speed version
for an additional fee.HIQ+. The NUR Blueboard Printers are currently the Company's
main hardware products. In February 1999, the Company

introduced the NUR Blueboard HiQ, partHIQ+ offers a digital
calibration system that provides ease of the NUR Blueboard family of products,
with higher print qualityuse and higher resolution than the market leading NUR
Blueboard printers.two optional packages for
multiple roll printing or double-sided printing for outdoor backlight
applications. The NUR Blueboard HiQHIQ+ is available both as an upgrade to existing
NUR Blueboard printers and as a new product delivered from the manufacturer.

The NUR Blueboard Printersprinters are all based on piezo continuous inkjet
technology, which is particularparticularly suitable for the superwidesuper wide format market due
to itsour outdoor durable inks, color consistency, high reliability and
adaptability for use with a variety of substrate materials including vinyl,
carpet, canvas, tarpaulin and mesh. The NUR Blueboard Printersprinters accept a wide
variety of rolled substrates, differing in types and sizes, with a new design
feeding mechanism that allows for ease of loading and unloading of substrate
rolls weighing 330 lbs.pounds or more. The NUR Blueboard Printersprinters are unique in that
they are able to print at their respective top speeds (up to 320 sq. ft./hr.square feet per
hour for the NUR Blueboard and up to 650 sq. ft./hrsquare feet per hour for the NUR
Blueboard 2, and the NUR Blueboard HiQ)HiQ and HiQ+) while printing at their
respective highest visual resolutions (70 DPIdots per square inch for the NUR
Blueboard and NUR Blueboard 2 and 150 DPIdots per square inch for the NUR Blueboard
HiQ)HiQ and HiQ+). They print directly from digital data, using no printing plates.
The NUR Blueboard Printers'printers' software accepts many popular types of image formats (such as TIFF,
CT, JPEG, BMP, and PostScript)
and images with various resolutions and converts them automatically for
printing. In addition, the NUR Blueboard Printers'printers' software can be connected to
any communication configuration supported by the operating system, which enables
smooth integration of the printers in the pre-press environment for higher
productivity. The NUR Blueboard Printers'printers' operating software is based on
Microsoft Corporation's Windows NT multitasking operating system, which enables
printing while preparing the next job for print. The software has sophisticated
color correction tables that enable the printers to match color output according
to substrate characteristics.

The NUR Blueboard printers are marketed primarily to commercial printers,
design and service firms, screen printers, outdoor media companies and trade
shops for shorter run, WFwide format and SWFsuper wide format printing. The Company'sOur NUR
Blueboard Printersprinters reproduce images with visual resolutions of 70-150 DPI,dots per
square inch, which allows for superior viewing from distances of at least 5-10 feet or
more, depending on the image file resolution. The Company's NUR Blueboard Printersprinters are
capable of producing millions of distinctive colors. Thanks to the constant ink
monitoring and control built into its continuous ink-jetinkjet printing technology, the
Company's
NUR Blueboard Printersprinters achieve a high level of color consistency for copies
printed at different times and under different environmental conditions in the
shop. Generally, depending upon the required print resolution, the Outboard
printer operates at speeds of between 200 to 600 sq. ft./hr; the Wideboard
printer operates at speeds of between 100 to 300 sq. ft./hr; the NUR Blueboard
printer operates at speeds of up to 300 sq. ft./hr;320 square feet per hour. The NUR Blueboard
2, the NUR Blueboard HiQ and the NUR Blueboard 2HIQ+ operate at speeds of up to
650 square feet per hour.

The NUR Salsa 5000 is a cost-effective super wide digital printer. NUR Salsa
5000 offers production flexibility by allowing for both super wide print jobs
(up to 5 meters or approximately 16 feet wide) and wide format jobs. Its piezo
drop-on-demand technology provides the photorealistic printing quality needed
for both super wide and wide jobs that require up-close viewing.

In March 2002, we introduced the new NUR BlueboardSalsa Ultima 5000. The NUR Salsa
Ultima 5000 is designed to provide enhancements to the NUR Salsa printer in the
areas of quality, color matching, productivity, material handling and
reliability. The NUR Salsa Ultima 5000 is available both as an upgrade to
existing NUR Salsa 5000 and as a new product delivered from the manufacturer. We
believe the NUR Salsa Ultima 5000 complements our product line, by offering a
cost-effective super wide format, photo realistic digital printer at entry-level
prices.

Wide Format Digital Printers

Our wide format printers are headed by the NUR Fresco family of wide format
printers. The first NUR Fresco printer was commercially released in February
2000. We believe that the NUR Fresco printer offers a digital alternative to
screen printing for short to medium length prints, eliminating the

high set-up cost associated with films and screen preparation costs which are
the basis of screen printing. The NUR Fresco printers use piezo continuous
drop-on-demand inkjet technology to produce high quality graphics for a wide
range of applications. These include point-of-purchase displays, banners, sheet
billboards, bus shelter graphics, posters, shopping mall displays, airport
terminal displays and many more.

The NUR Fresco printers print on a wide variety of substrates in
roll-to-roll or roll-to-sheet modes. The 1800 model outputs in widths up to 1.83
meters (6 feet). The 3200 models output in widths up to 3.2 meters
(approximately 10 feet).

In September 2001, we introduced a new and improved version of the Fresco
series, the NUR Fresco HiQ operateprinters, which are designed to provide enhanced
image quality, enhanced color gamut and text sharpness, operational ease, and
improved uptime and productivity. The NUR Fresco HiQ printers also offer
double-density printing for printing backlit graphics.

In April 2002, we announced the latest version of the Fresco series, the NUR
Fresco HiQ 8C models. The NUR Fresco HiQ 8C is based on the previous model which
has been modified to print using eight colors instead of the standard 4-color
inkset. Modifications to the printer include changes to the ink system to
accommodate eight colors and a new switch box that enables fast and easy
switching between the 4-color and the 8-color printing modes. NUR's software has
also been modified to support 8-color printing. The 8-color printers have
entered a beta-site testing period of approximately six months following which
they will be available both as an upgrade to existing NUR Fresco 4-color
printers and as a new product delivered from the manufacturer.

The Fresco media program has been developed by NUR in tandem with leading
substrate manufacturers in the market to offer NUR Fresco users a variety of
media choices suitable for all types of applications and price ranges. By
developing this open media system, NUR Fresco printers offer low operating costs
without binding the user to a specific provider of expensive consumables.

The NUR Salsa Ultima wide format printers include the NUR Salsa Ultima line
of 32-head, piezo technology digital printing systems. Various NUR Salsa Ultima
models print up to eight colors at up to 600 sq. ft./hr.dots per square inch, in print
widths of 5 feet, 8 feet and 10 feet, offering production, enhanced photo
realistic and photo high quality modes of operation. With speeds up to 40 square
meters (or approximately 410 square feet) per hour for commercial output, the
NUR Salsa Ultima series makes both one-offs and short-run jobs profitable. This
series of printers uses low-cost consumables and prints on a wide selection of
substrates, ensuring low operating costs.

The Salsa Media Program is a partnership with leading substrates
manufacturers to offer NUR Salsa users a variety of media choices suitable for
all types of applications and price ranges. These media are profiled on the NUR
Salsa printers with the NUR Salsa ink system for increased quality performance
and reliability.

We believe the NUR Salsa Ultima series complements our product line, by
offering a full a range of cost-effective wide format, photo realistic digital
printers at entry-level prices.

Dye Sublimation Wide Format Digital Printers

In November 2001, we introduced our new family of printers, the NUR
FabriGraph'TM' printers. NUR FabriGraph is a series of production wide format
inkjet printers designed specifically for textile applications. The NUR
FabriGraph'TM' series includes the NUR FabriGraph DS3200, 3.5 meters
(approximately 10 feet) wide printer, and the NUR FabriGraph DS1500, 1.5 meters
(approximately 5 feet.) wide printer. NUR FabriGraph printers use piezo
drop-on-demand inkjet technology to print onto standard dye sublimation carrier
substrates, for subsequent transfer by conventional heat press to textile
fabrics containing a minimum of 50% polyester, as well as a range of rigid and
flexible polyester-coated materials.

The NUR FabriGraph printers are capable of delivering an apparent print
resolution of up to 600 dots per square inch on all textile fabrics containing a
minimum of 50% polyester, as well as a range of rigid and flexible polyester
coated materials.

The Company's NUR Blueboard Printers are digital roll-fed presses that
accept a wide range of substrates. They print directly from digital data, using
no printing plates.-- General

The Company's Printers can be operated in a standalone mode or in
conjunction with pre-press and desktop publishing systems. When configured with
a pre-press system, the pre-press workstation prepares the digital file
containing the specifications for the output to be produced. The Company's
NUR Fresco printer, also introduced in February, 1999 and
still in beta testing, is specifically aimed at the WF markets. It produces
full-color images up to six feet wide on a variety of substrates at a much
higher 360 DPI and up to 1000 square feet per hour. The Company believes that
the NUR Fresco is one of the first commercially available WF printers that can
produce outdoor-durable WF images of almost any length from a rolled substrate
economically at run lengths up to several hundred copies. This productivity
makes the printer particularly attractive to screen printers trying to reduce
the burden of high set-up costs for shorter length runs.

The NUR Fresco is also based on piezo D-O-D inkjet technology. Much of the
expertise used in this printer had been developed by Meital. It is highly
suitable for the WF market due to its high resolution images and faster
throughput per unit cost of the print heads. The NUR Fresco complements the NUR
Blueboard Printers in that the Company's Printers cover a more complete and full
range of indoor and outdoor graphics.

The Company's Printers require little operator supervision, enabling one operator to run
several machines at once. While an operator must be specifically trained in the
operation of a printer, no special color mixing skills are required unlike
conventional methods such as offset printing.

6
The Company's Printers can significantly reduce the setupset-up costs associated
with each print job, the skill level of the personnel required and the number of
skilled personnel required as compared to traditional methods of WFwide format and
SWFsuper wide format printing. These advantages make WFwide format and SWFsuper wide
format short-run color printing significantly more economical than conventional
printing methods. Additionally, the relatively quick turnaround for the printed
product enables the Company's Printers to produce more output in a given period,
thereby lowering the costs of labor per print.

Unlike hand painting, and screen or offset printing, the layout can be
viewed through the pre-press workstation prior to printing, permitting last
minute fine-tuning. By running a single copy of the print, corrections of text,
enhancements of images, and additions of color can all be accomplished with
minimal time, effort and cost. Additionally, since the format can readily be
changed, the Company's Printers allow the end-user to make each print in the run
different, with little time, effort, or additional cost. For example, if so
desired, different languages, graphics and text can be added to each print in a
run.

During the years ended December 31, 19961999, 2000 and 1997 and, 1998,2001, sales of the
Company's Printers accounted for approximately 56%, 55%, 65% and 52%54%, respectively,
of the Company'sNUR's total consolidated sales. Sales of spare parts used in the Company's
Printers accounted for approximately 9%2.4%, 6%2.3% and 4.6%,5.4% of total sales forin the
years ended December 31, 1996, 19971999, 2000 and 1998.2001, respectively. Currently, the
retail prices of the Company's Printers generally range from $400,000$169,000 to
$500,000$459,000 per machine.

Consumables

NUR sells consumables (inks and printing substrates) primarily to the users
of the Company's Printers. Our wholly owned subsidiary NUR Media Solutions is
directly responsible for the sales of all NUR consumables, including both inks
and substrates in all Europe, Middle East and Africa, North, Central and South
America and the Asia Pacific region.

Inks

The NUR Blueboard Printersprinters use a specialized solvent-based pigmented ink
designed for the needs of the SWFsuper wide format market. The ink is resistant to
water and ultraviolet rays, making it fairly durable and thus well-suitedwell suited for
outdoor conditions. The Company's Printers,NUR Blueboard, through the utilization of the ink, can
print on almost an unlimited variety of substrates, including numerous types of
paper, vinyl, cloth, textiles, mesh and metals. The ink enables the output of
the Company's PrintersNUR Blueboard to be used both for indoor and outdoor advertising. During the years ended December 31, 1996, 1997, and 1998 sales of the ink
accounted for approximately 15%, 21% and 23.6%, respectively, of the Company's
total sales.

This ink
used by the NUR Blueboard printers was developed jointly with our participation by Imaje
S.A. ("Imaje"), a French ink manufacturer, specifically for use in the Company's Printers. The Company hasNUR Blueboard. We
have an exclusive distribution and manufacturing agreement with Imaje for inks used in
the
use of the ink. The agreement between NUR Blueboard Printers.and Imaje calls for mutual exclusivity
to be kept for as long as both parties abide by the agreement.

The NUR Fresco uses aprinters, the NUR Salsa Ultima series and the NUR FabriGraph
use specialized solvent-based pigmentedall-in-one solvent-pigment based ink designed for the needs of
the WF market. It alsowide format market and suited for drop-on-demand technology printers. This
ink is highly-resistantdeveloped to water and UV and
imparts more vibrant colors in the images printed usingensure color-real, long lasting, color consistent, weather
resistant prints.

Until October 2001, inks for the NUR Fresco.Fresco printers were manufactured by
Stillachem, a wholly owned subsidiary of NUR. Stillachem focused on the
development and manufacture of specialized inks for drop-on-demand digital
printing systems and inks for other digital printers, including clear-coat

varnishes for wide format and super wide format printers. In October 2001, we
consolidated and streamlined our ink manufacturing, research and development
operations. Our ink research and development operations previously located in
Israel, Belgium and San Antonio, TX were consolidated into a single facility in
Louvain-la-Neuve, Belgium. Inks for the NUR Fresco and NUR Salsa printers are
now manufactured by our wholly owned subsidiary Salsa Digital Printers in San
Antonio, TX.

During the years ended December 31, 1999, 2000 and 2001, sales of the ink
accounted for approximately 23.1%, 20.0% and 26.1%, respectively, of NUR's total
sales.

Substrates

As of June 1998, the CompanyNUR also began supplying, through itsour wholly owned
subsidiary in Belgium, NUR Media Solutions, cost-effectivespecialized substrates designed to
work with the Company's Printersour printers and its ink. The CompanyNUR sells substrates under the NUR brand name
that are manufactured for us by several different suppliers
for the Company.suppliers. The substrates are
made of vinyl, PVC, paper and mesh and are suited for indoor and outdoor use.
The substrates are distributed worldwide by the Company'sour sales and service organizations.subsidiaries.
All NUR-branded materials are manufactured exclusively for NUR Media Solutions.

SalesIn addition to its own branded substrates, NUR Media Solutions has developed
partnership programs with leading suppliers of self-adhesive vinyl,
micro-perforated vinyl, paper, banner vinyl, and Marketing

The Company currently distributestextiles which offers users of
the NUR Fresco and sells itsNUR Salsa specially endorsed substrates.

SALES AND MARKETING

We distribute and sell our products through its
wholly-owned subsidiaries,the following wholly owned
subsidiaries: NUR Advanced Technologies (Europe) S.A. ("NUR
Europe"), NUR America, Inc. ("NUR America"), NUREurope (including the Middle East & Africa Ltd.
("division), NUR
Middle East & Africa") andAmerica, NUR Asia Pacific, NUR Shanghai, NUR DO Brazil Ltda., NUR Japan and NUR
Media Solutions.

In July 2000, we purchased substantially all of the assets and specified
liabilities of Salsa Digital Ltd. ("NUR Asia Pacific"). The
Company engagesand related entities, previously one of our
competitors in the saledigital printing market. We have fully integrated the former
Salsa Digital sales and marketing of printed material produced byforce into our own existing marketing, sales
and service subsidiaries in Europe, North America, Brazil and the
Company's Printers through M.NUR Marketing & Communications GmbH ("NUR Germany")
in Germany, a subsidiary in which the Company owns an 84% interest.

Until the end of 1996, most worldwide sales of the Company's Printers had
been made through Scitex Corporation. Since the beginning of 1997, the Company
moved to direct distribution of its products starting from the Americas and
Europe. In February 1999, the Company established two additional sales
organizations, NUR Asia Pacific
and NUR Middle East & Africa, to replace Scitex
Corporation's role as distributor of the Company's products in the Far East, the
Middle East and Africa. NUR Asia Pacific, a Hong Kong corporation, is currently
operating out of Hong Kong with the use of an office in Shanghai. NUR Asia
Pacific will offer full support of its customer base through the Company in
Israel until completion of the full registration of a wholly-owned subsidiary of
the Company under Chinese law and the subsequent transfer of its headquarters to
Shanghai. As part of its distribution efforts, NUR Asia Pacific recently entered
into a letter of intent with Mitsui & Co. Graphic System Ltd. for distribution
of the Company's products in Japan.

The Companyregions. Our marketing activities include participating in relevant tradeshows
worldwide, advertising in trade publications, marketing directly to a target
base, as well as publishing itsour own newsletters, participating in services and
industry forums and maintaining an internet site.

The Company has
also started to sell its consumable products through a dedicated intranet site.

In April 1998, the Company renamed its previously established wholly-owned
subsidiary, NUR International, toThrough NUR Media Solutions. NUR Media Solutions'
objective isSolutions, we are working to develop, market and marketsell a
wide range of advanced consumables for the
Company's WFour wide format and SWFsuper wide format
printers. Included in such consumables are the Company's
cost-effectiveour inks, clear coats and a range of
specialized substrates, all of which are designed to work with the Company'sour existing
range of printers and inks and will be distributed worldwide by the
Company's sales and service organizations.printers.

The Israeli Government, through the Fund for the Encouragement of Marketing
Activities of the Ministry of Industry and Commerce (the "Marketing
Fund"),Trade, awards participation grants
for marketing expenses incurred overseas,
including expenses for maintaining warehouses and branches, advertising,
catalogs, exhibitions and surveys. In the years endedoverseas. As of December 31, 1991, 1992,
1993, and 1995, the Company2001, we received
grants from the Marketing Fund totaling
approximately $0.4$1.27 million for the promotion of our printers. NUR is no longer eligible for
support from the Outboard Printer andMarketing Fund due to its reaching the MegaLight, a discontinued printer. In 1997, the Company received $0.2 million
for the promotion of the Company's exportation of its printers. In 1998, the
Company received $0.11 million for the same purpose. The Company did not receive
any grants in 1994 or in 1996. The Companymaximum allowed export
revenues. NUR is obligated to pay a royalty of 3%3 - 4% of the export added value
to the Marketing Fund until 100% of the grants have been repaid. The value of
the grants received (including grants received in previous years), are linked to
the U.S. dollar. As of December 31, 1998, the Company2001, we had made royalty payments in
respect of such grants to the Marketing Fund totaling approximately $0.08$0.35
million.

Production and Sources of Supply

The CompanyPRODUCTION AND SOURCES OF SUPPLY

NUR manufactures and assembles through a subcontractor, the NUR Blueboard Printers, directly performing the installationand NUR Fresco printers
through NUR Pro Engineering, a 50% owned affiliate of the Company's
proprietary software into the NUR Blueboard Printers and fullNUR. Full system
integration and acceptance and quality control testing of the printers. The mechanical assembly of theprinters are
conducted by us at a NUR Blueboard Printers is carried out by an independent sub-contractor (the "NUR
Blueboard Assembler") at aPro Engineering facility located near the Company'sour operations in
Israel. The Company purchases most of the components comprising the NUR
Blueboard Printers from third parties.

The Company believes that it can expand production to meet anticipated
increases in production, either through the NUR Blueboard Assembler, by
utilizing additional sub-contractors, or by directly undertaking assembly of the
NUR Blueboard Printers. The Company installs its computer software and performs
full system integration and acceptance testing of the NUR Blueboard Printers at
the NUR Blueboard Assembler's facility. Product quality control tests and inspections are performed at various
steps throughout the manufacturing process, and each product is subjectedsubject to a
final test prior to delivery.

The Company obtainsWe believe that, to meet increases in sales, we can expand NUR Pro
Engineering's production capabilities or engage subcontractors to carry out
certain of the ink-jetmanufacturing or the assembly of our printers. NUR supplies NUR
Pro Engineering with the inkjet heads and the ink used in the NUR Blueboard

Printers18

printers, which we acquire from Imaje, the sole manufacturer and supplier of
these components. With the NUR Fresco printer, most of the components are
available from several sources; however, the drop-on-demand inkjet printheads
used in the NUR Fresco printer, are currently purchased exclusively from Modular
Ink Technology, a Swedish company. We have contracted with Modular Ink
Technology to ensure the supply of printheads, though this company is our sole
supplier.

The Company has an exclusive distribution agreementNUR Salsa line of printers is assembled by our wholly owned subsidiary
Salsa Digital Printers. Frames for the ink with
Imaje dated June 26, 1995. The term ofNUR Salsa printers are manufactured,
primarily, by an unaffiliated subcontractor, Gandi Innovations Corp., and the
agreement is currently on a year to
year basis and is renewed automatically on June 26 of each year, unless
terminated by either the Company or Imaje by three month advance written notice.
Pursuant to the agreement, Imaje has agreed to deposit the formulainkjet printheads for the ink
with a public notary for the term of the agreement and a period of one year
thereafter. The Company has the right to obtain the formula

for the inkNUR Salsa are purchased exclusively from Imaje, if during the term of the agreement, Imaje ceases to
operate as a going concern; ceases to manufacture the ink or to sell the ink to
the Company; or subject to certain conditions, fails to deliver the ink within
three months of a confirmed delivery date. In the case of any such event, if
Imaje does not deliver the formula to the Company within three months following
the Company's written request to obtain the formula, the public notary shall
release the formula to the Company. The Company believes that it will be able to
obtain and/or manufacture adequate supplies of the ink in the foreseeable
future.

The Company also employs other unaffiliated subcontractors to manufacture
other components for its printers. The Company's subcontractorsModular Ink
Technology.

To date, we have in the
past, been late in delivering components. The Company has, however, been able to obtain adequate supplies of the components and
raw materials necessary to produce itsour printers and hashave not had any serious
problems with itsour subcontractors. As the Company'sour business grows, itshowever, we will need
to purchase greater quantities of components on a timely basis; anybasis. Any delay in
supply could ultimately hurt its sales.

The Company is currently establishing a facility forour business.

As of June 1998, NUR also began supplying, through our wholly owned
subsidiary in Belgium, NUR Media Solutions, specialized substrates designed to
work with the manufactureCompany's Printers and assembly ofour ink. NUR sells substrates under the NUR
Fresco printer from parts suppliedbrand name that are manufactured by localseveral different suppliers for us. The
substrates are made of vinyl, PVC, paper and international suppliers. Mostmesh and are suited for indoor and
outdoor use. To date, we have not experienced any material supply problems with
the substrates.

SERVICE AND SUPPORT

Installation, post sale support and warranty services of our products, are
provided by NUR America, NUR Europe, (including the components are available from several
sources, however, the D-O-D ink-jet print heads are currently purchased from
Modular Ink Technology ("MIT")Middle East & Africa
division), a Swedish company. The Company has contracted
with MIT to ensure the supply of print heads, however, uninterrupted supply
cannot be guaranteed.

ServiceNUR Asia Pacific, NUR Shanghai, NUR DO Brazil Ltda. and Support

The Company'sNUR Japan. In
most cases, our warranty to itsour direct customers and the Company's
distributors in most cases covers defects
in the Company's Printers for a period of six months after installation. Ininstallation, and, in
most cases, the CompanyNUR has a parallel warranty from itsour subcontractors or from their
suppliers and the NUR Blueboard Assembler with respect to most of the components covered by the Company'sour warranty. The CompanyNUR is
also committed to maintaining sufficient spare parts and materials necessary for
the operation of the Company's Printers for a period of five years after the
manufacturing date of the last NUR Blueboard Printer. Local service and support
is provided through all of the Company's subsidiaries.

Research and Development

In September 1998, the Company purchased certain piezo D-O-D technology
from Meital. The Company purchased Meital's technology for an aggregate amount
of approximately $3 million, of which payment of $0.85 million is conditional
upon the success of the technology, and $0.9 million will be paid in future
installments. The Meital acquisition resulted in the recognition by the Company
of a one-time charge involving a write-off assigned to research and development
of $1.95 million ($1.6 million the third quarter of 1998 and $0.35 million in
the first and second quarters of 1998). As part of the purchase price, the
Company has future royalty obligations to Meital, during the next three years,
which will not exceed $1.3 million. If the Company does not meet its obligation
to pay minimum royalty payments or an amount equal thereto, the seller of the
technology will have the option to buy the technology back for approximately the
royalties paid by the Company to date.

The Company'sprinter.

RESEARCH AND DEVELOPMENT

NUR's research and development efforts, which currently engagingengage approximately
3050 employees, are focused on the development ofdeveloping new products and technologies, as well as enhancing
the quality and performance relative to price of itsour existing products, reducing
manufacturing costs, and upgrading and expanding itsour product line through the
development of additional features and improvedimproving functionality in response to
market demand.

There areWe have two research and development facilities, the mainincluding a facility
located at the Company'sour headquarters in Lod, Israel and another smallera facility located in
Louvain-la-Neuve, Belgium.

Total research and development expenses, before royalty bearing grants, were
approximately $1.53$5.5 million, $15.0 million and $1.73$10.9 million in the years ended
December 31, 1996,1999, 2000 and 1997, respectively, and $5.03 million in2001, respectively. In the year ended December 31,
1998,2000, $4.3 million of which $1.95 million isthese expenses were due to a one-time write-off of
in-process research and development related to the acquisition of technology
resulting in a one-time write-off assigned to research and development.Salsa Digital asset purchase
transaction.

Research and development expendituresexpenses are comprisedcomposed principally of salaries for
employees, the hiring of sub-contractors,subcontractors, depreciation of capital investment in
infrastructure for software and electronic designs and prototype material costs.
Initially, the CompanyNUR relied on outside research and development. 9

The CompanyWe began itsour own
research and development operations in early 1994.

Between December 1997 and March 1999, NUR Europe, one of our subsidiaries,
received a grant from local authorities in Belgium for reimbursement of up to
70% of its total research and development investment, which it carries out in
Belgium, up to approximately $1$0.6 million. If no revenues are derivedNUR Media Solutions markets and sells
the products developed under the grant, and reimburses the Belgium authorities
at a rate of 3% of the revenue generated from the technologies and NUR Europe develops no products as a result thereof, then no
repaymentsale of the grant is required. Should revenues be recognized fromproducts. NUR
Media Solutions has

reimbursed the research and development efforts, a progressive 5-year repayment program would
be implemented.Belgium authorities for approximately $0.08 million as of
December 31, 2001. NUR Media Solutions has established a research and
development center in Belgium dedicated to the research and development of print
substrates and inks for use with the Company's Printers. Between May 1999 and
April 2000, NUR Media Solutions received a grant from the Belgium authorities
for reimbursement of up to 50% of its total research and development investment,
which it carries out in Belgium, up to approximately $0.3 million. NUR Media
Solutions will reimburse the grant at a rate of 6% of the revenue generated from
the products developed under the grant. As of December 31, 2001, NUR Media
Solutions had a contingent obligation to pay royalties in the amount of $0.88
million.

In September 1998, we purchased certain piezo drop-on-demand technology from
Meital Technologies Ltd. We purchased Meital's technology for an aggregate
amount of $3.0 million. The Meital acquisition resulted in the recognition by us
of a one-time charge involving a write-off of technology assigned to research
and development of $1.95 million in the third quarter of 1998.

In July 2000, we purchased all of the assets and assumed specified
liabilities of Salsa Digital Ltd. and related entities, previously one of our
competitors in the digital printing market. The Salsa Digital asset purchase
transaction resulted in the recognition by us of a one-time write-off of $4.3
million assigned to in-process research and development.

In the past, the CompanyNUR has received grants from the Government of Israel, through
the Office of the Chief Scientist, (the "OCS"), for the development of itsour systems and
products, including the Outboard printer. The
CompanyNUR received approximately $0.37$0.74
million, $0.04 million$0.26 and $0.82$0 million in research and development grants from the OCSOffice
of the Chief Scientist in the years ended December 31, 1996, 19971999, 2000 and 1998,2001,
respectively. The OCSOffice of the Chief Scientist awards grants of up to 50% (and
in certain circumstances up to 66%) of a project's approved expenditures in
return for royalties. Under the terms of the Company's funding, from the OCS, royalties are payable
generally at a rate of 2% to 3% on sales of products developed from the funded
project and ending when 100% to 150% of the dollar value of the grant is repaid.
NoDuring 2001, we made royalty payments of $0.2 million in respect of such grant were madegrants
to OCS in the years ended
December 31, 1996 and 1997.Office of the Chief Scientist. As of December 31, 1998, the Company2001, we had a
contingent liability to pay OCS $1.1$0.26 million in future royalty payments. NUR
royalty payments to the Office of the Chief Scientist are in respect of sales of
the NUR Fresco printers. The terms of thesethe grants prohibit the manufacture of
products developed with government grants to be performed outside of Israel or the transfer out
of Israel of the technology developed pursuant to these grants without the prior
consent of the OCS.Office of the Chief Scientist. These restrictions do not bar
exports from Israel of products developed with such technologies. In addition,
the know-how from the research and development that is used to produce the
product may not be transferred to third parties or out of Israel without the
approval of the OCS.

CompetitionOffice of the Chief Scientist.

COMPETITION

The principal competitive factors affecting the Company's sales of itsour products are
their performance relative to price, productivity and throughput, product
features and technology, quality, reliability, cost of operation and
consumables, the quality and costs of training, support and service as well as
the flexibility of adapting to customers' applications of the products. Other
competitive factors include the ability to provide access to product financing,
the Company'sNUR's reputation and customer confidence in the CompanyNUR to continually develop new
products and product accessories that will help them maintain and grow their
business.

The Company'sOur main competitors in the SWFsuper wide format arena are Vutek Signtech and Matan Digital Systems (owned by Scitex
Corporation). All threeVision. Both companies have introduced products that directly compete with the
NUR Blueboard Printers.and NUR Salsa Ultima super wide printers. In the WF arena,wide format
market, the main competitors are Idanit Technologies,Scitex, through its subsidiary, Scitex Vision
Ltd. ("Idanit") (also
owned by Scitex), 3M Image Graphics, Vutek and Raster Graphics Inc. These companies have
introduced products that compete with the NUR Fresco printer.and NUR Salsa printers.

The printing industry is large, and many of the Company'sour competitors may possess
greater management, financial, technical, manufacturing, marketing, sales,
distribution and other resources than those of the Company.NUR. As a result, there can be no
assurance that competitors will not develop and market products utilizing new
technology that are competitive in price and performance with the Company's
Printers, and there can be no assurance that the Companywe can compete effectively with
such products.

Trade Secrets, Patents and Proprietary Rights

The Company20

TRADE SECRETS, PATENTS AND PROPRIETARY RIGHTS

We currently reliesrely on a combination of trade secrets, licenses and patents,
together with non-disclosure and confidentiality agreements, to establish and
protect itsour proprietary rights in itsour products. No assurance can be given that
the Company'sNUR's existing patents or any future patents by the
CompanyNUR will not be challenged,
invalidated, or circumvented, or that the
Company'sour competitors will not independently
develop or patent technologies that are substantially equivalent or superior to
the Company'sour technology. See "Item
3: Legal Proceedings." There can be no assurance that further patent protection will be
obtained in Israel, the United States, or elsewhere, for existing or new
products or applications, or that such further protection, if obtained, will be
effective. In some countries, meaningful patent protection is not available. The
Company isWe
are not aware of any claimsmaterial claim that itsour products infringe upon the
proprietary rights of third parties. However, there can be no assurance that
third parties will not assert infringement claims against the CompanyNUR in the future, and
the cost of responding to such assertions, regardless of their validity, could
be significant. In addition, such claims may be found to be valid and could
result in awards against the Company,NUR, which could have a material effect on the Company'sour
business. As a result, the cost to the CompanyNUR of protecting itsour patent rights could be
substantial. The Company believesWe believe that its

10
our success is less dependent upon the legal
protection afforded by patent and other proprietary rights than on the
knowledge, ability, experience and technological expertise of itsour employees and
itsour key suppliers. It is the Company'sNUR's policy to have employees sign confidentiality
agreements, to have selected parties, including key suppliers, sub-contractors,subcontractors
and distributors, sign non-competition agreements, and to have third parties
sign non-disclosure agreements. Although the CompanyNUR takes precautionary measures to
maintain itsour trade secrets, no assurance can be given that others will not
acquire equivalent trade secrets or otherwise gain access to or disclose the Company'sNUR's
proprietary technology, or that the Companywe can meaningfully protect itsour rights to such
proprietary technology not subject to patent protection.

Employees and Labor RelationsEMPLOYEES AND LABOR RELATIONS

As of MarchDecember 31, 1999, the Company2001, we employed approximately 120404 persons worldwide, about 25%twelve
percent of which work in research and development. About 65Approximately one-fifth of
these employees are located at the Company's headquartersemployed by NUR in Israel and the remainder are located at the Company's subsidiaries.employed by
our subsidiaries worldwide. All of the Company'sNUR's employees who have access to
confidential information are required to sign a non-disclosure agreement
covering all Companyof our confidential information that they might possess or to which
they might have access.

The Company believes itsWe believe our labor relations are satisfactory and hassatisfactory. We have never experienced a
strike or work stoppage. The Company believes itsWe believe our future success will depend, in part, on
itsour ability to continue to attract, retain, motivate and develop highly
qualified technical, marketing and sales andas well as management personnel.

Israeli law generally requires severance pay equal to one month's salary for
each year of employment upon the termination of employment. The Company'sNUR's liability for
future severance pay obligations is fully provided for by payments equal to
8.33% of an employee's salary each month made to various managers' insurance
policies and by accrual. The employees of the CompanyNUR are usually provided with an
additional contribution towardstoward their retirement that amounts to 10% of wages, of
which the employees'employee and the employer each contributes half. Furthermore, Israeli
employees and employers are required to pay predetermined sums to the National
Insurance Institute, which is similar to the United States Social Security
Administration, and additional sums towards compulsory health insurance.

Insurance

The Company believesINSURANCE

We believe that the insurance coverage for itsour business is in accordance
with industry standards and is adequate and appropriate in light of the Company'sour
businesses and the risks to which they are subject.

Risk Factors

InvestingLEGAL PROCEEDINGS

In December 1999, Poalim Capital Markets Ltd., an Israeli company engaged in
the business of mediation and assistance in securities transactions, filed suit
in the District Court of Tel Aviv, Israel, against NUR and Isal Amlat
Investments (1993) Ltd. Poalim Capital Markets claimed that NUR, in executing a
private placement agreement with Isal Amlat Investments (1993) Ltd. and Dovrat &
Co. Ltd. in September 1999, breached an agency agreement with Poalim Capital
Markets. Poalim Capital

Markets seeks enforcement and monetary relief up to approximately $0.33 million.
NUR believes that the claims are without merit and is defending itself
vigorously against the action.

The Poalim Capital Markets' litigation, whether or not determined in our
favor or settled by us, may be costly and may divert the efforts and attention
of our management from normal business operations.

In September 2000, Abudi Signage Industry Ltd., an Israeli company, and
Abudi Printing Technology Ltd., a wholly owned subsidiary of Abudi Signage
Industry Ltd. (collectively, the 'Abudi Parties'), filed suit in the District
Court of Tel Aviv, Israel, against Meital Technologies Ltd., Mr. Kobi Markovitz
(the major shareholder of Meital), who is currently a consultant to NUR in the
field of technologies development, NUR and Erez Shachar, our President and Chief
Executive Officer. The Abudi Parties claim that Meital, in selling its peizo
drop-on demand technology to NUR breached agreements between the Abudi Parties
and Meital pursuant to which: (i) Meital was to develop, manufacture and sell to
the Abudi Parties an upgrade for Abudi's Vutek airbrush digital printers and
Abudi was to receive the exclusive right to market, distribute and sell these
upgrades, and (ii) Abudi was provided an option to purchase up to 20% of Meital
shares is very risky. You should be ableupon terms and conditions no less favorable than other investors. The
Abudi Parties claim that NUR knowingly purchased the Meital technology and
therefore caused Meital to bearbreach its option agreements with the Abudi Parties.
The Abudi Parties seek consequential and indemnification monetary damages up to
approximately $4.95 million. In May 2002, the parties reached an out-of-court
settlement whereby the Company undertook to pay the Abudi Parties $0.14 million
for the complete and final settlement of this matter.

We are not currently subject to any other material legal proceedings. We may
from time to time become a complete lossparty to various legal proceedings in the ordinary
course of your investment. To understand the levelour business.

ORGANIZATIONAL STRUCTURE

As of risk, you should
carefully considerDecember 31, 2001, the following risk factors,chart presents our corporate
structure, the jurisdiction of incorporation of our subsidiaries and the
percentage of shares that we hold in those subsidiaries.

SUBSIDIARIES PERCENTAGE JURISDICTION OF INCORPORATION
------------ ---------- -----------------------------

Encre Consumables B.V. .................................. 100% Amsterdam, Netherlands
NUR America Inc. (NUR America)........................... 100% Texas, United States
NUR Asia Pacific (Hong Kong) Ltd. (NUR Asia Pacific)..... 100% Hong Kong, China
NUR DO Brazil Ltda. ..................................... 100% Sao Paulo, Brazil
NUR Europe S.A. (NUR Europe)............................. 100% Brussels, Belgium
NUR Hungary Trading and Software Licensing Limited
Liability Company...................................... 100% Budapest, Hungary
NUR Macroprinters (Shanghai) Ltd. (NUR Shanghai)......... 100% Shanghai, China
NUR Media Solutions S.A. (NUR Media Solutions)........... 100% Brussels, Belgium
Salsa Digital Printers Ltd. (Salsa Digital Printers)..... 100% Texas, United States*
NUR Japan Ltd. (formerly Signtech Japan Ltd.)
(NUR Japan)............................................ 100% Tokyo, Japan
NUR Pro Engineering Ltd. (NUR Pro Engineering)........... 50% Rosh Ha'ain, Israel
Stillachem S.A. (Stillachem)............................. 100% Brussels, Belgium**

- ---------

* Salsa Digital Printers is now doing business as NUR Engineering USA.

** NUR acquired the remaining outstanding capital stock of Stillachem in May
2001. As a result, Stillachem is now a wholly owned subsidiary of NUR. As
part of the restructuring and consolidation of our ink research and
development and manufacturing operations we are now in the process of
dissolving Stillachem. The ink previously manufactured by Stillachem is now
manufactured in San Antonio, TX by Salsa Digital Printers. The ink research
and development is to be continued by NUR Media Solutions.

Israel

NUR's main facilities are located in the high-tech industrial zone in Lod,
Israel in a building that is approximately 50,000 square feet. We use this
facility as our headquarters and for research and development. We have invested
a total of approximately $1.6 million in improving this facility. The initial
five-year lease of the Lod facility, which commenced November 20, 2000, provides
for monthly rent of $63,000. The lease agreement grants NUR an option to
continue the lease term for two consecutive periods of 2.5 years each.

NUR Pro Engineering Ltd., a 50% owned affiliate, leases approximately 23,777
square feet in Rosh Ha'ain, Israel, for the manufacture and assembly of the NUR
Blueboard and the NUR Fresco printers. The Rosh Ha'ain lease expires in October
2002.

United States

NUR America leases office space in Newton, MA consisting of 26,500 square
feet that it has used as the subsidiary's headquarters, sales and marketing
offices and demonstration and service center. The Newton lease expires in
January 2011. In addition, NUR America leases and sub-leases an additional 4,500
square feet of office space in Newton, MA that served in the past as NUR
America's headquarters. This lease expires in October 2008. As part of our
restructuring plan we consolidated our U.S. operations. NUR America, Inc. in
Boston, MA and Salsa Digital Printers Ltd. were integrated into a single large
facility in San Antonio, TX. We are currently evaluating options with respect to
the leases on the Newton, MA offices.

Salsa Digital Printers leases 67,250 square feet in San Antonio, TX for use
as a manufacturing facility for the Salsa product line and the NUR inks, as well
as the headquarters for NUR America and NUR America's sales and marketing
offices and training and service center. The San Antonio, TX lease expires in
June 2006.

Europe

NUR Europe leases approximately 1,970 square feet of office space in
Louvain-la-Neuve, Belgium for use as the subsidiary's headquarters and sales
office, demonstration and service center. The Louvain-la-Neuve lease expires in
March 2011. In 2000, NUR Europe expanded its headquarters space at the above
location by an additional 3,766 square feet. The lease for the additional space
expires in March 2012.

NUR Media Solutions leases approximately 1,867 square feet office space in
Louvain-la-Neuve, Belgium for use as office space. The Louvain-la-Neuve lease
expires in November 2009.

Stillachem leases temporary office space in Belgium of approximately 853
square feet. The lease expires in November 2002. We are now in the process of
dissolving Stillachem, therefore the lease will not be extended.

Asia Pacific

NUR Shanghai leases approximately 25,833 square feet of space for use as its
headquarters, warehouse and demonstration center in a free trade zone in
Shanghai, China. The leases will expire on January 2004.

NUR Asia Pacific leases office space of approximately 1,254 square feet in
Hong Kong. The lease expires on September 2002. NUR Asia Pacific leases office
space of approximately 1,162 square feet in Singapore. The lease expires on
April 2003. NUR Asia Pacific also leases approximately 1,395 square feet of
office space in Guangzhou and approximately 1023 square feet in Beijing. The
leases expire on October 2002 and May 2003, respectively.

Japan

Signtech Japan leases approximately 2,173 square feet of office space in
Tokyo. The lease expires February 2003.

ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS

OPERATING RESULTS

GENERAL

NUR is a world leader in the market for the sale of wide format and super
wide format digital printing systems. NUR develops, manufactures, sells and
services digital, inkjet color printing systems for on-demand, production, wide
format and super wide format printing. NUR also supplies inks and substrates
that are consumable products for the operation of the Company's Printers. In
July 2000, we purchased all of the assets and assumed specified liabilities of
Salsa Digital Ltd. and related entities, previously one of our competitors in
the digital printing market. NUR's total revenues grew from $60.7 million in the
year ended December 31, 1999 to $121.9 million in the year ended December 31,
2000 and declined to $120.4 million in the year ended December 31, 2001. Salsa
Digital's total revenues were $33.0 million in the year ended December 31, 1999
and $17.5 million for the first six months of 2000.

We carry out our research and development activities at two locations, our
facilities in Lod, Israel and in Belgium. NUR's main sales and service
activities are carried out through our wholly owned subsidiaries, NUR Europe,
located in Brussels, Belgium, NUR America, located in San Antonio, TX (USA), NUR
Asia Pacific located in Hong Kong, NUR Shanghai located in Shanghai, China, NUR
DO Brazil Ltda., located in Sao Paulo, Brazil, NUR Japan located in Tokyo, Japan
and through NUR Europe's division of Middle East & Africa located in Belgium.
The former Salsa Digital business is currently operated through Salsa Digital
Printers Ltd. and NUR Hungary Trading and Software Licensing Limited Liability
Company, both of which are wholly owned subsidiaries. NUR wholly owns NUR Media
Solutions, located in Brussels, Belgium, which develops, markets and sells
advanced consumables for the Company's Printers. NUR wholly owns Stillachem,
located in Charleroi, Belgium, which is a digital ink factory producing inks for
the NUR Fresco printers. In October 2001, we consolidated and streamlined our
ink manufacturing operations. Inks for the NUR Fresco, NUR Salsa and NUR
FabriGraph printers are now manufactured by our wholly owned subsidiary Salsa
Digital Printers in San Antonio, TX. Stillachem is in the process of being
dissolved. NUR holds 50% of NUR Pro Engineering Ltd. located at Rosh Ha'ain
Israel, which is our main subcontractor for the assembly of the NUR Blueboard
and NUR Fresco printers.

NUR was incorporated as an Israeli corporation on July 29, 1987 and began
operations in June 1991. Since October 1995, NUR's ordinary shares have been
traded on the Nasdaq National Market. NUR is currently quoted on Nasdaq National
Market under the symbol 'NURM.'

Revenues are derived from the sale of our printers, which include the NUR
Blueboard printers, the NUR Fresco printers, the NUR Salsa printers and the NUR
FabriGraph printers, and from the sale of inks, substrates, spare parts and
related services.

Cost of sales of printers and related materials includes materials, labor,
overhead, and other direct or allocated costs involved in the manufacture,
warehousing, delivery, support, and maintenance of products. Research and
development expenses include mainly labor, materials consumed, expenses by
subcontractors, consultants, and others. In 2000, $4.3 million of research and
development expenses were due to a one-time write-off of in-process research and
development related to the Salsa Digital asset purchase. Research and
development expenses are carried to the statement of operations as incurred.
Grants are netted from research and development costs on an accrual basis as the
related expenses are incurred.

The sales and marketing expenses include the costs associated with the staff
of the sales and marketing force of NUR and our subsidiaries, advertising and
promotion of existing and new products, trade shows, commissions, and other
marketing activities. During 2000, NUR expended significant financial and
management resources to expand our business and product offerings. Grants are
netted from sales and marketing costs on an accrual basis as the related
expenses are incurred. NUR invested in the integration of the Salsa Digital and
the NUR worldwide sales and service organizations, strengthening the service and
sales organizations of NUR Europe, (including the Middle East & Africa
division), NUR America, NUR Asia Pacific, NUR Shanghai, NUR DO Brazil and NUR
Japan. NUR also invested in the continuation of the development of NUR Media
Solutions, a subsidiary dedicated to

the development and marketing of consumables, mainly substrates, inks and clear
coat varnishes for the use with NUR's products.

CERTAIN CRITICAL ACCOUNTING POLICIES

The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. On an on-going basis, the
Company evaluates its estimates and judgments, including allowance for doubtful
accounts and inventory valuation. The Company bases its estimates and judgments
on historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Under different assumptions or
conditions, actual results may differ from these estimates.

NUR believes the following critical accounting policies, among others,
affect its more significant judgments and estimates used in the preparation of
its consolidated financial statements.

NUR's consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the U.S. For more information
foundon NUR's financial statements, please see NUR's consolidated financial
statements as of December 31, 2001, which are included as a part of this annual
report on Form 20-F.

The main sources of revenues for NUR are sales of the Company's Printers and
related consumable products. Revenues from sales of products are recognized upon
delivery provided that the collection of the resulting receivable is probable,
there is persuasive evidence of an arrangement, no significant obligations in
respect of installation remain and the price is fixed or determinable. NUR does
not grant a right of return.

The Company maintains an allowance for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments,
which is included in bad debt expense. The Company determines the adequacy of
this form.allowance by regularly reviewing the complexion of its accounts receivable
aging and evaluating individual customer receivables, considering customer's
financial condition, credit history and current economic conditions. If the
financial condition of the Company's customers were to deteriorate, resulting in
an impairment of their ability to make payments, additional allowances may be
required in future periods.

On occasion, the Company engages in the sale of trade receivables with
established commercial banking institutions. As of December 31, 2001, a total
amount of $ 10,186 was sold to the banks.

In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, 'Business Combinations', and No. 142,
'Goodwill and Other Intangible Assets', effective for fiscal years beginning
after December 15, 2001. Under the new rules, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized but will be subject
to annual impairment tests in accordance with the Statements. Other intangible
assets will continue to be amortized over their useful lives. The Company will
apply the new rule beginning in the first quarter of 2002. Application of the
non-amortization provisions of the Statements is expected to result in an
increase in net income of approximately $1.0 million per year. During 2002, the
Company will perform the first of the required impairment tests of goodwill and
indefinite lived intangible assets. The Company cannot yet estimate what the
effect of these tests will be on its financial position and results of
operations.

GEOGRAPHIC BREAKDOWN OF REVENUES

We needsell our products and services throughout the world. Revenues are
generally attributed to the location of the sale of the product or service to
the end-user. The table below shows the breakdown of revenues (dollars in
thousands) by categories of activities and into geographic markets in the years
ended December 31, 2001, 2000 and 1999. The 'Others' category, below, includes,
among other things, revenues generated by the service of the Company's Printers.
With the sale of NUR Germany in the third quarter of 1999, NUR no longer derives
significant revenues from the sale of printed materials.

YEAR ENDED DECEMBER 31, 2001
--------------------------------------------------------------------------------------------------
PRINTED
PRINTERS INK SUBSTRATES MATERIALS OTHERS TOTAL
(54.2%) (26.1%) (10.4%) (0%) (9.3%) (100%)
-------------- -------------- -------------- ------------ -------------- ---------------
REGION $ % $ % $ % $ % $ % $ %
------ - - - - - - - - - - - -

Middle-East & Africa...... 3,662 5.6% 1,234 3.9% 766 6.1% -- -- 169 1.5% 5,831 4.8%
Asia...................... 21,316 32.7% 7,483 23.8% 392 3.1% -- -- 4,639 41.5% 33,830 28.1%
Europe.................... 24,739 37.9% 7,401 23.6% 6,243 49.8% -- -- 3,374 30.2% 41,757 34.7%
North & Latin America..... 15,548 23.8% 15,272 48.7% 5,138 41.0% -- -- 3,001 26.8% 38,959 32.4%
------ ----- ------ ----- ------ ----- ----- ---- ------ ----- ------- -----
Total Revenues......... 65,265 100% 31,390 100% 12,539 100% -- -- 11,183 100% 120,377 100%
------ ----- ------ ----- ------ ----- ----- ---- ------ ----- ------- -----
------ ----- ------ ----- ------ ----- ----- ---- ------ ----- ------- -----

YEAR ENDED DECEMBER 31, 2000
--------------------------------------------------------------------------------------------------
PRINTED
PRINTERS INK SUBSTRATES MATERIALS OTHERS TOTAL
(65.3%) (19.8%) (9.8%) (0%) (5.1%) (100%)
-------------- -------------- -------------- ------------ -------------- ---------------
REGION $ % $ % $ % $ % $ % $ %
------ - - - - - - - - - - - -

Middle-East & Africa...... 4,081 5.2% 1,059 4.3% 979 8.2% -- -- 513 8.2% 6,632 5.4%
Asia...................... 18,120 22.8% 5,238 21.6% 365 3.0% -- -- 2,500 39.7% 26,223 21.6%
Europe.................... 27,802 35% 5,932 24.5% 5,922 49.3% -- -- 1,633 26.0% 41,289 33.9%
North & Latin America..... 29,518 37% 11,872 49.6% 4,747 39.5% -- -- 1,643 26.1% 47,780 39.1%
------ ----- ------ ----- ------ ----- ----- ---- ------ ----- ------- -----
Total Revenues......... 79,521 100% 24,101 100% 12,013 100% -- -- 6,289 100% 121,924 100%
------ ----- ------ ----- ------ ----- ----- ---- ------ ----- ------- -----
------ ----- ------ ----- ------ ----- ----- ---- ------ ----- ------- -----

YEAR ENDED DECEMBER 31, 1999
-----------------------------------------------------------------------------------------------
PRINTED
PRINTERS INK SUBSTRATES MATERIALS OTHERS TOTAL
(55.1%) (23.1%) (12.1%) (4%) (5.7%) (100%)
----------- -------------- -------------- ------------ -------------- ---------------
REGION $ % $ % $ % $ % $ % $ %
------ - - - - - - - - - - - -

Middle-East & Africa....... 2,408 7.2% 1,428 10.2% 785 10.8% -- -- 330 9.5% 4,951 8.2%
Asia....................... 6,357 19% 2,792 19.9% 468 6.4% -- -- 378 10.9% 9,995 16.5%
Europe..................... 11,017 32.9% 3,533 25.1% 2,898 39.8% 2,460 100% 1,540 44.4% 21,448 35.3%
North & Latin America...... 13,692 40.9% 6,291 44.8% 3,123 43% -- -- 1,219 35.2% 24,325 40%
------ ----- ------ ----- ------ ----- ----- ---- ------ ----- ------- -----
Total Revenues.......... 33,474 100% 14,044 100% 7,274 100% 2,460 100% 3,467 100% 60,719 100%
------ ----- ------ ----- ------ ----- ----- ---- ------ ----- ------- -----
------ ----- ------ ----- ------ ----- ----- ---- ------ ----- ------- -----

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated certain line items
from NUR's statement of operations as a percentage of NUR's sales:

YEARS ENDED DECEMBER 31,
---------------------------
1999(1) 2000(2) 2001(3)
------- ------- -------

Revenues.................................................... 100% 100% 100%
Cost of sales of printers and related products.......... 50.1 52.6 59.8
Cost of sales of printed materials...................... 2.2 -- --
Inventory write-off..................................... -- -- 3.2
Gross profit............................................ 47.7 47.4 37.0
Research and development expenses....................... 9.1 12.3 9.0
Research and development expenses net................... 7.9 12.0 8.5
Selling expenses, net................................... 15.6 14.3 15.5
General and administrative expenses..................... 10.3 10.5 11.1
Amortization of goodwill and other intangible assets.... -- 1.1 2.4
Operating income (loss)................................. 13.8 9.5 (3.4)
Financial expenses, net................................. 1 1.1 2.8
Other income (expense), net............................. 0.3 -- 0.3
Taxes on income (tax benefit)........................... 1.3 1.0 (0.2)
Minority interest in earnings of a subsidiary........... 0.05 -- --
Equity in earnings (losses) of affiliates, net.......... 0.1 0.4 (0.1)
Net income (loss)....................................... 11.8 7.0 (6.0)

- ---------

(1) Represents NUR on a consolidated basis with our subsidiaries NUR Media
Solutions, NUR America, NUR Europe, NUR Shanghai, NUR Asia Pacific and NUR
Germany (six months). We owned 84% of NUR Germany; this subsidiary was sold
during the third quarter of 1999.

(2) Represents financial information for NUR together with our subsidiaries NUR
Media Solutions, NUR America, NUR Europe, NUR Shanghai, NUR Asia Pacific,
Salsa Digital Printers Ltd. (six months), NUR Hungary Trading and Software
Licensing Limited Liability Company, NUR DO Brazil Ltda., Encre Consumables
B.V and NUR Japan.

(3) Represents financial information for NUR together with our subsidiaries NUR
Media Solutions, NUR America, NUR Europe, NUR Shanghai, NUR Asia Pacific,
Salsa Digital Printers, NUR Hungary Trading and Software Licensing Limited
Liability Company, NUR DO Brazil Ltda., Encre Consumables B.V, NUR Japan and
Stillachem. In May 2001, we purchased the remaining 49.9% of Stillachem S.A.
We previously owned 50.1% of this subsidiary.

YEAR ENDED DECEMBER 31, 2001 COMPARED WITH YEAR ENDED DECEMBER 31, 2000

Revenues. Revenues were approximately $120.4 million in the year ended
December 31, 2001, compared to approximately $121.9 million in the year ended
December 31, 2000. This decrease was attributable to a weakened macroeconomic
environment, a slowdown in capital equipment investments and reduced demand for
printing consumables.

Gross Profit. Gross profit was approximately $48.5 million, excluding
one-time inventory write-offs of $4.0 million, and $44.5 million including such
charges in the year ended December 31, 2001, compared to $57.8 million in the
year ended December 31, 2000. The decrease in gross profits in 2001 was
primarily due to a decline in our sales which subsequently led to an increase in
the overhead and fixed costs in the cost of goods sold as a percentage of sales.
In addition, the gross margins decreased as a result of the pressure we have
experienced on the price of our products throughout 2001.

Expenses. Research and development costs, net of government grants, were
approximately $10.2 million in the year ended December 31, 2001, compared to
$14.6 million in the year ended December 31, 2000. The expenses in 2000 included
a one-time $4.3 million write-off of research and development in-process due to
the Salsa Digital asset purchase transaction which was affected in July

2000. Accordingly, research and development expenses remained stable in 2001.
NUR expects to continue to invest significant resources in research and
development programs for new products and enhancements of existing products.

Selling and marketing expenses were approximately $18.7 million in the year
ended December 31, 2001 compared to approximately $17.4 million in the year
ended December 31, 2000. As of December 31, 2001, NUR received $1.27 million
from the Marketing Fund for selling and marketing expenses. NUR is no longer
eligible for support from the Marketing Fund due to its reaching the maximum
allowed export revenues. The majority of sales and marketing expenses are
incurred by the following distribution subsidiaries: NUR Europe, NUR America,
NUR Shanghai and NUR Asia Pacific.

General and administrative expenses were approximately $19.5 million,
including amortization of goodwill and other intangible assets of $2.9 million
and restructuring and other one-time expenses of $3.2 million, for the year
ended December 31, 2001 compared to approximately $14.2 million in the year
ended December 31, 2000. The restructuring consisted of a series of strategic
initiatives intended to further reduce costs and increase efficiency following
the acquisition of Salsa Digital, including the following: consolidating the
operations of NUR America and Salsa Digital Printing into one facility in
San-Antonio, TX; consolidating the operations of Stillachem into the facility of
Salsa Digital Printing in San Antonio; and, consolidating the Company's research
and development operations into the Company's facility in Lod, Israel.

Financial expenses, net increased to $3.3 million in the year ended
December 31, 2001 compared to $1.4 million in the year ended December 31, 2000.
This increase was mainly due to interest expenses in respect of long-term bank
loans taken to finance the cash portion of the Salsa Digital acquisition.

Taxes. Tax benefit was $(0.2) million in the year ended December 31, 2001 as
compared to tax expenses of $1.2 million in the year ended December 31, 2000.
The tax benefit is attributed to losses incurred by the Company in 2001.

YEAR ENDED DECEMBER 31, 2000 COMPARED WITH YEAR ENDED DECEMBER 31, 1999

Revenues. Total revenues increased by 100.8% to approximately $121.9 million
in the year ended December 31, 2000, from approximately $60.7 million in the
year ended December 31, 1999, as a result of both the purchase of substantially
all of the assets of Salsa Digital Ltd. in July 2000 and internally generated
growth. Excluding NUR Germany results from the year ended December 31, 1999 (a
subsidiary that was sold during the third quarter of 1999), total revenues in
2000 increased by 109.5% compared to $58.2 million in 1999. NUR's total
revenues, including Salsa Digital on a pro forma basis (assuming the Salsa
Digital acquisition had been consummated as of January 1, 1999), increased by
48.6% to approximately $139.4 million in the year ended December 31, 2000, from
approximately $93.8 million in the year ended December 31, 1999.

Gross Profit. Gross profit was approximately $57.8 million in the year ended
December 31, 2000, an increase of 100.0% from $28.9 million in the year ended
December 31, 1999. Gross profit as a percentage of revenues was 47.4% in the
year ended December 31, 2000 compared to 47.7% in the year ended December 31,
1999. Excluding NUR Germany, (a subsidiary that was sold during the third
quarter of 1999), gross profits from the year ended December 31, 2000 increased
by 107.9%, $57.8 million in the year ended December 31, 2000 as compared to
$27.8 million in 1999. Gross profits on a pro forma basis were approximately
$65.2 million in the year ended December 31, 2000 compared to $42.4 million in
the year ended December 31, 1999, an increase of 53.8%.

Expenses. Research and development costs, net of government grants, were
approximately $14.6 million in the year ended December 31, 2000, compared to
$4.8 million in the year ended December 31, 1999, an increase of 204.2%. The
increase occurred as a result of NUR's internal growth and the purchase of
substantially all of the assets of Salsa Digital Ltd. in July 2000 and included
a one time $4.3 million write-off of research and development in-process due to
the Salsa Digital asset purchase transaction. NUR expects to continue to invest
significant resources in our research and development programs for new products
and enhancements of existing products. NUR expects that research and development
expenses will continue to increase in absolute dollar terms as compared to
previous years.

Net research and development costs on a pro forma basis were approximately $9.6
million in the year ended December 31, 2000 compared to $6.7 million in the year
ended December 31, 1999, an increase of 43.3%.

Selling and marketing expenses were approximately $17.3 million in the year
ended December 31, 2000 compared to approximately $9.5 million in the year ended
December 31, 1999, an increase of 82.1%. The increase is due to NUR's internal
growth and the purchase of substantially all of the assets of Salsa Digital Ltd.
in July 2000. The majority of sales and marketing expenses are incurred by the
following distribution subsidiaries, NUR Europe, NUR America, NUR Shanghai and
NUR Asia Pacific. Selling and marketing expenses on a pro forma basis were
approximately $22.7 million in the year ended December 31, 2000 compared to
$14.5 million in the year ended December 31, 1999, an increase of 56.6%.

General and administrative expenses were approximately $14.2 million,
including amortization of goodwill and other intangible assets in the year ended
December 31, 2000, compared to approximately $6.3 million in the year ended
December 31, 1999, representing approximately 125% increase. General and
administrative expenses on a pro forma basis were approximately $17.2 million in
the year ended December 31, 2000 compared to $15.9 million in the year ended
December 31, 1999, an increase of 8.2%. This increase is a result of both the
purchase of substantially all of the assets of Salsa Digital Ltd. in July 2000
and approximately $0.6 million of integration costs and $1.4 million of
intangibles assets amortization costs, both related to the Salsa Digital asset
purchase transaction.

Financial expenses, net increased to $1.4 million in the year ended
December 31, 2000 from $0.6 million in the year ended December 31, 1999, a 133%
increase. This increase is mainly due to interest expenses in respect of loans
taken to finance the cash portion of the Salsa Digital asset purchase.

Taxes. Taxes on income were $1.2 million in the year ended December 31, 2000
as compared to $0.8 million in the year ended December 31, 1999, an increase of
50.0%. Taxes on a pro forma basis were approximately $1.2 million in the year
ended December 31, 2000 compared to $0.8 million in the year ended December 31,
1999, an increase of 50%.

IMPACT OF INFLATION, DEVALUATION AND FLUCTUATION OF CURRENCIES

Most of NUR's sales are in U.S. dollars. In addition, a substantial portion
of costs are incurred outside Israel in U.S. dollars or paid in U.S. dollars or
in NIS linked to the exchange rate of the U.S. dollar. Costs not effectively
denominated in U.S. dollars are translated to U.S. dollars, when recorded, at
prevailing exchange rates for the purposes of NUR's consolidated financial
statements, and will increase if the rate of inflation in Israel exceeds the
devaluation of the Israeli currency against the U.S. dollar or if the timing of
such devaluations were to lag considerably behind inflation. Consequently, NUR
is and will be affected by changes in the prevailing NIS/U.S. dollar exchange
rate.

NUR might also be affected by the U.S. dollar exchange rate to the Euro.

During 1992 and 1993, the value of the U.S. dollar increased relative to
major currencies and the rate of inflation in Israel exceeded the rate in the
United States. In 1995, 1996 and 1997 the value of the U.S. dollar decreased
relative to major currencies, and the rate of inflation in Israel exceeded the
rate in the United States. The annual rate of inflation in Israel in 1999 was
1.3%, decreased to 0% in 2000 and increased to 1.4% in the year ended
December 31, 2001. The NIS was devalued against the U.S. dollar by approximately
0.16% in 1999, by approximately 2.7% in 2000 and by approximately 9.3% in 2001.
NUR cannot predict whether the rate of devaluation of the NIS against the U.S.
dollar will continue to exceed the rate of inflation in the future and whether
these conditions will have a material adverse effect on NUR.

The representative dollar exchange rate for converting the NIS to dollars,
as reported by the Bank of Israel, was NIS 4.416 for one dollar U.S. on
December 31, 2001. The representative dollar exchange rate was NIS 4.041 on
December 31, 2000 and NIS 4.153 on December 31, 1999.

NUR's transactions and balances denominated in U.S. dollars are presented at
their original amounts. Non-dollar transactions and balances have been measured
into U.S. dollars in accordance with Statement 52 of the FASB. All transaction
gains and losses from remeasurement of monetary balance

sheet items denominated in non-dollar currencies are reflected in the statement
of operations as financial income or expenses, as appropriate. The average
exchange rates during the years ended December 31, 1999, 2000 and 2001 were NIS
4.077, 4.024 and 4.205 for one-dollar U.S., respectively. The exchange rate as
of May 31, 2002 was NIS 4.916 for one dollar.

LIQUIDITY AND CAPITAL RESOURCES

During the past several years, we have funded our operations primarily
through the private sale of our equity securities, commercial bank loans and
through cash generated from operations.

OPERATING ACTIVITIES

In the year ended December 31, 2001, NUR had net loss of $(7.2) million. Net
cash used in operating activities was approximately $0.6 million. The main
changes in NUR's working capital were (i) a decrease of approximately $7.0
million in trade accounts receivable and (ii) a decrease of approximately $3.2
million other accounts payable and accrued expenses.

In the year ended December 31, 2000, NUR had net income of $8.5 million. Net
cash used in operating activities was approximately $10.2 million. The main
changes in NUR's working capital were (i) an increase of approximately $25.7
million in trade accounts receivable, (ii) an increase of approximately $9.4
million in inventories, (iii) an increase of approximately $7.2 million in trade
payables, and (iv) an increase of approximately $4.7 million in accrued expenses
and other liabilities.

In the year ended December 31, 1999, NUR had net income of $7.2 million. Net
cash provided by operating activities was approximately $4.0 million. The main
changes in NUR's working capital were (i) an increase of approximately $3.6
million in trade accounts receivable, (ii) an increase of approximately $6.7
million in inventories, (iii) an increase of approximately $2.6 million in trade
payables, and (iv) an increase of approximately $3.1 million in accrued expenses
and other liabilities.

INVESTING ACTIVITIES

Net cash used in investing activities was approximately $8.1 million in the
year ended December 31, 2001, consisting mainly of purchase, net of property and
equipment. Net cash used in investing activities was approximately $21.8 million
in the year ended December 31, 2000, consisting mainly of $18.7 million in
respect of the purchase of the Salsa Digital assets and liabilities and $3.2
million for equipment. Net cash used in investing activities was approximately
$1.4 million in the year ended December 31, 1999, including $0.7 million
provided by realization of investment in a subsidiary.

FINANCING ACTIVITIES

Net cash provided by financing activities in the year ended December 31,
2001 was approximately $2.5 million derived from an increase in the Company's
short-term bank credit.

In January 2002, NUR sold an aggregate of 2,333,333 ordinary shares in a
private placement, at a price of $3.00 per share, to the Investment Corp. of
United Mizrahi Bank Ltd. generating total proceeds of $7.0 million. The
Investment Corp. also received warrants to purchase an additional 612,500
ordinary shares at an exercise price of $4.50 per share, exercisable until
January 17, 2006.

NUR maintained long- and short-term credit facilities in an aggregate amount
of approximately $38.8 million at December 31, 2001. At December 31, 2001, NUR
had approximately $33.7 million in long-term loans from banks and others, $2.0
million of which is payable within 12 months and $5.1 in short-term bank credit
and short-term loans. NUR's long term loans are linked to the U.S. dollar and
the Euro bearing interest at a rate ranging between 4.95% and 6.00%. In February
2002, the Company reached an agreement with the banks to reschedule the payment
terms of its long-term loans for certain terms and conditions, deferring payment
of the majority of the principal until 2005.

As of December 31, 2001, total current assets of NUR amounted to
approximately $79.3 million, out of which $12.5 million was in cash and cash
equivalents, compared with total current liabilities of

approximately $37.4 million. The decrease in current assets is attributable
primarily to the decrease in accounts receivable.

Net cash provided by financing activities in the year ended December 31,
2000 was approximately $42.1 million. In July and December 2000, we took
long-term commercial bank loans of $25 million and $10 million, respectively,
primarily to finance the cash portion of the Salsa Digital purchase and other
acquisition costs. In September 2000, NUR consummated a private placement
through Investec Investment Banking-Israel. Several investors purchased an
aggregate of 748,223 ordinary shares at a price of $13.365 per share for
aggregate net proceeds of $9.4 million.

In the year ended December 31, 1999, net cash provided by financing
activities was approximately $4.4 million. In September 1999, NUR sold an
aggregate of 600,000 ordinary shares and warrants to purchase 150,000 ordinary
shares, for aggregate proceeds of $3.3 million, in a private placement to ISAL
Amlat Investment (1993) Ltd. and Dovrat & Co. Ltd. In February 2000, ISAL and
Dovrat exercised the warrants at an exercise price of $8.00 per share for
aggregate proceeds of $1.2 million.

We have granted several security interests in our assets to various banks
and leasing companies to secure bank credit lines and lease facilities.

CURRENT AND FUTURE CAPITAL NEEDS

As a result of decreasing sales, NUR instituted a growth-renewal program in
May 2002 to complement certain restructuring steps already taken during 2001.
Taken together, we believe these efforts will provide NUR with a stronger
operational and capital position. First, we implemented a corporate plan in
order to create a more centralized, functional and cost-effective organization.
Second, in 2001, we reduced our number of employees from 528 at December 31,
2000 to 404 at December 31, 2001, or approximately 23%. During the second
quarter of 2002, we further reduced headcount by another 60 employees or 15% of
the workforce, and implemented salary cuts for most of the remaining employees.
Third, we are working to improve and expand our portfolio of products. Total
restructuring and other one-time expenses in 2001 amounted to $3.4 million. In
addition, in 2001, NUR incurred one-time inventory write-off of approximately
$4.0 million, which was associated with more efficient product rationalization
such as, among other things, the decrease of spare parts inventory.

We believe that our expected revenues from operations financing. together with ourexisting
capital resources and credit facilities will be sufficient to fund ourNUR's current
activities at their present rate without our
planned expansion through July 2000. If we want
We need to raise more to proceed with the planned expansion of our
money to successfully operations, werate. NUR will require additional funds, to
run our business. be
raised through public or private financing of debt or equity, if we seek to
ensureexpand our ability to maintain
our operations after December 1999.operations. If such funds are not raised, we aremay be unable to
raise such funds, we will have to reduce
or eliminate certain plannedincrease expenditures for research and development, production, or marketing of
our products, any one of which could have a
negative impactan adverse effect on our financial results.NUR's business.
There can be no assurance that such additional financing will be available or
that, if available, it will be obtained on terms favorable to NUR. We currently
have no commitments for additional financing and are exploring the possibility
of raising additional capital.

In this regard, how much money we will need depends onNUR's capital requirements and level of expenses depend upon
numerous factors, including the scope and success of our marketing and customer
service efforts, and of our research and development activities, and the demand
for our products and services. We cannot guarantee
that additional financing will be available or
that, if

available, it will be obtained on terms we
find favorable. We currently have no commitments
for additional financing.

We depend on a few key We are highly dependent upon the sale of our
products in a business principal products, the NUR Blueboard Printers and
subject to rapid the NUR Fresco printer. Rapid changes in
technological change. technology, customer preferences and evolving
industry standards increasingly characterize the
market for our printers. As a result of these
factors, our growth and future financial
performance will depend upon our ability to develop
and market new products and keep pace with the
latest technological advances in the industry. We
must also improve our existing products to
accommodate technological advances and customer
preferences. During 1997 and 1998, we
Our success depends invested approximately $1.72 million and $5.03
on the research and million, respectively, in research and development
development of new projects of which, in 1998, $1.95 million was
products. related to the acquisition of technology that
caused a one-time write-off assigned to research
and development. Our business could seriously
suffer if we fail to anticipate or respond
adequately to changes in technology and customer
preferences, or if our products are delayed in
their development or introduction. Other events
beyond our control could also hurt our business.
For example, one of our competitors could develop
and market a printer that customers prefer over our
printers. We cannot make assurances that we will
successfully develop any new products. Finally, we
cannot predict how the introduction of new products
by our competitors will affect sales of our
existing products.

Our new product, the The NUR Fresco was introduced in February 1999 and
NUR Fresco, is still is still in beta testing. Much of our success may
in beta testing. depend upon our ability to complete testing and
introduce the product to its intended market.

Over the next three years In September 1998 we acquired all rights to a
we will make significant certain D-O-D inkjet technology suitable for large
royalty payments. format digital printers. Over the next three
years we must pay royalty payments to the seller of
up to $1.3 million. If we do not make certain
minimum royalty payments, the seller of the
technology will have the option to buy-back the
technology. See "Item 9: Management's Discussion
and Analysis of Financial Condition and Results of
Operations--General--Certain Royalty Obligations."

Our success depends on our We currently purchase all of the ink and ink-jets
suppliers and used in our NUR Blueboard Printers from one
subcontractors. supplier, Imaje, a French manufacturer of
ink-related products, and purchase all of our
ink-jet printheads used in the NUR Fresco from
another supplier. We have been able to obtain
adequate supplies of ink and ink-jets in the past,
although Imaje has occasionally delivered the
Imaje is our only supplies late. If these sole suppliers experience
supplier of ink and any problem that results in production delays, our
ink-jets for the NUR sales to new customers and existing customers that
Blueboard Printers. rely on our ink and/or ink-jet components to
operate their printers could be hurt. Because the
success of our business depends on the sale of our
printers, such a supply problem could have a severe
effect on our financial results. Also, if Imaje
reduces or changes the credit or payment terms it
extends to us, our business could be hurt.

We rely on a limited We employ a limited number of unaffiliated
number of subcontractors to manufacture components for our
subcontractors. printers. We currently employ one independent
sub-contractor to assemble our NUR Blueboard
printers. Our subcontractors have, in the past,
been late in delivering components. We have,
however, been able to obtain adequate supplies of
the components and raw materials necessary to
produce our printers and we have not had any
serious

problems with our subcontractors. Because we rely
on subcontractors, we cannot be sure that we will
be able to maintain an adequate supply of
components. Moreover, we cannot be sure that any of
the components we purchase will satisfy our quality
standards and be delivered on time. Our business
could suffer if we fail to maintain our
relationships with our subcontractors or fail to
develop alternative sources for our printer
components. Also, as our business grows, we will
need to purchase greater quantities of components
on a timely basis, and any delay in supply could
hurt our sales. We cannot guarantee that we will
develop alternative sources of production for our
products or that we would be able to replace the
sub-contractor that assembles our NUR Blueboard
printers, if required.

We recently replaced our Scitex Corporation and its subsidiaries were,
largest distributor with through 1998, the most significant outside
our own distribution distributors of our products, concentrating in the
operation. Far East and the Middle East. In the fiscal years
ended December 31, 1997, and 1998, our sales to
Scitex Corporation and its subsidiaries accounted
for about 11.2% and 10.6% of our total sales,
respectively. In the first four months of 1999, we
replaced Scitex and its subsidiaries with our own
distribution operations in Shanghai, China and
Tel-Aviv, Israel. Our business could suffer as we
make such transition due to increased costs and
uncertainties associated with the development of
such business. Our business could also suffer if
our efforts prove unsuccessful.

Our business is extremely The printing equipment industry is extremely
competitive. competitive and many of our competitors have
greater management, financial, technical,
manufacturing, marketing, sales, distribution, and
other resources than we do. Our ability to
compete depends on factors both within and outside
of our control, including the performance and
We have numerous acceptance of our current printers and any
competitors in the products we develop in the future. We compete
market for our against several companies that market digital
printers. printing systems based on electrostatic, D-O-D,
airbrush, and other technologies. We also face
competition from existing conventional WF and SWF
printing methods, including hand painting, screen
printing, and offset printing. Our competitors
could develop new products, with existing or new
technology, that could be competitive in price and
performance with our printers. We can offer no
assurance that we can compete effectively with any
such products.

We also face We also compete with independent manufacturers in
competition in the the market for printer supplies, in particular,
market for printing the inks we supply. In 1997 and 1998, ink sales
supplies. accounted for 21% and 23.6% of our total sales,
respectively. We cannot guarantee that we will be
able to remain the exclusive or even principal ink
manufacturer for our printers. We recently entered
the substrate business, which is also highly
competitive and characterized by a large number of
suppliers worldwide. We are developing substrates
through subcontractors that have a high added-value
when used with our printers. We believe we are well
positioned, both in our technical knowledge and in
the minds of our customers, to succeed in selling
high value-added substrates to our customers. We
can not assure you that we will be able to compete
effectively or achieve significant revenues in the
substrate business.

We depend on our key Our success depends to a significant extent upon
employees. the contributions of key personnel and our senior
executives. Our business could seriously suffer if
one or more of our key personnel or senior
executives were to leave our company. In addition,
we do not have, and do not contemplate getting,

"key-man" life insurance for any of our key
employees. Our future success will also depend in
part on our continuing ability to retain our key
personnel and senior executives and to attract
other highly qualified employees. We cannot assure
our continued success in attracting or retaining
highly qualified personnel.

We rely on trade secrets, We rely on a combination of trade secrets,
patents and proprietary licenses, patents, and non-disclosure and
rights. confidentiality agreements to establish and
protect our proprietary rights in our products. We
cannot guarantee that our existing patents or any
future patents will not be challenged, invalidated,
or circumvented, or that our competitors will not
independently develop or patent technologies that
are substantially equivalent or superior to our
technology. We cannot be sure that we will receive
further patent protection in Israel, the United
States, or elsewhere, for existing or new products
or applications. Even if we do secure further
patent protection, we cannot guarantee it will be
effective. In some countries, meaningful patent
protection is not available. We are not aware of
any infringement claims against us involving our
proprietary rights. Third parties may assert
infringement claims against us in the future, and
the cost of responding to such assertions,
regardless of their validity, could be significant.
In addition, such claims could be found to be valid
and result in large judgments against us. Even if
such claims are not valid, the cost could be
substantial to protect our patent rights. See "Item
3: Legal Proceedings."

It is difficult to We believe that our success is less dependent upon
protect our the legal protection afforded by patent and other
proprietary rights. proprietary rights than on the knowledge, ability,
experience, and technological expertise of our
employees and our key suppliers. Our policy is to
have employees sign confidentiality agreements, to
have selected parties, including key suppliers,
sub-contractors, and distributors, sign
non-competition agreements, and to have third
parties that we deal with sign non-disclosure
agreements. Although we take precautionary measures
to protect our trade secrets, we cannot guarantee
that others will not acquire equivalent trade
secrets or steal our exclusive technology.
Moreover, we may not be able to meaningfully
protect our rights that are not protected by
patents.

We rely on international Our printers and supplies are sold worldwide, with
sales. revenues generated in various currencies. There
are a number of risks inherent in international
business activities, including unexpected changes
in regulatory requirements, political instability,
tariffs and other trade barriers, as well as the
burdens of complying with different foreign laws.
To date, fortunately, these risks have not
materially affected our business or financial
situation. We cannot predict, however, when
exchange or price controls or other restrictions on
the conversion of foreign currencies could impact
our business.

Currency fluctuations Because we have revenuesdemand for NUR's products and expenses in various
are a risk we face on currencies, including the U.S. dollar, the NIS,
a daily basis. and certain European currencies, our financial
results are subject to the effects of fluctuations
of foreign currency exchange rates. In the future,
currency fluctuations could hurt our profitability.
We do not hedge against fluctuations in currency
exchange rates, but we may do soservices. Moreover, in the future.

Environmental concerns. We mix the ink used in our NUR Blueboard Printers
with a methyl ethyl-ketone ("MEK") solvent. MEK
is a hazardous substance and is subject to

various government regulations relating to its
transfer, handling, packaging, use, and disposal.
We store the ink at warehouses in Europe, the
United States and Israel, and a shipping company
ships it at our direction. We face potential
responsibility for problems that may arise when we
ship the ink to customers. We believe that we are
in material compliance with all applicable
environmental laws and regulations. If we fail to
comply with these laws or an accident involving our
ink waste or MEK occurs then our business and
financial results could be adversely affected.

We rely on government We have been favorably affected by certain Israeli
grants, tax benefits, and Belgian Government programs and tax
other funding from and legislation principally related to research and
third parties. development and sales and marketing grants and
capital investment incentives. The Company's
operations could be adversely affected if these
programs or tax benefits are reduced or eliminated
and not replaced with equivalent programs or
benefits, or if the Company's ability to
participate in these programs were significantly
reduced. There can be no assurance that such
programs and tax legislation will continue in the
future or that the available benefits will not be
reduced or that the Company will continue to meet
the conditions to benefit from such programs and
legislation.

We receive tax Pursuant to the Law of Encouragement of Capital
benefits from the Investments, the Israeli government has granted
Israeli government. "Approved Enterprise" status to some of our
production facilities. Consequently, these
facilities are eligible for certain tax benefits
for the first several years in which they generate
taxable income. If we fail to obtain additional
grants, or if our tax benefits are significantly
reduced, our financial condition could suffer.

We must comply with To receive grants and tax benefits, we must comply
conditions to receive with a number of conditions. If we fail to comply
grants and tax with these conditions, the grants and tax benefits
benefits. that we receive could be partially or fully
canceled and we would be forced to refund the
amountcourse of the
canceled benefits received, adjusted
for inflation and interest. We believe that we have
operated and will continue to operate in compliance
with the required conditions, although we cannot be
sure. We further believe that the likelihood is
remote that we will be required to refund grants or
tax benefits that we receive from the OCS, the
Marketing Fund, and under our "Approved Enterprise"
status.

We have experienced In the past we experienced financial
financial difficulties in difficulties. As of December 31, 1996, we have
the past. written off $3.8 million due to outstanding debts
owed to us by Moshe Nur, our previous Chairman of
the Board and former major shareholder, and
companies controlled by Mr. Nur. These companies
are now in various insolvency proceedings. The
written off debts resulted, in part, from
ineffective controls, which failed to prevent
unauthorized transactions and the misappropriation
of funds. These difficulties resulted in losses of
$10.1 million in the year ended December 31, 1996,
and reduced our shareholders' equity to
approximately $1.8 million at such date. In April
1997, Moshe Nur transferred control of the Company
and subsequently resigned from the Board of
Directors. We have reached a settlement agreement
resolving all outstanding material claims related
to the insolvencybankruptcy proceedings of Moshe Nur and his
companies. Despite this settlement,the companies controlled by him, NUR in
the future
we may be exposed to claims arising from the actions of Moshe Nur's actions.Nur
despite the settlement of all material claims related to such persons and
entities. Liabilities arising from any such claims may be material.

RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

NUR's research and development efforts, which currently engage approximately
53 employees, are focused on developing new products and technologies; enhancing
the quality and performance relative to price of our existing products; reducing
manufacturing costs; upgrading and expanding our product line through the
development of additional features; and improving functionality in response to
market demand.

There are two research and development facilities, a facility at our
headquarters in Lod, Israel, and a facility in Louvain-la-Neuve, Belgium.

Total research and development expenses, before royalty bearing grants, were
approximately $5.5 million, $15.0 million and $10.9 million, in the years ended
December 31, 1999, 2000 and 2001, respectively. In the year ended December 31,
2000, $4.3 million of these expenses were related to the purchase of assets from
Salsa Digital, resulting in a one time $4.3 million write-off assigned to
research and development. Salsa Digital invested approximately $1.8 million and
$0.6 million for the years ended December 31, 1999 and the first six months of
2000, respectively. Research and development expenditures are composed
principally of salaries for employees, the hiring of subcontractors,
depreciation of capital investment in infrastructure for software and electronic
designs, and prototype material costs. See 'ITEM 4: Information on NUR-Research
and Development.'

TREND INFORMATION

PRINTERS SALES

Revenues from sales of the Company's Printers, which comprise 54% of the
Company's total revenues in 2001, declined by 18% in 2001 compared to 2000. We
believe that following a recovery of global economic conditions, the use of wide
format and super wide format printing, such as that produced by the Company's
Printers, should grow, and that the portion of the market serviced by digital
printing should continue to increase. There can be no assurance, however, that
NUR will increase its market share in the wide and super wide format market or
increase its revenues from sales of its printers.

CONSUMABLES SALES

During the past few years, NUR has focused on a recurring revenues strategy
for consumables. The consumable business is composed of two families of
products -- specialized inks and specialized substrates. Revenues from
consumables grew by 30% in 2001 compared to 2000. NUR believes that, on the one
hand, the growth rate in the sale of its consumables during 2002 will be
negatively affected by competitive pressures on pricing and reduced printing
output by our customers due to slow economic conditions worldwide and, on the
other hand, positively affected by the growth of our installed customer base,
likely resulting in a growth rate approximating the growth rate of the installed
base of the Company's Printers.

GROSS MARGINS

Following our financial results for the first quarter of 2002, we expect our
gross margins levels in 2002 to be lower than those realized in 2001. Although
we have made certain reductions in the manufacturing cost of our existing
products, we have experienced a downward price pressure on these products. In
addition, as our sales decline, the overhead and fixed costs in the cost of
goods sold has increased as a percentage of sales, reducing the gross margins.
NUR is currently implementing a plan to defendimprove operational efficiencies
worldwide, for more information see ' -- Restructuring Plans.'

INDUSTRY

With the cost of digital printing expected to decrease and the ability of
digital technology expected to produce shorter runs more economically, we
believe that the use of wide format and super wide format printing, such as that
produced by the Company's Printers, should grow, and that the portion of the
market serviced by digital printing should continue to increase. The ability to
produce wide format and super wide format images digitally has also opened new
media opportunities for advertisers, such as mural printing, carpet printing,
new forms of fleet graphics printing. The growth in demand for wide format
digital printers is fueled both by the replacement of conventional print methods
and the development of new printing applications.

Although we expect the above trends to continue worldwide, the digital
printing penetration rate to new markets may differ geographically.

RESTRUCTURING PLANS

During 2001, NUR announced and implemented a restructuring plan in order to
align its cost structure to more conservative growth rates. NUR's restructuring
plan was primarily related to the reorganization of operating activities, such
as the centralization of certain manufacturing operations, the relocation of
activities, a reduction in workforce and a reduction in other administrative
costs. Total restructuring and other one-time expenses amounted to $3.2 million.
In addition, NUR incurred one-time inventory write-offs of approximately $4.0
million associated with more efficient product rationalization such as, among
other things, the decrease of spare parts inventory.

Following the financial results of the Company in the first quarter of 2002,
the Company initiated an additional restructuring plan to complement the
restructuring steps already taken during 2001. First, NUR implemented a
corporate plan in order to create a more centralized, functional and
cost-effective organization. Second, the Company further reduced headcount by 60
positions during the second quarter of 2002, and implemented salary reductions
for most of the remaining employees. Third, NUR is working to improve and expand
our company may be
substantial.

We have recently changed In April 1997, when Moshe Nur transferred controlportfolio of products in an effort to increase market share and spur growth.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

DIRECTORS AND SENIOR MANAGEMENT

The executive officers, senior managers and directors of NUR are as follows:

NAME AGE POSITION WITH NUR
---- --- -----------------

Dan Purjes(2).................. 52 Chairman of the Board of Directors
Erez Shachar(3)................ 38 President, Chief Executive Officer and Director
Hilel E. Kremer................ 40 Vice President of Finance and Chief Financial
Officer
Eliahu Shalev.................. 52 Vice President of Research and Development and
Chief Operating Officer
Ron Michael.................... 34 Vice President of Marketing
Alon Avnon..................... 39 Vice President of Sales and Business Development
Doron Tsur(1)(2)(5)............ 38 Director
Robert F. Hussey (1)(2)........ 53 Director
Oded Akselrod (6).............. 56 Director
Orit Leitman (1)(2)(4)......... 43 Director
Gideon Shenholz (1)(3)(4)...... 48 Director

- ---------

(1) Member of NUR's Audit Committee.

(2) Member of NUR's Stock Option and Compensation Committee.

(3) Member of the NUR's Non-Employee Director Share Option Plan Committee.

(4) External Director.

(5) Elected to serve on the Board of Directors pursuant to a voting arrangement
between Dan Purjes and Isal Amlat Investments (1993) Ltd. For more
information, see 'ITEM 10.B: Memorandum of Association and Amended and
Restated Articles of Association -- Rights of Shareholders.'

(6) Elected to serve on the Board of Directors pursuant to a voting arrangement
between Dan Purjes and the Investment Corp. of United Mizrahi Bank Ltd. For
more information, see 'ITEM 10.B: Memorandum of Association and Amended and
Restated Articles of Association -- Rights of Shareholders.'

The address of each of our leadershipexecutive officers, senior managers and have ofdirectors
is c/o NUR Macroprinters Ltd., we replaced most12 Abba Hilel Silver St., PO. Box 1281, Lod
71111, Israel.

Dan Purjes has served as the Chairman of the limited management members of our Board of Directors. Wethe Company since
April 1997. Mr. Purjes is the Chairman and Chief Executive Officer of FAS
Holdings, Inc., the parent company of First Allied Securities, Inc., an
investment banking and brokerage firm, which is a member of the NASD.
Previously, Mr. Purjes was the Chairman and Chief Executive Officer of
Josephthal Group, Inc., the parent company of Josephthal & Co. Inc.
('Josephthal'), an investment banking and brokerage firm, which was a member of
the New York Stock Exchange. Prior to joining Josephthal in 1985, Mr. Purjes
served as Vice President to a number of securities firms, including Bear Stearns
& Co. and L.F. Rothschild Unterberg Towbin, in their corporate finance and
brokerage sales divisions. He began his Wall Street career at Morgan Stanley &
Co. in 1978 as a director of their computer systems department. Prior to that,
Mr. Purjes was a manager at Citibank and at Philip Morris International in their
computer systems areas. Mr. Purjes earned B.S. and M.S. degrees in Computer
Science from the City College of New York School of Engineering.

Erez Shachar has served as NUR's President and Chief Executive Officer since
July 1997 and as a Director of NUR since October 1997. Mr. Shachar has also
made
resourcesserved as a Director of NUR Europe and NUR America since October 1997, of NUR
Media Solutions since January 1998, of NUR Asia Pacific since January 1999, and
of NUR Pro Engineering since September 1999 and of Salsa Digital Printers since
May 2000. Prior to manage futurejoining NUR, from 1989 to 1997, Mr. Shachar served in various
research and development, marketing, sales, and senior management positions with
Scitex Corporation. Mr. Shachar's last position with Scitex was Vice President
of Sales and Marketing of Scitex Europe, and prior thereto,

Mr. Shachar held several management changes at such timepositions in the marketing organization of Scitex
Europe. Prior to joining Scitex Europe, Mr. Shachar was a software developer
within the research and growth. recently changed ourdevelopment group of Scitex. Mr. Shachar holds a B.Sc.
in Mathematics and Computer Science from Tel Aviv University, and an M.B.A.
degree from INSEAD, France. Mr. Shachar is also a director of Eltek Ltd., a
publicly held corporation.

Hilel E. Kremer has served as the Chief Financial Officer. Our
recent growthOfficer and Vice President
of Finance of NUR since December 1998. Mr. Kremer has placed,also served as a Director
of NUR Europe, NUR America and will continueNUR Media Solutions since December 1998, of NUR
Asia Pacific since April 1999, of Encre Consumables B.V since April 2000 and of
NUR Hungary Trading and Software Licensing Limited Liability Company and of
Salsa Digital Printers since May 2000. As of January 2001, Mr. Kremer has also
served as a Director of NUR Japan. Prior to place,joining NUR, from 1993 to 1998, Mr.
Kremer served in various management positions with Scitex Corporation. Mr.
Kremer's last position with Scitex was Vice President of Finance and Chief
Financial Officer of Scitex Asia Pacific, and prior thereto Mr. Kremer held
several positions in the finance organization of Scitex Europe. Prior to joining
Scitex, Mr. Kremer held various positions in the budgeting department of the
Israeli Finance ministry. Mr. Kremer holds a significant strain on ourB.A. in Economics from Hebrew
University, Jerusalem, and an M.B.A. degree from INSEAD, France.

Eliahu Shalev has served as Vice President of Research and Development since
March 2001 as well as Chief Operating Officer since November 2001. Prior to
joining NUR, from April 2000 to February 2001, Mr. Shalev served as corporate
Vice President of CreoScitex, heading the Output Division in Herzelia and
Vancouver. From May 1981 to March 2000, Mr. Shalev served in various research
and development management positions with Scitex Corporation Ltd. Mr. Shalev
holds a B.Sc. in Electrical Engineering from Ben Gurion University in Israel and
an MSC in Electrical Engineering from Technion Haifa. He also holds an M.B.A.
degree from Tel Aviv University.

Ron Michael has served as NUR's Vice President of Marketing since July 1999.
Prior to joining NUR, from 1997 to 1999, Mr. Michael served as Chief Executive
Officer of Hygiene Products Ltd., a McCarthy Group company. Prior to that he
held several positions within Strategic Business Development ('SBD'), an Israeli
strategy consulting firm. The last position he held at SBD was Senior Project
Manager, specializing in structural business moves. Prior to that, he founded
and served as Managing Director of Esprit Promotion Systems Ltd., a company
specializing in the development and sales of direct marketing databases. Mr.
Michael holds a B.A. in Business Administration from Tel-Aviv College of
Administration, an LL.B. degree in Law from Tel-Aviv University and an M.B.A.
degree from INSEAD, France.

Alon Avnon has served as NUR's Corporate Vice President of Sales and
Business Development since January 2001. Mr. Avnon served as Managing Director
of NUR Europe from October 1997 until December 2000. Prior to joining NUR, from
1996 to 1997, Mr. Avnon served as Vice President of Marketing of Scidel Ltd.
From 1994 to 1996 Mr. Avnon served as Director of Marketing of Scitex Europe
S.A. Prior to that, he served as a consultant with Shaldor Ltd., an Israel based
strategic management consulting firm. Mr. Avnon holds a B.A. in Economics and
Management from Tel-Aviv University and an M.B.A. degree from INSEAD, France.

Doron Tsur has served as a Director of the Company since July 2001. Mr. Tsur
is Deputy General Manager of Isal Amlat Investments (1993) Ltd. Prior to joining
Isal Amlat Investments, from 1996 to 2001, Mr. Tsur held the position of Chief
Analyst and Vice President of Gmul Sahar Securities Ltd. Prior thereto, from
1993 to 1996, Mr. Tsur served as an analyst at Ofek Securities and Investment
Ltd. Mr. Tsur holds an B.A. in Economics and Accounting and an M.B.A.
specializing in finance from Tel-Aviv University. Mr Tsur is also a director of
Cargal Ltd., a publicly-held company.

Robert F. Hussey has served as a Director of the Company since September
1997. Mr. Hussey is a private investor. From June 1991 to April 1997, Mr. Hussey
served as the President and Chief Executive Officer of Metrovision of North
America. Prior thereto, from 1984 to 1991, Mr. Hussey served as the President,
Chief Executive Officer and Director of POP Radio Corp., a company which he
helped form. From 1979 to 1984, Mr. Hussey served as the Vice
President/Management Supervisor for Grey Advertising, Inc. Mr. Hussey holds a
B.S. degree in Finance from Georgetown University and an M.B.A. degree in
International Finance from George Washington University. Mr. Hussey is also a

director of Digital Lightwave, Inc., New World Power Corp., and Digital Data
Networks, Corp., which are all publicly-held companies.

Oded Akselrod has served as a Director of the Company since February 2002.
Mr. Akselrod is the General Manager of the Investment Corp. of United Mizrahi
Bank Ltd., a wholly owned subsidiary of United Mizrahi Bank Ltd. Prior to
joining the Investment Corp. of United Mizrahi Bank, from 1994 to 1997, Mr.
Akselrod held the position of General Manager of Apex-Leumi Partners Ltd as well
as Investment Advisor of Israel Growth Fund. Prior thereto, from 1991 to 1994,
Mr. Akselrod served as General Manager of Leumi & Co. Investment Bankers Ltd.
Mr. Akselrod began his career in various managerial positions in the Bank Leumi
Group including member of the management team facilities,of Bank Leumi, Deputy Head of the
International Division, head of the Commercial Lending Department of the Banking
Division, member of all credit committees at the Bank, assistant to Bank Leumi's
CEO and Head of International Lending Division of Bank Leumi Trust Company of
New York. Mr. Akselrod holds a Bachelor's degree in Agriculture Economics from
Hebrew University, Jerusalem and a Master's degree in Business Administration
from Tel Aviv University. Mr. Akselrod is also a director of Moffet Technology
Fund Israel Ltd., a publicly held company.

Orit Leitman has served as an External Director of NUR since November 2000.
Ms. Leitman has served as Vice President of Finance of Paradigm Geophysical Ltd.
since April 1999. From 1992 to 1999, Ms. Leitman served as Corporate Treasurer
of Scitex Corporation Ltd. Ms. Leitman holds both a B.A. in Economics and an
M.B.A. from the Tel-Aviv University.

Gideon Shenholz has served as an External Director of NUR since November
2000. Mr. Shenholz has served as the Managing Director of Pegasus Technologies
Ltd. since October 1995. Mr. Shenholz is one of the two founders of Pegasus
Technologies Ltd., established in 1991, and one of the major shareholders in
Pegasus Technologies Ltd. Prior thereto, from 1988 to 1991, Mr. Shenholz was a
consultant in electronic warfare (EW), mainly to Tadiran Systems Ltd. (EW
division). From 1981 to 1988, Mr. Shenholz served as a senior manager in Tadiran
Systems Ltd. (EW division). Mr. Shenholz holds a B.Sc. Degree in Electronic
Engineering from Technion, Haifa (1976) and a B.A. degree in Psychology from
Tel-Aviv University (1982).

COMPENSATION OF OFFICERS AND DIRECTORS

In the year ended December 31, 2001, the aggregate compensation paid by NUR
to the executive officers and directors of NUR (a total of 11 persons) amounted
to approximately $1.0 million. This amount includes the amount of compensation
paid and benefits in kind granted to these persons by NUR and our subsidiaries.

The executive officers of NUR received part of the compensation set forth
above under NUR's Management by Objectives (MBO) Compensation Plan. The MBO sets
annual individual goals to be achieved by the executive officers throughout the
year. The percentage of individual achievement determines the percent of the MBO
bonus paid to each executive officer. The MBO plan for the benefit of NUR's
Chief Executive Officer is administered by the Stock Option and Compensation
Committee. The MBO plan for the benefit of the other resources.executive officers is
administered by the Chief Executive Officer. A portion of the bonus amounts are
paid in cash in the year for which they are awarded and the balance is paid in
cash in the year following the financial year for which they are awarded.

In addition, a total of 328,834 options were granted in 2001 to executive
officers and directors to purchase ordinary shares. The options granted had a
weighted average exercise price of $5.20 and have expiration dates ranging from
2011 to 2012.

Pursuant to an employment agreement, Mr. Erez Shachar, in his capacity as
President and Chief Executive Officer of NUR, earned an annual salary of
$238,000. In addition, for various services rendered to NUR Europe S.A. and NUR
Media Solutions S.A. by Sorly Ltd., a company wholly owned by Erez Shachar, NUR
Europe S.A. and NUR Media Solutions S.A. each paid Sorly Ltd. an average sum of
$9,173 per quarter during 2001. In 2001, NUR granted Mr. Shachar options to
purchase 110,000 ordinary shares, in addition to options previously granted to
Mr. Shachar, substantially, as follows:

(i) options to purchase 60,000 ordinary shares at an exercise price of
$4.40 per share, of which 20,000 will vest on August 3, 2002, 20,000 on
August 3, 2003 and 20,000 on August 3, 2004; and

(ii) options to purchase 50,000 ordinary shares at an exercise price of
$3.00 per share, of which 16,667 will vest on December 24, 2002, 16,667 on
December 24, 2003 and 16,666 on December 24, 2004.

All such options were issued under the Company's 2000 Stock Option Plan
and are exercisable until the earlier of (i) ten years from their date of
grant; or (ii) three months following termination of Mr. Shachar's
employment with the Company.

We pay our non-employee and external Directors remuneration for their
services as directors. This remuneration includes an annual payment of $8,000
and additional payments of approximately $500 per meeting and $250 per committee
meeting. The Chairman of the Board and Chairman of any committee are also
entitled to receive an additional annual fee of $5,000. Each non-employee and
non-external Director (other than Dan Purjes) also receives an annual grant of
options to purchase 10,000 ordinary shares under the conditions set forth in
NUR's 1998 Non-Employee Director Share Option Plan. Directors who are also
employees do not receive additional compensation for serving as directors. The
Directors do not receive any additional remuneration upon termination of their
services as directors.

NUR's shareholders approved at the Annual Shareholders meeting held on
February 12, 2002 a Terms of Service agreement with Mr. Dan Purjes effective as
of January 1, 2002. In his capacity as Chairman of the Board, Mr. Purjes will
receive an annual fee of $125,000 to be due and paid in ordinary shares to
Rockwood Group Inc., a company wholly owned by Mr. Dan Purjes. The fee shall be
paid quarterly, at the end of each quarter, by way of issuing ordinary shares
valued at $31,250. Such annual fee shall be in lieu of any and all payments
which are due to Mr. Purjes in his capacity as a Director, Chairman of the
Board, and a member of any committees of the Board, including the right to
receive options to purchase ordinary shares in accordance with the Company's
1998 Share Option Plan for Non-Employee Directors.

OUTSTANDING OPTIONS AND WARRANTS

As of May 31, 2002, NUR had outstanding options under NUR's stock option
plans to purchase a total of 2,200,846 of its ordinary shares. Of such options,
85,833 have been issued under the 1995 Israel Stock Plan, 1,131,967 have been
issued under the 1997 Stock Option Plan, 85,834 have been issued under the 1998
Non-Employee Director Share Option Plan and 897,212 have been issued under the
2000 Stock Option Plan. The options granted under the 1995 Plan, the 1997 and
the 2000 Plan are subject to various vesting requirements and have been issued
at exercise prices ranging from $1 to $14.25 per share with various expiration
dates. The options granted under the 1998 Plan are not subject to vesting
requirements and have an exercise price ranging from $2.75 to $13.50 per share,
with various expiration dates. See Note 16 to NUR's consolidated financial
statements included as a part of this annual report on Form 20-F for more
details.

On May 17, 2002, NUR filed a tender offer with the Securities and Exchange
Commission pursuant to which option holders had the right to cancel and exchange
certain options granted to them under the Company's 2000 Stock Option Plan, 1997
Stock Option Plan and 1995 Israel Stock Option Plan. Pursuant to the terms and
conditions of the tender offer, the new options are to be granted six months and
one day from the date the old options are canceled, at an exercise price equal
to the market price on the date of the new grant. In order to support our growth, ourreceive the new
leadership adopted
financial controls and reporting systems and
expanded our management, facilities, financial, and
other resources. To avoid any negative effects on
our business, weoptions, option holders must successfully implement
financial controls, expand our manufacturing,
sales, marketing, and service organizations, and
update our accounting, operational, and management
information systems. Failurecontinue to do so effectively
could have a material adverse effectservice relationship with the
Company or any of its subsidiaries until the new grant date. 2,027,166 ordinary
shares, representing 93% of the outstanding options under the Company's 2000
Stock Option Plan, 1997 Stock Option Plan and 1995 Israel Stock Option Plan,
were available for exchange under the tender offer. The tender offer expired on
June 15, 2002 and resulted in the cancellation of 1,245,316 options with varying
exercise prices.

As of May 31, 2002, NUR had outstanding warrants exercisable into a total of
864,911 ordinary shares. Of such warrants, (i) 55,000 were issued to Josephthal
& Co., Inc. as placement agent in connection with NUR's private placement
between September and December 1997, (ii) 25,000 were issued to Cruttenden Roth
Incorporated in connection with its role as 'qualified independent underwriter'
in a registration of ordinary shares on behalf of certain selling security
holders, (iii) 15,000 were issued to Zamir & Barak in partial consideration for
legal services rendered on behalf of NUR,

(iv) 37,411 were issued to Investec Clali Trust Company Ltd. as placement agent
in connection with NUR's private placement in September 2000, (v) 612,500 were
issued to the Investment Corp. of United Mizrahi bank Ltd. as part of the
private placement in January 2002, (vi) 70,000 were issued to Bank Hapoalim as
part of the rescheduling of NUR's long-term debts and (vii) 50, 000 were issued
to Bank Leumi as part of the rescheduling of NUR's long-term debts. The
Josephthal private placement warrants are exercisable at $1.00 per share no
later than September and December 2002. The Cruttenden Roth warrants are
exercisable at $4.50 per share from February 2000 to February 2004. The Zamir &
Barak warrants are exercisable at $2.75 per share from January 2000 to January
2004. The Investec Clali warrants are exercisable at $13.365 no later than
September 2005. The Mizrahi warrants are exercisable at $4.50 no later than
January 2006. The Bank Hapoalim and Bank Leumi warrants are exercisable at $5.00
no later than February 2006.

Of the options and warrants described above, directors and executive
officers of NUR hold options and warrants to purchase an aggregate of 936,168
ordinary shares issuable pursuant to exercise of such securities.

1995 ISRAEL STOCK OPTION PLAN

In 1995, NUR adopted the 1995 Israel Stock Option Plan which provides for
grants of stock options to employees and consultants of NUR. Options to purchase
an aggregate of 500,000 ordinary shares were originally available for grant
under the 1995 Israel Stock Option Plan, as amended, including service options
for future services, options for performance, and options to consultants for
service or performance.

NUR's 1995 Israel Stock Option Plan provides that it may be administered by
the Board or by a committee appointed by the Board and is currently administered
by the Stock Option and Compensation Committee subject to Board approval. The
Board determines the employees and consultants who are granted options under the
1995 Israel Stock Option Plan, the timing of such grants, the terms thereof and
the number of shares to be covered thereby. The Board also determines the
exercise price for ordinary shares subject to the performance and consultants
options under the 1995 Israel Stock Option Plan and the exercise price for the
service options; provided that in no case shall the exercise price of any
service option be less than 80% of the fair market value of such ordinary shares
at the date of grant. Service options usually vest over a four-year period.
One-third of the service options vest after the second annual anniversary of the
date of grant with an additional one-third vesting on the third and fourth
anniversary of the date of grant, respectively. Performance options vest under
the same terms as applicable to the service options. Consultants options vest
over a specified period of time based on past or future services rendered or
performance targets to be achieved by NUR as determined by the Board.
Notwithstanding the foregoing, the consultants options expire ten years
following the date of grant. No option may be assigned or transferred except by
will or the laws of descent and distribution.

Under the 1995 Israel Stock Option Plan, for Israeli employees, options and
ordinary shares issuable upon the exercise of options granted to Israeli
employees of NUR can be held in a trust until the payment of all taxes due with
respect to the grant and exercise (if any) of such options.

1997 STOCK OPTION PLAN

In 1997, NUR adopted the 1997 Stock Option Plan which provides for grants of
stock options to employees, directors of NUR and consultants to NUR. Options to
purchase an aggregate of 2,200,000 ordinary shares were originally available for
grant under the 1997 Stock Option Plan, as amended.

The 1997 Stock Option Plan provides that it is to be administered by the
Board or by a committee appointed by the Board and is currently administered by
the Stock Option and Compensation Committee subject to Board approval. The Board
has broad discretion to determine the persons entitled to receive options under
the 1997 Stock Option Plan, the terms and conditions on which options are
granted, and the number of ordinary shares subject thereto, up to the maximum
aggregate amount permitted under the 1997 Stock Option Plan. The Board also has
discretion to determine the purchase price to be paid upon the exercise of an
option granted under the 1997 Stock Option Plan.

The exercise price of the option shares under the 1997 Stock Option Plan is
determined by the Board, provided, however, that the exercise price of any
option granted shall not be less than eighty percent (80%) of the stock value at
the date of grant of such options. The stock value at any time is equal to the
then current fair market value of NUR's ordinary shares. For purposes of the
1997 Stock Option Plan, the fair market value means, as of any date, the last
reported sale price, on such date, of the ordinary shares on such principal
securities exchange of the most recent prior date on which a sale of the
ordinary shares took place.

The Board determines the term of each option granted under the 1997 Stock
Option Plan; provided, however, that the term of an option shall not be for more
than ten (10) years. Upon termination of employment, all unvested options lapse.
Pursuant to the 1997 Stock Option Plan, options shall vest over a three-year
period, provided that the Board may determine different vesting schedules.

The options granted are subject to restrictions on transfer, sale, or
hypothecation. All options and ordinary shares issuable upon the exercise of
options granted to Israeli employees of NUR are held in trust for a minimum of
two years in accordance with Section 102 of the Israel Income Tax Ordinance.

1998 NON-EMPLOYEE DIRECTOR SHARE OPTION PLAN

In 1998, NUR adopted the 1998 Non-Employee Director Share Option Plan to
provide for grants of options to purchase ordinary shares to non-employee
directors of NUR. The 1998 Plan is administered by the Non-Employee Directors
Share Option Committee subject to Board approval. An aggregate amount of not
more than 250,000 ordinary shares is reserved for grants under the 1998 Plan.
The 1998 Plan will expire on December 8, 2008 (10 years after adoption), unless
earlier terminated by the Board.

Under the 1998 Non-Employee Director Share Option Plan, each non-employee
director that served on the 1998 'Grant Date,' as defined below, automatically
received an option to purchase 10,000 ordinary shares on such Grant Date and
will receive an option to purchase an additional 10,000 ordinary shares on each
subsequent Grant Date thereafter provided that he or she is a non-employee
director on the Grant Date and has served as such for the entire period since
the last Grant Date. The 'Grant Date' means, with respect to 1998, October 26,
1998, and with respect to each subsequent year, August 1. Directors first
elected or appointed after the 1998 Grant Date, will automatically receive on
such director's first day as a director an option to purchase up to 10,000
ordinary shares prorated based on the number of full months of service between
the prior Grant Date and the next Grant Date. Each such non-employee director
would also automatically receive, as of each subsequent Grant Date, an option to
purchase 10,000 ordinary shares provided he or she is a non-employee director on
the Grant Date and has served for the entire period since the last Grant Date.

The exercise price of the option shares under the 1998 Plan is 100% of the
fair market of such ordinary shares at the date of grant of such options. The
fair market value means, as of any date, the average closing bid and sale prices
of the ordinary shares for the date in question as furnished by the National
Association of Securities Dealers, Inc. through Nasdaq or any similar
organization if Nasdaq is no longer reporting such information, or such other
market on which the ordinary shares are then traded, or if not then traded, as
determined in good faith (using customary valuation methods) by resolution of
the members of the Board of Directors of NUR, based on the best information
available to it. The exercise price is required to be paid in cash.

The term of each option granted under the 1998 Non-Employee Director Share
Option Plan is ten (10) years from the applicable date of grant. All options
granted vest immediately upon the date of grant.

The options granted would be subject to restrictions on transfer, sale or
hypothecation. All options and ordinary shares issuable upon the exercise of
options granted to the non-employee directors of NUR could be withheld until the
payment of taxes due with respect to the grant and exercise (if any) of such
options.

2000 STOCK OPTION PLAN

In 2000, NUR adopted the 2000 Stock Option Plan to provide for grants of
service and non-employee options to purchase ordinary shares to officers,
employees, directors and consultants of NUR. The 2000 Stock Option Plan provides
that it may be administered by the Board or by a committee appointed by the
Board and is currently administered by the Stock Option and Compensation
Committee subject to the Board approval. An aggregate amount of not more than
2,000,000 ordinary shares is reserved for grants under the 2000 Stock Option
Plan, as amended. The 2000 Stock Option Plan will expire on August 31, 2008,
unless previously terminated or extended by the Board.

The Board has broad discretion to determine the persons entitled to receive
options under the 2000 Stock Option Plan, the terms and conditions on which
options are granted, and the number of ordinary shares subject thereto. The
exercise price of the option shares under the 2000 Stock Option Plan is
determined by the Board, provided, however, that the exercise price of any
option granted shall not be less than eighty percent (80%) of the stock value at
the date of grant of such options. The stock value at any time is equal to the
then current fair market value of NUR's ordinary shares. For purposes of the
2000 Stock Option Plan, the fair market value means, as of any date, the last
reported sale price, on such date, of the ordinary shares on such principal
securities exchange of the most recent prior date on which a sale of the
ordinary shares took place.

The Board determines the term of each option granted under the 2000 Stock
Option Plan; provided, however, that the term of an option shall not be for more
than ten (10) years. Upon termination of employment, all unvested options lapse.
All options granted vest over a three to four-year period at the discretion of
the Board. One third of such options vest after the first or second anniversary
of the date of grant, one third after the second or third anniversary, and the
final third after the third or fourth anniversary of the date of grant.
Notwithstanding the foregoing, the Board may determine different vesting
schedules for consultant options in special circumstances.

The options granted are subject to restrictions on transfer, sale or
hypothecation. Under the 2000 Stock Option Plan, for Israeli employees, options
and ordinary shares issuable upon the exercise of options granted to Israeli
employees of NUR can be held in a trust until the payment of all taxes due with
respect to the grant and exercise (if any) of such options.

INDEMNIFICATION OF EXECUTIVE OFFICERS AND DIRECTORS

At the Annual Shareholders meeting held on February 12, 2002, NUR's
shareholders authorized the Company to enter into indemnification agreements
with each of its current and future directors. According to the terms of the
indemnification agreements, the Company shall, subject to the provisions of the
indemnification agreement, indemnify each director for the following:

(a) monetary liabilities imposed on the director for the benefit of
another person pursuant to a final judgment by a competent court relating to
acts performed by the director in his/her capacity as a director or officer
of the Company or its subsidiaries; and

(b) reasonable litigation expenses.

The indemnification undertaking shall be limited to certain categories of
events and to such monetary limitations as set forth in the indemnification
agreement. In addition, a policy of directors' and officers' liability insurance
is maintained by us that insures our directors and officers and those of our
subsidiaries against liability incurred by, arising from or against them for
certain of their acts, errors or omissions.

BOARD PRACTICES

TERMS OF DIRECTORS

The Board of Directors currently consists of seven members, including two
external directors. Unless otherwise prescribed by resolution, the Board shall
consist of not less than four (4) nor more than twelve (12) directors. The
members of the Board are elected annually at NUR's annual shareholders' meeting
and remain in office until the next annual shareholders' meeting, unless the

director has previously resigned, vacated his office, or was removed in
accordance with NUR's Articles of Association. In addition, the Board may elect
additional members to the Board. The members of the Board do not receive any
additional remuneration upon termination of their services as directors.

Pursuant to the Israeli Companies Law, the two external directors of the
Board serve for a period of three (3) years unless their office is vacated
earlier in accordance with NUR's then current Articles of Association and the
Israeli Companies Law.

ALTERNATE DIRECTORS

The Articles of Association provide that, subject to the Board's approval, a
director may appoint an individual, by written notice to NUR, to serve as an
alternate director. The following persons may not be appointed nor serve as an
alternate director: (i) a person not qualified to be appointed as a director,
(ii) an actual director, or (iii) another alternate director. Any alternate
director shall have all of the rights and obligations of the director appointing
him or her, except the power to appoint an alternate (unless the instrument
appointing him or her expressly provides otherwise). The alternate director may
not act at any meeting at which the director appointing him or her is present.
Unless the appointing director limits the time period or scope of any such
appointment, such appointment is effective for all purposes and for an
indefinite time, but will expire upon the expiration of the appointing
director's term. There are currently no alternate directors.

COMMITTEES OF THE BOARD OF DIRECTORS

APPROVAL OF CERTAIN TRANSACTIONS UNDER THE ISRAELI COMPANIES LAW; AUDIT
COMMITTEE

The Companies Law requires disclosure by an 'Office Holder' (as defined
below) to NUR in the event that an Office Holder has a direct or indirect
personal interest in a transaction to which NUR intends to be a party, and
codifies the duty of care and fiduciary duties which an Office Holder has to
NUR. An 'Office Holder' is defined under the Israeli Companies Law as a
director, general manager, chief business manager, vice general manager, other
manager directly subordinate to the general manager and financial results.

Our operating results tend Our revenues may vary significantly from quarterany other person
assuming the responsibilities of any of the foregoing positions without regard
to fluctuate.such person's title.

The Israeli Companies Law requires that certain transactions, actions and
arrangements must be approved by the Audit Committee, by the Board and, in
certain circumstances, by the shareholders of NUR. NUR is also required to
quartermaintain the Audit Committee as a result of the inclusion for quotation of the
ordinary shares on the Nasdaq National Market. The Audit Committee must be
composed of members of the Board who are not employees of NUR, the external
directors and the majority of members of the Audit Committee may not be holders,
directly or indirectly through family members, of more than five percent of the
ordinary shares.

NUR's Audit Committee currently consists of Orit Leitman, Gideon Shenholz,
Doron Tsur and Robert F. Hussey. Approval by the Audit Committee and the Board
is required for (i) proposed transactions to which NUR intends to be a party in
which an Office Holder has a direct or indirect personal interest, (ii) actions
or arrangements which may otherwise be deemed to constitute a breach of
fiduciary duty or of the duty of care of an Office Holder to NUR,
(iii) arrangements with directors as to the terms of office or compensation, and
(iv) indemnification of Office Holders. Arrangements with directors as to the
terms of their service or compensation also require shareholder approval. All
arrangements as to compensation of Office Holders who are not directors require
approval of the Board. In certain circumstances, the matters referred to in (i),
(ii), and (iv) may also require shareholder approval.

Office Holders (including directors) who have a personal interest in a
matter which is considered at a meeting of the Board or the Audit Committee may
not be present at such meeting, may not participate in the discussion, and may
not vote on any such matter, except that such Office Holders may consent in
writing to resolutions adopted by the Board and/or the Audit Committee by
unanimous consent.

The requirements of The Nasdaq Stock Market, Inc. provide that the Audit
Committee reports, among other factors,things, that it has reviewed and discussed the
timingconsolidated financial statements for the year ended December 31, 2001 with the
management of new product announcementsNUR.

The Audit Committee has discussed with the independent auditor the matters
covered by Statement on Auditing Standards No. 61, as well as the independence
of the independent auditor and releaseswas satisfied as to the independent auditor's
compliance with said standards.

STOCK OPTION AND COMPENSATION COMMITTEE

In March 1998, NUR established a Stock Option and Compensation Committee to
administer NUR's stock option plans, other than the 1998 Non-Employee Director
Share Option Plan. The Stock Option and Compensation Committee is charged with
administering and overseeing the allocation and distribution of stock options
under the approved stock option plans of NUR and the approval of the NUR's
executive officer's annual compensation. The Companies Law provides that the
Board is not entitled to delegate to Board committees its power, among other
things, to allocate shares or securities convertible into shares of NUR.
Accordingly, all recommendations of the Stock Option and Compensation Committee
are subject to the Board approval. The Stock Option and Compensation Committee
is presently composed of four members: Dan Purjes, Doron Tsur, Orit Leitman and
Robert F. Hussey.

NON-EMPLOYEE DIRECTOR SHARE OPTION PLAN COMMITTEE

In February 1999, NUR established a committee to administer the NUR's 1998
Non-Employee Director Share Option Plan (the 'NEDSOP Committee'). The NEDSOP
Committee is charged with administering and overseeing the allocation and
distribution of stock options under the 1998 Non-Employee Director Share Option
Plan. The Israeli Companies Law provides that the Board is not entitled to
delegate to Board committees its power, among other things, to allocate shares
or securities convertible into shares of NUR. Accordingly, the Non-Employee
Director Share Option Plan Committee recommendations are subject to the Board's
approval. The NEDSOP Committee is presently composed of two members: Erez
Shachar and Giddeon Shenholz.

EMPLOYEES

As of December 31, 2001, we had 404 employees and independent contractors
compared to 528 employees and independent contractors as of December 31, 2000.
The 23% decrease was primarily due to the restructuring and consolidation of
NUR's operations during 2001. As of December 31, 1999, we had approximately 190
employees and independent contractors. The increase of 277% was primarily due to
the acquisition of substantially all assets of Salsa Digital Ltd. in July 2000
and internal growth. Of NUR's 404 employees and independent contractors as of
December 31, 2001, 75 were in sales and marketing, 50 were in research and
development, 104 were in customer support and, 95 were in operations and
production and 80 were in finance and administration. As of December 31, 2001,
we had 92 employees located in Israel, 98 employees located in Belgium, 129
employees located in the U.S. and 70 employees located in Asia Pacific. We
believe our relations with employees are satisfactory.

SHARE OWNERSHIP

The following table sets forth certain information regarding the beneficial
ownership of NUR's ordinary shares as of May 31, 2002 of (i) each director of
NUR and (ii) each executive officer of NUR. All of the information with respect
to beneficial ownership of the ordinary shares is given to the best of NUR's
knowledge and has been furnished in part by our competitorsthe respective directors and
us. Weexecutive officers.

NUMBER
OF SHARES
BENEFICIALLY PERCENT
NAME OF BENEFICIAL OWNER HELD(1) OF CLASS
- ------------------------ ------- --------

Dan Purjes(2)............................................ 4,264,707 25.0%
Erez Shachar(3).......................................... 282,500 1.6%
Hilel E. Kremer.......................................... * *
Alon Avnon............................................... * *
Eliahu Shalev............................................ * *
Ron Michael.............................................. * *
Doron Tsur............................................... * *
Robert F. Hussey......................................... * *
Orit Leitman(4).......................................... -- --
Gideon Shenholz(4)....................................... -- --
Oded Akselrod(4)......................................... -- --

- ---------

* Less than one percent of the outstanding ordinary shares.

(1) As used in this table, 'beneficial ownership' means the sole or shared power
to vote or direct the voting or to dispose or direct the disposition of any
security. For purposes of this table, a person is deemed to be the
beneficial owner of securities that can be acquired within 60 days from
May 31, 2002 through the exercise of any option or warrant. Ordinary shares
subject to options or warrants that are currently exercisable or exercisable
within 60 days are deemed outstanding for computing the ownership percentage
of the person holding such options or warrants, but are not deemed
outstanding for computing the ownership percentage of any other person. The
amounts and percentages are based upon 17,085,086 ordinary shares
outstanding as of May 31, 2002.

(2) Mr. Purjes beneficially owned 4,733,171 ordinary shares of NUR, or 32.4
percent of NUR's ordinary shares, as of March 31, 2001. Mr. Purjes
beneficially owned 4,536,263 ordinary shares of NUR, or 35.8 percent of
NUR's ordinary shares, as of April 5, 2000.

(3) Includes 240,000 options that are exercisable within 60 days of May 31,
2002.

(4) Orit Leitman, Gideon Shenholz and Oded Akselrod do not typically have a material backloghold any ordinary
shares or options to purchase ordinary shares of ordersNUR.

The directors and officers of NUR hold, in the aggregate, options and
warrants exercisable into 936,168 ordinary shares. Under the 1998 Share Option
Plan for Non-Employee Directors (the '1998 PLAN'), approved at the beginningAnnual
Meeting held on September 8, 1998, each of Messrs. Robert Hussey, Dan Purjes,
who are Directors of the Company, were granted on October 26, 1998, August 1,
1999, August 1, 2000 and August 1, 2001, respectively, options to purchase
10,000 ordinary shares of the Company. Doron Tsur, a Director of the Company as
of July 2001, was granted on July 2, 2001. The exercise price for the underlying
shares of such options is the 'Fair Market Value' (as defined in the 1998 Plan)
of the ordinary shares of the Company at the date of grant.

ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

MAJOR SHAREHOLDERS

The following table sets forth information regarding the beneficial
ownership of NUR's ordinary shares as of May 31, 2002, by each quarter. We generally ship and
record a significant portionperson known by
NUR to be the beneficial owner of more than 5% of our revenues for
orders placed within the same quarter, primarily in
the last monthoutstanding ordinary
shares. Each of our shareholders has identical voting rights with respect to

its shares. All of the quarter. We may not learninformation with respect to beneficial ownership of shortfallsthe
ordinary shares is given to the best of NUR's knowledge and has been furnished
in sales until latepart by the beneficial owner.

PERCENTAGE
ORDINARY OF ORDINARY
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED OWNED(1)
----- --------

Dan Purjes(2)......................................... 4,264,707 25.0%
Investment Corp. of United Mizrahi Bank Ltd. ......... 2,333,333 13.7%

- ---------

(1) Based on a total of 17,085,086 ordinary shares outstanding as of May 31,
2002.

(2) Dan Purjes is Chairman of NUR. Mr. Purjes beneficially owned 4,733,171
ordinary shares of NUR, or 32.4 percent of NUR's ordinary shares, as of
March 31, 2001. Mr. Purjes beneficially owned 4,536,263 ordinary shares of
NUR, or 35.8% percent of NUR's ordinary shares, as of April 5, 2000.

As of May 31, 2002, there were 187 record holders of ordinary shares, of
which 45 represented United States record holders holding approximately 78.5% of
the outstanding ordinary shares of NUR.

NUR's shareholders approved at the Annual Shareholders meeting held on
February 12, 2002 a Terms of Service agreement with Mr. Dan Purjes effective as
of January 1, 2002. In his capacity as Chairman of the Board, Mr. Purjes will
receive an annual fee of $125,000 to be due and paid in or shortly afterordinary shares to
Rockwood Group Inc., a company wholly owned by Mr. Dan Purjes. The fee shall be
paid quarterly, at the end of each quarter, by way of issuing ordinary shares
valued at $31,250. Such annual fee shall be in lieu of any and all payments
which are due to Mr. Purjes in his capacity as a Director, Chairman of the
Board, and a member of any committees of the Board, including the right to
receive options to purchase ordinary shares in accordance with the Company's
1998 Share Option Plan for Non-Employee Directors.

RELATED PARTY TRANSACTIONS

For various services rendered to NUR Europe S.A. and NUR Media Solutions
S.A. by Sorly Ltd., a company wholly owned by Erez Shachar, NUR Europe S.A. and
NUR Media Solutions S.A. each paid Sorly Ltd. the average sum of $9,173 per
quarter during 2001.

At the annual shareholders meeting held on February 12, 2002 NUR's
shareholders approved a Terms of Service agreement with Mr. Dan Purjes effective
as of January 1, 2002. In his capacity as Chairman of the Board, Mr. Purjes will
receive an annual fee of $125,000 to be due and paid in ordinary shares of the
Company to Rockwood Group Inc., a company wholly owned by Dan Purjes. Until
decided otherwise by the Company's Audit Committee, the fee shall be paid
quarterly, at the end of each quarter, by way of issuing ordinary shares valued
at $31,250. Such annual fee shall be in lieu of any and all payments which are
due to Mr. Purjes in his capacity as a member of the Board, Chairman of the
Board, and a member of any committees of the Board, including the right to
receive options to purchase ordinary shares in accordance with the Company's
1998 Share Option Plan for Non-Employee Directors.

On October 2000, NUR loaned Hilel E. Kremer NIS 85,744 (approximately
$20,000). The loan agreement provides for a three-year term loan linked to the
consumer price index at an interest of 4% per annum. On October 2000, NUR loaned
Ron Michael NIS 80,700 (approximately $18,500). The loan agreement provides for
a three-year term loan linked to the consumer price index at an interest of 4%
per annum. As of May 31, 2002, $19,638 was outstanding under Mr. Kremer's loan
and $18,483 was outstanding under Mr. Michael's loan.

See 'ITEM 10: Additional Information -- Material Contracts' and Note 15 to
NUR's consolidated financial statements, which are included as a part of this
annual report, for a further discussion of transactions and balances with
related parties.

INTERESTS OF EXPERTS AND COUNSEL

Not Applicable.

ITEM 8: FINANCIAL INFORMATION

See pages F-1 to F-34.

ITEM 9: THE OFFER AND LISTING

Not Applicable, except for Items 9.A.4 and 9.C, which are detailed below.

NUR's ordinary shares are quoted on the Nasdaq National Market under the
symbol 'NURM.' NUR's ordinary shares have been traded on the Nasdaq National
Market since October 1995.

The prices set forth below are high and low bid prices for the ordinary
shares of NUR as reported by Nasdaq National Market for the fiscal year ended
December 31 of each year indicated below, as of the end of each fiscal quarter
indicated below, and for each month for the six-month period ending May 31,
2002. Such quotations reflect inter-dealer prices, without retail markup,
markdown, or commission and may not necessarily represent actual transactions.

YEAR HIGH (US) LOW (US)
- ---- --------- --------

1997.......................................... 2.25 1.00
1998.......................................... 4.50 1.63
1999.......................................... 13.00 2.38
2000.......................................... 21.00 7.31
2001.......................................... 9.75 2.29

QUARTER HIGH LOW
- ------- ---- ---

2000:
First Quarter................................. $21.00 $10.25
Second Quarter................................ 17.25 11.50
Third Quarter................................. 15.94 12.69
Fourth Quarter................................ 15.00 7.31

2001:
First Quarter................................. $ 9.75 $ 5.94
Second Quarter................................ 6.30 3.75
Third Quarter................................. 5.77 3.18
Fourth Quarter................................ 3.74 2.29

2002:
First Quarter................................. 3.65 2.47

MOST RECENT SIX MONTHS HIGH LOW
- ---------------------- ---- ---

May 2002...................................... $1.56 $0.80
April 2002.................................... 2.79 1.42
March 2002.................................... 3.09 2.47
February 2002................................. 3.43 2.84
January 2002.................................. 3.65 3.05
December 2001................................. 3.56 2.29

NUR does not anticipate that it will pay any cash dividend on its ordinary
shares in the foreseeable future. Dividends, if any, will be paid in NIS.
Dividends paid to shareholders outside Israel will be converted to U.S. dollars,
on the basis of the exchange rate prevailing at the date of payment. NUR has
determined that it will not distribute dividends out of tax-exempt profits.

ITEM 10: ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not applicable.

B. MEMORANDUM OF ASSOCIATION AND AMENDED AND RESTATED ARTICLES OF ASSOCIATION

Set forth below is a brief description of certain provisions contained in
the Memorandum of Association, the Amended and Restated Articles of Association
as well as certain statutory provisions of Israeli law. The Memorandum of
Association and the Articles have been filed as exhibits to this annual report
or incorporated by reference herein. The description of certain provisions does
not purport to be a complete summary of these provisions and is qualified in its
entirety by reference to such fiscal period. Asexhibits.

AUTHORIZED SHARE CAPITAL

The authorized share capital of NUR is NIS fifty million (50,000,000),
divided into fifty million ordinary shares.

PURPOSE AND OBJECTIVE

Pursuant to Section 3.1 of NUR's Articles, our objective is to undertake any
lawful activity, including any objective set forth in our Memorandum of
Association. Pursuant to Section 3.2 of our Articles, our purpose is to operate
in accordance with commercial considerations with the intentions of generating
profits.

BOARD OF DIRECTORS

Under the Israeli Companies Law, 5759-1999, the Board is authorized to set
NUR's strategy and supervise the performance of the duties and actions of NUR's
Chief Executive Officer. The Board may not delegate to a result, our
quarterly earningscommittee of the Board
or the Chief Executive Officer the right to decide on certain of the authorities
vested with it, including determination of NUR's strategy, distributions,
issuances of securities and approval of financial reports. The powers conferred
upon the Board are vested in the Board as a collective body and not in each one
or more of the directors individually. Unless otherwise set forth in a
resolution of the shareholders, the Board shall consist of not less than four
(4) nor more than twelve (12) directors (including any external directors whose
appointment is mandated under the Companies Law).

The directors are elected annually at a general meeting of shareholders and
remain in office until the next annual meeting at which time they shall retire,
unless their office is previously vacated as provided in the Articles. A
retiring director may be reelected. If no directors are elected at the annual
meeting, all of the retiring directors remain in office pending their
replacement at a general meeting. Holders of the ordinary shares do not have
cumulative voting rights in the election of directors. Consequently, the holders
of ordinary shares in the aggregate conferring more than 50% of the voting power
represented in person or by proxy will have the power to elect all the
directors. Pursuant to the Israeli Companies Law, publicly traded companies must
appoint two external directors to serve on their Board of Directors and Audit
Committee. The external directors are appointed for a 3-year term. The election
of external directors requires the vote of the majority of the voting power
represented at the meeting, provided that either (i) such a majority includes at
least one third of the shareholders present who do not qualify as controlling
shareholders (as such term is defined in the Israeli Companies Law) or (ii) the
aggregate number of shares held by non-controlling shareholders voting at the
meeting against such election does not exceed one percent of the outstanding
voting rights of the company.

Subject to the provisions of Israeli Companies Law, the Board may approve
each of the following transactions that are not detrimental to the best interest
of NUR: (i) a transaction to which NUR is a party to, and in which an officer of
NUR has an interest; (ii) a transaction between NUR and an officer of NUR;
(iii) a private offer of NUR's securities to a holder of five percent (5%) or
more of NUR's

shares; or (iv) such other transactions that require special approval pursuant
to the Companies Law. In the event of an extraordinary transaction or the
approval of the terms of service or employment (including any waiver, insurance
or indemnification) of an officer of NUR, such transaction shall require
additional approvals of the Audit Committee, or of the Audit Committee and of a
meeting of shareholders, by regular or special majority, all as stipulated by
the Companies Law. Any officer who has an interest in a transaction shall not
participate in the meeting of the Board or Audit Committee in which such
transaction is considered and shall not vote in such meeting, provided that if
the majority of the members of the Board or the Audit Committee have an interest
in the transaction, they may attend and vote at the meeting and then the
transaction must also be approved by a general meeting.

No person shall be disqualified to serve as a director by reason of his not
holding shares in NUR. Additionally, there is no age limit for the retirement of
directors.

RIGHTS OF SHAREHOLDERS

No preemptive rights are granted to holders of ordinary shares under the
Articles or the Israeli Companies Law. Each ordinary share is entitled to one
vote on all matters to be voted on by shareholders, including the election of
directors. Non-residents of Israel may freely hold and trade the ordinary shares
pursuant to general and specific permits issued under Israel's Currency Control
Law, 1978. Neither the Memorandum of Association nor the Articles make any
distinction between residents and non-residents of Israel with respect to the
ownership of ordinary shares. The Memorandum of Association, the Articles and
Israeli law do not make any distinction between residents and non-residents of
Israel with respect to the voting rights related thereto.

An annual meeting of shareholders must be held once in every calendar year
at such time (within a period of not more than fifteen months after the last
preceding annual meeting) and at such place as may be determined by the Board.
The Board may, at any time, convene general meetings of shareholders, and shall
be obligated to do so upon receipt of a requisition in writing in accordance
with Israeli law. Prior to any general meeting a written notice thereof shall be
delivered to all registered holders and to all other persons entitled to attend,
and shall be otherwise made public as required by Israeli law.

Two or more members present in person or by proxy and holding shares
conferring in the aggregate more than 33 1/3% of the total voting power attached
to our shares shall constitute a quorum at general meetings. If a meeting is
adjourned due to the lack of a quorum, one or more shareholders, holding not
less than 33 1/3% of all the outstanding voting power attached to the ordinary
shares, present in person or by proxy at the subsequent adjourned meeting, will
constitute a quorum. Unless provided otherwise by the terms of issue of the
shares, no member shall be entitled to be present or vote at a general meeting
(or to be counted as part of the quorum) unless all amounts due as of the date
designated for same general meeting with respect to his shares were paid. To be
deemed adopted, a resolution requires the affirmative vote of shareholders
present and holding in person or by proxy a majority of the shares present.
Certain resolutions (for example, a resolution to amend the Articles or the
Memorandum of Association) require the affirmative vote of shareholders present
in person or by proxy and holding shares conferring at least 75% of the votes to
be deemed adopted.

On August 18, 1999, pursuant to the purchase of 600,000 ordinary shares of
the Company and warrants exercisable for 150,000 ordinary shares of the Company
by Isal Amlat Investments (1993) a shareholders' agreement was signed between
Isal and Dan Purjes providing for, among other things, Dan Purjes voting the
ordinary shares over which he has voting control in favor of one designee
selected by Isal to serve as a director on the Company's board of directors.
This agreement will terminate in the event that either Isal holds less than
4% of the Company's outstanding ordinary shares or Dan Purjes holds less
than 20%.

On January 17, 2002, pursuant to the purchase of 2,333,333 ordinary shares
of the Company and of warrants exercisable for 612,500 ordinary shares of the
Company by Investment Corp. of United Mizrahi Bank Ltd., a shareholders'
agreement was signed between Mizrahi and Dan Purjes providing for, among other
things, Dan Purjes voting the ordinary shares in favor of one designee selected
by Mizrahi to serve as a director on

the Company's board of directors. This agreement will terminate in the event
that either Mizrahi holds less than 7% of the Company's outstanding ordinary
shares or Dan Purjes holds less than 17%.

DIVIDENDS AND PROFITS

The Board may from time to time, subject to significant
variations.the provisions of Israeli
Companies Law, declare and order the payment of a dividend from NUR's accrued
profits at the rate it may deem, provided that there is no reasonable concern
that payment of such dividend may prevent NUR from meeting its current and
expected liabilities when they become due. Subject, if any, to special or
restricted rights conferred upon the holders of shares as to dividends, the
dividends shall be distributed in accordance with the paid-up capital of the
Company attributable to the shares for which the dividend has been declared. Our
obligation to pay dividends or any other amount in respect of shares, may be
set-off against any indebtedness, however arising, liquidated or non-liquidated,
of the person entitled to receive the dividend. Any dividend unclaimed within
the period of seven years from the date stipulated for their payment, shall be
forfeited and returned to us, unless otherwise directed by the Board. In the
event of the winding up of the company, then, subject to provisions of any
applicable law and to any special or restricted rights attached to a share, our
assets in excess of our liabilities will be distributed among the stockholders
in proportion to the paid-up capital attributable to the shares in respect of
which the distribution is being made.

C. MATERIAL CONTRACTS

LOD LEASE AGREEMENT

We entered into a lease agreement with A. Barzilai Investments and Assets
Ltd. and Kamim Investments and Assets Ltd., commencing on November 1, 2000, that
provides for monthly rent payments of $63,750, with each rent payment to be paid
three months in advance. The lease agreement has an initial term of five years.
We have an uneven We have an uneven history of financial results.
history of financial We incurred an operating loss of approximately
results. $0.32 million in 1991two separate two and $0.22 million in 1992.
In 1993 we made an operating profitone-half year options to extend the lease. The rent
for the first time, earning approximately $0.04 million,option period will increase 6% from the current rental payment.
The rent for the second option period will increase 7% from the current rental
payment.

SALSA ASSET PURCHASE AGREEMENT

On May 17, 2000, we entered into an Asset Purchase Agreement by and among
Salsa Digital Ltd. ('Salsa Digital') and Signtech Japan, Ltd., Salsa Digital DO
Brazil, Ltda., Salsa Digital (Guangzhou) Ltd., Salsa Dubai Corp., Salsa
Technology Pte Ltd. (collectively, the 'Selling Subsidiaries'), and NUR and
Salsa Digital Printers Ltd. and Nur Hungary Trading and Software Licensing
Limited Liability Company (together the 'Purchasing Subsidiaries'). The Asset
Purchase Agreement was amended as of June 30, 2000, to, among other things, add
NUR Asia Pacific Ltd., NUR Europe S.A. and Encre Consumables B.V as Purchasing
Subsidiaries.

Pursuant to the Asset Purchase Agreement, the Purchasing Subsidiaries
acquired all of the rights, title and interests in Salsa Digital's purchased
assets, and acquired an option to purchase the rights, title and interests in
all or a portion of the purchased assets held by each Selling Subsidiary, or at
our or the Purchasing Subsidiaries' option, 100% of the outstanding capital
stock of some or all of the Selling Subsidiaries in lieu thereof. Purchased
assets included, without limitation, all cash and cash equivalents, all
furniture, fixtures, improvements, equipment and all other tangible personal
property, all accounts receivable, all claims and rights relating to the
purchased assets, all intellectual property relating to the business of Salsa
Digital, all rights and interests under all contracts, leases or permits which
increasedthe Purchasing Subsidiaries elected to approximately $0.92 millionassume, and all other assets except for
the excluded assets. Excluded assets included, without limitation, all bank
accounts held by Salsa Digital (with certain enumerated exceptions) and certain
deposits and prepaid expenses. NUR and the Purchasing Subsidiaries are solely
liable for the liabilities related to trade payables, operational liabilities
directly relating to the business of Salsa Digital and/or the purchased assets,
and as further set forth in 1994,the Asset Purchase Agreement. All other liabilities
remain the responsibility of Salsa Digital. The purchase price paid was
$30,000,000, which consisted of a cash payment of $20,000,000 and the delivery
of 666,667 NUR ordinary shares to $1.49 millionSalsa Digital. The Purchasing Subsidiaries did
not elect to exercise the option to purchase any of the

purchased assets or outstanding capital stock of the Selling Subsidiaries. NUR
filed a registration statement on Form F-3, which became effective on
December 22, 2000, to permit the resale of the shares sold as described above.

LONG TERM LOAN AGREEMENTS

In July 2000, in 1995. In 1996 we incurred
an operating lossorder to finance the acquisition of $9.2 million. In 1997 we
achieved an operating incomeSalsa Digital, the
Company entered into long-term loan agreements with Bank Hapoalim and Bank
Leumi, as subsequently amended. The loan agreements provided for a three-year
long-term credit line of $0.91up to $20.0 million and 1998 had operating$15.0 million from Bank
Hapoalim and Bank Leumi, respectively. The Bank Hapoalim loan carries an
interest rate of Libor plus 0.7% per annum on $5.0 million and Libor plus 0.85%
per annum on $15.0 million. The Bank Leumi loan carries an interest rate of
Libor plus 0.7% per annum on the full loan.

In February 2002, the Company signed an amendment to the long-term loan
agreements with both banking institutions, providing for the rescheduling of the
repayment periods of the remaining long-term loans. According to the long-term
loans rescheduling agreements, the remaining long-term loans at Bank Leumi carry
interest rates of Libor plus 1.75% per annum on $13.0 million and Libor plus
2.25% per annum on $2.0 million. The remaining long-term loan of $17.5 million
at Bank Hapoalim carries interest of Libor plus 2.0% per annum. As of May 31,
2002, $17.0 million was outstanding under the Bank Hapoalim loan and $14.825
million was outstanding under the Bank Leumi loan. The long-term loans are
secured by a floating lien on all assets of the Company. Under the terms of the
long-term loan rescheduling agreements the long-term loans are further secured
by a negative pledge of the assets of NUR's subsidiaries.

Under the terms of long-term loans rescheduling agreements the Company and
its subsidiaries have undertaken, among other things, the following:

To close a private placement of no less than $7.0 million by March 30,
2002.

To maintain an equity of no less than $29,000, or 25% of the Company's
tangible assets.

To prevent short-term credit from exceeding 70% of the Company's net
accounts receivable aged less than 180 days.

To refrain from merging, consolidating, amalgamating or entering into any
other form of business combination with a third party, or liquidating or
dissolving.

To maintain certain financial ratios relating to the Company's earnings
before income tax, depreciation and amortization (EBITDA) and the Company's
overall long-term debt to financial institutions.

To issue a warrant to purchase up to 70,000 ordinary shares and a warrant
to purchase up to 50,000 ordinary shares of $2.38 million. We
cannot assure profitabilitythe Company to Bank Hapoalim
and Bank Leumi, respectively. Both warrants will be exercisable until
February 2006 at $5.00 per ordinary share.

Both the long-term loan agreements and the rescheduling agreements also
contain customary events of defaults, including the failure to pay interest or
principal, material breach of any representation or warranty or breach of any
covenant, cross-defaults, bankruptcy, or a change in control event relating to
the future.

Important facilitiesCompany or its subsidiaries. The long-term loan agreements and Our most important facilities and operations and
operationsthe long-term
loan rescheduling agreements are located in manygoverned by the laws of our subcontractors are located entirely in
Israel. the State of Israel.

PoliticalCITICORP VENDOR FINANCE AGREEMENT

NUR America, Inc. and military
conditions in Israel directly affect operations.
Since Israel was established in 1948, a state of
hostility has existed, varying in degree and
intensity, between Israel and certain Arab
countries. Although Israel has entered into
agreements with some of these countries, the
Palestine

Liberation Organization and the Palestinian
Authority, and the feuding parties have signed
various declarations in hopes of resolving some of
the hostilities, we cannot predict the future of
the volatile Middle East and of Israel in
particular. To date, Israel has notCiticorp Vendor Finance, Inc entered into a
peace treaty with Lebanon or Syria, with whom
Israel shares its northern borders, or with certain
other Arab countries with whomManufacturer Program Agreement and a state of hostility
exists. Any major hostilities involving Israel, the
Palestinian Authority, or Arab countriesMaster Remarketing Agreement on July 20,
2001. This is a 'pay-as-you-go' customized financing program for clients and
prospective clients in the Middle East could haveUnited States. According to these agreements, NUR
will sell equipment to Citicorp Vendor Finance who in turn will enter into
separate agreements with customers, providing necessary finance for customers to
purchase NUR equipment. The Master Remarketing Agreement allows Citicorp Vendor
Finance to request that NUR try and remarket equipment that has not been sold to
customers or that has been returned. In addition each customer will enter into a
serious negative impact on
our business operations.

Someseparate supply and maintenance agreement with NUR.

SHARE AND WARRANT PURCHASE AGREEMENT

In January 2002, we entered into a Share and Warrant Purchase Agreement with
the Investment Corp. of United Mizrahi Bank Ltd, a Company registered under the
laws of the State of Israel and an affiliate of an Israeli commercial bank, the
United Mizrahi Bank B.M. Pursuant to the Share and Warrant Purchase Agreement we
issued 2,333,333 of our officers Furthermore, all nonexempt male adult citizensordinary shares to the Investment Corp. at a purchase
price of and employees are on Israel, including some$3.00 per share. In connection with the private placement we also
issued to the Investment Corp. warrants to purchase an additional 612,500
ordinary shares at an exercise price of our officers and
military reserve. employees, are obligated to perform military
reserve duty and are subject to being called for
active duty under emergency circumstances. While we
have operated effectively under these conditions in
the past, we cannot predict the full impact of such
conditions on us in the future, particularly if
emergency circumstances occur.

We are sensitive to Inflation in Israel and devaluation of the NIS
economic conditions in have an impact on our financial results. Although
Israel. Israel has substantially reduced the rates of
inflation and devaluation in recent years, they are
still relatively high and we could experience
losses due to inflation or devaluation. If
inflation rates in Israel increase again and hurt
Israel's economy as a whole, our operations and
financial condition could be negatively impacted.

We do not know the$4.50 per warrant share exercisable
until January 17, 2006.

D. EXCHANGE CONTROLS

Israeli law limitsplaces limitations on foreign currency transactions
impact of recent and
transactions between Israeli and non-Israeli policy changes on residents.residents, including payment of
dividends. The Controller of Foreign Exchange at foreign currency the Bank of Israel, through "general" and
transactions. "special"
permits, may regulate or waive these limitations. Until recently, transactions in
foreign currency were strictly regulated. InAs of May 1998, the Bank of Israel liberalized its foreign
currency regulations by issuing a new "general
permit" pursuant to which foreign
currency transactions are generally permitted, although certain restrictions
still apply. Restricted transactions include foreign currency transactions by
institutional investors, including futures contracts by foreign residents for
periods of more than one month, and investments outside of Israel by pension
funds and insurers. Under the new
general permit, all foreign currency transactions must be
reported to the Bank of Israel.

We cannot
currently assess what impact, if any, this
liberalization will have on us. We also cannot
predict its impact on the value of the NIS compared
to the dollar and the corresponding effect on our
financial statements.

Service of process and We are organized under the laws of Israel and our
enforcement of judgments. headquarters are in Israel. Certain of our
officers and directors reside outside of the United
States. Therefore, you may not be able to enforce
any judgment obtained in the U.S. against us or any
of such persons. You may not be able to enforce
civil actions under U.S. securities laws if you
file a lawsuit in Israel. However, we have been
advised by our Israeli counsel that subject to
certain limitations, Israeli courts may enforce a
final judgment of a U.S. court for liquidated
amounts in civil matters after a hearing in Israel.
If a foreign judgment is enforced by an Israeli
court, it will be payable in Israeli currency.

We are preparing for the Many computer systems and software products will
Year 2000. not function properly commencing in the year 2000
due to a once-common programming standard that
represents years using only the last two-digits.
This is known as the Year 2000 problem. We are in
the process of upgrading our

computers to avoid any material complications due
to the Year 2000 problem. As part of this program,
we will identify those systems and applications
that require modification, redevelopment or
replacement. We expect to be Year 2000 compliant by
July 1999 with respect to our internal systems and
our products. Providing upgrades and changes to our
older products could cost up to $15,000 in the
aggregate. If we do not attain compliance for our
products in time to avoid complications, we have a
contingency plan in place that we believe will
protect our customers. We do not believe that the
failure of our vendors or other third-party
providers' systems to be Year 2000 compliant will
have a materially negative impact on our business.
See "Item 9: Management's Discussion and Analysis
of Financial Condition and Results of
Operation-Year 2000."

Forward-looking In this report we make forward-looking statements
statements. that involve risks and uncertainties. Our actual
results could differ considerably due to a variety
of factors, including competitive developments, the
risk factors listed above, and the risk factors
listed from time to time in the reports we file
with the U.S. Securities and Exchange Commission.

ITEM 2: DESCRIPTION OF PROPERTY

Israel

The Company's main facilities in Moshav Magshimim, Israel, consist of
approximately 13,000 square feet, which the Company uses as its headquarters and
as a research and development facility. The buildings are situated on a plot of
land leased to Moshe Nur and his wife. Mr. Nur served until April 1997 as the
Company's Chairman and was its major shareholder. See "Item 3: Legal
Proceedings" and "Item 13: Interest of Management in Certain Transactions."

The Company also subleases approximately 1,780 square feet at the NUR
Blueboard Assembler's facilities in Rosh Ha'ain, Israel, to conduct software
installation and system integration operations for the NUR Blueboard Printers.

United States

NUR America leases office space in Newton Centre, Massachusetts,
consisting of two office suites for use as the subsidiary's headquarters, sales
office and demonstration and service center. Unless terminated by written
notice, the lease is automatically extended in one-year increments.

Belgium

NUR Europe leases approximately 6,000 square feet of office space in
Brussels, Belgium, for use as the subsidiary's headquarters, sales office and
demonstration and service center.

Germany

NUR Germany occupies facilities in Kassel, Germany, consisting of one
building of approximately 3,500 square feet for use as the subsidiary's
headquarters, sales office and printing center. NUR Germany does not currently
have a formal lease agreement for the facilities.

China

NUR Asia Pacific leases a warehouse to use as such and as a demonstration
center in a free trade zone in Shanghai, China, and occupies office space in a
separate location in Shanghai.

ITEM 3: LEGAL PROCEEDINGS

In September 1998, the district court of Tel Aviv approved a settlement
agreement among the Company and several other parties that, together with other
settlement agreements, resolved all material claims, including those involving
the Company, relating to Mr. Moshe Nur and his affiliated companies. Mr. Nur
served until April 1997 as the Company's Chairman and was its major shareholder.

The parties to the court approved settlement agreement were the Company,
the special manager for Moshe Nur's assets in his bankruptcy proceedings, Moshe
Nur, and other of his family members. The parties to the other settlement
agreements included two Israeli banks, and the temporary receiver of Nur Outdoor
Advertising Ltd. (a company formerly affiliated with Mr. Nur).

According to the agreements, all material claims against the Company
relating to the lease of its facilities in Moshav Magshimim (including
confirmation of the Company's pre-payment of lease until July 2000), alleged
breach of contracts and alleged debts owed to any of the above mentioned parties
were dismissed. Separately, claims related to the ownership of the Company's
shares have been resolved and the temporary injunction on the issuance of
securities by the Company was lifted.

As part of the various settlement agreements, the Company paid an
aggregate of $100,000 and will withdraw its lawsuit against the First
International Bank.

Separately, in December 1998, the Company and certain parties achieved a
settlement agreement that, among other things, resolved several outstanding
legal disputes between the Company and the Matan Parties (defined below) (the
"Matan Settlement Agreement"). The Matan Settlement Agreement resolves several
lawsuits and proceedings pending in courts of Israel and the Israeli Patent
Office. The parties to the Matan Settlement Agreement include Matan Digital
Printing Ltd., Matan Y. Systems Ltd., Sprintek Ltd., Mr. Rami Dochovna (such
four parties, "Matan Parties"), the Company, Meital, Scitex, Idanit and others.

The Matan Settlement Agreement resolved all disputes between the Company
and the Matan Parties, including disputes on patent ownership, alleged royalty
payments due to certain members of the Matan Parties, alleged debts of the
Company to certain members of the Matan Parties and different rights relating to
the technologies of such parties. Under the terms of the Matan Settlement
Agreement, the patents in dispute are the property of the Company; the Company
granted the Matan Parities, Idanit, Scitex and affiliates of Scitex a
non-exclusive perpetual license for use of such patents; the Company is no
longer obligated to pay royalty payments to the Matan Parties in connection with
the sale of the Company's printers; all past debts of the Company to the Matan
Parties are deemed paid in full; and the mutual lawsuits filed in the Tel Aviv
District Court and the Israeli Patent Office were withdrawn.

The Matan Settlement Agreement also resolved all existing disputes and
legal proceedings between the Company, Idanit, Scitex and Meital, a company that
recently sold technology to the Company.

As part of the Matan Settlement Agreement, the Company is required to pay
a total of $880,000, plus interest and VAT, assuming timely payments, to the
Matan Parties, which amount has been fully reserved and is payable by the
Company in equal quarterly installments over a three year period which commenced
in December 1998.

In March 1999, the district court of Tel-Aviv approved a settlement
between the Company and Quantum Securities Ltd. whereby the Company paid Quantum
$6,000 settling all disputes with Quantum.

In February 1999, Idanit, a competitor of the Company in the large format
digital printer market, and Idanit USA, Inc., a wholly owned subsidiary of
Idanit (collectively, the "Idanit Parties"), filed suit in the District Labour
Court, Tel Aviv, Israel, against the Company, NUR America, and a former sales
professional of Idanit currently employed with NUR America. At approximately the
same time, Idanit also filed suit in Superior Court, Commonwealth of
Massachusetts, against Nur America. The Idanit Parties claim that NUR America,
in hiring the

sales professional, interfered with non-competition and confidentiality
agreements between Idanit and the sales professional. On March 12, 1999 the
Idanit Parties filed an amended complaint in the Massachusetts action alleging
that NUR America misappropriated Idanit USA's confidential and propriety
information in connection with its hiring of the sales professional. Idanit
seeks injunctive relief to prevent the sales professional from working with the
Company and unspecified consequential and punitive monetary damages. In March
1999, the Israeli Court declined to exercise jurisdiction over the parties and
deferred the matter to the United States Courts. The Company and NUR America
plan to defend themselves vigorously in the Massachusetts action.

ITEM 4: CONTROL OF REGISTRANT

The following table sets forth certain information regarding the
beneficial ownership of the Company's Ordinary Shares as of April 16, 1999, by
(i) each person known by the Company to be the beneficial owner of more than 10%
of the outstanding Ordinary Shares and (ii) all of the Company's executive
officers and directors as a group (8 persons). All of the information with
respect to beneficial ownership by the Company's directors, executive officers
and beneficial owners has been furnished by the respective director, executive
officer, or beneficial owner, as the case may be. The Company believes that the
persons named in this table have sole voting and investment power with respect
to the Ordinary Shares indicated.

Percentage of
Ordinary Shares Ordinary Shares
Beneficially Owned Beneficially Owned
------------------ ------------------

Dan Purjes* 4,285,151 37.26%

WBM I, LLC** 2,918,720 26.83%

All current executive officers
and directors as a group (8
persons) 5,190,927 45.56%

- ---------------------

* Dan Purjes is Chairman of the Company and Chairman of Josephthal. See
"Item 13: Interest of Management in Certain Transactions."
** Dan Purjes may be deemed to be the beneficial owner of shares held by WBM
I, LLC. See "Item 13: Interest of Management in Certain Transactions."

ITEM 5: NATURE OF THE TRADING MARKET

The Company's Ordinary Shares are quoted on the NASDAQ National Market
under the symbol NURM. There is no non-United States trading market for the
shares.

As of April 16, 1999, there were 116 record holders of Ordinary Shares, of
which 98 represented United States record holders holding approximately 81.75%
the outstanding Ordinary Shares of the Company.

The prices set forth below are high and low closing bid prices for the
Ordinary Shares of the Company as reported by NASDAQ National Market. Such
quotations reflect inter-dealer prices, without retail markup, markdown, or
commission and may not necessarily represent actual transactions.

Quarter High Low
------- ---- ---

1st Quarter 1997 2-1/4 1-1/4
2nd Quarter 1997 1-3/4 1
3rd Quarter 1997 2-1/8 1-1/16
4th Quarter 1997 2-1/8 1-1/4
1st Quarter 1998 3-1/8 1-11/16
2nd Quarter 1998 4-1/2 2-1/4
3rd Quarter 1998 3-1/8 1-15/16
4th Quarter 1998 3-3/8 1-3/4
1st Quarter 1999 3-5/16 2-1/2
2nd Quarter 1999* 3-23/32 2-7/8

- ----------
* Represents the period from April 1, 1999 through April 30, 1999.

The Company does not anticipate that it will pay any cash dividend on its
Ordinary Shares in the foreseeable future. Dividends, if any, will be paid in
NIS. Dividends paid to shareholders outside Israel will be converted to U.S.
dollars, on the basis of the exchange rate prevailing at the date of payment.
The Company has determined that it will not distribute dividends out of
tax-exempt profits.

ITEM 6: EXCHANGE CONTROLSE. TAXATION

CAPITAL GAINS AND OTHER LIMITATIONS AFFECTING SECURITY
HOLDERS

Non-residents of Israel will be able to receive dividends, if declared,
and any amounts payable upon the dissolution, liquidation or winding-up of the
affairs of the Company. Any such payments will be paid in freely repatriable
non-Israeli currencies (including U.S. dollars). Such payments, if made, shall
be made pursuant to a general permit issued by the Controller under the Currency
Control Law, 1978 (the "Currency Control Law").

In May 1998, a new "general permit" was issued, which removed most of the
restrictions prohibited under the law, and thus enabled Israeli citizens to
freely invest outside of Israel and freely convert Israeli currency into
non-Israeli currencies.

ITEM 7: TAXATION

Capital Gains and Income Taxes Applicable to Non-Israeli ShareholdersINCOME TAXES APPLICABLE TO NON-ISRAELI SHAREHOLDERS

The following is a summary of the current tax laws of the State of Israel as
they relate to the CompanyNUR and itsour shareholders. This summary does not discuss all
aspects of Israeli tax law that may be relevant to a particular investor in
light of his personal investment circumstances or to certain types of investors
subject to special treatment under Israeli law (for example, traders in
securities, businesses in Israel or persons that own, directly or indirectly,
10% or more of the Company'sNUR's outstanding voting stock). The following also includes a
discussion of certain Israeli government programs benefiting various Israeli
businesses such as the Company.NUR. To the extent that the discussion is based on new
legislation yet to be subject to judicial or administrative interpretation,
there can be no assurance that the views

21
expressed herein will accord with any
such interpretation in the future. This discussion is not intended and should
not be construed as legal or professional tax advice, and does not cover all
possible tax considerations.

General Corporate Tax Structure

The CompanyGENERAL CORPORATE TAX STRUCTURE

NUR is subject to corporate tax in Israel. Commencing in the tax year 1993
through and including 1996, the regular rate of corporate tax to which Israeli
companies are subject decreased by 1% each year, i.e., from 39% in 1993 down to
36% in 1996 and thereafter. However, the effective rate payable by a company
which derives income from an "Approved Enterprise"'Approved Enterprise' (as further discussed below)
may be considerably less. See "--Law' -- Law for the Encouragement of Capital
Investments, 1959."

Taxation Under Inflationary Conditions'

On May 4, 2000, a committee chaired by the then Director General of the
Israeli Ministry of Finance, issued a report recommending significant changes in
the Israeli system of taxation. The proposed changes, if adopted, would
significantly alter the taxation of individuals, and would also have affect on
corporate taxation. In particular, the proposed changes would reduce, but not
eliminate, the tax benefits available to 'Approved Enterprises' such as the
Company's. The proposed changes, if adopted, would also impose a capital gains
tax on individuals on the sale of shares, unless the selling shareholder is
entitled to benefits under a tax treaty. In the interim, the Israeli financial
atmosphere has undergone significant political and economic changes. On
February 26, 2002 the Minister of Finance appointed a new committee to recommend
tax reforms, and this committee has submitted its report in June 2002. The
Company cannot be certain whether the proposed changes will be adopted, when
they will be adopted or what form any changes to the Israeli system of taxation
will ultimately take.

TAXATION UNDER INFLATIONARY CONDITIONS

The Income Tax Law (Adjustment for Inflation), 1985 (the "Adjustment'Adjustment for
Inflation Law"Law') attempts to overcome some of the problems experienced in a
traditional tax system by an economy experiencing rapid inflation, which was the
case in Israel at the time the Adjustment for Inflation Law was enacted.
Generally, the Adjustment for Inflation Law was designed to neutralize for
Israeli tax purposes the erosion of capital investments in businesses and to
prevent unintended tax benefits resulting from the deduction of inflationary
financing expenses. The Adjustment for Inflation Law applies a supplementary set
of inflationary adjustments to a normal taxable profit computed according to regular
historical cost principles.

The Adjustment for Inflation Law introduced a special tax adjustment for the
preservation of equity for Israeli tax purposes based on changes in the Israeli CPI whereby certain
corporate assets are classified broadly into fixed (inflation resistant) assets
and non-fixed assets. Where shareholders' equity, as defined in the Adjustment
for Inflation Law, exceeds the depreciated cost of fixed assets, a corporate tax
deduction which takes into account the effect of inflationary change on such
excess inis allowed (up to a ceiling of 70% of taxable income for companies in any
single tax year, with the unused portion permitted to be carried forward on a
linked basis with no ceiling). If the depreciated cost of fixed assets exceeds
shareholders' equity, then such excess multiplied by the annual rate of
inflation is added to taxable income. Due to the zero inflation that prevailed
in Israel in 2000, such adjustments to taxable income will not be required for
the year 2000.

In addition, subject to certain limitations, depreciation on fixed assets
and losses carried forward are adjusted for inflation based on changes in the
Israeli CPI. The net effect of the Adjustment for Inflation Law on the CompanyNUR might be
that the Company'sNUR's taxable income, as determined for Israeli corporate tax purposes,
will be different than the Company'sNUR's U.S. dollar income, as reflected in itsour
consolidated financial statements, due to the difference between the annual
changes in the CPI and in the NIS exchange rate with respect to the U.S. Dollar,
causing changes in the actualeffective tax rate.

Law for the Encouragement of Industry (Taxes)LAW FOR THE ENCOURAGEMENT OF INDUSTRY (TAXES), 1969

The CompanyNUR currently qualifies as an "Industrial Company"'Industrial Company' within the definition of
the Law for the Encouragement of Industry (Taxes), 1969 (the "Industry'Industry
Encouragement Law"Law'). According to the Industry Encouragement Law, an "Industrial Company"'Industrial
Company' is a company resident in Israel, which at least 90% of theits income of
which in any tax year (exclusive of income from any defense loans, capital
gains, interest and dividends), is derived from an "Industrial Enterprise"'Industrial Enterprise' owned
by it. An "Industrial Enterprise"'Industrial Enterprise' is defined by that law as an enterprise whose
major activity in a given tax year is industrial production activity.

Included among the tax benefits for an Industrial Company are deductions of
12.5% per annum of the purchase price of a good-faith acquisition of a patent or
of know-how, an election under certain conditions to file a consolidated return
and accelerated depreciation rates on equipment and buildings.

Eligibility for the benefits under the Industry Encouragement Law is not
subject to receipt of prior approval from any governmental authority. No
assurance can be given that the CompanyNUR will continue to qualify as an "Industrial Company"'Industrial
Company' or that the benefits described above will be available in the future.

Law for the Encouragement of Capital Investments,LAW FOR THE ENCOURAGEMENT OF CAPITAL INVESTMENTS, 1959

The Law for the Encouragement of Capital Investments, 1959, as amended (the
"Investment Law"'Investment Law'), provides that a capital investment in production facilities
(or other eligible facilities) may, upon application to the Israel Investment
Center, be designated as an Approved Enterprise. Each certificate of approval
for an Approved Enterprise relates to a specific program delineated both by its
financial scope, including its capital sources, and its physical
characteristics, i.e., the equipment to be purchased and utilized pursuant to
the program. The tax benefits derived from any such certificate of approval
relate only to taxable profits attributable to the specific Approved Enterprise.

Taxable income of a company derived from an Approved Enterprise designated
as such after October 30, 1978, is subject to corporate tax at the rate of 25% or less based on the
percentage of foreign ownership of the

company (rather than the current regular corporate tax rate of 36%) throughout the
"Benefit Period"--a'Benefit Period' -- a period of seven years commencing with the year in which
the Approved Enterprise first generated taxable income (limited to the earlier
of twelve years from the commencement of production or fourteen years from the
date of approval) and under certain circumstances, extending to a maximum of ten
years therefrom. In the event a company operates under more than one approvalapproved
plan or only part of its capital investments are approved (a "Mixed Enterprise"'Mixed
Enterprise'), its effective corporate tax rate is the result of a weighted
combination of the various applicable rates.

In addition, a company owning an Approved Enterprise approval after April
1, 1986 (or prior thereto, provided no government grants or loans had previously
been granted in respect to such enterprise) may elect to
forego certain government grants extended tofor its Approved Enterprise in exchange for an
"alternative package"'alternative package' of tax benefits (the "Alternative Package"'Alternative Package'). Under the
Alternative Package, a company's undistributed income derived from an Approved
Enterprise will be exempt from corporate tax for a period of between two and ten
years, depending on the geographic location of the Approved Enterprise within
Israel, and such company will be eligible for the tax benefits under the
Investment Law described above for the remainder of the Benefits Period.

Part of the Company'sNUR's production facilities have been granted the status of
"Approved Enterprise"'Approved Enterprise' under the Investment Law, under twothree separate investment
plans. The implementation of the investments under the first plan was finalizedcompleted
in 1993. The implementation of the second plan is expected to bewas finalized in 1999. NUR's
application for a third plan was approved in 2000.

According to the provisions of the Investment Law, the CompanyNUR chose to enjoy
"alternative benefits"--waiver'alternative benefits' -- waiver of grants in return for tax exemption.benefits.
Accordingly, the Company'sNUR's income from the Approved Enterprise will be tax-exempt for a
period of two and four years for the first and the third plans and for a period of four
years for the second plans,
respectively,plan, commencing with the year it first earns taxable
income, and subject to corporate tax at the rate of 25%15% - 20% (or less based on
the percentage of foreign ownership of the company), for additional periods of
five, six and threeeight years, for the first, second and secondthird plans, respectively.

The period of tax benefits, detailed above, is subject to limits of 12twelve
years from the commencement of production, or 14fourteen years from receiving the
approval, whichever is earlier. Given the above mentionedabove-mentioned conditions, the period
of benefits for the first plan commenced in the year 1994 and will terminateterminated in the
year 2000, and the period of benefits for the second plan commenced in the year
1999 and will terminate in the year 2006. The period of benefits for the third
plan has not yet commenced.been determined.

If dividends are distributed out of such tax-exempt profits the Companyderived from 'Approved
Enterprise', NUR will be liable for corporate tax at the rate, which would have
been applied if it had not chosen the alternative tax benefits (currently 25%15% to
20% based on the percentage of foreign ownership of NUR for an "Approved
Enterprise"'Approved
Enterprise'). Therefore, income derived from the Company's "Approved Enterprise"
statusNUR's 'Approved Enterprise'
tax-exempt profits, is not available for distribution to shareholders as a
dividend. See Note 20(a)16(a) to the Company's Financial Statements.NUR's consolidated financial statements, which are
included as a part of this annual report on Form 20-F.

The dividend recipient is taxed at the reduced rate applicable to dividends
from Approved Enterprises (15% - 20%), if the dividend is distributed during the
tax exemptionbenefits period or within a specifiedtwelve years period thereafter, or for an
unlimited period in the case of a "Foreign'Foreign Investors' Company" -Company' -- a company over
25% foreign-owned with an approved enterprise. This tax must be withheld by the
company at source, regardless of whether the dividend is converted into foreign
currency. See "--Capital' -- Capital Gains and Income Taxes Applicable to Non-Israeli
Shareholders."'

Subject to certain provisions concerning income subject to the Alternative
Package, all dividends are considered to be attributable to the entire
enterprise, and the effective tax rate is the result of a weighted combination
of the various applicable tax rates.

The Investment Law also provides that an Approved Enterprise is entitled to
accelerated depreciation on its property and equipment that are included in an
approved investment program.

Grants and certain other incentives received by a company in accordance with
the Investment Law remain subject to final ratification by the Israel Investment
Center, such ratification being conditional upon fulfillment of all terms of the
approved program. Failure to comply with all such terms may require the return
of such grants and incentives (inclusive of interest as of the date of the
grant).

Receipt of grants and tax benefits from the OCS and the Marketing Fund and
under the Company's52

NUR's existing "Approved Enterprise"'Approved Enterprise' status and any new programs, if and
when approved, are or will be, as the case may be, subject to various conditions. The tax benefits derived from
the Company's "Approved Enterprise"NUR's 'Approved Enterprise' status are conditioned upon fulfillment of the
conditions stipulated by the Investment Law, the regulations promulgated
thereunder and the criteria set forth in the certificate of approval issued
pursuant to the Investment Law. In the event of a failure by the CompanyNUR to comply with
these conditions and criteria, the grants and tax benefits could be canceled, in
whole or in part, and the CompanyNUR would be required to refund the amount of the canceled
benefits, adjusted for inflation, interest and interest.penalties. Management believes
that the CompanyNUR has operated and will continue to operate in compliance with all the
"Approved
Enterprise"'Approved Enterprise' conditions and criteria applicable to itus from the OCS,Office
of Chief Scientist, the Marketing Fund and its "Approved Enterprise"our 'Approved Enterprise' status,
although there can be no assurance of this, and that the likelihood is remote
that itwe will be required to refund grants or tax benefits that it deriveswe derive from
the OCS,Office of Chief Scientist, the Marketing Fund and under its "Approved Enterprise"our 'Approved
Enterprise' status. There can be no assurance that the funding and tax benefits
will continue. See "Item 1: Description of
Business--Research'ITEM 4: Information on NUR -- Research and DevelopmentDevelopment' and
--Risk Factors--We Rely Upon Government
Grants, Tax Benefits,'ITEM 3: Key Information -- Risk Factors -- We rely upon government grants, tax
benefits, and Other Funding From Third Parties."

Capital Gains and Income Taxes Applicable to Non-Israeli Shareholdersother funding from third parties.'

CAPITAL GAINS AND INCOME TAXES APPLICABLE TO NON-ISRAELI SHAREHOLDERS

Under existing regulations, any capital gain realized by an individuala shareholder with
respect to the Ordinary Sharesordinary shares acquired on or after the registration of such
shares will be exempt from Israeli Capital Gains Tax if the Ordinary Sharesordinary shares are
listed on an approved foreign securities market (which term includes the Nasdaq
in the United States) and provided that the CompanyNUR continues to qualify as an
Industrial Company under Israeli law, and provided the individualshareholder does not hold
such shares for business purposes.

Proposals exist to impose capital gains tax on individuals at a rate of 25%
and on companies at up to 36%, subject to any applicable tax treaty. Under the
U.S.-Israel tax treaty, U.S. residents may be exempt from Israeli capital gains
tax, if they held under 10% of the voting stock throughout the twelve months
preceding a sale or disposition of stock in an Israeli company.

Upon a distribution of dividends other than bonus shares (stock dividends),
income tax is generally withheld at source at the rate of 25% (or the lower rate
payable with respect to Approved Enterprises, see "--Law' -- Law for the Encouragement
of Capital Investments, 1959"1959'), unless a double taxation treaty is in effect
between Israel and the shareholder's country of residence that provides for a
lower tax rate in Israel on dividends.

A tax treaty between the United States and Israel (the "Treaty"'Treaty'), effective
since January 1, 1995, provides for a maximum tax of 25% on dividends paid to a
resident of the United States (as defined in the Treaty). Dividends distributed
by an Israeli company and derived from the income of an approved enterprise are
subject to a 15% dividend withholding tax in the preceding year
and the current year to the date of payment.tax. The Treaty further provides that a
12.5% Israeli dividend withholding tax would apply to dividends paid to a United
States corporation owning 10% or more of an Israeli company's voting stock. The
12.5% rate applies only on dividends from a company that does not have an
"Approved Enterprise"'Approved Enterprise' in the applicable period.

A non-resident of Israel who has had dividend income derived or accrued in
Israel from which tax was withheld at source is currently exempt from the duty
to file an annual Israeli tax return with respect to such income, provided such
income was not derived from a business carried on in Israel by such non-residentnon-
resident and that such non-resident does not derive other non-passive income
from sources in Israel.

Proposals are being formulated to expand the requirement to file
annual Israeli tax returns.

Tax Benefits for Research and DevelopmentTAX BENEFITS FOR RESEARCH AND DEVELOPMENT

Israeli tax law allows under certain conditions a tax deduction in the year
incurred for expenditures (including non-depreciable 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) and 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. Expenditures not so approved are deductible over a three-year period.
However, according to recent Israeli Supreme Court decisions, expenditures made out of
the proceeds of government grants are not deductible, i.e., the CompanyNUR will be able to
deduct the unfunded portion of the research and development expenditures and not
the gross amount.

U.S. TAX CONSIDERATIONS REGARDING ORDINARY SHARES

The following summary describes certain of the principal United States
federal income tax consequences relating to an investment in Ordinary
Sharesordinary shares as
of the date hereof. The summary is based on the Internal Revenue Code of 1986
(the "Code"'Code'), and existing final, temporary and proposed Treasury Regulations,
Revenue Rulings and judicial decisions, all of which are subject to prospective
and retroactive changes. The CompanyNUR will not seek a ruling from the Internal Revenue
Service (the "IRS"'IRS') with regard to the United States federal income tax
treatment relating to an investment in Ordinary Sharesordinary shares and, therefore, there can
be no assurance that the IRS will agree with the conclusions set forth below.
The summary does not purport to address all federal income tax consequences that
may be relevant to particular investors. For example, the summary applies only
to holders who hold Ordinary Sharesordinary shares as a capital asset within the meaning of
Section 1221 of the Code, and does not address the tax consequences that may be
relevant to investors in special tax situations (including, for example,
insurance companies, tax-exempt organizations, dealers in securities or
currency, banks or other financial institutions, or investors that hold
Ordinary Sharesordinary shares as part of a hedge, straddle or conversion transaction, or holders that own, directly or indirectly, five
percent or more of the Company's outstanding Ordinary Shares)transaction).
Further, it does not address the alternative minimum tax consequences of an
investment in Ordinary Sharesordinary shares or the indirect consequences to Holdersholders of equity
interests in investors in Ordinary Shares.ordinary shares. ACCORDINGLY, PERSONS CONSIDERING THE
PURCHASE OF ORDINARY SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE
APPLICATION OF UNITED STATES FEDERAL INCOME TAX LAWS, AS WELL AS THE LAWS OF ANY
STATE, LOCAL OR FOREIGN TAXING JURISDICTION, TO THEIR PARTICULAR SITUATIONS.

For purposes of this discussion, "Company"'Company' refers to NUR Macroprinters Ltd.,
and "U.S. Holder"'U.S. Holder' means a holder of Ordinary Sharesordinary shares that is a citizen or
resident of the United States, a partnership or corporation created or organized
in the United StatesS tates or any State thereof (including the District of Columbia),
or an estate or trust the income of which is subject to United States federal
income tax on a net income basis with respect to Ordinary Shares.ordinary shares. The term
"non-U.S. Holder"'non-U.S. Holder' refers to any holder of Ordinary Sharesordinary shares other than a U.S.
Holder.

Taxation ofTAXATION OF U.S. HoldersHOLDERS

Distributions on Ordinary Shares. Distributions made by the CompanyNUR with respect to
Ordinary Sharesordinary shares generally will constitute dividends for federal income tax
purposes and will be taxable to a U.S. Holder as ordinary income to the extent
of the Company'sNUR's undistributed current or accumulated earnings and profits (as
determined for United States federal income tax purposes). Distributions in
excess of the Company'sNUR's current or accumulated earnings and profits will be treated
first as a nontaxable return of capital reducing the U.S. Holder's tax basis in
the Ordinary Shares,ordinary shares, thus increasing the amount of any gain (or reducing the
amount of any loss) which might be realized by such Holder upon the sale or
exchange of such Ordinary Shares.ordinary shares. Any such distributions in excess of the U.S.
Holder's tax basis in the Ordinary Sharesordinary shares will be treated as capital gain to the
U.S. Holder and will be either long term or short term capital gain depending
upon the U.S. Holder's federal income tax holding period for the Ordinary Shares.ordinary
shares. Dividends paid by the CompanyNUR generally will not be eligible for the dividends
received deduction available to certain United States corporate shareholders
under Code Sections 243 and 245. The amount of any cash distribution paid in a
foreign currency will equal the U.S. dollar value of the distribution,
calculated by reference to the exchange rate in effect at the time the dividends
are received. A U.S. Holder should not recognize any foreign currency gain or
loss if such foreign currency is converted into U.S. dollars on the day
received. If a U.S. Holder does not convert the foreign currency into U.S.
dollars on the date of receipt, however,

25
such Holder may recognize gain or loss
upon a subsequent sale or other disposition of the foreign currency (including
an exchange of the foreign currency for U.S. dollars). Such gain or loss, if
any, will be ordinary income or loss for United States federal income tax
purposes.

Subject to certain conditions and limitations, any Israeli withholding tax
imposed upon distributions which constitute dividends under United States income
tax law will be eligible for credit against a U.S. Holder's federal income tax
liability. Alternatively, a U.S. Holder may claim a deduction for such amount,
but only for a year in which a U.S. Holder elects to do so with respect to all
foreign income

taxes. The overall limitation on foreign taxes eligible for credit is calculated
separately with respect to specific classes of income. For this purpose,
dividends distributed by the CompanyNUR with respect to Ordinary Sharesordinary shares will generally
constitute "passive'passive income."'

Sale or Exchange of Ordinary Shares. A.A U.S. Holder of Ordinary
Sharesordinary shares
generally will recognize capital gain or loss upon the sale or exchange of the
Ordinary Sharesordinary shares measured by the difference between the amount realized and the
U.S. Holder's tax basis in the Ordinary Shares.ordinary shares. Gain or loss will be computed
separately for each block of shares sold (shares acquired separately at
different times and prices). The gain or loss on such disposition will be long
term capital gain or loss if the Ordinary Shares had been held for more than one
year. The deductibility of capital losses is restricted
and generally may only be used to reduce capital gains to the extent thereof.
However, individual taxpayers generally may deduct annually $3,000 of capital
losses in excess of their capital gains.

Passive Foreign Investment Company. A foreign corporation generally will be
treated as a "passive'passive foreign investment company" ("PFIC"company' ('PFIC') if, after applying
certain "look-through"'look-through' rules, either (i) 75% or more of its gross income is
passive income or (ii) 50% or more of the average value of its assets is
attributable to assets that produce or are held to produce passive income.
Passive income for this purpose generally includes dividends, interest, rents,
royalties and gains from securities and commodities transactions. The
look-through rules require a foreign corporation that owns at least 25%, by
value, of an operating subsidiarythe stock of another corporation to treat that proportiona proportionate amount of the subsidiaries
assets and income as held or received directly by the foreign parent.

The Companycorporation.

NUR does not believe that it is currently a PFIC nor does it anticipate that
it will be a PFIC in the future because it expects that less than 75% of its
annual gross income will be passive income and less than 50% of its assets will
be passive assets, based on the look-through rules, the current income and
assets of the CompanyNUR and its subsidiaries, and the manner in which the CompanyNUR and its
subsidiaries are anticipated to conduct their businesses in the future. However,
there can be no assurance that the CompanyNUR is not or will not be treated as a PFIC in
the future. If the CompanyNUR were to be treated as a PFIC, all U.S. Holders may be
required, in certain circumstances, to pay an interest charge together with tax
calculated at maximum rates on certain "excess'excess distributions,"' including any
gain on the sale of Ordinary Shares.ordinary shares. In order to avoid this tax consequence, a
U.S. Holder (i) may be permitted to make a "qualified'qualified electing fund"fund' election,
in which case, in lieu of such treatment, such holder would be required to
include in theirits taxable income certain undistributed amounts of the Company'sNUR's income or
(ii) may elect to mark-to-market the Ordinary
Sharesordinary shares and recognize ordinary
income (or possible ordinary loss) each year with respect to such investment and
on the sale or other disposition of the Ordinary
Shares.ordinary shares. Neither the CompanyNUR nor its
advisors have the duty to or will undertake to inform U.S. Holders of changes in
circumstances that would cause the CompanyNUR to become a PFIC. U.S. Holders should consult
their own tax advisors concerning the status of the CompanyNUR as a PFIC at any point in
time after the date of this Form. The CompanyNUR does not currently intend to take the
action necessary for a U.S. Holder to make a "qualified'qualified electing fund"fund' election
in the event the
CompanyNUR is determined to be a PFIC.

Foreign Personal Holding Company. A foreign corporation may be classified as
a foreign personal holding company (a "FPHC"'FPHC') for federal income tax purposes if
both of the following tests are satisfied: (i) at any time during the taxable
year five or fewer individuals who are United States citizens or residents own
or are deemed to own (under certain attribution rules) more than 50% of its
stock (vote or value) and (ii) at least 60% (50% for years subsequent to the
year in which it becomes a FPHC) of its gross income (regardless of its source),
as specifically adjusted, "is'is foreign personal holding company income,"' which
includes dividends, interest, rents, royalties and gain from the sale of stock
or securities.

The CompanyNUR does not believe that it is currently a FPHC nor does it anticipate that
it will be a FPHC in the future; however, no assurance can be given that the CompanyNUR is
not or will not become a FPHC as a result of future changes of ownership or
changes in the nature of the income of the Company.NUR. If the CompanyNUR were to be classified as a
FPHC, each U.S. Holder would be required to include in income as a taxable
constructive dividend its pro rata share of the Company'sNUR's undistributed foreign personal
holding company income.

Controlled Foreign Corporation. If more than 50% of the Ordinary
Sharesordinary shares
(vote or value) of the CompanyNUR is owned, directly or indirectly, by U.S. Holders each of whom ownsthat
own or isare deemed to own under certain attribution rules 10% or more of the
total combined voting power of all classes of stock of the
Company ("10% Shareholder"NUR ('10% Shareholder'),
the CompanyNUR could be treated as a "controlled'controlled foreign corporation"corporation' (a "CFC"'CFC') under
Subpart F of the Code. It is unclear how controlling blocks of stock will be
valued for these purposes. Accordingly,

the
Company55

NUR may be treated as a CFC for United States federal income tax purposes even
though 10% Shareholders do not own more than 50% of the outstanding Ordinary Shares.

The Companyordinary
shares.

NUR does not believe that it is currently a CFC; however, no assurance can
be given that the CompanyNUR will not become a CFC as a result of future changes in its
ownership. If the CompanyNUR were to be treated as a CFC, each 10% Shareholder would be
required to include in its taxable income as a constructive dividend its pro
rata share of certain undistributed income of the
Company,NUR, and all or a portion of the
gain from the sale or exchange of the Ordinary Sharesordinary shares may be treated under
Section 1248 of the Code as dividend income. Neither the CompanyNUR nor its advisors have
the duty to or will undertake to inform U.S. Holders of changes in circumstances
that would cause the CompanyNUR to become a CFC. U.S. Holders should consult their own tax
advisors concerning the status of the CompanyNUR as a CFC.

Information Reporting. Any U.S. Holder who owns 10% or more (in
voting power or value) of the Ordinary Shares of the Company may be required to
file IRS Form 5471 with the IRS to report certain acquisitions or dispositions
of Ordinary Shares. In addition, annual filings of IRS Form 5471 would be
required (i) by any U.S. Holder of 10% or more (of the voting power in the case
of a CFC, or value in the case of a FPHC) of the Ordinary Shares of the Company,
and (ii) by any U.S. Holder owning more than 50%, in voting power or value, of
the Ordinary Shares of the Company. In addition, for taxable years beginning
after February 5, 1999, U.S. Holders are required to report certain acquisitions
of Ordinary Shares from the Company to the IRS on IRS Form 926, and that
nonreporting may subject the U.S. Holder to substantial penalties. Potential
investors of the Shares should consult with their own tax advisors regarding the
necessity of filing information returns.

Taxation of Non-U.S. HoldersTAXATION OF NON-U.S. HOLDERS

Distributions on Ordinary Shares. Distributions made by the CompanyNUR with respect to
the Ordinary Sharesordinary shares to non-U.S. Holders who are not engaged in the conduct of a
trade or business within the United States will be subject to United States
federal income tax only if 25% or more of the gross income of the
CompanyNUR (from all
sources for the three-year period ending with the close of the taxable year
preceding the declaration of the distribution) was effectively connected with
the conduct of a trade or business in the United States by the
Company. The CompanyNUR. NUR does not
anticipate engaging in the conduct of a trade or business within the United
States, except through its subsidiaries. However, if the 25% threshold for such
period is exceeded, a portion of any distribution paid by the CompanyNUR to a non-U.S.
Holder could be subject to federal income tax withholding at the rate of 30%;
the portion of the distribution that could be subject to withholding would
correspond to the portion of the Company'sNUR's gross income for the period that is
effectively connected to its conduct of a trade or business within the United
States.

Sale or Exchange of Ordinary Shares. A non-U.S. Holder will not be subject
to United States federal income tax on any gain realized upon the sale or
exchange of Ordinary Sharesordinary shares if such Holder has no connection with the United
States other than holding the Ordinary Sharesordinary shares and in particular (i) such gain is
not effectively connected with a trade or business in the United States of the
non-U.S. Holder and (ii) in the case of a non-U.S. Holder who is an individual,
which has a "tax home" (as defined in Section 911(d)(3) of the Code) in the
United States,
such non-U.S. Holder is not present in the United States for 183 days or more in
the taxable year of such disposition, and (iii) the Company is
not and has not been at any time within 5 years preceding such disposition a
"U.S. real property holding corporation" (a "USRPHC") for federal income tax
purposes.

The Company believes that it is not and does not currently intend to
become a USRPHC, but no assurance can be given that the Company is not or will
not become a USRPHC in the future. In general, if the Company is determined to
be a USRPHC then non-U.S. Holders may be subject to United States federal income
tax on the sale or exchange of the Ordinary Shares, and to withholding at a rate
of 10% on any such disposition. However, a non-U.S. Holder will not be subject
to these special rules even if the Company is determined to be a USRPHC provided
that (i) such non-U.S. Holder did not at any time during the five years ending
on the date of sale or disposition actually or constructively own more than 5%
of the Ordinary Shares of the Company and (ii) the Ordinary Shares are then
"regularly traded" on an established securities market in the United States.
Since the Ordinary Shares are traded on the Nasdaq stock market and since it is
regularly quoted by broker dealers, the Ordinary Shares should be considered to
be "regularly traded" on an established securities market. However, it is
possible to interpret the current Temporary Regulations as concluding that the
Ordinary Shares will not be considered "regularly traded" at any time during
which 50% or more thereof is owned by 100 or fewer persons, which will be the
case as of the date of this Form.

United States Business. A non-U.S. Holder engaged in a trade or business in
the United States whose income from the Ordinary Sharesordinary shares (including gain from the
sale or exchange thereof) is effectively connected with the conduct of such
trade or business will generally be subject to regular United States federal
income tax on such income in the same manner as if it were a U.S. Holder. In
addition, if such a Holder is a foreign corporation, it may be subject to a
branch profits tax equal to 30% of its effectively connected earnings and
profits for the taxable year, subject to adjustments.

Backup WithholdingBACKUP WITHHOLDING

Distributions made by the CompanyNUR with respect to the Ordinary Sharesordinary shares and the gross
proceeds received from the disposition of the Ordinary Sharesordinary shares may be subject to
certain information reporting to the IRS and to a 31% backup withholding tax.
However, backup withholding generally will not apply to payments made to certain
exempt recipients (such as a corporation or financial institution) or to a
Holder who furnishes a correct taxpayer identification number or provides a
certificate of foreign status and provides certain other required information.
If backup withholding applies, the amount withheld is not an additional tax, but
is credited against such Holder's United States federal income tax liability.

2856

ITEM 8: SELECTED CONSOLIDATED FINANCIAL DATA

StatementsF. DIVIDENDS AND PAYING AGENTS

Not Applicable.

G. STATEMENT BY EXPERTS

Not Applicable.

H. DOCUMENTS ON DISPLAY

Any statement in this annual report about any of Operations
(In U.S. Dollars)

The following selected consolidated financial dataour contracts or other
documents is not necessarily complete. If the contract or document is filed as
an exhibit to a registration statement, the contract or document is deemed to
modify the description contained in this annual report. You must review the
exhibits themselves for a complete description of December 31, 1996,
1997,the contract or document.

You may review a copy of our filings with the SEC, including exhibits and
1998 have been derivedschedules, and obtain copies of such materials at the SEC's public reference
room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W, Washington, D.C.
20549. You may also obtain copies of such materials from the Company's Consolidated Financial
Statements,Public Reference
Section of the SEC, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W,
Washington, D.C. 20549, at proscribed rates. You may call the SEC at
1-800-SEC-0330 for further information on the public reference room. The SEC
maintains a web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC. Although we make many of our filings with the SEC
electronically, as a foreign private issuer we are not obligated to do so.

You may read and copy any reports, statements or other information that we
file with the SEC at the addresses indicated above and you may also access them
electronically at the web site set forth elsewhere in this Form 20-F.above. These financial statements
have been prepared in accordance with generally accepted accounting principles
in the United States ("GAAP"). The selected financial data as of December 31,
1994 and 1995 and for the years ended December 31, 1994 and 1995 have been
derived from audited financial statements not included herein, which haveSEC filings are also
been prepared in accordance with GAAP. The selected Consolidated Financial
Statements set forth below should be read in conjunction with and are qualified
by reference to "Management's Discussions and Analysis of Financial Condition
and Results of Operations" and the Company's Consolidated Financial Statements
included elsewhere in this prospectus.

Years Ended December 31,
------------------------
1994 1995 1996* 1997* 1998*
---- ---- ----- ---- -----

Revenues:
Sales of printers and related products $10,010 $13,824 $13,639 $18,874 $31,905
Sales of printed materials** -- -- 2,998 3,085 4,540
------- ------- ------- ------- -------
10,010 13,824 16,637 21,959 36,445
------- ------- ------- ------- -------
Cost of revenues:
Cost of sales of printers and related products 6,939 9,374 11,528 9,627 16,368
Cost of sales of printed materials -- -- 2,008 1,684 2,579
------- ------- ------- ------- -------
6,939 9,374 13,536 11,311 18,947
------- ------- ------- ------- -------
Gross profit 3,071 4,450 3,101 10,648 17,498
------- ------- ------- ------- -------
Research & development expenses 497 1,040 1,530 1,726 5,027
Less royalty-bearing grants 161 306 372 43 818
------- ------- ------- ------- -------
Research & development expenses, net 336 734 1,158 1,683 4,209
------- ------- ------- ------- -------
Selling and marketing expenses, net 715 1,039 4,823 4,620 6,111
General & administrative expenses 1,099 1,187 2,560 3,439 4,802
Write-off of debts from related parties -- -- 3,757 -- --
------- ------- ------- ------- -------
1,814 2,226 11,140 8,059 10,913
------- ------- ------- ------- -------
Operating income (loss) 921 1,490 (9,197) 906 2,376
Financial expenses, net 65 205 589 320 501
Gain (loss) on marketable securities (40) 12 22 -- (91)
Other income (expenses), net -- 110 76 (8) (20)
------- ------- ------- ------- -------

- -------------------
* Represents financial information for the Company together with its
subsidiaries NUR Media Solutions, NUR America, NUR Europe and NUR Germany.
** Represents sales of printed materials by NUR Germany.

Years Ended December 31,
------------------------
1994 1995 1996* 1997* 1998*
---- ---- ----- ---- -----

Income (loss) before taxes on income 816 1,407 (9,688) 578 1,764
Taxes on income 25 221 400 67 264
--------- --------- --------- --------- ----------
Income (loss) after taxes on income 791 1,186 (10,088) 511 1,500
Minority interest in earnings of subsidiary -- -- -- (26) (43)
Equity in losses of 50% owned joint venture (987) (1,125) -- -- --
--------- --------- --------- --------- ----------
Net income (loss) for the year $(196) $61 $(10,088) $485 $1,457
--------- --------- --------- --------- ----------
Basic and diluted earnings (loss) per share $(0.05) $0.01 $(1.47) $0.07 $0.13
--------- --------- --------- --------- ----------
Weighted average number of shares used in
computing basic and diluted earnings (loss)
per share 4,123,082 4,904,118 6,880,000 7,293,640 10,880,000
========= ========= ========= ========= ==========

- -------------------
* Represents financial information for the Company together with its
subsidiaries NUR Media Solutions, NUR America, NUR Europe, and NUR Germany.

Balance Sheet Data
(In U.S. Dollars)

December 31,
------------
1996* 1997* 1998*
----- ----- -----

Working capital................ $ 690 $ 4,674 $ 5,441
Total assets................... 12,161 13,783 21,995
Total liabilities.............. 10,325 7,998 14,565
Total shareholders' equity..... $ 1,836 $ 5,785 $ 7,430

ITEM 9: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

General

The Company is a world leader in the market for the sale of SWF printing
systems. The Company develops, manufacturers, sells, and services digital,
ink-jet color printing systems for on demand, short-run, WF and SWF printing.
The Company also supplies inks and substrates which are consumables products for
the operation of the Company's printers. In June 1998, the Company began
supplying substrates for use with the Company's printers. The Company's total
revenues grew from approximately $16.6 million for the year ended December 31,
1996 to approximately $22 million for the year ended December 31, 1997 and $36.4
million for the year ended December 31, 1998.

The Company carries out its main research, development and manufacturing
operations at its facilities in Moshav Magshimim and Rosh Ha'ain, Israel. The
Company's main sales and service activities are carried out through its wholly
owned subsidiaries, NUR Europe, located in Brussels, Belgium, and NUR America,
located in Newton, Massachusetts, in the United States, NUR Asia Pacific located
in Hong Kong and Shanghai, China, and NUR Middle East and Africa located in
Moshav Magshimim, Israel. The Company also wholly owns NUR Media Solutions,
located near Brussels, Belgium, which develops and markets advanced consumables
for the Company's printers, and owns 84% of NUR Germany, located in Kassel,
Germany, which is a digital printing and outdoor advertising company.

The Company incorporated as an Israeli corporation on July 29, 1987, and
the Company's Ordinary Shares have been traded on the NASDAQ National Market
since October 1995. The Company's trading symbol is NURM.

Revenues from the Company's printers and related materials are derived
from the sale of the Company's printers, inks, substrates, spare parts, and
related services. Revenues from printed materials are derived from NUR Germany's
printing and advertising display services.

Cost of sales of printers and related materials include costs related to
product shipments including materials, labor, overhead, and other direct or
allocated costs involved in the manufacture, warehousing, delivery, support, and
maintenance of products. Cost of sales of printed materials include costs
related to product materials involved in the printing and delivery of printed
materials.

Research and development expenses include mainly labor, materials
consumed, expenses by sub-contractors, consultants, and others. Research and
development expenses are carriedavailable to the statement of operations as incurred.
Grants are nettedpublic from research and development costs on an accrual basis as the
related expenses are incurred.

The sales and marketing expenses include the costs associated with the
staff of the sales and marketing force of the Company and its subsidiaries,
advertising and promotion of existing and new products, trade shows,
commissions, and other marketing activities.

During 1998, the Company expended significant financial and management
resources to expand its business and product offerings. The Company invested in
strengthening the service and sales organizations in NUR Europe and NUR America,
by hiring additional sales and service staff in both territories. The Company
also invested in the creation and set-up of NUR Media Solutions, a subsidiary
dedicated to the development and marketing of substrates for the use with the
Company's products. The Company has continued to expend more resources to this
operation in 1999. The Company also established two new company owned
distribution operations in Shanghai, China and Tel-Aviv, Israel, to replace its
former distributor in February 1999.

In September 1998, the Company acquired from Meital all rights (including
all related assets) to Meital's piezo D-O-D inkjet technologies for application
in large format digital printers for approximately $3.0 million, consisting of
an up-front payment of $0.75 million, the assumption of certain liabilities,
including the legal dispute (now settled) between Meital and Idanit, a division
of Scitex Corporation, and future sales based royalties. The Meital acquisition
resulted in the recognition by the Company of a one-time charge involving a
write-off assigned to research and development in the amount of $1.95 million
($1.6 million in the third quarter of 1998 and $0.35 million in the first and
second quarters of 1998). As part of such agreement the Company has also
retained Meital's President as a consultant to the Company.commercial document retrieval services.

I. SUBSIDIARY INFORMATION

See "Item 10:
Directors and Officer of Registrant--Consulting Agreement."

Certain Accounting Policies

The main sources of revenues for the Company are sales of the Company's
printers and related consumable products. Sales are recognized upon delivery of
the product to customers, provided that no significant vendor obligation remains
and collection is deemed probable.

The accompanying consolidated financial statements have been prepared in
U.S. dollars. The U.S. dollar is the currency of the primary economic
environment in which the operations of the Company and NUR America are

conducted. The U.S. dollar is the functional and reporting currency of the
Company. The majority of sales are made in U.S. dollars and the majority of
purchases of materials and components are invoiced and paid in U.S. dollars. In
addition, a substantial number of other expenses are incurred outside Israel in
U.S. dollars or paid in U.S. dollars or in New Israeli Shekels ("NIS") linked to
the exchange rate of the U.S. dollar.

See note 2 to the Company's Financial Statements included as a partItem 4.C. of this annual report for a discussion of the Company's accounting policy for
determining rate of exchange and linkage based amounts.

The Company's transactions and balances denominated in U.S. dollars are
presented in their original amounts. Non-dollar transactions and balances have
been remeasured into U.S. dollars in accordance with Statement 52 of the
Financial Accounting Standards Board ("FASB"). All transaction gains and losses
from remeasurement of monetary balance sheet items denominated in non-dollar
currencies are reflected in the statement of operations as financial income or
expenses, as appropriate.

The financial statements of certain subsidiaries and other entities
reported using the equity method of accounting, whose functional currency is not
the U.S. dollar, have been translated into U.S. dollars, in accordance with FASB
Statement No. 52, "Foreign Currency Translation." 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 year. The resulting aggregate translation adjustments are
reported as a component of shareholders' equity.

The Company's consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the U.S.

The Company has chosen to continue accounting for stock-based compensation
in accordance with the provisions of Accounting Principles Board Opinion No.25
("APB-25"), "Accounting for Stock Issued to Employees." Under APB-25, when the
exercise price of the Company's shares options equals or is higher than the
market price of the underlying shares on the date of grant, no compensation
expense is recognized. The pro-forma information with respect to the fair value
of the options is provided in accordance with the provisions of Statement No.123
(see Note 18).

In accounting for options granted to persons other than employees, the
provisions of Financial Accounting Standards Board Statement No. 123,
"Accounting for Stock Based Compensation" were applied. According to FASB 123,
the fair value of these options was estimated at the grant date using
Black-Scholes options pricing model.

Current and Future Trends

The Company has estimated based on its own market research that the SWF
industry has grown at a rate of 15-20% annually for the last 3 years. The
Company's growth during 1997 and 1998 has exceeded this growth rate, mainly as a
result of increasing market share of the Company in the SWF market and the
introduction of new products. Although there can be no assurance, the Company
believes it will maintain during 1999 a growth rate similar to the general
industry's growth rate in the SWF segment of its business. The Company is also
planning to introduce products to the WF professional print market during 1999.
The gross margins of the Company are expected to continue to remain at the 1998
levels throughout 1999. Although there is a downward price pressure on the
Company's existing products, there have been certain reductions in the
manufacturing cost of these products. The Company's anticipates a launch of its
new products at gross margins similar to its existing products.

The SWF industry has undergone significant changes in the past few years,
and additional change is anticipated in the future. The most noticeable change
in the industry during 1997 has been the adoption of inkjet technologies by all
major competitors in the industry. Until 1997, the Company had the only
continuous inkjet SWF printer in the market. During 1997, the Company's major
competitors have each introduced an inkjet-based printer to replace their
existing airbrush printers. The new printers, introduced during 1997, are based
on the D-O-D technology, as opposed to the continuous inkjet technology
currently used by the Company's printers. To date, the Company has been
successful in maintaining and increasing its growth in revenues from the
Company's printers.

With the cost of digital printing expected to decrease and the ability of
digital technology expected to produce shorter runs more economically, the
Company believes that the use of WF and SWF printing, such as that produced by
the Company's printers, should grow, and that the portion of the market serviced
by digital printing should increase. The ability to produce SWF images digitally
has also opened new media opportunities for advertisers, such as mural printing,
carpet printing, new forms of fleet graphics printing. The growth in demand for
SWF digital printers is fueled by both the replacement of conventional print
methods and the development of new printing applications.

Certain of the statements made in this report are forward-looking
statements that involve risks and uncertainties. Actual results could differ
materially as a result of a variety of factors.

Geographic Breakdown of Revenues

The Company sells its products and services primarily to customers around
the world. Revenues are generally recognized at the location of the sale of the
product or service. The table below shows the breakdown of revenues (dollars in
thousands) by geographic region for the years ended December 31, 1998, 1997, and
1996.

Year ended Printers Ink Printed Materials Others Total
December 31, 1998 (52.3%) (23.6%) (12.5%) (11.6%) (100%)
REGION $ % $ % $ % $ % $ %
- ------------------- ------ --- ----- --- ----- --- ----- --- ------ ---

Middle-East, Asia &
Africa ............ 2,678 14% 2,144 25% 0 0 742 17% 5,564
Europe ............ 7,369 39% 2,388 28% 4,540 100% 1,944 46% 16,241 44%
North & Latin
America ........... 9,005 47% 4,087 47% 0 0 1,548 37% 14,640
Total Revenues .... 19,052 100% 8,619 100% 4,540 100% 4,234 100% 36,445 100%
====== === ===== === ===== === ===== === ====== ===

Year ended Printers Ink Printed Materials Others Total
December 31, 1997 (55%) (21%) (14%) (10%) (100%)
REGION $ % $ % $ % $ % $ %
- ------------------- ------ --- ----- --- ----- --- ----- --- ------ ---

Middle-East, Asia &
Africa ............ 1,344 11% 1,122 25% 0 0% 583 26% 3,049 14%
Europe ............ 6,353 53% 1,549 34% 3,085 100% 862 38% 11,849 54%
North & Latin
America ........... 4,326 36% 1,900 42% 0 0% 835 37% 7,061 32%
Total Revenues .... 12,023 100% 4,571 100% 3,085 100% 2,280 100% 21,959 100%
====== === ===== === ===== === ===== === ====== ===

Year ended Printers Ink Printed Materials Others Total
December 31, 1996 (52.3%) (23.6%) (12.5%) (11.6%) (100%)
REGION $ % $ % $ % $ % $ %
- ------------------- ------ --- ----- --- ----- --- ----- --- ------ ---

Middle-East, Asia &
Africa ............ 6,060 65% 1,400 56% 0 0% 264 14% 7,724 46%
Europe ............ 2,410 26% 551 22% 2,998 100% 1,414 77% 7,373 44%
North & Latin
America ........... 847 9% 544 22% 0 0% 149 8% 1,540 9%
Total Revenues .... 9,317 100% 2,495 100% 2,998 100% 1,827 100% 16,637 100%
====== === ===== === ===== === ===== === ====== ===

Results of Operations

The following table sets forth for the periods indicated certain line
items from the Company's statement of operations as a percentage of the
Company's sales:

Years ended December 31,
----------------------------------------------------------
1994 1995 1996* 1997* 1998*
---- ---- ----- ----- -----
(in percents)
----------------------------------------------------------

Revenues 100% 100% 100% 100% 100%
Cost of sales of printers and related
products..................................... 69 68 69 43.9 44.9
Cost of sales of printed materials........... - - 12 7.6 7.1
Gross profit................................. 31 32 19 48.5 48
Research & development expenses.............. 5 8 9 7.8 13.8
Research & development expenses net.......... 3 5 7 7.7 11.5
Selling expenses, net........................ 7 7 29 21 16.8
General & administrative expenses............ 11 9 15 15.7 13.2
Write-off debts of related parties........... - - 23 - -
Operating income (loss)...................... 9 11 (55) 4.1 6.5
Financial expenses, net...................... 1 2 4 1.5 1.4
Gain (loss) on marketable securities......... - - - - 0.2
Other income (expense)....................... - 1 - - 0.05
Taxes on income (tax benefit)................ - 2 2 0.3 0.7
Minority interest in earnings of subsidiary.. - - - 0.1 0.1
Equity in loss of a 50% owned subsidiary..... (10) (8) - - -
Net income (loss) for the year............... (2) - (61) 2.2 4.05

- -----------------
* Represents the Company on a consolidated basis with its subsidiaries NUR
Media Solutions, NUR America, NUR Europe and NUR Germany.

Year Ended December 31, 1998 Compared with Year Ended December 31, 1997

Revenues. Total revenues increased by 66%, to approximately $36.44 million
for the year ended December 31, 1998 from approximately $21.96 million for the
year ended December 31, 1997, mainly as a result of the introduction of the NUR
Blueboard 2 and market acceptance of the NUR Blueboard Printers and as a result
of the continued move to direct distribution by the Company of the Company's
products in Europe and the United States, the Company's two major markets.
Growth was also fueled by the growth of sales of the ink as a result of the
growth of the installed base of the Company's printers.

Sales. Sales of the Company's printers and related products increased by
69% to approximately $31.9 million for the year ended December 31, 1998 from
approximately $18.9 million for the year ended December 31, 1997. This increase
was attributed primarily to the introduction and market acceptance of the NUR
Blueboard and to increased revenues due to the move from sales through
distributors to direct sales to end users through the Company's subsidiaries in
Europe and the United States.

Expenses. Research and development costs, net of the OCS grants, were
approximately $4.2 million in the year ended December 31, 1998, compared to
$1.68 million in the year ended December 31, 1997. The increase is mainly due to
acquired in process research and development in the amount of $1.95 million and
as a result of increased efforts in developing new products. The Company expects
to continue to invest significant resources in its research and development
programs for new products and enhancements of existing products. The Company
expects that research and development expenses will continue to increase in
absolute dollar terms as compared to previous years.

Selling and marketing expenses were approximately $6.1 million in the year
ended December 31, 1998 compared to approximately $4.6 million in the year ended
December 31, 1997. The Company received $0.25 million in the year ended December
31, 1998 from the Marketing Fund for selling and marketing expenses as compared
to $0.2 million in the year ended December 31, 1997. The Company will not be
eligible for support from the Marketing Fund commencing in 1999 due to the
Company reaching the maximum allowed export revenues. The majority of sales and
marketing expenses are incurred by the distribution subsidiaries, NUR Europe and
NUR America.

General and administrative expenses were approximately $4.8 million for
the year ended December 31, 1998, compared to approximately $3.4 million for the
year ended December 31, 1997, representing an approximately 40% increase. This
increase was due primarily to expansion in operation and to the re-building of
the financial and administrative infrastructures of the Company.

Financial expenses, net increased to $0.5 million in the year ended
December 31, 1998 from $0.32 million in the year ended December 31, 1997.

Gross Profit. Gross profit was approximately $17.5 million in the year
ended December 31, 1998, an increase of 65.1% from $10.6 million in the year
ended December 31, 1997. Gross profit as percentage of sales was 48% in the year
ended December 31, 1998 compared to 48.5% in the year ended December 31, 1997.

Taxes. Taxes on income were $0.264 million in the year ended December 31,
1998 as compared to $0.067 million in the year ended December 31, 1997.

Year Ended December 31, 1997 Compared with Year Ended December 31, 1996

Revenues. Total revenues increased by 32.3%, to approximately $21.96
million for the year ended December 31, 1997 from approximately $16.6 million
for the year ended December 31, 1996, mainly as a result the introduction and
market acceptance of the NUR Blueboard and as a result of the move to direct
distribution by the Company of the Company's products in Europe and the United
States, the Company's two major markets. Growth was also fueled by the growth of
sales of the ink as a result of the growth of the installed base of the
Company's printers.

Sales. Sales of the Company's printers and related products increased by
38.4% to approximately $18.8 million for the year ended December 31, 1997 from
approximately $13.6 million for the year ended December 31, 1996. This increase
was attributed primarily to the introduction and market acceptance of the NUR
Blueboard and to increased revenues due to the move from sales through
distributors to direct sales to end users through the Company's subsidiaries in
Europe and the United States.

Expenses. A portion of the Company's research and development expenses is
funded by the OCS pursuant to programs entitling the OCS to receive royalties on
sales of products developed with the use of OCS funds. Research and development
costs, net of the OCS grants, were approximately $1.68 million in the year ended
December 31, 1997, rising by 45% from $1.16 million in the year ended December
31, 1996, as a result of increased efforts in developing new products. The
Company expects to continue to invest significant resources in its research and
development programs for new products and enhancements of existing products. The
Company expects that research and development expenses will continue to increase
in absolute dollar terms as compared to previous years.

Selling and marketing expenses were approximately $4.6 million in the year
ended December 31, 1997 compared to approximately $4.8 million in the year ended
December 31, 1996. The Company received $0.2 million in the year ended December
31, 1997 from the Marketing Fund for selling and marketing expenses as compared
to no receipt of such funds in the year ended December 31, 1996. The Company
will not be eligible for support from the Marketing Fund commencing in 1999 due
to the Company reaching the maximum allowed export revenues. The majority of
sales and marketing expenses are incurred by the distribution subsidiaries, NUR
Europe and NUR America.

In early 1997, Moshe Nur, the previous Chairman of the Company and its
former major shareholder, and companies controlled by Moshe Nur, experienced
financial difficulties. These affiliated companies and Moshe Nur

had outstanding debts to the Company stemming from a combination of purchases of
printers, spare parts, ink, and cash transfers. As a result, management of the
Company decided to write-off these debts in the year ended December 31, 1996,
totaling $3.8 million. The Company was in litigation with Moshe Nur and his
court appointed receiver for the return of funds misappropriated from the
Company until September 1998 when a settlement was reached. See "Item 3: Legal
Proceedings."

In April 1997, following Moshe Nur's financial difficulties, a group of
investors led by Dan Purjes, the Chairman of Josephthal & Co. Inc.
("Josephthal") assumed control of the Company and consequently replaced all
but one of the previous directors. The Chairman, Chief Executive Officer and
Chief Financial Officer of the Company were also consequently replaced. See
"Item 13: Interest of Management in Certain Transactions."

In the year ended December 31, 1997, sales to related parties were 0.8%,
as opposed to 3.6% for the year ended December 31, 1996 as a result of the
change in control of the Company.

General and administrative expenses were approximately $3.4 million for
the year ended December 31, 1997, compared to approximately $2.56 million for
the year ended December 31, 1996, representing a 34.3% increase. This increase
was due primarily to legal and extra-ordinary audit costs resulting from the
change in control and management of the Company, and to the re-building of the
financial and administrative infrastructures of the Company.

Financial expenses, net decreased to $0.32 million in the year ended
December 31, 1997 from $0.59 million in the year ended December 31, 1996.

Gross Profit. Gross profit was approximately $10.6 million in the year
ended December 31, 1997, an increase of $7.5 million from $3.1 million in the
year ended December 31, 1996. Gross profit as percentage of sales increased to
48.5% in the year ended December 31, 1997 from 19% in the year ended December
31, 1996. The increase in gross profit was attributed mainly to the change in
distribution strategy discussed above and reduced manufacturing costs.

Taxes. Taxes on income decreased by 83.25% to $0.067 million in the year
ended December 31, 1997 as compared to $0.4 million in the year ended December
31, 1996, due to available carry-forward losses (including capital losses) and
deductions aggregating approximately $7.5 million.

Liquidity and Capital Resources

Since the commencement of the Company's activities in the second half of
1991 through mid-1993, the Company financed its operations primarily through
loans and injection of equity by shareholders. In October 1993, the Company
raised, through a private placement, approximately $6 million (approximately $3
million in equity and $3 million in convertible debentures).

Following the 1993 private placement, the Company financed its operations
primarily through cash generated from operations. For the year ended December
31, 1995, the Company's major source of cash was the $6.86 million of net
proceeds from the Company's initial public offering in October 1995.

The Company incurred a loss of approximately $10.1 million in the year
ended December 31, 1996. This loss was comprised of approximately $4.8 million
in losses due to increased expenses associated with the setup of direct sales
and marketing efforts by the Company in Europe and in the United States, and to
the assumption of international support and service; approximately $1.2 million
in research and development expenses; approximately $0.6 million in financing
expenses; approximately $0.4 million in elimination of deferred taxes; and
approximately $3.8 million in losses due to the write-off of debts to the
Company associated with Moshe Nur and companies controlled by him. These debts
resulted, in part, from ineffective controls that failed to prevent unauthorized
transactions and failed to detect the misappropriation of funds. As a result,
the Company's shareholders' equity was reduced to approximately $1.8 million as
of December 31, 1996.

In the year ended December 31, 1997, the Company's net income was $0.485
million. In 1997, additional capital was needed to fund accrued debts to
suppliers during the year ended December 31, 1996 and the beginning

of 1997, and to increase the Company's working capital and equity base. In the
third and fourth quarters of 1997, the Company completed a private placement of
$4.0 million of Ordinary Shares, from which the Company received net proceeds of
approximately $3.51 million (the "Private Placement").

For the year ended December 31, 1997, the Company's major source of cash
was the $3.51 million of net proceeds from the Private Placement.

For the year ended December 31, 1998, net cash provided by operating
activities was approximately $2.9 million. Cash provided from financing activity
was $1.7 million primarily from additional use of short-term credit line
totaling $2.3 million.

The Company entered into several project plans with the OCS regarding the
development of the printers and the Mega Light, a discontinued product. The
Company has an obligation to pay royalties at the rate of 2% - 3% of the sales
derived from the applicable products developed within the framework of such
research and development projects, up to an amount equal to 100% - 150% of the
grant received, in NIS linked to the exchange rate of the U.S. dollar. The
Company has no obligation to repay this amount if sales are not sufficient to
satisfy the royalty obligations. As of December 31, 1998, the Company has a
contingent obligation to pay royalties in the amount of $1.152 million.

The Company is required to pay royalties to the Marketing Fund at the rate
of 3% with respect to increases in export sales of products for which the
Company received funds for its marketing activities, up to an amount equal to
100% of the grant received. The grant is repayable only in respect of sales of
the related products, as a percentage of the growth in export sales. If there is
no increase in export sales, or if the Company ceases producing the relevant
products, the grant should not be repaid. As of December 31, 1998, the Company
has a contingent obligation to pay royalties in the amount of $0.434 million.

The Company has future royalty obligations to Meital, which will not
exceed $1.3 million, payable during the three years ending September 2001. Such
commitment is part of the purchase price for technology acquired by the Company
from Meital.

As part of the Matan Settlement Agreement, the Company is obligated to pay
a total of $880,000, plus interest and VAT, assuming timely payments, to the
Matan Parties. Such amount has been fully reserved and is payable by the Company
to the Matan Parties in equal quarterly installments over a three-year period
ending December 2001.

Operating activities

In the year ended December 31, 1997, the Company had net income of $0.485
million. Net cash used in operating activities was approximately $2 million. The
main changes in the Company's working capital were (i) an increase of
approximately $1.8 million in trade accounts receivable, (ii) a decrease of
approximately $1.24 million in trade payables, and (iii) a decrease of
approximately $1.3 million in customer advances.

In the year ended December 31, 1998, the Company had net income of $1.457
million. Net cash provided by operating activities was approximately $2.9
million. The main changes in the Company's working capital were (i) an increase
of approximately $3.03 million in trade accounts receivable, (ii) an increase of
approximately $1.4 million in inventories, and (iii) an increase of
approximately $4.1 million in trade payables.

Investing activities

Net cash provided by investing activities was approximately $0.53 million
in the year ended December 31, 1996, and net cash used in investing activities
approximately $1.61 million in the year ended December 31, 1997. The Company
invested approximately $3.58 million in the year ended December 31, 1998
consisting of $2.54 million for equipment and $1.3 million for the acquisition
of technology.

Financing activities

Net cash provided by financing activities in the year ended December 31,
1998 was approximately $1.763 million.

The Company maintains long and short-term credit facilities in an
aggregate amount of approximately $4.15 million at December 31, 1998. At
December 31, 1998, the Company had approximately $1.174 million in long-term
loans from banks and others, $0.224 million of which is payable within 12
months. Most of the Company's long term loans are linked to the U.S. dollar
bearing interest at a rate ranging between 6.2% and LIBOR plus 3.12%.

As of December 31, 1998, total current assets of the Company amounted to
approximately $17.936 million, out of which $2.39 million was in cash, cash
equivalents and marketable securities, compared with total current liabilities
of $12.495 million. The increase in current assets is attributable primarily to
growth in trade receivables resulting from the growth in the Company's revenues.
The increase of the current liabilities is attributable primarily to the
increase of trade payables and short term loans.

Net cash provided by financing activities in the years ended December 31,
1996, 1997 and 1998 was approximately $1.07, $3.08 and $ 1.76 million,
respectively.

The Company has granted several security interests in its assets to
various banks and leasing companies to secure bank credit lines and lease
facilities.

Impact of Inflation, Devaluation and Fluctuation of Currencies

Most of the Company's sales are in U.S. dollars. In addition, a
substantial number of other expenses are incurred outside Israel in U.S. dollars
or paid in U.S. dollars or in NIS linked to the exchange rate of the U.S.
dollar. Approximately 50% of these costs are denominated in U.S. dollars. Costs
not effectively denominated in U.S. dollars are translated to U.S. dollars, when
recorded, at prevailing exchange rates for the purposes of the Company's
financial statements, and will increase if the rate of inflation in Israel
exceeds the devaluation of the Israeli currency against the U.S. dollar or if
the timing of such devaluations were to lag considerably behind inflation.
Consequently, the Company is and will be affected by changes in the prevailing
NIS/U.S. dollar exchange rate.

The Company might also be affected by the U.S. dollar exchange rate to the
major European currencies - mainly the German Mark and the Belgian Franc.

During 1992 and 1993, the value of the U.S. dollar increased relative to
major currencies and the rate of inflation in Israel exceeded the rate in the
United States. In 1995 and 1996, the value of the U.S. dollar decreased relative
to major currencies, and the rate of inflation in Israel exceeded the rate in
the United States. The annual rate of inflation in Israel in 1995 was 8.1%,
which increased to 10.6% in 1996 and decreased to 7.0% in 1997 and to 8.6% in
the year ended December 31, 1998. The NIS was devalued against the U.S. dollar
by approximately 1%, 3.9%, 3.7%, 8.8% and 17.6% in 1994, 1995, 1996, 1997 and
1998 respectively. The Company cannot predict whether the rate of devaluation of
the NIS against the U.S. dollar will continue to exceed the rate of inflation in
the future and whether these conditions will have a material adverse effect on
the Company.

The representative dollar exchange rate for converting the NIS to dollars,
as reported by the Bank of Israel, was NIS 4.16 for one dollar US on December
31, 1998. (NIS 3.536 on December 31, 1997, NIS 3.251 on December 31, 1996 and
NIS 3.135 on December 31, 1995).

The Company's transactions and balances denominated in U.S. dollars are
presented at their original amounts. Non-dollar transactions and balances have
been measured into U.S. dollars in accordance with Statement 52 of the FASB. All
transaction gains and losses from remeasurement of monetary balance sheet items
denominated in non-dollar currencies are reflected in the statement of
operations as financial income or expenses, as appropriate. The average exchange
rates during the years ended December 31, 1995, 1996, 1997 and 1998 were NIS
3.011, 3.187, 3.449 and 3.8 for one dollar US, respectively. The exchange rate
as of March 31, 1999 was NIS 4.034 for one dollar.

Current and Future Capital Needs

The Company believes that its revenues from operations together with its
existing capital resources and credit facilities will be sufficient to fund the
Company's current activities at their present rate without the Company's planned
expansion through July 2000. The Company will require additional funds, to be
raised through public or private financing of debt or equity, to ensure its
ability to proceed with the planned expansion of its operations after December
1999. If such funds are not raised, the Company may have to reduce or eliminate
planned expenditures for research and development, production, or marketing of
its products, any one of which could have an adverse effect on the Company's
business. There can be no assurance that such additional financing will be
available or that, if available, it will be obtained on terms favorable to the
Company. The Company currently has no commitments for additional financing and
is exploring the possibility of raising capital through additional borrowings.

In this regard, the Company's capital requirements and level of expenses
depend upon numerous factors, including the scope and success of the Company's
marketing and customer service efforts, and of its research and development
activities, as well as the demand for the Company's products and services.
Moreover, in the course of the bankruptcy proceedings of Moshe Nur and the
companies controlled by him, the Company in the future may be exposed to claims
arising from the actions of Moshe Nur despite the recent settlement of all
material claims related to such persons and entities. Liabilities arising from
any such claims may be material. See "Item 3: Legal Proceedings."

Year 2000

The Company's State of Readiness

Many computer systems and software products will not function properly in
the years starting 2000 due to a once-common programming standard that
represents years using only the last two-digits. This is known as the Year 2000
problem.

In 1998, the Company began converting its internal computer systems to be
Year 2000 compliant. As of March 31, 1999, approximately 85% of the Company's
information technology ("IT") systems and approximately 90% of the Company's
non-IT systems were compliant. All of the Company's internal IT and non-IT
systems are expected to be compliant by July 1999. Completion of the Company's
compliance program involves upgrading the operating systems of the remaining 25%
of user workstations.

The applications used in the Company's internal IT and non-IT systems are
commercially available and certified by the vendors of the systems for full Year
2000 compliance. Additionally, the Company has verified the functional behavior
of these applications as being Year 2000 compliant.

The Company does not believe, after contacting appropriate parties, that
the failure of its vendors' or other third-party providers' systems to be Year
2000 compliant will materially adversely affect the Company's financial
performance.

The Costs to Address the Company's Year 2000 Issues

As of March 31, 1999, the Company had spent approximately $20,000 on its
Year 2000 compliance efforts. This figure includes the expense of updated
software licenses and updated application versions and has been fully expensed.
The total cost of attaining Year 2000 compliance is estimated to be $30,000 and
is being funded through operating cash flows. The Company plans to pay for
expenses and liabilities related to Year 2000 complications out of revenues from
operations and capital resources.

The Risks of the Company's Year 2000 Issues

Based on its compliance efforts, the Company does not anticipate any
significant internal Year 2000 complications.

The Company's primary concern is the compliance of its products. All of
the Company's currently manufactured products are fully compliant; however,
approximately 30 customers who purchased current Company products in the past
will require operating system upgrades. The Company estimates its exposure for
covering the costs related to these upgrades to be approximately $5,000 in the
aggregate.

The Company has tested prior generation products and not found any Year
2000 functionality problems. Further testing is necessary, however. There is a
risk that prior generation products will require changes in application software
to be Year 2000 compliant. The Company estimates its exposure for covering the
costs related to these changes to be $5,000 to $10,000 in the aggregate.

The Company's Contingency Plans

If the Company does not attain compliance for its prior generation
products and complications arise, customers will be advised to reset the
computer clock to a date in the 1990's. The Company has verified that resetting
the internal clock will enable the Company's products to function in accordance
with their specifications.

While the Company believes that it is adequately addressing the Year 2000
problem, there can be no assurance that the costs and liabilities of the Year
2000 problem will not have material adverse effects on its business, financial
condition and results of operations.report.

ITEM 9A:11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to the Company's operations result primarily from weak
economic conditions in the markets in which the Company sells its products and
from changes in exchange rates or in interest rates.

INFLATION, DEFLATION AND FLUCTUATION OF CURRENCIES

See 'ITEM 5: Operating and Financial Review and Prospects -- Impact of
Inflation, Deflation and Fluctuation of Currencies.'

INTEREST RATE

The Company's exposure to market risk due to changes in interest rates
relates primarily to the Company's long-term loans interest rate variation. As
of December 31, 2001 we had a balance of $20,000 and $15,000 of long term loans
carrying annual interest rates of Libor + 0.7% and Libor + 0.85%, respectively.
Changes in the Libor interest rate might affect our financial expenses. In
February 2002, the Company signed an amendment to the long-term loan agreements
providing for the rescheduling of the repayment dates of the remaining long-term
loans. According to the long-term loans rescheduling agreements the remaining
long term loans at Bank Leumi carry interest rates of Libor plus 1.75% per annum
on $13.0 million and Libor plus 2.25% per annum on $2.0 million. The remaining
$17.5 million loan at Bank Hapoalim carries interest of Libor plus 2.0% per
annum.

NUR does not otherwise believe the disclosure otherwise required by Item 9A11 of Form 20-Fthis
annual report to be material to NUR.

ITEM 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable.

PART II

ITEM 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

In February 2002, the Company.

ITEM 10: DIRECTORS AND OFFICERS OF REGISTRANT

The executive officersCompany signed an amendment to its long-term loan
agreements with Bank Hapoalim and directorsBank Leumi providing for the rescheduling of
the Company are:

Name Age Position with the Company
- ---- --- -------------------------

Dan Purjes(1) 49 Chairman of the Board of Directors
Erez Shachar 35 President, Chief Executive Officer and
Director
Hilel Kremer 37 Chief Financial Officer and Secretary
Eyal Israeli 44 Vice President of Operations
Yoram Ben-Porat 44 Director and President of NUR Media
Solutions
Robert L. Berenson(2) 60 Director
Roni Ferber (1)(2) 56 Director
Robert F. Hussey(1)(2) 50 Director

- ---------
(1) Memberrepayment dates of the Company's stock option committee.
(2) Member ofremaining long-term loans. For more information see
'ITEM 10.C: -- Material Contracts.' Under the Company's audit committee.

Dan Purjes has served as the Chairman of the Board ofrescheduling agreements, the
Company since
April 1997. Mr. Purjes is Chairman and Chief Executive Officer of Josephthal, an
investment banking and brokerage firm which is a member of the New York Stock
Exchange. Prior to joining Josephthal in 1985, Mr. Purjes was a Vice President
with a number of securities firms, including Bear Stearns & Co. and L.F.
Rothschild Unterberg Towbin, in their corporate finance and brokerage sales
divisions. He began his Wall Street career at Morgan Stanley & Co. in 1978 as a
director of their computer systems department. Prior to that, Mr. Purjes was a
manager at Citibank and at Philip Morris International in their computer systems
areas. Mr. Purjes earned B.S. and M.S. degrees in computer science from the City
College of New York School of Engineering.

Erez Shachar has served as the Company's President and Chief Executive
Officer since July 1997 and as a Director of the Company since October 1997. Mr.
Shachar has also served as a Director of NUR Europe, NUR America and NUR Media
Solutions since January 1998. Prior to joining the Company, from 1989 to 1997
Mr. Shachar served in various research and development, marketing, sales, and
senior management positions with Scitex Corporation. Mr. Shachar's last position
with Scitex was Vice President of Sales and Marketing of Scitex Europe, and
prior thereto Mr. Shachar held several positions in the marketing organization
of Scitex Europe. Prior to joining Scitex Europe, Mr. Shachar was a software
developer within the research and development group of Scitex. Mr. Shachar holds
a B.Sc. in mathematics and computer science from Tel Aviv University, and a
M.B.A. degree from INSEAD, France.

Hilel Kremer has served as the Chief Financial Officer and Secretary of
the Company since December 1998. Mr. Kremer has also served as a Director of NUR
Europe, NUR America and NUR Media Solutions since December 1998. Prior to
joining the Company, from 1993 to 1998 Mr. Kremer served in various management
positions with Scitex Corporation. Mr. Kremer's last position with Scitex was
Vice President of Finance and Chief Financial Officer of Scitex Asia Pacific,
and prior thereto Mr. Kremer held several positions in the finance organization
of Scitex Europe. Prior to joining Scitex Europe, Mr. Kremer held various
positions in the budgeting department of the Israeli Finance ministry. Mr.
Kremer holds a B.A. in economics from Hebrew University, Jerusalem, and an
M.B.A. degree from INSEAD, France.

Eyal Israeli has served as the Vice President of Operations since June
1996. Prior thereto, since January 1995, Mr. Israeli served as the Director of
Customer Support for Indigo Electronic Printing Systems Ltd. From February 1993
to January 1995, Mr. Israeli served as the Manager of Corporate Customer Support
for Orbotech Ltd. In addition, from January 1989 to 1993, Mr. Israeli served as
Vice President of Customer Support for Optrotech Inc., the U.S. subsidiary of
Optrotech Ltd. Mr. Israeli holds a B.Sc. degree in electronic engineering from
Ben-Gurion University and a M.Sc. degree in electronic systems from Tel Aviv
University.

Yoram Ben-Porat has served as a Director of the Company since March 1991.
Since October 1993, Mr. Ben-Port has served as Director and President of NUR
Media Solutions. Since October 1993, Mr. Ben-Porat has served as the Chief
Executive Officer and Deputy Chairman of the Board of Directors of NUR
International. He wasundertook, among the founders of the Company and between January and
September 1993, he served as the Chief Executive Officer of the Company. From
1987 until December 1992, Mr. Ben-Porat served as Research and Development and
Business Development Manager of NUR Outdoor and NUR Focus. Prior thereto, he was
an independent consultant to metal finishing process companies in the high
technology industry. Mr. Ben-Porat holds a degree in economics and marketing
from the Tel Aviv College of Management and Administration.

Robert L. Berenson has served as a Director of the Company since July
1998. Mr. Berenson is President of Grey Advertising Inc., the second largest
advertising agency in the United States and sixth largest in the world. He
joined Grey in 1964 as an Assistant Account Executive, rose through the ranks to
become the youngest Executive Vice President in the company's history in 1977
and took his present position as President in 1989. Mr. Berenson is also a
Director of the Better Business Bureau of New York, the Advertising Educational
Foundation and the Federal Law Enforcement Foundation. He holds a B.S./B.A.
degree in journalism and marketing from Syracuse University and an M.S. degree
in journalism from the Medill School at Northwestern University.

Roni Ferber has served as a Director of the Company since July 1998. Since
1991, Mr. Ferber has served as a Financial and Economic Consultant. Mr. Ferber
also serves on the Board of Directors of Omnitech Eichut Ltd., International
Software Group Ltd., Zvi Zorfati Ltd. and Aflkim Consulting and Investments Ltd.
From 1986 to 1992, Mr. Ferber served as a Director and member of the executive
committee and of the investment committee of Caesarea - Edmond Benjamin de
Rothschild Foundation. During that time he also served as a Director and member
of the executive committee of the Caesarea Development Corporation. From 1967 to
1991, Mr. Ferber served as a Director and co-founder of Nikuv Computers Ltd.,
the first Israeli software company to be listed on the Tel Aviv Stock Exchange.
From 1986 to 1991, Mr. Ferber served as CEO of Nikuv Computers Ltd. Mr. Ferber
holds a B.A. in economics from Hebrew University and a B.A. in Semitic languages
from Tel Aviv University. Mr. Ferber is fluent in Hebrew, Arabic, English,
French, German and Italian.

Robert F. Hussey has served as a Director of the Company since September
1997. Prior to joining the Company, from June 1991 to April 1997, Mr. Hussey
served as the President and Chief Executive Officer of Metrovision of North
America. Prior thereto, from 1984 to 1991, Mr. Hussey served as the President,
Chief Executive Officer and Director of POP Radio Corp., a company which he
helped form. From 1979 to 1984, Mr. Hussey served as the Vice
President/Management Supervisor for Grey Advertising, Inc. From 1977 to 1979,
Mr. Hussey was the Director of Financial Advertising for E.F. Hutton. Prior
thereto, from 1973 to 1977, Mr. Hussey served as a Senior Financial Analyst and
Product Manager for American Home Products, Inc. Mr. Hussey holds a B.S. degree
in finance and a M.B.A. degree in international finance from Georgetown
University.

Consulting Agreement

The Company has retained the President of Meital, Kobi Markowitz, as a
consultant to the Company for a two-year period, which commenced in September
1998, in connection with the Company's acquisition of D-O-D technology from
Meital. Meital is paid monthly compensation of approximately $7,370 for these
services and has been granted the option to acquire 100,000 Ordinary Shares at
$1.00 per share at the end of the first year of the agreement.

Terms of Directors

The members of the Board are elected annually at the Company's general
meeting and remain in office until the next annual general meeting of the
Company, unless the director has previously resigned, vacated his office, or was
removed in accordance with the Company's Articles of Association. In addition,
the Board may elect additional members to the Board.

Alternate Directors

The Articles of Association provide that, subject to the Board's approval,
a director may appoint, by written notice to the Company, any individual
(whether or not such person is then a member of the Board) to serve as an
alternate director. Any alternate director shall have all of the rights and
obligations of the director appointing him or

her, except the power to appoint an alternate (unless the instrument appointing
him or her expressly provides otherwise). The alternate director may not act at
any meeting at which the director appointing him or her is present. Such
alternate may act as the alternate for several directors and have the
corresponding number of votes. Unless the appointing director limits the time
period or scope of any such appointment, such appointment is effective for all
purposes and for an indefinite time, but will expire upon the expiration of the
appointing director's term. There are currently no alternate directors.

Committees of the Board of Directors

The Company's Articles of Association provide that the Board may delegate
all of its powers to committees of the Board as it deems appropriate, subject to
the provisions of the Israeli Companies Ordinance (New Version) 1983, as amended
(the "Companies Ordinance").

Approval of Certain Transactions under the Companies Ordinance; Audit
Committee

The Companies Ordinance requires disclosure by an "Office Holder" (as
defined below) to the Company in the event that an Office Holder has a direct or
indirect personal interest in a transaction to which the Company intends to be a
party, and codifies the duty of care and fiduciary duties which an Office Holder
has to the Company. An "Office Holder" is defined in the Companies Ordinance as
a director, managing director, chief business manager, executive vice president,
vice president, other manger directly subordinate to the managing director and
any other person assuming the responsibilities of any of the foregoing positions
without regard to such person's title.

The Companies Ordinance requires that certain transactions, actions, and
arrangements must be approved by an audit committee of the Company's Board (the
"Audit Committee") meeting certain criteria defined in the Companies Ordinance,
and by the Board itself. The Company is also requiredthings, to maintain the Audit
Committee asfour financial ratios. As a
result of the inclusion for quotationdecrease in its revenues in the first quarter of 2002, the Company
did not meet one of the Ordinary Shares onratios relating to the Nasdaq National Market. In certain circumstances, shareholder approval is
also required. The Audit Committee must be comprised of members of the Board who
are not employees of the Company,Company's earnings before income
tax, depreciation and amortization and the majority of members ofCompany's overall long-term debt to
financial institutions However, the Audit
Committee maybanks have agreed in writing not be holders, directly or indirectly through family members, of
more than five percent ofto act upon
their contractual rights pursuant to the Ordinary Shares.

The Company has appointed an Audit Committee consisting of Robert L.
Berenson, Roni Ferber, and Robert F. Hussey. Approval by the Audit Committee and
the Board is required for (i) proposed transactions to which the Company intends
to be a party in which an Office Holder has a direct or indirect personal
interest, (ii) actions or arrangements which may otherwise be deemed to
constitute a breach of fiduciary duty or of the duty of care of an Office HolderCompany's default mentioned above,
subject to the Company (iii) arrangements with directorsmeeting certain financial targets as to the terms of office or
compensation, and (iv) indemnification of Office Holders. Arrangements with
directors as to the terms of their service or compensation also require
shareholder approval. All arrangements as to compensation of Office Holders who
are not directors require approval of the Board. In certain circumstances, the
matters referred to in (i), (ii), and (iv) may also require shareholder
approval.

Office holders (including directors) who have a personal interest in a
matter which is considered at a meeting of the Board or the Audit Committee may
not be present at such meeting, may not participate in the discussion, and may
not vote on any such matter, except that such Office Holders may consent in
writing to resolutions adopted by the Board and/or the Audit Committee by
unanimous consent.

Stock Option Committee

In March 1998, the Company established a committee to administer the
Company's stock option plans (the "Stock Option Committee"). The Stock Option
Committee is charged with administering and overseeing the allocation and
distribution of stock options under the approved stock option plans of the
Company. The Stock Option Committee is presently comprised of three members: Dan
Purjes, Roni Ferber and Robert F. Hussey.

ITEM 11: COMPENSATION OF DIRECTORS AND OFFICERS

For the year ended December 31, 1996, the aggregate compensation paid by
the Company to the directors and executive officers of the Company (a total of
seven persons) amounted to approximately $523,000. For the year

ended December 31, 1997, the aggregate compensation paid by the Company to the
directors and executive officers of the Company (a total of 13 persons) amounted
to approximately $813,000. For the year ended December 31, 1998, the aggregate
compensation paid by the Company to the directors and executive officers of the
Company (a total of 14 persons of which eight were in office at December 31,
1998) amounted to approximately $806,000.

In October 1997, the Company undertook to pay its Board members who are
not employees of the Company remuneration for their services as directors. This
remuneration includes an annual payment of $5,000 and an additional payment of
approximately $250 per meeting. Each non-employee Board member also receives an
annual grant of options to purchase 10,000 Ordinary Shares under the conditions set forth in the Company's 1998 Non-Employee Director Share Option Plan.

ITEM 12: OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES

Outstanding Warrants and Options

As of April 22, 1999, the Company had options to purchase a total of
1,839,039 Ordinary Shares outstanding under the Company's stock option plans. Of
such 1,839,039 options, 460,039 have been issued under the 1995 Plan, 1,329,000
have been issued under the 1997 Plan and 50,000 have been issued under the 1998
Plan. The options granted under the 1995 Plan and the 1997 Plan are subject to
various vesting requirements, have been issued at exercise prices ranging from
$0.30 to $3.00 per share with various expiration dates. The options granted
under the 1998 Plan have an exercise price of $2.75 per share are not subject to
vesting requirements and expire on October 26, 2008. See Note 19its
business plan presented to the Company's Financial Statements included as a part of this Form. The Company has
also granted to Meital, in connection with a consulting arrangement, an option
to acquire 100,000 Ordinary Shares at $1.00 per share in September 1998.

As of April 22, 1999, the Company had warrants exercisable into a total of
580,000 Ordinary Shares outstanding. Of such warrants, (i) 155,000 were issued
to Josephthal as representative of the underwriters in connection with the
Company's initial public offering in October 1995 (the "IPO Warrants"), (ii)
400,000 were issued to Josephthal as placement agent in connection with the
Company's private placement between September and December 1997 (the "Private
Placement Warrants"), and (iii) 25,000 were issued to Cruttenden Roth
Incorporated in connection with its role as "qualified independent underwriter"
in the Company's current registration on behalf of certain selling security
holders of certain Ordinary Shares held thereby (the "QIU Warrants"). The
Company also agreed to issue a warrant to purchase a total of 15,000 Ordinary
Shares to Zamir & Barak in partial consideration for legal services rendered on
behalf of the Company (the "ZB Warrants"). The IPO Warrants are exercisable at
$7.20 per share no later than October 2000. The Private Placement Warrants are
exercisable at $1.00 per share no later than September and December 2002. The
QIU Warrants are exercisable at $4.50 per share from February 2000 to February
2004. The ZB Warrants will be exercisable at $2.75 per share from January 11,
2000 to January 11, 2002. Dan Purjes, the Chairman of the Company is also the
Chairman of Josephthal. See "Item 13: Interest of Management in Certain
Transactions."

1995 Stock Option Plan

In 1995, the Company's Board adopted a Flexible Stock Incentive Plan (the
"1995 Plan") that provides for grants to employees and consultants of the
Company of stock options. An aggregate amount of not more than 500,000 stock
options is available for grant under the 1995 Plan, including options for future
services (such options, "Service Options"), options for performance (such
options, "Performance Options"), and options to consultants for service or
performance (such options, "Consultant Options").

The Company's Board determines the employees and consultants who are
granted options under the 1995 Plan, the timing of such grants, the terms
thereof, and the number of shares to be covered thereby. The Board also
determines the exercise price for Ordinary Shares subject to the Performance and
Consultants Options under the 1995 Plan and the exercise price for the Service
Options, provided that in no case shall the exercise price of any Service Option
be less than 80% of the fair market value of such Ordinary Shares at the date of
grant (the "Date of Grant"). Service Options usually vest over a four-year
period. One-third of the Service Options vest after the second annual
anniversary of the Date of Grant with an additional one-third vesting on the
third and fourth anniversary of the Date of Grant, respectively. Performance
Options vest under the same terms as applicable to the Service

Options. Consultants Options vest over a specified period of time based on past
or future services rendered or performance targets to be achieved by the Company
as determined by the Board. Notwithstanding the foregoing, the Consultants
Options vest ten years following the Date of Grant. No option may be assigned or
transferred except by will or the laws of descent and distribution.

The Company's 1995 Plan provides that it is to be administered by the
Board or by a committee appointed by the Board and is currently administered by
the Stock Option Committee. The Stock Option Committee has broad discretion to
determine the persons entitled to receive options under the 1995 Plan, the terms
and conditions on which options are granted, and the number of Ordinary Shares
subject thereto, up to an aggregate amount of 500,000 Ordinary Shares.

Under the 1995 Plan for Israeli employees, options and Ordinary Shares
issuable upon the exercise of options granted to Israeli employees of the
Company can be held in a trust until the payment of all taxes due with respect
to the grant and exercise (if any) of such options.

1997 Stock Option Plan

In 1997, the Company's Board adopted the 1997 Plan that provides for
grants to employees and consultants of the Company of stock options. An
aggregate amount of not more than 1,700,000 stock options are available for
grant under the 1997 Plan.

The Company's 1997 Plan provides that it is to be administered by the
Board or by a committee appointed by the Board and is currently administered by
the Stock Option Committee. The Stock Option Committee has broad discretion to
determine the persons entitled to receive options under the 1997 Plan, the terms
and conditions on which options are granted, and the number of Ordinary Shares
subject thereto, up to the maximum aggregate amount permitted under the 1997
Plan. The Stock Option Committee also has discretion to determine the purchase
price to be paid upon the exercise of an option granted under the 1997 Plan.

The exercise price of the option shares under the 1997 Plan is determined
by the Committee; provided, however, that the exercise price of any option
granted shall not be less than eighty percent (80%) of the Stock Value (as
defined below) at the time of the issuance of such options (the "Date of
Grant"). The "Stock Value" at any time is equal to the then current Fair Market
Value (as defined below) of the Company's Ordinary Shares. For purposes of the
1997 Plan, the "Fair Market Value" means, as of any date, the last reported sale
price, on such date, of the Ordinary Shares on such principal securities
exchange of the most recent prior date on which a sale of the Ordinary Shares
took place.

The Stock Option Committee determines the term of each option granted
under the 1997 Plan; provided, however, that the term of an option shall not be
for more than ten (10) years. Upon termination of employment, all unvested
options lapse. All options granted vest over a four-year period. One-third of
such options vest after the second anniversary of the Date of Grant, one-third
after the third anniversary, and the final third after the fourth anniversary of
the Date of Grant. Notwithstanding the foregoing, the Stock Option Committee may
determine different vesting scheduled for service options granted to employees
in special circumstances.

The options granted are subject to restrictions on transfer, sale, or
hypothecation. All options and Ordinary Shares issuable upon the exercise of
options granted to Israeli employees of the Company are held in trust for a
minimum of two years in accordance with Section 102 of the Israel Income Tax
Ordinance.

1998 Non-Employee Director Share Option Plan

The Company's shareholders approved the 1998 Non-Employee Director Share
Option Plan at its annual meeting of shareholders on December 8, 1998 to provide
for grants of options to purchase Ordinary Shares to non-employee directors of
the Company (the "1998 Plan"). The 1998 Plan will be administered by a committee
appointed by the Board consisting of directors not eligible for awards of
options under the 1998 Plan (the "Committee"). An aggregate amount of not more
than 250,000 Ordinary Shares is reserved for grant under the 1998 Plan. The 1998
Plan will expire on December 8, 2008 (10 years after adoption), unless earlier
terminated by the Board.

Under the 1998 Plan, each non-employee director that served on the 1998
"Grant Date," as defined below, automatically received an option to purchase
10,000 Ordinary Shares on such Grant Date and will receive an option to purchase
an additional 10,000 Ordinary Shares on each subsequent Grant Date thereafter
provided that he or she is a non-employee director on the Grant Date and has
served as such for the entire period since the last Grant Date. The "Grant Date"
means, with respect to 1998, October 26, 1998, and with respect to each
subsequent year, August 1. Directors first elected or appointed after the 1998
Grant Date, will automatically receive on such director's first day as a
director an option to purchase up to 10,000 Ordinary Shares prorated based on
the number of full months of service between the prior Grant Date and the next
Grant Date. Each such non-employee director would also automatically receive, as
of each subsequent Grant Date, an option to purchase 10,000 Ordinary Shares
provided he or she is a non-employee director on the Grant Date and has served
for the entire period since the last Grant Date.

The exercise price of the option shares under the 1998 Plan is 100% of the
Fair Market Value (as defined below) of such Ordinary Shares at the time of
issuance of such options (the "Date of Grant"). The "Fair Market Value" means,
as of any date, the average closing bid and sale prices of the Ordinary Shares
for the date in question as furnished by the National Association of Securities
Dealers, Inc. through Nasdaq or any similar organization if Nasdaq is no longer
reporting such information, or such other market on which the Ordinary Shares
are then traded, or if not then traded, as determined in good faith (using
customary valuation methods) by resolution of the members of the Board of
Directors of the Company, based on the best information available to it. The
exercise price is required to be paid in cash.

The term of each option granted under the 1998 Plan is ten (10) years from
the applicable Date of Grant. All options granted vest immediately after
issuance.

The options granted would be subject to restrictions on transfer, sale or
hypothecation. All options and Ordinary Shares issuable upon the exercise of
options granted to the non-employee directors of the Company could be withheld
until the payment of taxes due with respect to the grant and exercise (if any)
of such options.

ITEM 13: INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Private Placement and Other Payments and Grants

Between September and December 1997, the Company effected a private
offering of its Ordinary Shares in the United States, for which Josephthal acted
as exclusive placement agent. As of April 16, 1999, the Chairman of Josephthal,
Dan Purjes, who is also the Company's Chairman, beneficially owns approximately
37.26% of the Company's Ordinary Shares, and other individuals affiliated with
Josephthal beneficially own approximately 7.13% of the Company's Ordinary
Shares. As compensation for its services as the Company's exclusive placement
agent, Josephthal received fees of $439,000 and warrants to purchase 400,000
Ordinary Shares at an exercise price of $1.00 per share. Payment to Josephthal
in consideration for the banking services rendered by Josephthal to the Company
was approved by the Company's shareholders at its annual meeting in October
1997.

From April through October 1997, an individual employed by Josephthal was
the Company's acting Chief Financial Officer, for which he received compensation
of approximately $45,000, and Dan Purjes received $20,000 in compensation for
his services as Chairman of the Board of Directors of the Company. Dan Purjes,
Chairman of the Company and Josephthal, and two individuals who are officers of
Josephthal and were simultaneously directors of the Company were granted options
under a company stock option plan to purchase in the aggregate 500,000 Ordinary
Shares of the Company at $1.25 per share. The foregoing payments and grants were
approved by the Company's shareholders at its annual meeting in October 1997.

Certain Facilities and Related Legal Proceedings

The Company's main facilities in Magshimim, Israel (the "Facilities"),
which the Company uses as its headquarters and as a research and development
facility, are situated on a plot of land leased to Moshe Nur and his wife. Moshe
Nur was the Company's Chairman and its major shareholder until April 1997. Moshe
Nur and certain affiliated companies, have been involved in various insolvency
proceedings which involved the Company, until a settlement was reached in
September 1998. According to the settlement agreements, all material claims
against the Company relating to the lease of the Facilities, alleged breach of
contracts and alleged debts owed to any of the above mentioned parties were
dismissed. Specifically, the Company reached an agreement with Moshe Nur's

receiver (and certain creditors) pursuant to which the Company may continue to
lease the Facilities until July 2000 without payment of rent. This rent-free use
of the Facilities was granted to the Company as set against payment previously
made and accounted for as pre-paid rent. Separately, claims related to the
ownership of the Company's shares have been resolved and the temporary
injunction on the issuance of securities by the Company was lifted.

PART IIbanks.

ITEM 14: DESCRIPTIONMATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES TO BE REGISTEREDSECURITY HOLDERS AND USE OF
PROCEEDS

Not applicable

PART IIIApplicable.

ITEM 15: DEFAULTS UPON SENIOR SECURITIES

Not applicableRESERVED

ITEM 16: CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
SECURITIES

Not applicableRESERVED

PART IVIII

ITEM 17: FINANCIAL STATEMENTS

Not applicableApplicable.

ITEM 18: CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements and related notes thereto
included under Item 19: "Consolidated Financial Statements and Exhibits" are
incorporated herein by reference.

47
See pages F-1 to F-34.

ITEM 19: CONSOLIDATED FINANCIAL STATEMENTS AND EXHIBITS

A. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

NUR MACROPINTERS LTD.

Report of Independent Auditors F-2
Consolidated Balance Sheets F-3 - F-4
Statements of Operations F-5
Statements of Changes in Shareholders'
Equity F-6
Statements of Cash Flows F-7 - F-9
Notes to Financial Statements F-10 - F-39

B. EXHIBITS

Exhibit
Number DescriptionNUMBER DESCRIPTION
- ------ -----------

3.1 -- Memorandum of Association of the Registrant, in Hebrew with a translation to English.(1)English(1)
3.2 -- Amended and Restated Articles of Association of the Registrant.(1)Registrant(10)
3.3 -- Certificate of Name Change.(2)Change(2)
4.1 -- Specimen Certificate for Ordinary Shares.(1)ordinary shares(1)
4.2 -- Representative's Warrant Agreement dated October 12, 1995.(1)1995(1)
4.3 -- Form of Representative's Warrant Certificate.(1)Certificate(1)
4.4 -- Forms of Placement Agent's Warrant Agreement and Certificate.(3)Certificate(3)
4.5 -- Forms of Qualified Independent Underwriter's Warrant Agreement and Certificate.(3)Certificate(3)
4.6 -- Form of Warrant Agreement between the Registrant and Barak Zamir, Advocates(4)
4.7 -- Form of Share and Warrant Purchase Agreement dated January 17, 2002 between the
Registrant and The Investment Corp. of United Mizrahi Bank Ltd.
4.8 -- Form of Warrant Agreement dated January 17, 2002 between the Registrant and The
Investment Corp. of United Mizrahi Bank Ltd.
4.9 -- Form of Registration Rights Agreement dated January 17, 2002 between the Registrant and
The Investment Corp. of United Mizrahi Bank Ltd.
4.10 -- Form of Warrant Agreement dated February 12, 2002 between the Registrant and Bank
Hapoalim B.M.
4.11 -- Form of Registration Rights Agreement dated February 12, 2002 between the Registrant
and Bank Hapoalim B.M.
4.12 -- Form of Warrant Agreement dated February 12, 2002 between the Registrant and Bank Leumi
le-Israel Ltd.
4.13 -- Form of Registration Rights Agreement dated February 12, 2002 between the Registrant
and Bank Leumi le-Israel Ltd.
10.1 -- 1995 Israel Stock Option Plan (previously referred to in Company filings as the 1995
Flexible Stock Incentive Plan or the 1995 Stock Option / Option/Stock Purchase Plan.Plan)(1)
10.2 -- Amendment to the 1995 Israel Stock Option / Stock Purchase Plan.(3)Plan(3)
10.3 -- 1997 Stock Option Plan.(4)Plan(5)
10.4 -- 1998 Non-Employee Director Share Option Plan.(5)Plan(6)
10.5 Lease Agreement between the Registrant and Mr. Moshe Nur dated October 4,
1993, as amended on May 29, 1995, in Hebrew with a translation to
English.(1)-- 2000 Stock Option Plan(11)
10.6 -- Lease Agreement for office space in Brussels, Belgium between Nivellease, S.A. and the
Registrant dated November 25, 1996.(3)

48
26, 1996(3)
10.7 -- Lease Agreement for office space in Newton Centre, Massachusetts between WHTR Real
Estate Limited Partnership and the Registrant dated July 10, 1998.(3)1998(3)
10.8 Qualified Independent Underwriting Agreement.(3)

10.9-- Distribution Agreement between Imaje S.A. and the Registrant dated June 26, 1995.(1)

10.101995(1)
10.9 -- Settlement Agreements relating to Moshe Nur and his affiliated companies.(3)

10.16companies(3)
10.10 -- Bank Hapoalin revolving loan agreement.(3,6)

NUMBER DESCRIPTION
- ------ -----------

10.14 -- Form of confidentiality agreement(3)
10.15 -- The Founders Agreement dated September 30, 1999 among
Gera Eiron, Ogen Dialogix Ltd. and the Registrant
dated February 10, 1997.(3)

10.18 Form of confidentiality agreement.(3)

10.19Registrant(10)
10.16 -- Assembly Agreement dated September 13, 1998October 4, 1999 between "Meital" Electronic TechnologyNUR Pro
Engineering and the Registrant(10)
10.17 -- Lod Lease Agreement between A. Barzilai Investments and
Assets Ltd. and Markowitz YaakovKamim Investments and Assets Ltd. and the
Registrant(10)
10.18 -- Asset Purchase Agreement dated May 17, 2000 by and among
Salsa Digital, Ltd., Signtech Japan, Ltd., Salsa Digital
DO Brasil, Ltda., Salsa Digital (Guangzhou) Ltd., Salsa
Dubai Corp., Salsa Technology Pte Ltd., as sellers, and
NUR Macroprinters Ltd.(3)

21, Salsa Digital Printing Ltd. and
Nur Hungary Trading and Software Licensing Limited
Liability Company, as puchasers(8)
10.19 -- Amendment No. 1 to Asset Purchase Agreement dated as of
June 30, 2000(9)
10.20 -- Master Remarketing Agreement dated July 20, 2001 by and
between NUR America and CVF Vendor Finance, Inc.
10.21 -- Lease Agreement dated July 1, 2001 by and between RAM
Global, Ltd. and Salsa Digital Printers
21.1 -- List of Subsidiaries of the Registrant.

27.1 Financial Data Schedule asRegistrant
23.1 -- Consent of and for the year ended December 31, 1995.(4)

27.2 Financial Data Schedule asKost Forer & Gabbay (S-8)
23.2 -- Consent of and for the year ended December 31, 1996.(4)

27.3 Financial Data Schedule as of and for the year ended December 31, 1997.(4)

27.4 Financial Data Schedule as of and for the year ended December 31, 1998.Kost Forer & Gabbay (F-3)

- -----------------------

(1) Previously filed with the Company's Registration StatementNUR's F-1 (File No. 33-93160) on Form F-1 and incorporated by
reference herein.

(2) Previously filed with the Company'sNUR's Form 6-K dated January 7, 1998 and incorporated
by reference herein.

(3) Previously filed with the Company'sNUR's Form F-1 (File No. 333-66103) and incorporated
by reference herein.

(4) Previously filed with NUR's Form 20-F for the Company'syear ended December 31, 1999
and incorporated by reference herein.

(5) Previously filed with NUR's Form 20-F for the year ended December 31, 1997
and incorporated by reference herein.

(5)(6) Previously filed with the Company'sNUR's Form 6-K dated November 13, 1998 and
incorporated by reference herein.

(6)(7) Filed in summary form. Original filed in paper format pursuant to Form SE.

(a) Financial Statement Schedules(8) Previously filed with NUR's Form 6-K/A dated May 22, 2000 and incorporated
by reference herein.

(9) Previously filed with NUR's Form 6-K/A dated July 7, 2000 and incorporated
by reference herein.

(10) Previously filed with NUR's Form 20-F for the year ended December 31, 2000
and incorporated by reference herein.

(11) Previously field with NUR's Schedule TO-I (File No. 5-56015) on May 16,
2002 and incorporated by reference herein.

FINANCIAL STATEMENT SCHEDULES

Other than as set forth below, all schedules have been omitted as the
required information is either not applicable or presented in the financial
statements or notes thereto.

NUR MACROPRINTERS LTD.
Schedule II - VALUATION AND QUALIFYING ACCOUNTS
US DOLLAS in THOUSANDS

- ---------------------------------------------------------------------------------------------------------------------
Balance at Charged to costs Deductions Balance at
December 31, 1995 and expenses December 31, 1996
- ---------------------------------------------------------------------------------------------------------------------

Allowance for doubtful 132 499 (25) 606
accounts
- ---------------------------------------------------------------------------------------------------------------------
Allowance for returns -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Allowance for price -- -- -- --
protection
- ---------------------------------------------------------------------------------------------------------------------
Total 132 499 (25) 606
- ---------------------------------------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------------------------------------
Balance at Charged to costs Deductions Balance at
December 31, 1996 and expenses December 31, 1997
- ---------------------------------------------------------------------------------------------------------------------

Allowance for doubtful 606 448 (514) 644
accounts
- ---------------------------------------------------------------------------------------------------------------------
Allowance for returns -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Allowance for price -- -- -- --
protection
- ---------------------------------------------------------------------------------------------------------------------
Total 606 448 (514) 644
- ---------------------------------------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------------------------------------
Balance at Charged to costs Deductions Balance at
December 31, 1997 and expenses December 31, 1995
- ---------------------------------------------------------------------------------------------------------------------

Allowance for doubtful 540 282 (178) 644
accounts
- ---------------------------------------------------------------------------------------------------------------------
Allowance for returns -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Allowance for price -- -- -- --
protection
- ---------------------------------------------------------------------------------------------------------------------
Total 540 282 (178) 644
- ---------------------------------------------------------------------------------------------------------------------

5060

SIGNATURESSIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this Annual Reportannual report to be signed on its behalf
by the undersigned, thereunto duly authorized.

NUR MACROPRINTERS LTD.

By: /s/ Erez Shachar
-------------------------------------
Erez Shachar
President and Chief Executive OfficerEREZ SHACHAR
.................................
EREZ SHACHAR
PRESIDENT AND CHIEF EXECUTIVE
OFFICER

Dated: May 4, 1999

51June 21, 2002

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001
IN U.S. DOLLARS

INDEX

PAGE
----

Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets................................. F-3 - F-4
Consolidated Statements of Operations....................... F-5
Statements of Changes in Shareholders' Equity............... F-6
Consolidated Statements of Cash Flows....................... F-7 - F-9
Notes to Consolidated Financial Statements.................. F-10 - F-34

[Ernst & Young Logo] KOST FORER & GABBAY Phone: 972-3-6232525
3 Aminadav St. Fax: 972-3-5622555
Tel-Aviv 67067, Israel

REPORT OF INDEPENDENT AUDITORS

To the Shareholders of
M.NUR MARKETING & COMMUNICATION GmbHNUR MACROPRINTERS LTD.

We have audited the accompanying consolidated balance sheets of M.Nur Marketing &
Communication GmbH ("the Company"NUR
Macroprinters Ltd. ('the Company') and its subsidiaries as of December 31, 19972000
and 19982001 and the related consolidated statements of operations, changes in
shareholdersshareholders' equity and cash flows for each of the twothree years in the period
ended December 31, 1998 and the
company's statement of operations, changes in shareholders equity and cash flows
for the year ended December 1996.2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance as to whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by the Company's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, based on our audits, the financial statements referred to
above present fairly, in all material respects, the financial position of the
Company as of December 31, 1997 and 1998 and the related results of their
operations and cash flows for each of the two years in the period ended
December 31, 1998, and the Company's results of operations and cash flows for
the year ended December 31, 1996, in conformity with generally
accepted
accounting principles in Germany. As applicable to the Company's financial
statements, generally accepted accounting principles in the United States and in
Germany are identical in all material aspects.

Kasell, Germany
April 21, 1999

Yours truly,

[seal] /s/ Willy Knyrim

WILLY KNYRIM
Certified Public Accountants (Germany)

NUR MACROPRINTERS LTD.

CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998

IN U. S. DOLLARS

INDEX

Page
-----------

Report of Independent Auditors F-2

Consolidated Balance Sheets F-3 - F-4

Consolidated Statements of Operations F-5

Statements of Changes in Shareholders' Equity F-6

Consolidated Statements of Cash Flows F-7 - F-9

Notes to Financial Statements F-10 - F-39

- - - - - - - - - - - -

ERNST & YOUNG [ERNST & YOUNG LOGO]
KOST FORER & GABBAY

REPORT OF INDEPENDENT AUDITORS

To the Shareholders of

NUR MACROPRINTERS LTD.

We have audited the accompanying consolidated balance sheets of Nur
Macroprinters Ltd. ("the Company") and its subsidiaries as of December 31, 1997
and 1998 and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of a subsidiary, which statements reflect total assets constituting
4.9% and 4.2% of consolidated total assets as of December 31, 1997 and 1998,
respectively, and total revenues constituting 18%, 14% and 12% of the related
consolidated totals for each of the three years in the period ended December 31,
1998, respectively. These statements were audited by other auditors whose report
has been furnished to us, and our opinion, insofar as it relates to data
included for this subsidiary, is based solely on the reports of the other
auditors.

We conducted our audits in accordance with generally accepted auditing
standards in the 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. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes 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 and the reports of the other
auditors provide a reasonable basis
for our opinion.

In our opinion, based on our audits, and the reports of the other
auditors, the consolidated financial statements
referred to above present fairly, in all material respects, the consolidated
financial position of the Company and its subsidiaries as of December 31, 19972000
and 19982001 and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998,2001, in conformity
with accounting principles generally accepted accounting principles in the United States.

/s/ Kost, Forer and Gabbay
Tel-Aviv, Israel --------------------------
March 1, 1999 KOST FORER and& GABBAY
Certified Public Accountants (Israel)
A Member of Ernst & Young
International

F - 2Tel-Aviv, Israel
February 14, 2002

F-2

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------U.S. DOLLARS IN THOUSANDS

DecemberDECEMBER 31,
----------------------------------
1997 1998
------------- --------------
U.S. dollars in thousands
----------------------------------
ASSETS-------------------
2000 2001
---- ----

CURRENT ASSETS
Current Assets:
Cash and cash equivalents (Note 3) 1,234 2,327
Marketable securities - 63equivalents............................... $ 19,219 $ 12,486
Trade receivables (net of allowance for doubtful
accounts:
$ 540accounts of $4,593 and $ 644$3,922 as of December 31, 19972000
and 1998,2001, respectively) (Note 4) 5,981 9,091............................... 43,126 36,670
Other accounts receivable and prepaid expenses
(Note 5) 1,745 2,7563).............................................. 6,336 5,151
Inventories (Note 6) 2,252 3,699
------------- --------------4).................................... 23,547 24,998
-------- --------
Total current assets 11,212 17,936
- -----
------------- --------------

LONG-TERM INVESTMENTS:assets................................ 92,228 79,305
-------- --------

Long-Term Investments:
Long-term trade receivables (Note 5).................... 2,387 2,266
Investments in affiliates (Note 6a)..................... 342 592
Restricted long-term bank deposit 150 337
Prepaiddeposits (Note 7)............. 262 135
Related parties (Note 14a).............................. 618 --
Severance pay fund...................................... 696 751
Long-term prepaid expenses.............................. 208 184
-------- --------
Total long-term investments......................... 4,513 3,928
-------- --------
Property, plant and equipment, net (Note 8)................. 7,046 12,578
-------- --------
Other assets, net (Note 9).................................. 15,994 13,739
-------- --------
Deferred income taxes (Note 16f)............................ 225 1,546
-------- --------
Total assets........................................ $120,006 $111,096
-------- --------
-------- --------

F-3

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

DECEMBER 31,
-------------------
2000 2001
---- ----

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term bank credit and short-term loans (Note 10)... $ 667 $ 5,061
Current maturities of long-term loans (Note 12)......... 864 2,057
Trade payables.......................................... 17,657 18,683
Trade payables to related parties (Note 14b)............ 2,565 983
Other accounts payable and accrued expenses (Note 9) 137 59
Severance pay fund11)... 13,290 10,045
Customer advances....................................... 1,999 542
-------- --------
Total current liabilities....................... 37,042 37,371
-------- --------
Long-Term Liabilities:
Long-term loans, net of current maturities (Note 15) 262 369
------------- --------------12).... 33,847 31,720
Excess of losses over investment in an affiliate (Note
6b)................................................... 212 --
Accrued severance pay................................... 980 1,008
-------- --------
Total long-term investments 549 765
- -----
------------- --------------

PROPERTYliabilities..................... 35,039 32,728
-------- --------
COMMITMENTS AND EQUIPMENT, NETCONTINGENT LIABILITIES (NOTE 13)
Shareholders' Equity (Note 7)15):
1,641 3,058
------------- --------------

OTHER ASSETS, net (Note 8) 381 236
------------- --------------Share capital
Ordinary shares of NIS 1 par value:
Authorized: 50,000,000 shares as of December 31,
2000 and 2001;
Issued and outstanding: 14,525,918 and 14,751,753
shares as of December 31, 2000 and 2001,
respectively...................................... 3,618 3,674
Additional paid-in capital.......................... 39,057 39,493
Accumulated other comprehensive loss................ (578) (782)
Retained earnings (accumulated deficit)............. 5,828 (1,388)
-------- --------
Total assets 13,783 21,995
- -----
============= ==============shareholders' equity...................... 47,925 40,997
-------- --------
Total liabilities and shareholders' equity...... $120,006 $111,096
-------- --------
-------- --------

The accompanying notes are an integral part of the consolidated financial
statements.

F - 3F-4

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------STATEMENTS OF OPERATIONS
U.S. DOLLARS IN THOUSANDS (EXCEPT PER SHARE DATA)

DecemberYEAR ENDED DECEMBER 31,
------------------------------------
1997 1998
------------- ----------------
U.S. dollars in thousands
------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Short-term bank loans (Note 10) 652 2,972
Current maturities of long-term bank loans (Note 13) 527 224
Trade payables (Note 11) 3,216 6,104
Accrued expenses and other liabilities (Note 12) 2,126 2,926
Customer advances 17 269
------------- ----------------

Total current liabilities 6,538 12,495
- -----
------------- ----------------

LONG-TERM LIABILITIES:
Long-term loans, net (Note 13) 1,076 950
Accrued expenses (Note 14) - 587
Accrued severance pay (Note 15) 358 464
------------- ----------------

Total long-term liabilities 1,434 2,001
- -----
------------- ----------------

MINORITY INTEREST 26 69
------------- ----------------

SHAREHOLDERS' EQUITY:
Share capital (Note 19):
Ordinary Shares of NIS 1 per nominal value:
Authorized: 20,000,000 shares; Issued and outstanding:
10,880,000 shares as of December 31, 1997 and 1998 2,729 2,729
Additional paid-in capital 14,383 14,376
Other comprehensive income (loss) (30) 165
Accumulated deficit (11,297) (9,840)
------------- ----------------

Total shareholders' equity 5,785 7,430
- -----
------------- ----------------

Total liabilities and shareholders' equity 13,783 21,995
- -----
============= ================

The accompanying notes are an integral part of the financial statements.

F - 4

NUR MACROPRINTERS LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
- -----------------------------------------------------------------------------------------------------

Year ended December 31,
--------------------------------------------------
1996 1997 1998
------------ ----------- ---------------
U.S. dollars in thousands except per share amounts
-------------------------------------------------------------------------------
1999 2000 2001
---- ---- ----

Revenues (Note 21a-c)17):
Sales of printers and related products 13,639 18,874 31,905products.................. $58,259 $121,924 $120,377
Sales of printed materials 2,998 3,085 4,540
------------ ----------- ---------------

16,637 21,959 36,445
------------ ----------- ---------------materials.............................. 2,460 -- --
------- -------- --------
Total revenues...................................... 60,719 121,924 120,377
------- -------- --------
Cost of revenues:
Cost of sales of printers and related products 11,528 9,627 16,368products(a)....... 30,440 64,107 71,928
Cost of sales of printed materials 2,008 1,684 2,579
------------ ----------- ---------------

13,536 11,311 18,947
------------ ----------- ---------------materials...................... 1,344 -- --
Inventory write-off..................................... -- -- 3,989
------- -------- --------
Total cost of revenues.............................. 31,784 64,107 75,917
------- -------- --------
Gross profit 3,101 10,648 17,498
------------ ----------- ---------------profit................................................ 28,935 57,817 44,460
------- -------- --------
Operating expenses:
Research and development, expenses 1,530 1,726 5,027
Less - grants and royalty-bearing grants 372 43 818
------------ ----------- ---------------

Research and development expenses, net 1,158 1,683 4,209
------------ ----------- ---------------(Note 18a)................ 4,809 14,626 10,234
Selling and marketing, expenses, net (Note 21d) 4,823 4,620 6,11118b)................... 9,485 17,385 18,665
General and administrative expenses 2,560 3,439 4,802
Write-offadministrative.............................. 6,275 12,765 13,321
Amortization of debts of related partiesgoodwill and other intangible assets.... -- 1,452 2,904
Restructuring charges (Note 21f) 3,757 - -
------------ ----------- ---------------

11,140 8,059 10,913
------------ ----------- ---------------1f)......................... -- -- 3,237
------- -------- --------
Total operating expenses............................ 20,569 46,228 48,361
------- -------- --------
Operating income (loss) (9,197) 906 2,376..................................... 8,366 11,589 (3,901)
Financial expenses, net (Note 21e) 589 320 501
Gain (loss) on marketable securities 22 - (91)18c).......................... (616) (1,423) (3,336)
Other income (expenses), net 76 (8) (20)
------------ ----------- ---------------net................................ 176 25 (324)
------- -------- --------
Income (loss) before taxes on income (9,688) 578 1,764(tax benefit).......... 7,926 10,191 (7,561)
Taxes on income (tax benefit) (Note 20e) 400 67 264
------------ ----------- ---------------16)..................... 798 1,244 (191)
------- -------- --------
Income (loss) after taxes on income (10,088) 511 1,500before equity in earnings (losses) of
affiliates and minority interest in earnings of a
subsidiary................................................ 7,128 8,947 (7,370)
Equity in earnings (losses) of affiliates, net.............. 75 (454) 154
Minority interest in earnings of subsidiary - (26) (43)
------------ ----------- ---------------a subsidiary............... (28) -- --
------- -------- --------
Net income (loss) (10,088) 485 1,457
============ =========== ===============........................................... $ 7,175 $ 8,493 $ (7,216)
------- -------- --------
------- -------- --------
Basic and dilutednet earnings (loss) per share (Note 2j and 19b) (1.47) 0.07 0.13

============ =========== ===============18d).............. $ 0.64 $ 0.65 $ (0.49)
------- -------- --------
------- -------- --------
Diluted net earnings (loss) per share (Note 18d)............ $ 0.56 $ 0.57 $ (0.49)
------- -------- --------
------- -------- --------

(a) Cost of sales includes purchases from related parties for the years ended
December 31, 1999, 2000 and 2001 in the amounts of $1,494 and $16,378 and
$13,819, respectively.

The accompanying notes are an integral part of the consolidated financial
statements.

F-5

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)

ACCUMULATED
NUMBER OF OTHER RETAINED TOTAL
ORDINARY ADDITIONAL COMPREHENSIVE EARNINGS COMPREHENSIVE TOTAL
SHARES SHARE PAID-IN INCOME (ACCUMULATED INCOME SHAREHOLDERS'
OUTSTANDING CAPITAL CAPITAL (LOSS) DEFICIT) (LOSS) EQUITY
----------- ------- ------- ------ -------- ------ ------

Balance as of January 1,
1999........................ 10,880,000 $2,729 $14,376 $ 165 $(9,840) $ 7,430
Comprehensive income:
Net income................ -- -- -- -- 7,175 $ 7,175 7,175
Other comprehensive loss:
Foreign currency
translation
adjustments......... -- -- -- (279) -- (279) (279)
-------
Total comprehensive
income.................. -- -- -- -- -- $ 6,896 --
-------
-------
Issuance of shares, net....... 600,000 141 2,764 -- -- 2,905
Exercise of options........... 294,573 70 395 -- -- 465
Amortization of deferred stock
compensation................ -- -- 167 -- -- 167
---------- ------ ------- ----- ------- -------
Balance as of December 31,
1999........................ 11,774,573 2,940 17,702 (114) (2,665) 17,863
Comprehensive income:
Net income................ -- -- -- -- 8,493 $ 8,493 8,493
Other comprehensive loss:
Foreign currency
translation
adjustments......... -- -- -- (464) -- (464) (464)
-------
Total comprehensive
income.................. -- -- -- -- -- $ 8,029 --
-------
-------
Issuance of shares related to
the acquisition of Salsa
Group, net (Note 1b)........ 666,667 164 9,274 -- -- 9,438
Issuance of shares related to
a private placement, net.... 748,223 186 9,255 -- -- 9,441
Exercise of warrants, net..... 597,487 147 1,694 -- -- 1,841
Exercise of options........... 738,968 181 1,080 -- -- 1,261
Amortization of deferred stock
compensation................ -- -- 52 -- -- 52
---------- ------ ------- ----- ------- -------
Balance as of December 31,
2000........................ 14,525,918 3,618 39,057 (578) 5,828 47,925
Comprehensive loss:
Net loss.................. -- -- -- -- (7,216) $(7,216) (7,216)
Other comprehensive loss:
Foreign currency
translation
adjustments......... -- -- -- (204) -- (204) (204)
-------
Total comprehensive
loss.................... -- -- -- -- -- $(7,420) --
-------
-------
Exercise of options, net...... 225,835 56 436 -- -- 492
---------- ------ ------- ----- ------- -------
Balance as of December 31,
2001........................ 14,751,753 $3,674 $39,493 $(782) $(1,388) $40,997
---------- ------ ------- ----- ------- -------
---------- ------ ------- ----- ------- -------

The accompanying notes are an integral part of the consolidated financial
statements.

F - 5F-6

NUR MACROPRINTERS LTD. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------

Number of
shares
outstanding Other
----------- Additional comprehensive
Ordinary Share paid-in income Accumulated
shares capital capital (loss) deficit
----------- ----------- ------------ ------------- ------------
U.S. dollars in thousands
--------------------------------------------------------------------------

Balance as of January 1, 1996 6,880,000 1,593 11,867 48 (1,694)
- -----------------------------

Comprehensive income:
Net loss - - - - (10,088)
Other comprehensive income:
Foreign currency translation adjustment - - - 61 -

Comprehensive income (loss) - - - - -

Amortization of deferred compensation - - 49 - -
----------- ----------- ------------ ------------- ------------
Balance as of December 31, 1996 6,880,000 1,593 11,916 109 (11,782)
- -------------------------------

Comprehensive income:
Net income - - - - 485
Other comprehensive income:
Foreign currency translation adjustment - - - (139) -

Comprehensive income - - - - -

Issuance of shares, net 4,000,000 1,136 2,376 - -
Amortization of deferred compensation - - 91 - -
----------- ----------- ------------ ------------- ------------
Balance as of December 31, 1997 10,880,000 2,729 14,383 (30) (11,297)
- -------------------------------

Comprehensive income:
Net income - - - - 1,457
Other comprehensive income:
Foreign currency translation adjustment - - - 195 -

Comprehensive income - - - - -

Share capital issuance expenses - - (128) - -
Amortization of deferred compensation - - 121 - -
----------- ----------- ------------ ------------- ------------
Balance as of December 31, 1998 10,880,000 2,729 14,376 165 (9,840)
- -------------------------------
=========== =========== ============ ============= ============

Total
Comprehensive shareholders'
income (loss) equity
------------ ------------
U.S. dollars in thousands
----------------------------

Balance as of January 1, 1996 11,814
- -----------------------------

Comprehensive income:
Net loss (10,088) (10,088)
Other comprehensive income:
Foreign currency translation adjustment 61 61
------------
Comprehensive income (loss) (10,027) -
============
Amortization of deferred compensation 49
------------
Balance as of December 31, 1996 1,836
- -------------------------------
Comprehensive income:
Net income 485 485
Other comprehensive income:
Foreign currency translation adjustment (139) (139)
------------
Comprehensive income 346 -
============
Issuance of shares, net 3,512
Amortization of deferred compensation 91
------------
Balance as of December 31, 1997 5,785
- -------------------------------
Comprehensive income:
Net income 1,457 1,457
Other comprehensive income:
Foreign currency translation adjustment 195 195
------------
Comprehensive income 1,652 -
============
Share capital issuance expenses (128)
Amortization of deferred compensation 121
------------
Balance as of December 31, 1998 7,430
- ------------------------------- ============

The accompanying notes are an integral part of the financial statements.

F - 6

NUR MACROPRINTERS LTD.AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------U.S. DOLLARS IN THOUSANDS

Year ended DecemberYEAR ENDED DECEMBER 31,
--------------------------------------
1996 1997 1998
----------- ---------- ---------
U.S. dollars in thousands
------------------------------------------------------------------
1999 2000 2001
---- ---- ----

Cash flows from operating activities:
Net income (loss) (10,088) 485 1,457......................................... $ 7,175 $ 8,493 $(7,216)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Minority interest in earnings of subsidiary - 26 43a subsidiary......... 28 -- --
Depreciation and amortization 321 644 792amortization......................... 932 3,156 5,333
Write-off of property and equipment................... -- -- 636
Loss (gain) fromon sale of property and equipment (4) 8 20equipment......... (44) (25) 190
Gain on realization of a subsidiary................... (132) -- --
Loss (gain) on trading marketable securities (22) - 91securities.......... (67) -- --
Deferred income taxes, net 400 27 (34)net............................ (867) 26 (663)
Amortization of deferred compensation 49 91 121stock compensation........... 167 52 --
Accrued severance pay, net 83 (18) (1)
Write-offnet............................ 51 138 (27)
Equity in losses (earnings) of technology assigned toaffiliates, net........ (75) 719 (154)
In process research and development - - 1,950
Marketablewrite-off......... -- 4,300 --
Trading marketable securities, 512 - (154)net.................... 130 -- --
Decrease (increase) in trade receivables 3,625 (1,783) (3,026)receivables.............. (3,645) (25,683) 7,043
Decrease (increase) in other accounts receivable and
prepaid expenses (378) 41 (953)expenses.................................... (337) (2,519) 658
Increase in inventories............................... (6,664) (9,409) (1,261)
Decrease (increase) in inventories (1,738) 317 (1,447)long-term trade receivables.... -- (2,387) 168
Decrease (increase) in long-term related parties'
accounts............................................ -- (618) 618
Decrease (increase) in long-term prepaid expenses - *) 231 78expenses..... 59 (155) 24
Increase in trade payables............................ 2,650 7,216 257
Increase (decrease) in trade payables 1,435 (1,248) 2,933from related
parties............................................. -- 2,565 (1,576)
Increase (decrease) in other accounts payable and
accrued expenses and
other liabilities 224 502 463expenses.................................... 3,093 4,722 (3,147)
Increase (decrease) in customer advances 1,345 (1,328) 59
Increase in long term accrued expenses - - 504
----------- ---------- ---------advances.............. 1,522 (829) (1,452)
------- -------- -------
Net cash provided by (used in) operating activities (4,236) (2,005) 2,896
----------- ---------- ---------activities... 3,976 (10,238) (569)
------- -------- -------

*) Reclassified.

The accompanying notes are an integral part of the financial statements.

F - 7F-7

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - --------------------------------------------------------------------------------- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

Year ended DecemberYEAR ENDED DECEMBER 31,
--------------------------------------
1996 1997 1998
----------- ------------ ------------
U.S. dollars in thousands
------------------------------------------------------------------
1999 2000 2001
---- ---- ----

Cash flows from investing activities:
Investment in restricted long-term bank deposit......... (30) -- --
Proceeds from principal of short-term loans to affiliates
and a shareholder 339 - -
Restricted long term bank deposit - (150) (187)
Proceeds fromrestricted long-term bank deposit 400 - -deposit......... -- 105 127
Purchase of property and equipment (230) (1,479) (2,541)equipment...................... (1,498) (3,227) (9,043)
Proceeds from sale of property and equipment 393 15 191
Grants received - - 266
Prepaid expenses (368) *) - -
Acquisitionequipment............ 188 14 686
Purchase of technology - - (1,307)
----------- ------------ ------------other assets................................ (11) -- --
Investments in affiliates............................... (774) -- --
Payment for the acquisition of Salsa Group(1)........... -- (18,674) --
Proceeds from sale of investment in a subsidiary net of
cash in the subsidiary at the time it ceased being
consolidated(2)....................................... 702 -- --
Proceeds from acquisition of consolidated subsidiary,
net(3)................................................ -- -- 110
------- -------- -------
Net cash provided by (used in)used in investing activities 534 (1,614) (3,578)
----------- ------------ ------------activities................... (1,423) (21,782) (8,120)
------- -------- -------
Cash flows from financing activities:
Share capital issuance expenses - - (128)
Proceeds from issuance of shares, net - 3,512 -net................... 2,905 8,879 --
Proceeds from exercise of options and warrants, net..... 465 3,102 492
Short-term bank credit net 1,424 (810) 2,320and short-term loans, net........ (229) (2,076) 4,323
Proceeds from principallong-term loans........................... 2,000 35,646 --
Principal payment of long-term loans - 1,263 106
Repayment of principal of long-term loans (355) (886) (535)
----------- ------------ ------------loans.................... (692) (3,417) (2,322)
------- -------- -------
Net cash provided by financing activities 1,069 3,079 1,763
----------- ------------ ------------activities............... 4,449 42,134 2,493
------- -------- -------
Effect of exchange rate changes on cash and cash
equivalents 6 36 12
----------- ------------ ------------equivalents............................................... (139) (85) (537)
------- -------- -------
Increase (decrease) in cash and cash equivalents (2,627) (504) 1,093equivalents............ 6,863 10,029 (6,733)
Cash and cash equivalents at the beginning of the year 4,365 1,738 1,234
----------- ------------ ------------year...... 2,327 9,190 19,219
------- -------- -------
Cash and cash equivalents at the end of the year 1,738 1,234 2,327
=========== ============ ============

*) Reclassified.

The accompanying notes are an integral part of the financial statements.

F - 8

NUR MACROPRINTERS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------

Year ended December 31,
-------------------------------------
1996 1997 1998
---------- -----------year............ $ 9,190 $ 19,219 $12,486
------- -------- U.S. dollars in thousands
-------------------------------------

(1) Purchase of subsidiary for cash:

Estimated fair value of assets and liabilities acquired:

Working capital 196 - -
Fixed assets (585) - -
Long-term loan 359 - -
Accrued severance pay 30 - -
----------- ----------- ---------

- - -
=========== =========== =========
Supplemental disclosure of cash flow information:

Cash paid during the year for:
Interest 763 367 174
=========== =========== =========

Income taxes 38 74 110
=========== =========== =========

Non-cash investing information:

Accrued expenses and other liabilities incurred upon
the acquisition of technology - - 643
=========== =========== =========-------
------- -------- -------

The accompanying notes are an integral part of the consolidated financial
statements.

F - 9F-8

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

YEAR ENDED DECEMBER 31,
----------------------------
1999 2000 2001
---- ---- ----

(1) Payment for the acquisition of Salsa Group:
Fair value of assets acquired and liabilities assumed at
the date of acquisition was as follows
Working capital (excluding cash and cash
equivalents)...................................... $ -- $ 4,666 $ --
Property and equipment.............................. -- 2,216 --
Long-term prepaid expenses.......................... -- 53 --
Technology.......................................... -- 9,672 --
Assembled work-force................................ -- 1,478 --
Customer list....................................... -- 3,094 --
Goodwill............................................ -- 3,195 --
In-process research and development................. -- 4,300 --
------- -------- -------
-- 28,674 --
Less -- amount acquired by issuance of shares... -- (10,000) --
------- -------- -------
$ -- $ 18,674 $ --
------- -------- -------
------- -------- -------
(2) Proceeds from sale of investment in a subsidiary net of
cash in the subsidiary at the time it ceased being
consolidated:
Working capital (excluding cash and cash
equivalents)...................................... $ (499) $ -- $ --
Property and equipment.............................. (168) -- --
Minority interest................................... 97 -- --
Gain on realization of a subsidiary................. (132) -- --
------- -------- -------
$ (702) $ -- $ --
------- -------- -------
------- -------- -------
(3) Proceeds from acquisition of consolidated subsidiary:
Estimated fair value of assets acquired and liabilities
assumed at the date of acquisition was as follows:
Working capital, net (excluding cash and cash
equivalents)...................................... $ -- $ -- $ (554)
Long-term trade receivables......................... -- -- 42
Property and equipment.............................. -- -- 862
Technology.......................................... -- -- 700
Long-term loans..................................... -- -- (1,468)
Excess of losses over investment in an affiliate.... -- -- 308
------- -------- -------
$ -- $ -- $ (110)
------- -------- -------
------- -------- -------
(4) Supplemental disclosure of cash flows activities:
Cash paid during the year for:
Interest............................................ $ 333 $ 585 $ 2,628
------- -------- -------
------- -------- -------
Income taxes........................................ $ -- $ 423 $ 945
------- -------- -------
------- -------- -------
Non-cash investing activities:
Purchase of property and equipment.................. $ -- $ 483 $ --
------- -------- -------
------- -------- -------
Assignment from property and equipment to
inventory......................................... $ 666 $ -- $ --
------- -------- -------
------- -------- -------

The accompanying notes are an integral part of the consolidated financial
statements.

F-9

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------U.S. DOLLARS IN THOUSANDS

NOTE 1:-1 -- GENERAL

a. Organization:

1. NurNUR Macroprinters Ltd. ("the Company"('the Company'), is an Israeli Corporation, is an industrial company.Corporation. The
Company develops, manufactures, sells and sellsprovides services of digital continuous
ink-jet printing
systems for on-demand, short-run, wide format and super-wide format printing as
well as related consumable products
for large format printing. The Company maintains
wholly-owned subsidiaries in Europe and United States
for sales support and marketing. The Company's products
are sold by a network of dealers and distributors.products. The principal markets of the Company and
its subsidiaries are located in Europe, the Americas and United States.

2. NurAsia.

The Company operates through wholly-owned subsidiaries for sales, support
services and marketing of the Company's products in their country or region of
domicile. Such entities include NUR Europe S.A. ('NUR Europe') in Belgium, NUR
America Inc. ('NUR America') in the U.S., NUR Asia Pacific Ltd. ('NUR Asia
Pacific') in Hong Kong and NUR Macroprinters (Shanghai) Co. Ltd. ('NUR
Shanghai') in the People's Republic of China.

NUR Media Solutions S.A. ("Nur('NUR Media Solutions"Solutions'):

In April 1998, the Company renamed its previously, a wholly-owned subsidiary, Nur International S.A. to Nur
Media Solutions S.A., which
is engaged in developing and marketing of consumables for the Company's printers.

In October 1999, the Company entered into a joint venture with a third
party -- NUR Pro Engineering Ltd., for the assembly of the Company's printers,
in which the Company has 50% holdings (see Note 16c)6a). 3. Nur America Inc. ("Nur America"):Under the establishment
agreements, the Company has the option to purchase the other 50% of NUR Pro
Engineering or to sell its 50%, if certain conditions as described in the
agreements, are met.

In 1996,December 1999, the Company established Stillachem S.A. ('Stillachem'), a
joint venture with a third party of which the Company owns 50.1%. Stillachem is
engaged in development and manufacture of special inks for digital printing
systems. During the second quarter of 2001 the company acquired the remaining
49.9% of the shares of Stillachem (See also Note 6b). The transaction was
accounted for by the purchase method of accounting. Pro forma information in
accordance with APB-16 has not been provided since the revenues for 2000 and
2001, were not material in relation to total consolidated revenues. The
operations of Stillachem are included in the consolidated statements from the
second quarter of 2001.

In connection with the acquisition, the Company recorded an amount of $700
as technology to be amortized over a period of 5 years.

In December 1997, the Company, through NUR Media Solutions, purchased 84% of
the shares of M. NUR Marketing & Communication GmbH ('NUR Germany'). During the
third quarter of 1999, the Company sold its shares in NUR Germany and recorded
$132 as a capital gain.

In July 2000, the Company established a wholly-owned subsidiary named Salsa
Digital Printers Ltd. ('Salsa Digital Printers') in San Antonio, Texas, as part
of the Salsa Group acquisition (See Note 1b). In addition, the Company
established a wholly-owned subsidiary in Hungary named NUR Hungary Trading and
Software Licensing LLC. ('HOC').

As part of the United States - Nur America, which isSalsa Group acquisition, the Company acquired the shares of
Signtech Japan, Ltd. ('Signtech Japan'), a wholly-owned subsidiary in Japan. In
November 2000, the Company established a wholly-owned subsidiary in Brazil named
NUR Do Brazil ('NUR Brazil'). Both companies are engaged in the marketing of the
Company's products and
related consumable productsas well as in South America and North
America.

4. Nur Advanced Technologies (Europe) S.A. ("Nur Europe"):

In 1996,providing support services in their countries
of domicile.

b. Acquisition of Salsa Group:

On May 17, 2000, the Company establishedentered into an acquisition agreement with a
U.S. partnership, Salsa Ltd., and its wholly-owned subsidiary in Belgium - Nur Europe which is engaged insubsidiaries ('Salsa Group').
According to the marketingagreement, the Company and its subsidiaries acquired as of July
3, 2000, all the assets and assumed certain liabilities of the Company's productsSalsa Group and
related
consumable productsall of the outstanding shares of Signtech Japan in Europe.

5. M. Nur Marketing & Communication GmbH ("Nur Germany"):consideration of $20,000 in
cash and $10,000 through the issuance of 666,667 Ordinary shares of the Company.
In December 1997,addition, the Company

purchased the shares of Nur
Germany, a 84% owned subsidiary, that were held by Nur
Media Solutions. Nur Germany is engaged in selling and
marketing of consumable printed materials.

b. Financial difficulties:

During 1996, the Company experienced severe financial
difficulties. The Company wrote off $ 3,757 thousand, due to
outstanding debts of the Company to Moshe Nur, the Company's
former Chairman of the Board of Directors and a former major
shareholder, and with companies controlled by Moshe Nur, which
are currently in bankruptcy proceedings (see also Notes 16, 18
and 22j).

F - 10F-10

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

incurred other costs directly related to the acquisition amounted to
approximately $400. The total acquisition cost amounted to $30,400.

Salsa Group was engaged in the development, manufacturing and selling of
digital printing systems for on-demand, short-run, wide format and super wide
format printing, and also in selling of related consumable products.

The operations generated by the acquired net assets of Salsa Group are
included in the consolidated statements commencing the third quarter of 2000.

The acquisition was accounted for by the purchase method of accounting.
Accordingly, the purchase price has been allocated according to the fair value
of the assets acquired and liabilities assumed and resulted in the recording of
goodwill of approximately $3,195, which is being amortized on a straight-line
basis over a 10-year period (See Note 2w).

In connection with the above-mentioned acquisition, the Company recorded in
the third quarter of 2000, a one-time research and development expense of $4,300
to write-off the in-process research and development acquired from Salsa Group,
for which technological feasibility has not yet been established and for which
no alternative future use exists.

Other intangible assets acquired had an estimated fair value of $14,244 as
shown in Note 9.

The following is a summary of the fair value of the assets acquired:

Working capital, net........................................ $ 6,392
Property and equipment...................................... 2,216
Long-term prepaid expenses.................................. 53
Goodwill and other intangible assets (See Note 9)........... 17,439
In-process research and development......................... 4,300
-------
$30,400
-------
-------

The following represents the unaudited pro-forma results of operations for
the years ended December 31, 1999 and 2000, assuming that the Salsa Group
acquisition had been consummated as of January 1, 1999 and January 1, 2000,
respectively:

YEAR ENDED
DECEMBER 31,
------------------
1999 2000
---- ----
UNAUDITED

Revenues................................................. $93,789 $139,422
------- --------
------- --------
Net income............................................... $ 3,927 $ 12,620
------- --------
------- --------
Basic net earnings per share............................. $ 0.33 $ 0.94
------- --------
------- --------
Diluted net earnings per share........................... $ 0.29 $ 0.83
------- --------
------- --------

c. Acquisition of technology:

In December 1997, the Company signed an agreement with a private
company, Meital Electronic
Technologies Ltd. ("Meital"('Meital'), which iswas engaged in research and development in
fields related to the Company's activity. In accordance with the agreement, the
Company provided loans to Meital in 1997 and 1998 totaling $ 50
thousand and $ 350 thousand, respectively. During 1997 and 1998,
the Company recorded a provision in respect of the
aforementioned amounts since Meital is in the development stage,
and there is an uncertainty regarding its ability to repay the
loans.

In September 1998, the Company acquired from Meital all rights (including
all related assets) to Meital's piezo DoDdrop on demand inkjet technologies for
application in wide format digital printers for approximately $3.0 million,$3,000, consisting
of an up-front payment, of
$750 thousand, the assumption of certain liabilities including those
that relate to the legal dispute between Idanit Technologies Ltd. ("Idanit"('Idanit') and
Meital (see Note 14) and future sales which are based on royalties. The Meital acquisition
resulted in a one-time chargeroyalties to research and development inbe paid upon success of such technology (not
exceeding $1,300). During 2000, the
amount of $1.95 million. The Company has future royalty
obligations, based on future sales, inreached the next three years, of
Meital's technology-based printers,maximum royalties
liability which will not exceed $1.3
million. If certain minimum royalties are notwas fully paid Meital has
the option to buy back the technology in the amount of royalties
paid by the Company.during 2000 and 2001.

F-11

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

d. Concentration of risks that may have a significant impact on the
Company:

Suppliers The Company purchases allsome of the ink and ink-jetsall of the ink-jet printerheads
used in its current printers from onea single supplier while using the supplier's
credit-terms.for each series of printers. The
Company's customers rely on the ink and ink-jet printerheads to operate their
printers. Because the Company's business depends on thethese items for sale and
maintenance of its printers, a failure in supplying or a change in credit-termscredit terms
could have a severematerial adverse effect on the Company's results of operations and
financial results.

Subcontractorsposition.

e. The Company employs a limited number of unaffiliated subcontractors to
manufacture components for its printers. The Company currently employs one independent50%
owned affiliated sub-contractor to assemble some of its printers.

Because the Company relies on a limited number of subcontractors, its business
could suffer if the
Company fails to maintain its relationships with its subcontractors or fails to
develop alternative sources for its printer components.

F - 11
components, it could have a material
adverse effect on the Company's results of operations and financial position.

f. Restructuring charges:

During the first and fourth quarter of 2001, the Company decided to perform
a series of strategic initiatives intending to further reduce costs and increase
efficiency. As a result, approximately 60 positions were eliminated in the
Company. In addition, during the first quarter of the year the Company wrote-off
$3,989 of its inventories.

The restructuring charges consisted of the following:

a) Consolidating the operations of NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------America and Salsa Digital
Printers into one facility in San Antonio.

b) Consolidating the ink manufacturing of Stillachem into the facility
of Salsa Digital Printers in San Antonio.

c) Consolidating the Salsa Digital Printers R&D operations in Israel and
the U.S. into the Company's facility in Lod, Israel.

The components and the classification of the restructuring charges and the
write-offs associated with the restructuring charges for the year ended 2001 are
as follows:

DECEMBER 31,
2001
----

Restructuring charges:
Employee termination and severance costs................ $1,881
Write-off of property and equipment..................... 636
Other exit costs........................................ 720
------
$3,237
------
------

In connection with SFAS No. 121, 'Accounting for the impairment of Long
Lived Assets and for Long lived assets to be Disposed of' and Emerging Issues
Task Force ('EITF') Issue 94-3 'Liability Recognition for certain Employee
Termination Benefits and Other Costs to Exit an Activity' (including certain
costs in Restructuring), and Staff Accounting Bulletin No. 100, 'Restructuring
and Impairment Charges' the Company recorded during 2001 restructuring charges
of $3,237.

NOTE 2:-2 -- SIGNIFICANT ACCOUNTING POLICIES

The Company's consolidated financial statements have been prepared in
accordance with Generally Accepted Accounting Principles in
Israel ("Israel GAAP"). As applicable to the Company's consolidated
financial statements Generally Accepted Accounting Principlesgenerally accepted accounting principles in the United States
("('US GAAP').

F-12

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
U.S. GAAP") and in Israel are identical in all
material respects.DOLLARS IN THOUSANDS

a. Use of estimates:

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
accompanyingccompanying notes. Actual results could differ from those estimates.

b. Financial statements:

1. Financial statements in U.S. dollars:

The accompanying consolidated financial statements have been prepared in U.S. dollars.U.S
dollars ('dollars'). The U.S. dollar is the currency of the primary economic
environment in which the operations of the Company, NUR America, Salsa Digital
Printers, HOC and Nur AmericaNUR Pro Engineering are conducted. The U.S. dollar is also the functional and
reporting currency of the Company. The majority of sales areis
made in U.S. dollars and the majority of purchases of materials and components areis
invoiced and paid in
U.S. dollars. In addition, a substantial numberportion of other
expenses arecosts is
incurred outside Israel in U.S. dollars or paid in U.S. dollars or in New Israeli Shekels ("NIS")
linked todollars. Accordingly, the exchange rateCompany's management
believes that the dollar is the primary currency of the U.S.economic environment in
which the Company and the above-mentioned entities operate. Thus, the functional
and reporting currency of the Company and these subsidiaries is the dollar.

The Company'sAccordingly, transactions and balances denominated in
U.S. dollars are presented
at their original amounts. Non-dollar transactions and balances have beenMonetary accounts maintained in currencies other than
the dollar are remeasured into U.S. dollars in accordance with Statement 52 of the Financial
Accounting StandardsStandard Board ("FASB"(No. 52), 'Foreign Currency Translation' ('SFAS No.
52'). All transaction gains and losses fromof the remeasurement of monetary balance
sheet items denominated in non-dollar currencies are reflected in the statementstatements
of operations as financial income or expenses, as appropriate.

F - 12

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------

2. Foreign currency translation:

The financial statements of certainall other subsidiaries and an affiliate, whose
functional currency is not the U.S.U.S dollar, have been translated into U.S. dollars, in accordance with FASB
Statement No. 52, "Foreign Currency Translation".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 year.period. The resulting
aggregate
translation adjustments are reported as a component of accumulated other
comprehensive loss in shareholders' equity.

c. Principles of consolidation:

The consolidated financial statements include the accounts of the Company
and its subsidiaries listed below.subsidiaries. Intercompany transactions and balances including profitsprofit
from intercompany sales not yet realized outside the group, have been eliminated
inupon consolidation.

Subsidiaries included in consolidation:

December 31, 1998 and 1997
------------------------------------
Shares conferring
------------------------------------
Rights to
Voting rights profits
--------------- ---------------
% %
--------------- ---------------

Nur Media-Solutions S.A. 100 100

Nur Europe 100 100

Nur America 100 100

Nur Germany 84 84

d. Cash equivalents:

The Company considers allCash equivalents are short-term highly liquid investments originally
purchasedthat are readily
convertible to cash with original maturities of three months or less to be cash
equivalents.

F - 13

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------less.

e. Trade receivables:

Trade receivables include amounts billed to clientsMarketable securities:

The Company accounts for investments in debt and various
amounts due from transactions arisingequity securities (other
than those accounted for under the equity method of accounting) in the ordinary course
of business. Management periodically evaluates the
collectibility of these receivablesaccordance
with FASB Statement No. 115, 'Accounting for Certain Investments in Debt and
adjusts the allowance
for doubtful accounts to reflect the amounts estimated to be
uncollectible.

f. Marketable securities:Equity Securities'.

Management determines the appropriate classification of its investments in
marketabledebt and equity securities at the time of purchase and reevaluatedreevaluates such
determinationdeterminations at each balance sheet date.

MarketableManagement has classified all of its marketable securities are accounted for as trading
securities. These securities
in accordance with the provisions of Statement No. 115 of the
FASB. The marketable securities consist of debentures, mutual
funds and other securities which are carried at their fair value based upon the
quoted market valueprice of those investments. Net realized gains on balance sheet date. The changethese securities
are included in the difference
between the market value and cost of marketable securities is
credited or charged to the statement of operations.

g.operations, as financial income.

f. Inventories:

Inventories are stated at the lower of cost or market value. Inventory
write-offs are provided to cover risks arising from slow-moving items or
technological obsolescence (See note 1f). Cost is determined as follows:

F-13

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

Raw materials --- by the "first-in, first-out"'first-in, first-out' method;

work-in-progressWork-in-progress and finished products --- on the basis of computeddirect
manufacturing costs with the addition of allocable indirect manufacturing
costs.

g. Long-term trade receivables:

Long-term receivables from extended payment agreements are recorded at
estimated present values determined based on current rates of interest and
reported at the net amounts in the accompanying financial statements. Imputed
interest is recognized, using the effective interest method as a component of
interest income in the accompanying statements.

h. Investments in affiliates:

The investment in NUR Pro Engineering, over which the Company can exercise
significant influence, is presented using the equity method of accounting. In
prior years, the balance also included Stillachem, a joint venture fully
acquired during 2001. The Company annuallygenerally discontinues applying the equity
method when its investment (including advances and loans) is reduced to zero and
it has not guaranteed obligations of the affiliate or otherwise committed to
provide further financial support to the affiliate. Where the Company's share of
an affiliate's losses is greater than the investment in such an affiliate and in
which the Company has guaranteed obligations of the affiliate, the excess amount
is presented as a liability.

Management periodically reviews the inventory for obsolescence,
based on the sales activity of its products, and provides a
reserve where appropriate.

h. Restricted long term bank deposit:

Restricted long term bank deposit is maintained with banks to
secure leasing obligations of a customer. The Company is
restricted from withdrawing any portioncarrying value of the long term bank
deposit at any time, untilinvestments. If
this review indicates that the repaymentcost is not recoverable, the carrying value is
reduced to its estimated fair value. As of the leasing
obligation by the customer. The restricted long term bank
deposit will mature approximately inDecember 31, 2001, is linked to the
U.S. dollar and bears interest at a rate of 5%.no impairment
losses have been identified.

i. Property, plant and equipment:

These assetsProperty and equipment are stated at cost, net of grant received.grants received and
accumulated depreciation.

Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets.

F - 14

NUR MACROPRINTERS LTD.

NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------

The annual depreciation rates are as follows:

%
------------------------------------

Machinery and equipmentequipment.......................... 10 - 33
Motor vehiclesvehicles................................... 15
Office furniture and equipmentequipment................... 6 - 10
BuildingBuilding......................................... 3
Leasehold improvementsimprovements........................... Over the term of the term of the lease
agreement

Statement No. 121, 'Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of' ('SFAS No. 121') requires impairment
losses to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets is less than the carrying amount of such assets. The Company and
its subsidiaries periodically assess the recoverability of the carrying amount
of property and equipment and provide for any possible impairment loss based
upon the difference between the carrying amount and fair value of such assets.
As of December 31, 2001, no impairment losses have been identified.

F-14

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

j. Other assets:

Other assets are stated at amortized cost. Amortization is calculated using
the straight-line method over the estimated useful lives, atwhich are as follows:

ESTIMATED
USEFUL LIFE
-----------
(IN YEARS)

Technology............................................... 5
Assembled work-force..................................... 7
Customer list............................................ 7
Goodwill................................................. 10
Distribution rights...................................... 5
Patent rights............................................ 10

The carrying value of intangible assets is periodically reviewed by
management, based on the following annual rates:

%
--------------

Distribution rights 20
Patent rights 10expected future undiscounted operating cash flows over
the remaining amortization period. If this review indicates that the intangible
assets will not be recoverable, the carrying value of the intangible assets is
reduced to estimated fair value. Based on its most recent analysis, management
believes that no impairment of other assets exists as of December 31, 2001 (See
note 2w).

k. Severance pay:

The Company's liability for severance pay is calculated pursuant to 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's salary for each year of employment, or a portion
thereof. The Company's liability for all of employees, is fully provided by
monthly deposits with severance pay funds, insurance policies and by an accrual.
The value of these policies is recorded as an asset in the Company's
consolidated balance sheet.

The deposited funds may be withdrawn only upon the fulfillment of the
obligation pursuant to 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 immaterial profits.

Severance expenses for the years ended December 31, 1999, 2000 and 2001
amounted to approximately $440, $306 and $1,426, respectively.

l. Income taxes:

The Company accountsand its subsidiaries account for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting'Accounting for Income
Taxes"Taxes' ('SFAS No. 109'). This statement prescribes the use of the liability
method whereby deferred tax asset and liability account balances are determined
based on 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 providesand its
subsidiaries provide a valuation allowance, if necessary, to reduce deferred tax
assets to their estimated realizable value.

l.m. Basic and diluted net earnings (loss) per share:

Basic net earnings (loss) per share is computed based on the weighted
average number of ordinaryOrdinary shares outstanding during each year. Diluted net
earnings (loss) per share is computed based on the weighted average number of
ordinaryOrdinary shares outstanding during each year,the period, plus dilutive potential ordinaryOrdinary
shares considered outstanding during the year, in accordance with FASB Statement of
Financial Accounting Standard No. 128, "Earnings'Earnings Per Share"Share' ('SFAS No. 128').

m.Outstanding stock options and warrants have been excluded from the
calculation of the diluted net earnings (loss) per Ordinary share when such
securities are anti-dilutive for all periods presented. The total weighted
average number of shares related to the outstanding options and warrants
excluded from

F-15

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

the calculations of diluted net earnings (loss) per share was 967,766, 310,200
and 931,736 for the years ended December 31, 1999, 2000 and 2001, respectively.

n. Accounting for stock-based compensation:

The Company has chosenelected to continue accounting for stock-based
compensation in accordance with the provisions offollow Accounting Principles Board Opinion No. 25
("APB-25"), "Accounting'Accounting for Stock Issued to Employees".Employees' ('APB 25') and FASB Interpretation
No. 44 'Accounting for Certain Transactions Involving Stock Compensation' ('FIN
44') in accounting for its employee stock option plans. Under APB-25,APB 25, when the
exercise price of the Company's sharestock options equals or is higherless than the market price of
the underlying shares on the date of grant, no compensation expense is recognized.
The pro-forma informationdisclosures required by Statement of Financial Accounting Standard
No. 123 'Accounting for Stock-Based Compensation' ('SFAS No. 123'), are provided
in Note 15e.

The Company applies SFAS No. 123 and EITF 96-18 'Accounting for Equity
Instruments that are Issued to Other than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services' ('EITF 96-18') with respect to
options issued to non-employees. SFAS No. 123 requires use of an option
valuation model to measure the fair value of the options is
provided in accordance withat the provisions of Statement No.
123 (see Note 19). In accounting for option granted to other
than employees, the provision of SFAS 123 was applied.

F - 15

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------

n.grant date.

o. Revenue recognition

1.recognition:

Revenues from sales of products are recognized in accordance with Staff
Accounting Bulletin No. 101 'Revenue Recognition in Financial Statements' ('SAB.
No 101') upon shipmentdelivery provided that the collection of resulting receivable is
probable, there is a persuasive evidence of an arrangement, no significant
vendor obligations in respect of installation remain and collectionthe price is deemed probable.

2.fixed or
determinable. The Company does not grant right of return.

On occasion, customers request delayed shipment, usually due to scheduling
of systems integration and/or lack of storage space at the customers' facilities
during the implementation. In such bill and hold transactions, the Company
recognizes revenue when the criteria of Staff Accounting Bulletin No. 101 are
satisfied.

Revenues from servicesservice contracts are recognized ratably over the term of the
agreements.

3. EstimatedRevenues from trade-in transactions of the Company's printers are recorded
at fair value as a discount from revenues in accordance with APB 29 'Accounting
for Non-monetary Transactions' and EITF 86-29 'Non-monetary Transactions:
Magnitude of Boot and the Exceptions to the Use of Fair Value', when the cash
consideration involved with such transactions is material.

Deferred revenue includes amounts received from customers for which revenue
has not yet been recognized.

p. Warranty costs:

The Company provides a warranty of up to six months, at no extra charge. A
provision is recorded for probable costs which to date have been
insignificant are accrued in connection with warranties, based on
the financial statementsCompany's experience (in respect of most of these costs the Company has
warranties from its suppliers). o. ResearchWarranty costs for the years ended December 31,
1999, 2000 and development:2001 were $1,099, $1,738 and $2,401, respectively.

q. Research and development expensescosts:

Research and development costs net of grants for funding approved research
and development projects are charged to expenses as incurred.

Grants are netted from research and development costs on an
accrual basis as the related expenses are incurred.

p.r. Royalty-bearing grants:

Royalty-bearing grants from the Government of Israel and from the government
of Belgium for funding of approved research and development projects and for
funding marketing activityactivities are recognized at the time in which the Company is entitled
to such grants, on the basis of the related costs incurred.

q.incurred

F-16

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

and included as a deduction of research and development, and selling and
marketing expenses, respectively.

s. Non-royalty-bearing grants:

The Company is also entitled to non-royalty-bearing grants for its
participation in the 'MAGNET' project financed by the Government of Israel.
These grants are recognized at the time the Company is entitled to such grants,
on the basis of the costs incurred and are recorded as a deduction of research
and development expenses.

t. Advertising costs:

The Company expenses advertising costs as incurred. r.Advertising expenses for
the years ended December 31, 1999, 2000 and 2001 were $602, $662 and $554,
respectively.

u. Concentrations of credit risk:

SFAS No. 105, "Disclosure of Information About Financial
Instruments with Off-Balance-Sheet Risk and Financial
Instruments with Concentrations of Credit Risk", requires
disclosure of any significant off-balance-sheet and credit
risk concentrations. The Company has no significant
off-balance-sheet concentration of credit risk such as foreign
exchange contracts, option contracts or other foreign hedging
arrangements.

Financial instruments that potentially subject the Company and its
subsidiaries to concentrations of credit risk consist principally of cash and
cash equivalents, trade receivables, long-term trade receivables, restricted
long-term bank deposits and restricted cash.long-term loans to an affiliate.

Cash and cash equivalents consist primarily of U.S. dollar, New Israeli
Shekel ('NIS') and Euro amounts deposited in banks. Cash and cash equivalents
and restricted cashbank deposits are deposited withinvested in major banks primarily in Israel,
the United States, Asia and Belgium. Such deposits in the United States may be
in excess of insured limits and are not insured in other jurisdictions.
Management believes that the financial institutions that hold the Company's
investments are financially sound, and, accordingly, minimal credit risk exists
with respect to these investments.

The Company's trade receivables and the long-term trade receivables of the Company and
its subsidiaries are mainly derived from sales to customers located primarily in
the United StatesAmerica, Asia and Europe. The Company has
adopted credit policies and standards intended to accommodate
industry growth and inherent risk. Management believes that credit risks are moderated by
the diversity of its end
customersend-customers and geographic sales areas. The Company
performs ongoing credit evaluations of its customers' financial conditioncondition. An
allowance for doubtful accounts is determined with respect to those amounts that
the Company has determined to be doubtful of collection. In addition, starting
September 1, 2001 the Company insures some of its trade receivables.

On occasion, the Company engages in the sale with recourse of trade
receivables with established commercial banking institutions. As of December 31,
2001, a total amount of $10,186 were sold to the banks.

As for loans to an affiliate, the Company performs ongoing evaluations of
the balances and, requires collateralto date, considers the credit risk to be low.

The Company has no significant off-balance-sheet concentration of credit
risk such as deemed necessary.

F - 16

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------

s.foreign exchange contracts, option contracts or other foreign
hedging arrangements.

v. Fair value of financial instruments:

The estimated fair value of financial instruments has been
determinedfollowing methods and assumptions were used by the Company using available market information
and valuation methodologies. Considerable judgment is requiredits
subsidiaries in estimating their fair values. Accordingly, the estimates may not
be indicative of the amounts the Company could realize in a
current market exchange.value disclosures for financial
instruments:

The carrying amounts of cash and cash equivalents, trade receivables, other
accounts receivable, short-term bank credit, short-term loans, trade payables
and restricted cashother accounts payable approximate their fair values,value, due to the short term
maturitiesmaturity of these instruments and the
terms of the deposits.such instruments.

The carrying amounts of the Company's borrowings under its
short-term credit agreementslong-term trade receivables, long-term
loans to an affiliate and restricted long-term bank deposits, approximate their
fair value. The fair value of the Company's long-term loan iswas estimated using discounted cash flow analyses,
based on the Company's current
incrementincremental investment rates for similar type of
investment arrangements.

F-17

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

The carrying amount of the Company's long-term loans approximates their fair
value. The fair value was estimated using discounted cash flow analyses, based
on the Company's incremental borrowing rates for similar typestype of borrowing
arrangements.

The carrying amountsfair value of foreign currency transactions (used for hedging purposes)
made during 1999 and fair values of the Company's financial
instruments at December 31, 1998, are as follows:

Carrying amount Fair value
---------------- ----------------
U.S. dollars in thousands
------------------------------------

Cash and cash equivalents 2,327 2,327
Restricted long-term bank deposits 337 337
Short term bank loans 2,972 2,972
Long term loans 1,174 1,174

t. Segment reporting:

The Company adopted SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information", in 1998. SFAS No.
131 supersedes SFAS No. 14, replacing the "industry segment
approach" with the "management approach", whereby companies
report financial and descriptive information about their
operating segments. Operating segments are revenue-producing
components of the enterprise for which separate financial
information is produced internally and are subject to
evaluation2000 was estimated by the chief operating decision-maker in deciding
how to allocate resources to segments (see Note 22).

u.obtaining quotes from investment
bankers.

w. Impact of recently issued accounting standards:

In June 1998,2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, 'Business Combinations', and No. 142,
'Goodwill and Other Intangible Assets', effective for fiscal years beginning
after December 15, 2001. Under the new rules, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized but will be subject
to annual impairment tests in accordance with the Statements. Other intangible
assets will continue to be amortized over their useful lives.

The Company will apply the new rule beginning in the first quarter of 2002.
Application of the non-amortization provisions of the Statement is expected to
result in an increase in income before taxes on income of approximately $972
($0.07 per share) per year. The Company will reclassify an assembled workforce
and a customer list intangible assets with an amortized balance of $3,591 to
goodwill at the date of adoption. During 2002, the Company will perform the
first of the required impairment tests of goodwill and indefinite lived
intangible assets. The Company can not yet estimate what the effect of these
tests will be on its financial position and results of operations.

In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS
133")144, 'Accounting for the Impairment of
Disposal of Long-Lived Assets' (FAS 144), "Accounting for Derivative Instruments and Hedging
Activities". The Statement establisheswhich addresses financial accounting
and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other
contracts)for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, 'Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be recorded inDisposed Of', and the balance sheet as either an asset
or liability measured at its fair value. The Statement
requires that changes inaccounting and reporting
provisions of APB Opinion No. 30, 'Reporting the derivative's fair value be
recognized currently in earnings, unless specific hedge
accounting criteria are met. Special accountingResults of Operations for qualifying
hedges allows a
derivative's gains and losses to offset
related results on the hedged item in the income statement,
and requires thatdisposal of a company must formally document, designate
and assess the effectivenesssegment of transactions that receive
hedge accounting. SFAS 133a business'. FAS 144 is effective for fiscal years
beginning after JuneDecember 15, 1999, and must be applied to
instruments issued, acquired, or substantively modified after
December 31, 1997.2001, with earlier application encouraged. The
Company expects to adopt FAS 144 as of January 1, 2002 and it does not expect
that the adoption of the accounting pronouncement toStatement will have a material effectsignificant impact on its
financialthe
Company's Financial position orand results of operations.

F - 17

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------

NOTE 3:- CASH AND CASH EQUIVALENTS

December 31,
Linkage Interest --------------------------
terms rate 1997 1998
------------- -------- --------- -------------
% U.S. dollars in thousands
----------- --------------------------

U.S. dollars 5.1 1,031 1,297
FF 9.2 61 76
DM 3.3 135 698
Unlinked NIS - 7 5
Belgian Franks - 163
Other - 88
---------- ------------

1,234 2,327
========== ============

NOTE 4:- TRADE RECEIVABLES

Open accounts (1) 6,340 9,653
Notes receivable 181 82
---------- ------------

6,521 9,735
Less - allowance for doubtful accounts 540 644
---------- ------------

5,981 9,091
========== ============
(1) Including receivables due from one customer in the amount
of $ 717 thousand as of December 31, 1998
(December 31, 1997 - $784 thousand).

NOTE 5:-3 -- OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES

DECEMBER 31,
---------------
2000 2001
---- ----
Government authorities 321 665authorities...................................... $ 881 $ 953
Participations and grants receivable 392 683
Related parties (1) 146 93receivable........................ 900 477
Deferred taxes (2) 8 42income taxes(1).................................... 658 --
Employees................................................... 384 447
Advances to suppliers 353 437suppliers(2).................................... 1,335 980
Prepaid expenses and other 525 836
---------- ------------

1,745 2,756
========== ============expenses............................................ 504 735
Other....................................................... 1,674 1,559
------ ------
$6,336 $5,151
------ ------
------ ------

- ---------

(1) BalancesSee Note 16f.

(2) Includes $494 and $633 as of two executivesDecember 31, 2000 and 2001, respectively, paid
in advance to an affiliate, NUR Pro Engineering, in respect of printers that
have not yet been supplied.

F-18

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

NOTE 4 -- INVENTORIES

DECEMBER 31,
-----------------
2000 2001
---- ----

Raw materials............................................. $ 6,176 $ 5,616
Work-in-progress.......................................... 3,030 4,366
Finished products......................................... 14,341 15,016
------- -------
$23,547 $24,998
------- -------
------- -------

As for inventories write-off see Note 1f.

NOTE 5 -- LONG-TERM TRADE RECEIVABLES

The aggregate annual maturities of long-term trade receivables from the sale
of products are as follows:

DECEMBER 31,
---------------
2000 2001
---- ----

First year (current maturities)............................ $2,172 $2,860
Second year................................................ 1,876 1,555
Third year................................................. 468 493
Fourth year................................................ 43 195
Fifth year................................................. -- 23
------ ------
4,559 5,126
Less -- current maturities................................. 2,172 2,860
------ ------
$2,387 $2,266
------ ------
------ ------

Long-term trade receivables bear interest at the average rate of 13% per
annum.

NOTE 6 -- INVESTMENTS IN AFFILIATES AND EXCESS OF LOSSES OVER INVESTMENTS

a. Investment in NUR Pro Engineering:

DECEMBER 31,
-------------
2000 2001
---- ----

Equity, net(1).............................................. $ 58 $308
Long-term loans(2).......................................... 284 284
---- ----
Total investments in NUR Pro Engineering................ $342 $592
---- ----
---- ----
(1) Net equity as follows:
Net equity as of purchase date.......................... $-- * $-- *
Accumulated net earnings................................ 58 308
---- ----
$ 58 $308
---- ----
---- ----

(2) In 1999, the Company granted the following loans to NUR Pro
Engineering:

A loan in the amount of $175 linked to the U.S. dollar
carrying annual interest at the rate of 3%. A maturity date has
not yet been determined.

A loan in the amount of $100 linked to the NIS bearing no
interest, to be repaid in 20 years.

- ---------

* Represents an amount lower than $1.

F-19

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

b. Investment in Stillachem:

DECEMBER 31,
-------------
2000 2001
---- ----

Equity, net(1).............................................. $(212) $--
----- -----
Total investments (excess of losses over investments) in
Stillachem................................................ $(212) $--
----- -----
----- -----
(1) Net equity as follows:
Net equity as of purchase date.......................... $ 490 $--
Accumulated net losses.................................. (437) --
Elimination of an intercompany transaction.............. (265) --
----- -----
$(212) $--
----- -----
----- -----

On May 21, 2001 the Company acquired the remaining 49.9% of the Ordinary
shares of Stillachem in consideration of $1. As of December 31, 2001 the
financial statements of Stillachem are consolidated with the financial
statements of the Company.

NOTE 7 -- RESTRICTED LONG-TERM BANK DEPOSITS

Restricted long-term bank deposits are maintained with banks mainly to
secure obligations to customers. The Company is restricted from withdrawing any
portion of the long-term bank deposits at any time, until the repayment of the
leasing obligation by the customer. The restricted long-term bank deposits as of
December 31, 2001 will mature in 2003, are linked to the U.S. dollar and bears annualbear
weighted average interest at thea rate of 2%4%.

(2) See Note 20.

F - 18NOTE 8 -- PROPERTY, PLANT AND EQUIPMENT

a. Composition of property and equipment is as follows:

DECEMBER 31,
-----------------
2000 2001
---- ----

Cost:
Machinery and equipment............................... $ 2,163 $ 5,555
Motor vehicles........................................ 33 53
Office furniture and equipment........................ 4,937 7,699
Buildings............................................. 1,421 1,421
Leasehold improvements................................ 1,704 4,076
------- -------
10,258 18,804
------- -------
Accumulated depreciation:
Machinery and equipment............................... 546 1,561
Motor vehicles........................................ 16 14
Office furniture and equipment........................ 1,749 3,074
Buildings............................................. 136 522
Leasehold improvements................................ 614 962
------- -------
3,061 6,133
------- -------
Depreciated cost before grants............................ 7,197 12,671
Less -- grants............................................ 151 93
------- -------
Depreciated cost.......................................... $ 7,046 $12,578
------- -------
------- -------

F-20

b. Depreciation expenses for the years ended December 31, 1999, 2000 and
2001 amounted to $782, $1,614 and $3,014, respectively.

As for charges, see Note 13c.

NOTE 6:- INVENTORIES9 -- OTHER ASSETS

a. Composition of other assets is as follows:

DecemberDECEMBER 31,
-----------------------------
1997 1998
------------- -------------
U.S. dollars in thousands
----------------------------------------------
2000 2001
---- ----

Raw materials (* 372 1,539
Work-in-progress 277 226
Finished products (* 1,603 1,934
------------- -------------

2,252 3,699
============= =============Original amounts:
Technology(1)......................................... $ 9,672 $10,372
Assembled work-force(1)............................... 1,478 1,478
Customer list(1)...................................... 3,094 3,094
Goodwill(2)........................................... 3,195 3,195
Patent rights......................................... 72 72
------- -------
17,511 18,211
------- -------
Accumulated amortization:
Technology............................................ 966 2,900
Assembled work-force.................................. 106 318
Customer list......................................... 221 663
Goodwill.............................................. 159 519
Patent rights......................................... 65 72
------- -------
1,517 4,472
------- -------
Amortized cost............................................ $15,994 $13,739
------- -------
------- -------

*) Reclassified.- ---------

(1) $14,244, resulting from the acquisition of Salsa Group, and $700 resulting
from the acquisition of Stillachem in 2001.

(2) Resulting from the acquisition of Salsa Group.

b. Amortization of other assets for the years ended December 31, 1999, 2000
and 2001 were $150, $1,542 and $2,955, respectively.

NOTE 7:- PROPERTY10 -- SHORT-TERM BANK CREDIT AND EQUIPMENTSHORT-TERM LOANS

Office Building
Machinery furniture and
and Motor and leasehold
equipment vehicles equipment improvements Grants TotalINTEREST
RATE DECEMBER 31,
LINKAGE ----------- -------------
---------- ----------- ------------ -------- ---------
U.S. dollars in thousands
-------------------------------------------------------------------------TERMS 2000 2001 2000 2001
----- ---- ---- ---- ----
%

Cost as of January 1, 1998 313 146 1,067 918 - 2,444
Additions 1,374 270 606 291 (266) 2,275
Disposals (368) (71) (9) - - (448)
------------- ---------- ----------- ------------ -------- ---------
Balance as of
December 31, 1998 1,319 345 1,664 1,209 (266) 4,271
------------ --------- ---------- ----------- ------- --------
Accumulated depreciation
as of January 1, 1998 131 64 487 121 - 803
Additions 219 59 308 111 (50) 647
Disposals (217) (18) (2) - - (237)
------------- ---------- ----------- ------------ -------- ---------
Balance as of
December 31, 1998 133 105 793 232 (50) 1,213
------------- ---------- ----------- ------------ -------- ---------
Depreciated cost as of
December 31, 1998 1,186 240 871 977 (216) 3,058
============= ========== =========== ============ ======== =========
Depreciated cost as of
December 31, 1997 182 82 580 797 - 1,641
============= ========== =========== ============ ======== =========Short-term bank credit.................. NIS-unlinked -- 5.1 $-- $4,827
Short-term bank loans................... U.S. dollar 7.75 5.23 500 10
Short-term bank loans................... Belgian franc 6.8 -- 167 --
Short-term bank loans................... Euro -- 5.23 -- 224
---- ------
$667 $5,061
---- ------
---- ------

Depreciation expense amounted to $ 177 thousand, $ 496 thousand and
$ 647 thousand, for the years ended December 31, 1996, 1997 and 1998
respectively.

As for charges, see Note 17.

F - 19

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 8:- OTHER ASSETS, NET

December 31,
-----------------------------
1997 1998
------------- -------------
U.S. dollars in thousands
-----------------------------

Cost:
Distribution rights 700 700
Patent rights 61 61
------------- -------------

761 761
------------- -------------
Accumulated amortization:
Distribution rights 350 490
Patent rights 30 35
------------- -------------

380 525
------------- -------------

Depreciated cost 381 236
============= =============

Amortization of distribution and patent rights was $ 144 thousand,
$148 thousand and $145 thousand, for the years ended December 31,
1996, 1997 and 1998, respectively.

NOTE 9:- LEASES

a. Nur America Inc. leases office space and demo-center facility
under a ten-year operating lease agreement ending October
2008.

b. Nur Germany leases office space for a period of 10 years
ending in October 2006.

c. Nur Europe S.A. leases office space and warehouse facilities
under a 15 year operating lease agreement ending in December
2011.

d. The Company entered into a lease agreement with a former
shareholder (Moshe Nur) according to which the Company leases
two adjacent buildings. Each building occupies approximately
6,500 square feet.

During 1996 and 1997, the Company paid $ 545 thousand in
respect of the construction of the building, on behalf of
Moshe Nur. In 1997, Moshe Nur experienced financial
difficulties, resulting in the filing of a petition for
bankruptcy. The amounts paid are presented as prepaid rent
expensesweighted average interest rate as of December 31, 19972000 and 1998.

According to a settlement agreement signed in September 1998
(see Note 16e)2001 was 7.5%
and 5.1%, it was agreed that the Company's payments are
considered as a pre-payment of the lease until July 2000.respectively.

The Company recorded $ 162 thousand as rent expenses, in
connection with such prepaid expenses.

F-20

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

e. Future minimum rental payments as of December 31, 1998, under
the aforementioned non- cancelable leases, are as follows
(U.S. dollars in thousands):

1999 $ 86
2000 89
2001 91
2002 97
Thereafter 820
------------

$ 1,183
============

f. Rental expenses were $ 244 thousand, $ 350 thousand and $ 220
thousand for the each of the years ended December 31, 1996,
1997 and 1998, respectively.

NOTE 10:- SHORT-TERM BANK LOANS

Weighted
average December 31,
Linkage interest --------------------------
terms rate 1997 1998
--------------- ------------ --------- --------------
% U.S. dollars in thousands
------------ --------------------------

Revolving banktotal authorized credit Belgian Franks 5 - 173
Revolving bank credit NIS 17 160 112
Short-term loans U.S. dollar 7.2+1.5 453 1,214
Short-term loans NIS 17.7 39 683
Short-term loans Belgian Franks Libor+0.25 - 790
--------- -------------
652 2,972
========= =============

The unused line of credit, nominated in NIS, Belgian Franks and US
dollars,is $15,090 from which, at December 31,
1997 and 1998 is $ 0 and $ 1,657,
respectively.2001, was fully utilized. See also note 12b.

F-21

NOTE 11:- TRADE PAYABLES11 -- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES

DecemberDECEMBER 31,
--------------------------
1997 1998
--------- -------------
U.S. dollars in thousands
--------------------------

Open accounts 2,695 4,812
Notes payable 521 1,292
---------- ------------
3,216 6,104
========== ============

NOTE 12:- ACCRUED EXPENSES AND OTHER LIABILITIES

-----------------
2000 2001
---- ----
Employees and payroll accruals 585 670accruals.............................. $ 3,075 $ 2,476
Government Authorities...................................... 2,202 1,187
Royalties payable 390 664
Current maturities of accrued expenses - 293
Other accrued expenses 1,151 1,299
---------- ------------
2,126 2,926
========== ============payable........................................... 1,358 1,082
Warranty.................................................... 2,390 1,365
Accrued expenses............................................ 4,265 3,935
------- -------
$13,290 $10,045
------- -------
------- -------

NOTE 13:-12 -- LONG-TERM LOANS

a. Composed as follows:

Weighted
average
Linkage interest
terms rate
--------------- ----------INTEREST
RATE DECEMBER 31,
LINKAGE ----------- -----------------
TERMS 2000 2001 2000 2001
----- ---- ---- ---- ----
%
----------
From banksbanks........................... U.S. dollar LIBOR
+3.12 289 207.4 6.00 $33,444 $32,795
From othersleasing companies............... Belgian Franks 6.6 1,314 1,154
--------- ------------

1,603 1,174franc 6.0 -- 1,267 --
From leasing companies............... Euro -- 4.95 -- 982
------- -------
34,711 33,777
Less --- current maturities 527 224
--------- ------------

1,076 950
========= ============
b. Aggregate maturities of long-term loans:maturities........... 864 2,057
------- -------
$33,847 $31,720
------- -------
------- -------

b. The aggregate annual maturities of long-term loans are as follows:

DECEMBER 31,
-----------------
2000 2001
---- ----

First year (current maturities) 527 224
--------- ------------............................. $ 864 $ 2,057
------- -------
Second year 190 188year................................................. 7,680 2,064
Third year 162 170year.................................................. 25,279 4,070
Fourth year 139 118year................................................. 71 24,874
Fifth year and thereafter 585 474
--------- ------------

1,076 950
--------- ------------

1,603 1,174
========= ============thereafter................................... 817 712
------- -------
33,847 31,720
------- -------
$34,711 $33,777
------- -------
------- -------

During the first quarter of 2002, the Company entered into agreements with
the banks according to which the banks agreed to reschedule the repayment dates
of the Company's long-term loans and bank credit (see also Note 19b). The
long-term loans balances are presented according to the new rescheduled periods
and in accordance with Statement of Financial Accounting No. 6, 'Classification
of Short-Term obligation Expected to be Refinanced'.

As part of the agreements signed with the banks, the Company had paid a
commission in the amount of $54 for the rescheduling of the loans and agreed to
the following covenants:

1. The Company will finalize a private placement of not less than $7,000, no
later than March 30, 2002, (See also Note 19a -- subsequent events).

2. The Company will maintain no less than $29,000 of the tangible
shareholders' equity. The tangible shareholders equity will not be lower
than 25% of the Company's total assets.

3. Total short term bank credit will not exceed 70% of the Company's net
accounts receivable, aged under a period of 180 days.

F-22

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------

NOTE 14:- ACCRUED EXPENSES

In connection-- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

4. To retrain from merging, consolidating, amalgamating or entering into
other form of business combination with various claims filed by Dochovna group (the
developer of Outboard Printera third party or liquidating or
dissolving.

5. The Company will maintain certain financial ratios relating to the
Company's earnings before income tax, depreciation and several companies he controls),
Idanitamortization
(EBITDA) and the Company, a settlement was reached in December 1998,
accordingCompany's overall long-term debt to whichfinancial
institutions.

6. In addition, the Company will pay a totalissue to the banks warrants to purchase up
to 120,000 of $ 880 thousand
during a three year period.the Company's Ordinary shares of 1 NIS par value each for
an exercise price of $5 per share. The warrants will be issued no later
than April 30, 2002, and will be exercisable until February 2006. (See
also Note 19b).

Based on the unaudited financial statements of the Company as of March 31,
2002, the Company complies with all terms, except for the one described in 5
above. However, the banks have agreed in writing not to act upon their
contractual rights pursuant to the Company's abovementioned default, subject to
the Company meeting certain financial targets as set forth in its Business plan
presented to the banks. The company's management is of the opinion that these
targets will be met.

NOTE 13 -- COMMITMENTS AND CONTINGENT LIABILITIES

a. Lease commitments:

The Company fully provided forand most of its subsidiaries rent their facilities under various
operating lease agreements, which expire on various dates, the said
amount.

Payments shall bear annual interestlatest of 6% unless the Company pays
the full amount by March 31, 2000.which
is in 2009. The parties to the settlements were Dochovna Idanit, Scitex
corporation Ltd. (which acquired Idanit), Meital and Jacob Markovits
(Meital CEO).

NOTE 15:- ACCRUED SEVERANCE PAY, NET

The Company's liability for severance pay pursuant to Israeli law is
fully provided by an accrual. Part of the liability is funded
through insurance policies whichminimum rental payments under non-cancelable operating leases
are designated only for severance
payments. The value of these policies is recorded as an asset in the
Company's balance sheet. Severance payfollows:

YEAR ENDED
DECEMBER 31
-----------

2002............................................ $ 1,859
2003............................................ 1,798
2004............................................ 1,798
2005............................................ 1,798
2006 and thereafter............................. 2,820
-------
$10,073
-------
-------

Total rent expenses for the years ended December 31, 1996, 19971999, 2000 and 19982001
were $ 217, $ 312$297, $900 and $ 314,$1,778, respectively.

NOTE 16:- CONTINGENT LIABILITIES

a.b. Royalty commitments:

1. The Company entered into several project plans with the Chief Scientist
of the GovernmentIsrael's Ministry of Israel regarding the
development of the printersIndustry and the Mega Light, a discontinued
product.Trade. The Company has an obligation
to pay royalties at the rate of 2% - 3% of the sales derived from the
applicable products developed within the framework of such research and
development projects, up to an amount equal to 100% - 150% of the grant
received, in NIS linked to the exchange rate of the
U.S. dollar.dollar and bears LIBOR interest per annum.
The Company has no obligation to repay this amount if sales are not
sufficient to satisfy the royalty obligations.

In addition, a subsidiary, NUR Media Solutions, has an obligation to pay
royalties at rates of 3% - 6% on the sales of products developed with
funds provided by the Government of Belgium, up to an amount equal to the
research and development grants received in connection to such products,
linked to the Euro.

Total royalties accrued or paid amounted to $16, $432 and $180 as of
December 31, 1999, 2000 and 2001, respectively.

As of December 31, 1998,2001, the Company hasand NUR Media Solutions have a
contingent obligation to pay royalties in the amount of $ 1,152 thousand.$1,142.

F-23

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------

b.-- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

2. The Company is required to pay royalties to the Fund for the
Encouragement of Marketing Activity at the rate of 3% - 4% of the
increases in export sales of products for which the Company received
participations for its marketing activities, up to an amount equal to
100% - 150% of the grant received.received, linked to the U.S. dollar. Royalties
regarding grants received from 1999 bear LIBOR interest.

The grant is repayable only in respect of sales of the related products,
as a percentage of the growth in export sales. If there is no increase in
export sales, or if the Company ceases producing the relevant products,
the grant would not be repaid.

As of December 31, 1998,2001, the Company paid an aggregate amount of $346.

As of December 31, 2001, the Company has a contingent obligation to pay
royalties in the amount of $ 434 thousand.$929.

c. Charges and guarantees:

As collateral for its liabilities to the banks, the Company placed fixed
charges on certain assets and share capital, as well as a floating lien on all
of its assets.

Other financial guarantees are made from time to time in the ordinary course
of business, on behalf of customers. The Company's exposure amounted to $227
thousand and $0 at December 31, 2000 and 2001, respectively.

d. Litigation:

1. In December 1999, a claim was filed against the Company in the amount of
$330 regarding a breach of an agreement to pay finders fee in connection
with a private placement in 1999 (see Note 15b). The Company provided $50
in respect of this claim, based on the opinion of its legal advisors.
Management believes that this provision is adequate.

2. In September 2000, a claim in the amount of approximately $4,950 was
filed against the Company and Meital and the CEOs of the companies
(jointly and severally), according to which Meital breached a contract,
and the Company caused Meital to such breach of contract. In May 2002 the
parties reached an out-of-court settlement whereby the Company undertook
to pay $140 for the complete and final settlement of this matter. The
Company fully provided in respect of this claim.

e. Other contingent liabilities:

In May 1996, the Company and Shamrock (former shareholder in
Nur Media Solutions) signed an agreement as follows:

1. Shamrock will not be required to provide further
financing to Nur Media Solutions, in accordance with the
previous agreement.

2. The Company exercised the option to purchase all of Shamrock's
(former shareholder in NUR Media Solutions) shares in NurNUR Media Solutions, free and clear
of any liens, encumbrances, etc., for a
consideration of one dollar.

Notwithstanding the above, for every year during which NurNUR Media Solutions'
net income (after taxes) will exceed $ 1 million,$1,000, the Company will pay Shamrock a sum
equal to 10% of NurNUR Media Solutions' net income, up to a total of $ 0.5 million500
(accumulating from the first payment). NurNUR Media Solutions' net income shall be
determined inby its annual audited financial statements. Shamrock's right to
payments under this section will expire upon the earlier of the payment of the
$ 0.5
million thereunder,above $500, or at the end of the fiscal year 2002. In 1996, 19971999, 2000 and 1998, Nur2001, NUR
Media Solutions' net income (after taxes) was less than $ 1 million.

Commencing January 1996, the accounts of Nur Media
Solutions are consolidated with those of the Company.

d. The Company has guaranteed capital lease payments in the
amount of $ 105 thousand for a printer that was leased by a
subsidiary.

e. During September 1998, the district court of Tel Aviv approved
several settlement agreements among the Company, the special
manager for Moshe Nur's assets in his bankruptcy proceedings,
Moshe Nur and some of his family members, two Israeli banks,
and the temporary receiver of Nur Outdoor Advertising Ltd. (a
company formerly affiliated with Mr. Nur).

F-24

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

According to the settlement, all material claims against the
Company relating to the lease of its offices (including
confirmation of the Company's pre-payment of lease until July
2000), alleged breach of contracts and alleged debts owed to
any of the abovementioned parties were dismissed. The Company
agreed not to file any claim against the abovementioned
settling parties, provided that no claims will be filed
against the Company in connection with the bankruptcy
proceedings.

As part of the various settlement agreements, the Company paid
an aggregate of $100 thousand. However, in the course of the
bankruptcy proceedings of Moshe Nur and the companies
controlled by him, the Company may, in the future, be exposed
to claims arising from the actions of Moshe Nur, the liability
of whom could be material.

f. In 1997, claims and threats of claims were brought against the
Company in respect of various matters. The Company made a
provision in the amount of $ 50 thousand in respect of these
claims and threats of claims based on the opinion of the
Company's Israeli legal advisors. The Company's management
believes that these provisions are adequate.$1,000.

NOTE 17:- CHARGES, GUARANTEES AND RESTRICTED CASH

a. As collateral for its liabilities to the banks, the Company
granted an unlimited senior in priority lien on its machinery
and equipment, motor vehicles, receivables from Scitex, a
major customer ("Scitex"), a long-term bank deposit, and
marketable securities, as well as a floating lien (a lien on
the assets of the Company as they exist from time to time) on
all of its assets.

b. The collateralized liabilities are as follows:

December 31,
------------------------------
1997 1998
------------- -------------
U.S. dollars in thousands
------------------------------

Short-term bank credit 652 2,972
Long-term liabilities, including current 1,603 1,174
maturities
------------- ------------
2,255 4,146
============= ============

NOTE 18:-14 -- TRANSACTIONS AND BALANCES WITH RELATED PARTIES

a. In March 1997, three companiesBalance with Stillachem, an affiliate during 2000, in which Moshe Nur - a former
shareholder - has holdingsrespect of services
provided, is linked to the Euro and bears no interest. (see Note 6b).

b. Accounts payable in various percentages, experienced
financial difficulties andrespect of an affiliate, NUR Pro Engineering, are in
different stagesrespect of insolvency. These companies are Nur Outdoor Advertising
(Manufacturing and Production) Ltd. ("Nur Outdoor"), Nur Focus
Assets and Investments Ltd. ("Nur Focus Assets") and Nur Focus
Production (1995) Ltd. ("Nur Focus"). Consequently, therethe assembly of the Company's printers. The amount is a
considerable doubt as to whether these companies will continue
as going concerns. Aslinked to the
write-off of related parties
debts, seeNIS and does not bear any interest. (See Note 21f.

F-256a).

F-24

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------

In May 1997-- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

c. A company wholly-owned by the Company's CEO rendered services to certain
subsidiaries. The Company terminated alland its subsidiaries' expenses during the year 2001 in
respect of such services amounted to approximately $73.

d. Loans to related parties, see Note 6a.

e. Advances to an affiliated supplier, NUR Pro Engineering, see Note 3.

NOTE 15 -- SHAREHOLDERS EQUITY

a. Shareholders' rights:

Ordinary shares confer upon their holders voting rights, the right to
receive dividends and the right to share in excess assets upon liquidation of
the various
agreements entered with these companies and as part of a
settlement agreement (see Note 16e) it was agreed that the
mentioned companies, Moshe Nur, the temporary receiver of
those companies and the Company do not have any claims against
each other.Company.

b. For a lease agreement with a former shareholder, see Note 9d.

c. BetweenIn September and December 1997,1999, the Company effected a private offering of its
Ordinary Shares in the United States
(see also Note 19a), for which the investment banking firm of
Josephthal and Co. Inc. ("Josephthal") acted as an exclusive
placement agent. The chairman of Josephthal beneficially owns
approximately 37.26% of the Company's Ordinary Shares, and
other individuals affiliated with Josephthal beneficially own
approximately 7.13% of the Company's Ordinary Shares. The
chairman of Josephthal is the company's chairman. As
compensation for his services as the Company's exclusive
placement agent, Josephthal received fees of $ 439 thousand
and warrants to purchase 400,000 Ordinary Shares at an
exercise price of $ 1.00 per share or less than 400,000
Ordinary Shares of the Company if the cashless alternative
pursuant to the agreement has been chosen. Finally, an
individual employed by Josephthal was the Company's acting
Chief Financial Officer from April through October 1997
received compensation of approximately $ 45 thousand.

d. Transactions with related parties:

Year ended December 31,
--------------------------------------
1996 1997 1998
----------- ----------- ----------
U.S. dollars in thousands
--------------------------------------

Sales:
Nur Outdoor 485 159 -
Nur Focus 113 31 -
----------- ----------- ----------
598 190 -
=========== =========== ==========
Cost of sales:
Paid to:
Nur Outdoor 511 99 -
Nur Focus 7 18 -
----------- ----------- ----------
518 117 -
=========== =========== ==========
Selling expenses:
Nur Focus 130 - -
=========== =========== ==========

F-26

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

Year ended December 31,
------------------------------------------------
1996 1997 1998
--------------- ----------- ---------------
U.S. dollars in thousands
------------------------------------------------

General and administrative expenses:
Rent expenses 153 204 -
Salary and related benefits
paid to two shareholders
(1997--three shareholders) 244 261 238
--------------- ------------- ------------
397 465 238
=============== ============= ============
Financial income:
Nur Focus 107 - -
Nur Outdoor 182 - -
--------------- ------------- ------------
289 - -
=============== ============= ============

As to the write-off of debts of related parties, see Note 21f.

NOTE 19:- SHARE CAPITAL

a. Between September and December 1997, the Company effected a
private offering of its securities in the United States.securities. In the private offering, the Company issued 4,000,000600,000 Ordinary Sharesshares
of NIS 1 par value each in consideration of $ 1$5.5 per ordinaryOrdinary share.

After the initial public offering and the private offering,c. In July 2000, the Company has 10,880,000issued 666,667 Ordinary Sharesshares of NIS 1 par
value each.

Followingeach to the initial publicformer owners of Salsa Group as a partial consideration for
the acquisition in a value of $10,000 (see Note 1b).

d. In September 2000, the Company effected a private offering of the Company's shares
in October 1995, the Company issued 155,000 warrants to
Josephthal. These warrants are exercisable no later than
October 2000 into 155,000 Ordinary Shares of the Company at an
exercise price of $ 7.20 per share, or less than 155,000
Ordinary Shares of the Company if the cashless alternative
pursuant to the agreement has been chosen.

As part ofits
securities. In the private offering, the Company issued warrants
to the placement agent, Josephthal, expiring748,223 Ordinary shares
of NIS 1 par value in September 2002
to purchase 400,000 Ordinary Sharesconsideration of the Company at an
exercise price of $ 1.00 per share or less than 400,000
Ordinary Shares of the Company if the cashless alternative
pursuant to the agreement has been chosen.

F-27

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

b. Earning (loss) per share:

The following table sets forth the computation of historical
basic and diluted earnings (loss) per share:

1996 1997 1998
------------- -------------- -------------

Numerator:
Net income (loss) $ (10,088) $ 485 $ 1,457
============= ============== =============
Numerator for basic earnings
(loss) per share - income
(loss) available to
ordinary shareholders $ (10,088) $ 485 $ 1,457
============= ============== =============
Numerator for diluted earnings
(loss) per share - income (loss)
available to ordinary shareholders
after assumed conversions $ (10,088) $ 485 $ 1,457
============= ============== =============
Denominator:
Weighted average
Ordinary shares outstanding 6,880,000 7,293,640 10,880,000
------------- -------------- -------------
Denominator:
Denominator for basic earnings
(loss) per share --
weighted-average shares 6,880,000 7,293,640 10,880,000
------------- -------------- -------------
Effect of dilutive securities*)
Employee stock options - 72,527 571,389
------------- -------------- -------------
Denominator for diluted earnings
(loss) per share-adjusted
weighted-average shares and
assumed conversions 6,880,000 7,366,167 11,451,389
============= ============== =============

*) The effect of the inclusion of these securities in 1996 would
be antidilutive.

c.$10,000 (excluding issuance expenses).

e. Stock Option Plan:Plans:

1. In October 1995, the Company's Board of Directors adopted a Flexible
Stock Incentive Plan (the "Stock Incentive Plan"('1995 Plan'). The Stock Incentive Plan provides for
grants of stock options to the Company's employees and outside
consultants. An aggregate amount of not more than 500,000 stock options
are available for grant under the Stock Incentive Plan. Of such amount,
(i) not more than 414,768 options are available for grant as stock
options on the basis of future services ("Service Options"('Service Options'), (ii) not
more than 18,232 options may be granted as stock options on the basis of
performance ("Performance Options")('Performance Options' -- as of December 31, 2001 there are
no outstanding performance options) and (iii) not more than 67,000
options may be granted as stock options to consultants on the basis of
service or performance in respect of the public offering ("Consultant Options"('Consultant
Options').

F-28

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

Compensation expenses, which compriseThe service options usually vest over a four-year period with an exercise
price of not less than 80% of the excess of fair market value of the Performance Options overOrdinary
shares at the exercise
price atdate of grant date, are charged to expenses over a vesting
period of(as defined in the stock incentive plan).

Consultant options usually vest immediately based on past services
rendered as the board determines. The options expire usually after ten
years or on an accelerated basis, provided that
various performance targets are achieved (the only variable
component isfrom the vesting period).

Compensation expenses, which comprise the excessdate of market
value of the Service Options over the exercise price at grant
date, are charged to expenses over the vesting period of four
years.grant.

In October 1997, the Company adopted an additional stock option plan.
According to that option plan, 1,200,000 options will be granted to the
Company's and its subsidiaries' employees, directors and consultants. In
October 1998 and August 1999, the Company increasedCompany's and its subsidiaries'
shareholders approved the increase in the number of options available for
grant by 500,000, options. During
1998, the Company granted 600,000and 500,000 options, (out of which 50,000respectively. The options were granted to the Company's CEO) atusually
vest over a three-year period with an exercise price ranging between $ 1.00 to $ 3.00 per share with vesting
period between 0 and 3 years.of not less than 80%
of the fair market value of the common stock at the date of grant (as
defined in the stock option plan). Each option usually expires after ten
years from the date of grant.

In December 1998, the Company's shareholders approved the directors sharestock
option plan ("1998 plan"('1998 plan') according to which 250,000 options are
available for grant with an exercise price of the average of the closing
bid and sale price at the issuance date. Each option is vested
immediately

F-25

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

and will expire after 10 years. During 1998,1999, 2000 and 2001, the Company
granted 40,000
options to directors (including the Chairman of the Board of Directors)
58,333, 40,000 and 20,834 options, respectively.

In August 2000, the Company's Board of Directors adopted the 2000 Stock
Option Plan ('2000 plan'). According to that option plan, 1,000,000
options may be granted to officers, directors, employees and consultants
of the Company and its subsidiaries. The Options usually vest over a
three-year period. The exercise price of the options under the 2000 plan
is determined to be not less than 80% of the fair market value of the
Company's Ordinary shares at the time of grant, and they usually expire
after ten years from the date of grant. The 2000 plan expires on August
31, 2008, unless previously terminated or extended by the Board of
Directors.

Under the Company's 1995, 1997, 1998 and 2000 plans, the Company reserved
for issuance 500,000, 2,200,000, 250,000 and 1,000,000 Ordinary shares,
respectively. As of December 31, 2001, 261, 174,764, 100,833 and 302,532
options, respectively, are still available for future grants under these
plans. Any options, which are canceled or forfeited before expiration,
become available for future grant.

2. The balance of the options at December 31, 19982001 is as follows:

Options outstanding
--------------------------------------
Weighted
Available Number Exercise average
for grant of options price exercise price
----------- ----------- ------------OPTIONS OUTSTANDING
--------------------------
WEIGHTED
AVAILABLE NUMBER OF AVERAGE
FOR GRANT OPTIONS EXERCISE PRICE
--------- ------- --------------

Balance as of January 1, 1996 310,474 189,526 0.3-4.8 2.321999.................... 676,295 1,775,039 1.62
Additional stock option plans................ 500,000 -- --
Options granted (1 employee) (18,232) 18,232 1.3 1.30(93 employees, 4 directors
and 1 consultant).......................... (693,933) 693,933 5.12
Options expired 87,987 (87,987) 1.3-4.8 2.37
----------- ----------- ------------ ------------exercised............................ -- (294,573) 1.57
---------- --------- ----
Balance as of December 31, 1996 380,229 119,771 0.3-1.75 1.342000.................. 482,362 2,174,399 1.98
Additional stock options plan 1,200,000 - - -option plans................ 1,000,000 -- --
Options granted (25 employee(358 employees, 4 directors
and a vendor) (325,600) 325,600 0.3-1.75 1.331 consultant).......................... (1,069,900) 1,069,900 9.00
Options granted (2 employees
and 3 directors) (825,000) 825,000 1-3 1.46
----------- ----------- ------------ ------------exercised............................ -- (738,968) 1.71
Options forfeited............................ 102,132 (102,132) 5.80
---------- --------- ----
Balance as of December 31, 1997 429,629 1,270,371 0.3-3 1.3
Additional stock options plan 750,000 - - -2000.................. 514,594 2,403,199 5.69
Options granted (46 employee,
4 directors(29 employees and
1 consultant) (655,000) 655,000 1 - 3 2directors)............................... (505,734) 505,734 5.051
Options expired 150,332 (150,332) 1.4 - 2 1.4
----------- ----------- ------------ ------------exercised............................ -- (225,835) 2.46
Options forfeited............................ 569,530 (569,530) 7.66
---------- --------- ----
Balance as of December 31, 1998 674,961 1,775,039 0.3 - 3 1.62
=========== =========== ============ ============2001.................. 578,390 2,113,568 5.41
---------- --------- ----
---------- --------- ----

The number of options exercisable as of December 31, 1996,
19971999, 2000 and 19982001 was
54,771, 849,9211,209,967, 951,212 and 1,308,622,1,095,851, respectively.

The weighted average exercise price of options exercisable as of
December 31, 1996, 19971999, 2000 and 19982001 is $ 1.06, $ 1.3$1.65, $3.25 and $
1.28,$4.51, respectively.

F-29F-26

3. The options outstanding as of December 31, 19982001 have been separated into
ranges of exercise price, as follows:

Options Weighted
outstanding as average Weighted
of DecemberWEIGHTED
OPTIONS WEIGHTED OPTIONS AVERAGE
OUTSTANDING AVERAGE WEIGHTED EXERCISABLE EXERCISE
AS OF REMAINING AVERAGE AS OF PRICE
RANGE OF DECEMBER 31, remaining average
Exercise price 1998 contractual life exercise priceCONTRACTUAL EXERCISE DECEMBER 31, OF OPTIONS
EXERCISE PRICE 2001 LIFE PRICE 2001 EXERCISABLE
-------------- ---------------- ---------------- -------------------- ---- ----- ---- -----------
(YEARS)
$ 0.3
1.00 - 1.50..................... 281,734 5.35 1.22 281,734 1.22
1.75 359,539 3 1.33
$ 1 - 1.5 912,000 4 1.27
$ 22.50..................... 211,500 5.78 2.13 201,166 2.11
2.75 - 3 463,500 8 2.54
$ 2.75 40,000 10 2.75
---------------- ----------------
1,775,039 1.62
================ ================3.50..................... 179,000 7.42 2.99 84,000 2.99
4.45 - 5.15..................... 299,000 9.51 4.44 20,000 4.67
5.50 - 6.125.................... 282,667 5.97 5.51 205,979 5.50
6.313 - 6.938................... 13,150 9.16 6.54 -- --
7 - 7.875....................... 686,849 8.56 7.39 227,035 7.46
10.625 - 12.125................. 71,500 7.94 11.43 21,834 11.14
13 - 14.25...................... 88,168 7.64 13.94 55,504 14
--------- ----- --------- -----
2,113,568 5.41 1,097,252 4.51
--------- ----- --------- -----
--------- ----- --------- -----

d. The Company has elected to follow Accounting Principles Board
Opinion 25, "Accounting for Stock Issued to Employees" (APB
25) and related interpretations for its employee stock
options. As discussed below, the alternative fair value
provided for under FASB Statement No. 123, "Accounting for
Stock-Based Compensation" (FASB 123), requires the use of
option valuation models4. Compensation expenses that were not developed for use in
valuating employee stock options. Where the exercise price
equals the market price of the underlying stock on the grant
date, no compensation expense is recognized under APB 25.

e. In September 1998, the Company granted to its counsel an
option to purchase 15,000 shares at an exercise price of $
2.25 per share with an immediate vesting. The fair market
value of these options was estimated according to FASB-123 at
the grant date using Black-Scholes option valuation pricing
model. The aggregate amount of compensation related to the
above options was $ 10,530 and was accounted for as
compensation expensehave been recorded in the year ended December 31, 1998.

f.consolidated
statements of income in 1999, 2000 and 2001 were $167, $152 and $0,
respectively.

5. Pro-forma information under SFAS 123:

Pro-forma information regarding net income (loss) and net earnings (loss)
per share is required by FASBSFAS No. 123, and has been determined as if the Company
hashad accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant, date
using the Black-Scholes option valuation pricing modelOption Valuation Model, with the following
weighted-average assumptions for 1996, 19971999, 2000 and 1998:2001: risk-free interest rates
of 7%, 6.3%6% and 5%2%, respectively, dividend yields of 0% for each year, volatility
factors of the expected market price of the Company's Ordinary Sharesshares of $
1.75, $ 1.250.59,
0.66 and $ 0.46,0.74, respectively, and a weighted average expected life of the option
of 5 years.

F-30

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The Black-Scholes model was developed10 years for use in estimating
the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective
assumptions including the expected share price volatility.
Because the Company's employee stock options have
characteristics significantly different from those of traded
options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily
provide a reliable single measure of the value of its employee
stock options. For purposes of pro-forma disclosures, the
estimated fair value of the options is amortized to expense
over the options vesting period.

For purposes of pro forma disclosure, the estimated fair value
of the options is amortized to expense over the options
vesting period. The Company'seach year.

Pro-forma information under SFAS No. 123 is as follows:

Year ended DecemberYEAR ENDED DECEMBER 31,
-------------------------------------------------
1996 1997 1998
---------------- --------------- --------------
U. S. dollars in thousands, except per share amount
-----------------------------------------------------------------------------
1999 2000 2001
---- ---- ----

Net income (loss), as reported (10,088) 485 1,457
=============== =============== =============
Pro formareported............................. $7,175 $8,493 $ (7,216)
------ ------ --------
------ ------ --------
Pro-forma net income (loss) (10,142) 129 1,251
=============== =============== =============
Pro forma............................... $6,443 $6,225 $(12,034)
------ ------ --------
------ ------ --------
Pro-forma basic earnings (loss) per share (1.47) 0.02 0.11
=============== =============== =============
Pro formashare................. $ 0.55 $ 0.47 $ (0.82)
------ ------ --------
------ ------ --------
Pro-forma diluted earnings (loss) per share (1.46) 0.02 0.11
=============== =============== =============share............... $ 0.51 $ 0.42 $ (0.82)
------ ------ --------
------ ------ --------

6. Weighted-average fair values and exercise price of options on dates of
grant are as follows:

FOR EXERCISE PRICES ON THE DATE OF GRANT THAT
----------------------------------------------------------------------
ARE LESS THAN
EQUAL MARKET PRICE EXCEED MARKET PRICE MARKET PRICE
--------------------- ---------------------- ---------------------
1999 2000 2001 1999 2000 2001 1999 2000 2001
---- ---- ---- ---- ---- ---- ---- ---- ----

Weighted average exercise prices................... $5.52 $8.99 $4.25 $4.09 $13.00 $6.87 $5.30 $8.50 $--
----- ----- ----- ----- ------ ----- ----- ----- -----
----- ----- ----- ----- ------ ----- ----- ----- -----
Weighted average fair value on grant date.......... $4.10 $7.04 $3.31 $2.90 $10.16 $5.29 $4.15 $6.64 $--
----- ----- ----- ----- ------ ----- ----- ----- -----
----- ----- ----- ----- ------ ----- ----- ----- -----

F-27

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

f. Stock warrants and options to consultants:

The totalCompany's outstanding warrants as of December 31, 2001, are as follows:

NUMBER OF
WARRANTS EXERCISE PRICE WARRANTS EXPIRATION
ISSUANCE DATE ISSUED PER SHARE EXERCISABLE DATE
------------- ------ --------- ----------- ----

December 1997(1)................. 400,000 $ 1.00 55,000 September -
December 2002
January 2000(2).................. 15,000 $ 2.75 15,000 January 2004
February 2000(3)................. 25,000 $ 4.5 25,000 February 2004
September 2000(4)................ 37,411 $13.36 37,411 September 2005
------- -------
Total number of warrants and
options to consultants......... 477,411 132,411
------- -------
------- -------

- ---------

(1) As part of a private offering, the Company issued warrants to the placement
agent, Josephthal, to purchase 400,000 Ordinary shares of the Company or
less if the cashless alternative, pursuant to the agreement, has been
elected. In 2000, 345,000 of these warrants were exercised in consideration
of $345.

(2) The Company issued warrants to its consultant, in connection with legal
services provided to the Company. Due to immateriality, no compensation
expense includedexpenses have been recorded in the statementsfinancial statements.

(3) Following a registration statement of operations for 1996, 1997 and 1998 is $ 49 thousand, $ 91
thousand and $ 121 thousand, respectively.

The weighted average fair valueForm F-1, the Company issued warrants
to its qualified independent underwriter.

(4) As part of the options at their grant
dates in 1996, 1997 and 1998 was $ 0.86, $ 0.42 and $ 1.4,
respectively.

Weighted average exercise price and weighted average fair
value of optionsprivate placement, the Company granted during the year was as follows:

2.75 and 1.29, respectively, for options granted at an
exercise price equalwarrants to the
market price of the stock on the
grant date.

1.91 and 1.07, respectively, for options granted at an
exercise price that exceeds the market price of the stock on
the grant date.

1.82 and 1.61, respectively, for options granted at an
exercise price that is less than the market price of the stock
on the grant date.placement agent (see d above).

g. Dividends:

Dividends if any,In the event that cash dividends are declared in the future, such dividends
will be paid in NIS. DividendsDividend paid to shareholders outside Israel will be
converted into U.S. dollars, on the basis of the exchange rate prevailing at the date
of payment. F-31

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------The Company does not intend to pay cash dividends in the foreseeable
future.

NOTE 20:-16 -- TAXES ON INCOME

a. Tax benefits under the Law for the Encouragement of Capital Investments,
1959 (the "law"'law'):

Certain of the Company's production facilities have been granted the status
of "approved enterprise"'approved enterprise' under the law, under two separate investment plans.

The implementation of the investments under the first and second plan was
finalized in 1993. The implementation of the second plan is
expected to be finalized in 1999.1993 and 1998, respectively.

According to the provisions of this law, the Company choseelected to enjoy
"alternative benefits"'alternative benefits' which provide tax exemptionbenefits in exchange for waiver of
grants. Accordingly, the Company's income from the approved enterprise will be
tax-exempt for a period of two and four years for the first and second plan,
respectively, commencing with the year it first earns taxable income. Based on
the percentage of foreign ownership of the Company, income and subject to corporate tax atderived during the
rate of 25%, for
additionalremaining periods of five and three years forof benefits is taxable at the first and
second plan, respectively.rate of
15% to 20%.

The period of tax benefits detailed above is subject to limits of 12twelve
years from the commencement of production, or 14fourteen years from receiving the
approval, whichever is earlier. Given the abovementioned conditions, the period
of benefits for the first planand second plans commenced

F-28

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

in 1994 and 1999, respectively. The first plan terminated in 2000 and the second
plan will terminate in 2006.

The Company applied for a third plan under 'approved enterprise' status, an
application which was approved by the Investment Center in 2000. The third plan
entitles the Company for two years of tax-exempt income and a reduced tax rate
of 15% to 20% for an additional five years period. The period of tax benefits
for the secondthird plan has not yet commenced.been determined.

The entitlement to the above benefits is conditional upon the Company's
fulfilling the conditions stipulated by the above law, regulations published
thereunder and the instruments of approval for the specific investments in
'approved enterprises'. In the event of failure to comply with these conditions,
the benefits may be canceled and the Company may be required to refund the
amount of the benefits, in whole or in part, including interest. As of the
balance sheet date, the Company complies with all these conditions.

The tax-exempt profits earned by the Company's "approved
enterprise"'approved enterprise' can be
distributed to shareholders, without subjectingimposing a tax liability on the Company, to taxes
only upon the complete liquidation of the Company. The retained tax-exempt
profits as of December 31, 19982001 are approximately $ 1,660 thousand.25,934 . If these retained
tax-exempt profits are distributed in a manner other than upon the complete
liquidation of the Company, they would be taxed at the corporate tax rate
applicable to such profits as if the Company had not chosenelected the alternative tax
benefits (currently - 25%-- 15% to 20% for an "approved enterprise")'approved enterprise' based on the
percentage of foreign ownership of the Company) and an income tax liability of
approximately $ 4155,187 would be incurred.

IncomeThe Company has decided to permanently invest the tax exempt income
resulting from sources other than the "approved enterprise"
during the periods'approved enterprise' status and not to distribute such
income as dividends. Accordingly, no deferred income taxes have been provided in
respect of benefits, will be taxable at regularsaid tax rate of 36%.exempt income.

The law also entitles the Company to claim accelerated rates of depreciation
on equipment used by the "approved enterprise"'approved enterprise' during five tax years.

Income from sources other than the 'approved enterprise' during the periods
of benefits, will be taxable at the statutory rate of 36%.

b. Measurement of results for tax purposes:purposes under the Income Tax Law
(Inflationary Adjustments), 1985:

Results for tax purposes are measured in terms of earnings in NIS after
certain adjustments for increases in the Israeli CPI.Consumer Price Index ('CPI').
As explained in Note 2b, the financial statements are measured in U.S. dollars.
The difference between the annual change in the Israeli CPI and in the
NIS/dollar exchange rate causes a difference between taxable income and the
income before taxes shown in the financial statements. F-32

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------In accordance with
paragraph 9(f) of SFAS No. 109, the Company has not provided deferred income
taxes in respect of the difference between the reporting currency and the tax
bases of assets and liabilities.

c. Tax benefits under the Law for the Encouragement of Industry (Taxation),
1969:

The Company is an "industrial company" under the above'industrial company', as defined by this law and, as such,
is entitled to claim accelerated rates of depreciation, in accordance with
regulations published under the inflationary adjustments law. The Company is
also entitled to deduct the offering expenses and patent amortization costs from
its taxable income in three and eight equal annual installments.installments, respectively.

F-29

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

d. Theoretical tax expense:

A reconciliation of the theoretical tax expense, assuming all income is
taxed at the regular statutory rate applied to corporations in Israel up to December 31, 1998, and the actual tax
expense, is as follows:

Year ended DecemberYEAR ENDED DECEMBER 31,
--------------------------------------
1996 1997 1998
---------- ---------- -----------
U.S. dollars in thousands
-----------------------------------------------------------------
1999 2000 2001
---- ---- ----

Theoretical tax expense (tax benefit) computed at the rate
of 36% (3,624) 208 635.................................................. $ 2,853 $ 3,669 $(2,722)
Increase (decrease) in taxes:
EffectApproved enterprise(1)................................ (1,274) (3,226) 1,498
Reduced statutory tax rate of certain adjustments ona subsidiary............ -- (3,232) (5,886)
Non-deductible expenses and other..................... 118 313 207
Carryforward loss, generated during the results for tax purposes and the Israeli CPI 49 61 91
Carryforward lossyear for which
a valuation allowance was provided 3,975 - -provided.................. 522 3,917 6,943
Utilization of operating carryforward tax losses - (202) (462)
---------- ---------- -----------from
prior years......................................... (1,421) (197) (231)
------- ------- -------
Actual tax expense 400 67 264
========== ========== ===========(tax benefit).......................... $ 798 $ 1,244 $ (191)
------- ------- -------
------- ------- -------
- ---------
(1) Basic net earnings (loss) per share amounts of the tax
benefits resulting from the 'approved enterprise'
benefits.............................................. $ 0.11 $ 0.25 $ (0.10)
------- ------- -------
------- ------- -------
Diluted net earnings (loss) per share amounts of the tax
benefits resulting from the 'approved enterprise'
benefits................................................ $ 0.10 $ 0.22 $ (0.10)
------- ------- -------
------- ------- -------

e. The provision for taxes is comprised as follows:
Deferred taxes 400 (27) (34)
Current taxes - 94 298
----------- ---------- ----------

400 67 264
=========== ========== ==========Taxes on income (benefit) included in the statements of operations:
Current:
Domestic.......................................... $ 1,132 $ 474 $ --
Foreign........................................... 533 744 472
------- ------- -------
$ 1,665 $ 1,218 $ 472
------- ------- -------
------- ------- -------
Deferred:
Domestic.......................................... $ (531) $ 26 $ (656)
Foreign........................................... (336) -- 7
------- ------- -------
$ (867) $ 26 $ (663)
------- ------- -------
------- ------- -------
$ 798 $ 1,244 $ (191)
------- ------- -------
------- ------- -------

F-33F-30

f. Deferred income taxes:

Deferred income taxes reflect the net tax effects 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 and its subsidiaries' deferred tax assets are as follows:

Year ended DecemberDECEMBER 31,
--------------------------------------
1996 1997 1998
------------ ---------- ---------
U.S. dollars in thousands
-------------------------------------------------------
2000 2001
---- ----

Deferred tax assets (liabilities)
are comprised of the following:
Provisions for severance pay 76 34 34
Deductible public offering expenses 195 - -
Others (mainly capitalized royalties) 326 120 92
Net operating loss carryforward 3,539 3,337 3,195
------------ ----------- ---------
Gross deferred tax assets 4,136 3,491 3,321
------------ ----------- ---------
Fixed assets (52) (64) (82)
Inventories - (12) (20)
------------ ----------- ---------
Gross deferred tax liabilities (52) (76) (102)
------------ ----------- ---------
Valuation allowance (1) (4,103) (3,407) (3,177)
------------ ----------- ---------losses and deductions carryforward.......... $ 5,188 $10,271
Others.................................................... 148 300
------- -------
Net deferred tax assets (liabilities) (19) 8 42
============ =========== =========before valuation allowance........ 5,336 10,571
------- -------
Valuation allowance(1).................................... (4,453) (9,025)
------- -------
Net deferred tax assets................................... $ 883 $ 1,546
------- -------
------- -------
Domestic.................................................. $ 883 $ 1,546
Foreign................................................... -- --
------- -------
$ 883 $ 1,546
------- -------
------- -------
Presented as follows:
Current assetsassets........................................ $ 658 $ --
Long-term assets...................................... 225 1,546
------- -------
$ 883 $ 1,546
------- -------
------- -------

- 8 42
Current liabilities (19) - -
------------ ----------- ---------
(19) 8 42
============ =========== =========

(1) The company hasCompany and its subsidiaries have provided valuation allowances against thein
respect of deferred tax assets in respectresulting from tax losses carryforward and
other temporary differences. Due to history of losses of these subsidiaries
management believes it is more likely than not that deferred tax lossregarding
the losses carryforward and other temporary differences due to history ofwill not be
realized.

g. Carryforward tax losses and current uncertainty concerning its ability to realize
these deferred tax assets in the future.

g. Income tax assessments, losses and deductions carried forward
to future years:

Atdeductions:

As of December 31, 1998,2001, the Company had available carryforward
losses (excluding capital losses totaling $ 2,363 thousand)
and deductions aggregating $ 5,751 thousand. Carryforwardto
$1,230. In addition, the Company has capital losses for tax purposes of
approximately $1,053, which will expire in the Companyyear 2002 and can be offset
against capital gains for tax purposes.

Utilization of the U.S. net operation losses may be subject to substantial
annual limitation due to the 'change in ownership provision of the Internal
Revenue code of 1986' and similar state provision. The annual limitation may
result in the expiration of net operating losses before utilization.

NUR Asia Pacific and NUR Shanghai had available carryforward losses as of
December 31, 2001 aggregating to approximately $7,300, which have no expiration
date. Additional carryforward losses of NUR America and Salsa Digital Printers,
in the amount of $6,560, which are not limitedlocated in time.

Nur America, Nurthe U.S., will expire in 2020.

As of December 31, 2001 NUR Europe and NUR Media Solutions and Nur Europe had available
carryforward losses aggregating $1,372 thousand, $150
thousand and $165 thousand for the years in the period ended
December 31, 1998, respectively.

F-34

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------to approximately $10,375, which have no
expiration date.

h. Income (loss) before income taxes consistedconsists of the following:

Year ended DecemberYEAR ENDED DECEMBER 31,
---------------------------------------------------
1996 1997 1998
--------------- --------------- -------------
U.S. dollars in thousands
------------------------------------------------------------------------------
1999 2000 2001
---- ---- ----

Domestic (8,947) 1,156 2,535
Foreign (741) (578) (771)
--------------- --------------- --------------
(9,688) 578 1,764
=============== =============== ==============Domestic................................................. $10,318 $10,275 $(6,238)
Foreign.................................................. (2,392) (84) (1,323)
------- ------- -------
$ 7,926 $10,191 $(7,561)
------- ------- -------
------- ------- -------

F-31

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

NOTE 21:- SELECTED STATEMENTS OF OPERATIONS DATA

a. Summary information about geographic areas:17 -- CUSTOMERS AND GEOGRAPHIC INFORMATION

The Company manages its business on a basis of one reportable segment. See
note 1Note 1a for a brief description of the Company's business.

The Company's business is divided into three main
geographic areas: Middle-East, Asia and Africa, America and
Europe. Total revenues are attributed to geographic areas based
on location of customers.

This data is presented in accordance with SFASStatement of Financial Accounting
Standard No. 131 "Disclosures('SFAS No 131'), 'Disclosures about Segments of an Enterprise
and Related Information", which
the Company has retroactively adopted for all periods presented.Information'.

The following presents total revenues for the yearyears ended December 31, 1996, 19971999,
2000 and 19982001 based on the end customers' location and Long-livedlong-lived assets as of
December 31, 19971999, 2000 and 1998:2001:

1996 1997 1998
------------------ -------------------- ------------------
Long- Long- Long-
Total lived Total lived Total lived
revenues assets revenues assets revenues assets
------------------ -------------------- ------------------
U.S. dollars in thousands
----------------------------------------------------------------------1999 2000 2001
--------------------- --------------------- ---------------------
TOTAL LONG-LIVED TOTAL LONG-LIVED TOTAL LONG-LIVED
REVENUES ASSETS REVENUES ASSETS REVENUES ASSETS
-------- ------ -------- ------ -------- ------

Middle-East, Asia and
AfricaIsrael.................... $ 7,724600 $1,093 $ 1,0091,856 $ 3,0491,554 $ 9751,873 $ 5,564 $ 1,109
America 1,540 9 7,061 166 14,640 977
Europe 7,373 192 11,849 1,392 16,241 1,7474,187
Asia...................... 9,995 389 26,223 609 33,830 1,224
America................... 24,325 453 47,780 7,298 38,959 8,611
Europe.................... 21,448 1,010 41,289 13,787 41,757 13,030
Others.................... 4,351 -- 4,776 -- 3,958 --
------- ------ -------- ------- -------- -------
$60,719 $2,945 $121,924 $23,248 $120,377 $27,052
------- ------ -------- --------- ------- -------- -------
------- ------ -------- ------- -------- -------

Total revenues from external customers divided on the basis of the Company's
product lines are as follows:

YEAR ENDED DECEMBER 31,
-----------------------------
1999 2000 2001
---- ---- ----

Printers............................................... $33,474 $ 16,63779,521 $ 1,210 $ 21,959 $ 2,533 $ 36,445 $ 3,833
======== ======= ======== ======== ========= =======65,265
Ink.................................................... 14,044 24,101 31,390
Printed materials...................................... 2,460 -- --
Substrates............................................. 7,274 12,013 12,539
Others................................................. 3,467 6,289 11,183
------- -------- --------
$60,719 $121,924 $120,377
------- -------- --------
------- -------- --------

F-35Major customer data as a percentage of total revenues:

The Company does not have any major customer that represents 10% or more of
the consolidated revenues.

NOTE 18 -- SELECTED STATEMENTS OF OPERATIONS DATA

a. Research and development expenses, net:

YEAR ENDED DECEMBER 31,
--------------------------
1999 2000 2001
---- ---- ----

Research and development expenses(1)...................... $5,530 $15,077 $10,883
Less -- participation of the Israeli and Belgian
governments in research and development projects........ 721 451 649
------ ------- -------
$4,809 $14,626 $10,234
------ ------- -------
------ ------- -------

- ---------

(1) Including write-off of in process research and development resulting from
the acquisition of Salsa Group in the amount of $4,300 for the year ended
December 31, 2000.

F-32

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------

Total revenues are divided by the following products:

Year ended December 31,
----------------------------------------------
1996 1997 1998
--------------- ------------ -------------
U.S. dollars in thousands
----------------------------------------------

Printers 9,317 12,023 19,052
Ink 2,495 4,571 8,619
Printed Materials 2,998 3,085 4,540
Others 1,827 2,280 4,234
--------------- ------------ -------------
$ 16,637 $ 21,959 $ 36,445
=============== ============ =============-- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

b. Major customer data:
Sales to customer A 7,665 2,455 3,861
=============== ============ =============
Percentage of total sales 46.1% 11.18% 10.6%
=============== ============ =============

c. Sales from Israel classified by geographical destinations:

Local:
Israel 780 679 1,631
Export (1):
Europe 3,957 1,325 -
America 2,325 907 -
Others (1) 662 138 3,933
--------------- ------------ ------------
7,724 3,049 5,564
=============== ============ ============

(1) Including indirect export sales to distributor which are
presented in accordance with the geographical location of
the end customer.

Year ended December 31,
--------------------------------------------------
1996 1997 1998
------------------ ------------ -------------
U.S. dollars in thousands
--------------------------------------------------

d. Selling and marketing expenses, net:

YEAR ENDED DECEMBER 31,
--------------------------
1999 2000 2001
---- ---- ----
Selling and marketing expenses 4,823 4,820 6,361expenses............................ $9,885 $17,385 $18,665
Less --- participation of the Fund for the Encouragement of
Marketing Activity - 200 250
------------------ ------------ -------------
4,823 4,620 6,111
================== ============ =============Activity...................................... 400 -- --
------ ------- -------
$9,485 $17,385 $18,665
------ ------- -------
------ ------- -------

F-36c. Financial expenses, net:

YEAR ENDED DECEMBER 31,
---------------------------
1999 2000 2001
---- ---- ----

Expenses:
Interest on short-term bank credit and charges........ $ (461) $(1,024) $(1,364)
Interest on long-term loans........................... (92) (581) (1,368)
Foreign currency translation differences.............. (659) (1,353) (1,630)
------- ------- -------
(1,212) (2,958) (4,362)
------- ------- -------
Income:
Interest on bank deposits and other................... 86 163 365
Gain on marketable securities......................... 67 -- --
Foreign currency translation differences.............. 443 1,372 661
------- ------- -------
596 1,535 1,026
------- ------- -------
$ (616) $(1,423) $(3,336)
------- ------- -------
------- ------- -------

d. The following table sets forth the reconciliation of basic and diluted
net earnings per share:

YEAR ENDED DECEMBER 31,
-----------------------------------
1999 2000 2001
---- ---- ----

Numerator:
Net earnings (losses) available to
shareholders of ordinary shares............ $7,175 $8,493 $(7,216)
------ ------ -------
------ ------ -------
Numerator for diluted net earnings (losses)
per share -- earnings available to
shareholders of Ordinary shares............ $7,175 $8,493 $(7,216)
------ ------ -------
------ ------ -------
Denominator:
Weighted average number of ordinary shares
(denominator for basic net earnings (loss)
per share)................................. 11,181,137 13,150,110 14,655,048
Effect of dilutive securities:
Employee and non-employee stock options and
warrants................................... 1,541,46 1,643,21 --*
--------- --------- ----------
Denominator for diluted net earnings (loss) per
share.......................................... 12,722,600 14,793,327 14,655,048
---------- ---------- ----------
---------- ---------- ----------

- ---------

* antidilutive.

NOTE 19 -- SUBSEQUENT EVENTS (UNAUDITED)

a. On January 17, 2002, the Company effected a private offering of its
securities in which the Company issued 2,333,333 Ordinary shares of NIS 1 par
value each in consideration of $3 per Ordinary share.

F-33

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------

Year ended December 31,
------------------------------------------
1996 1997 1998
-------------- ---------- -----------
U.S. dollars in thousands
------------------------------------------

e. Financial expenses, net:

Expenses:
Interest
On short-term credit 682 390 342
On long-term loans 72 193 67
Loss arising from foreign
currency transactions 154 - 151
-------------- ---------- -----------
908 583 560
-------------- ---------- -----------
Income:
Interest 319 234 59
Gain arising from foreign
currency transactions - 29 -
-------------- ---------- -----------
319 263 59
-------------- ---------- -----------
589 320 501
============== ========== ===========

f. Write-off of debts of related parties:-- (CONTINUED)
U.S. DOLLARS IN THOUSANDS

In March 1997, three companies in which Moshe Nur - a former
shareholder has holdings in various percentages, experienced
financial difficulties (see also Note 18a). The debts stem from
the purchases of printers, spare parts and ink and cash
transfers from the Company.

As a result, managementaddition, as part of the Company decided to write-off the
debts of these related companies, totaling $ 3,757 thousand,
comprised as follows:

Year ended
December 31, 1996
-------------------
U.S. dollars
in thousands
-------------------

Nur Outdoor Advertising (Manufacturing and Production) Ltd. 994
Nur Focus Assets and Investments Ltd. 2,117
Nur Focus Production (1995) Ltd. 646
-------------------

3,757
===================

F-37

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 22:- INVESTEES

Percentage of (1)
------------------------------
Name of the Company Ownership Control
------------------------------------------------------- ------------- --------------
%
------------------------------

a. Subsidiaries outside Israel:

Active:
-------

Nur Media Solutions S.A 100 100

Nur Advanced Technologies (Europe) S.A. 100 100

Nur America Inc. 100 100

M. Nur Marketing & Communication GmbH 84 84

Inactive:
---------

Nur Hungaria KFT (1) 100 100

Good-Lux S.A (1) 100 100

b. Subsidiaries in Israel:

Inactive:
---------

M.B.T. (Nur) Industries Ltd 100 100

Nur Print Technologies (1993) Ltd. 100 100

N.A.T. Holdings and Investments (1997) Ltd. 100 100

(1) Represents the percentages of ownership of Nur Media
Solutions (formerly "Nur International") in these
subsidiaries. The shares of some of these subsidiaries
are held in custody by the Company.

F-38

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 23:- SUBSEQUENT EVENTS

a. On February 24, 1999 the Company registered 9,119,483 Ordinary
Shares.

Following this registration,share purchase agreement, the Company issued to
its
qualified independent underwriterthe investors warrants exercisable into an aggregate of 612,500 Ordinary shares.

The total consideration for the private offering amounted to purchase 25,000$7,000 (net of
issuance expenses at the amount of $359).

b. On February 12, 2002, pursuant to the rescheduling agreement signed with
banks, the company issued to the banks 120,000 warrants. The warrants are
exercisable into 120,000 of the Company's Ordinary shares of the Company at1 NIS par value
each for an exercise price of $ 4.5$5 per share. These warrants are exercisablewarrant.

c. On February 12, 2002, the Company's board of directors approved to
increase the number of options available for a period of four
years commencing February 24,grant under the 2000 and are not to be sold,
transferred, assigned or hypothecated until February 2000,
(except for permitted transferees).

b.stock option
plan by 1,000,000 options.

d. In February 1999 Idanit and a wholly-owned subsidiary of
Idanit filed a suit againstMay 2002, the Company announced that it had commenced offering option
holders the right to cancel and Nur America
accordingexchange certain stock options granted to which Nur America hired a former employee of
Idanitthem
under the Company's 1995, 1997 and thus interfered with non-competition2000 Stock Option Plans. The exchange offer
expired on June 15, 2002 and confidentiality agreements between Idanit and its former
employee.

The Company and Nur America plan to defend themselves
vigorouslyresulted in the action.

- - - - - - - - - - - - -

F-39cancellation of 1,245,316 options
with varying exercise price. The new options will be granted six months and one
day from the date of cancellation of the old options.

F-34

EXHIBIT INDEX

B. EXHIBITS

Exhibit
Number DescriptionNUMBER DESCRIPTION
- ------ -----------

4.4Change(2)
4.1 -- Specimen Certificate for Ordinary Shares.(1)

4.5ordinary shares(1)
4.2 -- Representative's Warrant Agreement dated October 12,
1995.(1)

4.61995(1)
4.3 -- Form of Representative's Warrant Certificate.(1)Certificate(1)
4.4 -- Forms of Placement Agent's Warrant Agreement and
Certificate.(3)Certificate(3)
4.5 -- Forms of Qualified Independent Underwriter's Warrant
Agreement and Certificate.(3)Certificate(3)
4.6 -- Form of Warrant Agreement between the Registrant and
Barak Zamir, Advocates(4)
4.7 -- Form of Share and Warrant Purchase Agreement dated
January 17, 2002 between the Registrant and The Investment
Corp. of United Mizrahi Bank Ltd.
4.8 -- Form of Warrant Agreement dated January 17, 2002 between
the Registrant and The Investment Corp. of United Mizrahi
Bank Ltd.
4.9 -- Form of Registration Rights Agreement dated January 17,
2002 between the Registrant and The Investment Corp. of
United Mizrahi Bank Ltd.
4.10 -- Form of Warrant Agreement dated February 12, 2002 between
the Registrant and Bank Hapoalim B.M.
4.11 -- Form of Registration Rights Agreement dated February 12,
2002 between the Registrant and Bank Hapoalim B.M.
4.12 -- Form of Warrant Agreement dated February 12, 2002 between
the Registrant and Bank Leumi le-Israel Ltd.
4.13 -- Form of Registration Rights Agreement dated February 12,
2002 between the Registrant and Bank Leumi le-Israel Ltd.
10.1 -- 1995 Israel Stock Option Plan (previously referred to in
Company filings as the 1995 Flexible Stock Incentive Plan
or the 1995 Stock Option / Option/Stock Purchase Plan.Plan)(1)
10.2 -- Amendment to the 1995 Israel Stock Option / Stock Purchase Plan.(3)Plan(3)
10.3 -- 1997 Stock Option Plan.(4)Plan(5)
10.4 -- 1998 Non-Employee Director Share Option Plan.(5)Plan(6)
10.5 Lease Agreement between the Registrant and Mr. Moshe Nur dated October 4,
1993, as amended on May 29, 1995, in Hebrew with a translation to
English.(1)-- 2000 Stock Option Plan(11)
10.6 -- Lease Agreement for office space in Brussels, Belgium
between Nivellease, S.A. and the Registrant dated November
25, 1996.(3)26, 1996(3)
10.7 -- Lease Agreement for office space in Newton Centre,
Massachusetts between WHTR Real Estate Limited Partnership
and the Registrant dated July 10, 1998.(3)1998(3)
10.8 Qualified Independent Underwriting Agreement.(3)

10.9-- Distribution Agreement between Imaje S.A. and the
Registrant dated June 26, 1995.(1)

10.101995(1)
10.9 -- Settlement Agreements relating to Moshe Nur and his
affiliated companies.(3)

10.16companies(3)
10.10 -- Bank Hapoalin revolving loan agreement.(3)

10.17Hapoalim Loan Agreements
10.11 -- Bank Hapoalim Rescheduling Loan Agreement between I.T.S. Machinery Developmentdated
February 10, 2002
10.12 -- Bank Leumi le-Israel Loan Agreements
10.13 -- Bank Leumi le-Israel Rescheduling Loan Agreement dated
February 11, 2002
10.14 -- Form of confidentiality agreement(3)
10.15 -- The Founders Agreement dated September 30, 1999 among
Gera Eiron, Ogen Dialogix Ltd. and the Registrant
dated February 10, 1997.(3)

10.18 Form of confidentiality agreement.(3)

NUMBER DESCRIPTION
- ------ -----------

10.20 -- Master Remarketing Agreement dated July 20, 2001 by and
between NUR America and CVF Vendor Finance, Inc.
10.21 -- Lease Agreement dated July 1, 2001 by and between RAM
Global, Ltd. and Salsa Digital Printers
21.1 -- List of Subsidiaries of the Registrant.

27.1 Financial Data Schedule asRegistrant
23.1 -- Consent of and for the year ended December 31, 1995.(4)

27.2 Financial Data Schedule asKost Forer & Gabbay (S-8)
23.2 -- Consent of and for the year ended December 31, 1996.(4)

27.3 Financial Data Schedule as of and for the year ended December 31, 1997.(4)

27.5 Financial Data Schedule as of and for the year ended December 31, 1998.Kost Forer & Gabbay (F-3)

- -----------------------

(1) Previously filed with the Company's Registration StatementNUR's F-1 (File No. 33-93160) on Form F-1 and incorporated by
reference herein.

(2) Previously filed with the Company'sNUR's Form 6-K dated January 7, 1998 and incorporated
by reference herein.

(3) Previously filed with the Company'sNUR's Form F-1 (File No. 333-66103) and incorporated
by reference herein.

(4) Previously filed with NUR's Form 20-F for the Company'syear ended December 31, 1999
and incorporated by reference herein.

(5) Previously filed with NUR's Form 20-F for the year ended December 31, 1997
and incorporated by reference herein.

(5)(6) Previously filed with the Company'sNUR's Form 6-K dated November 13, 1998 and
incorporated by reference herein.

(6)(7) Filed in summary form. Original filed in paper format pursuant to Form SE.

(8) Previously filed with NUR's Form 6-K/A dated May 22, 2000 and incorporated
by reference herein.

(9) Previously filed with NUR's Form 6-K/A dated July 7, 2000 and incorporated
by reference herein.

(10) Previously filed with NUR's Form 20-F for the year ended December 31, 2000
and incorporated by reference herein.

(11) Previously field with NUR's Schedule TO-I (File No. 5-56015) on May 16,
2002 and incorporated by reference herein.

STATEMENT OF DIFFERENCES
------------------------

The trademark symbol shall be expressed as.............................. 'TM'
The section symbol shall be expressed as................................ 'SS'
The degree symbol shall be expressed as................................. [d]