B.O.S. Better Online Solutions (BOSC) 6-K 2021 Q2 Report of Foreign Private Issuer

Exhibit 99.1

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND IT’S SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2021

IN U.S. DOLLARS

UNAUDITED

INDEX

	Page
Condensed Interim Consolidated Balance Sheets	F2 – F3
Condensed Interim Consolidated Statements of Operations	F4
Condensed Interim Consolidated Statements of Comprehensive Income (loss)	F5
Condensed Interim Consolidated Statements of Changes in Equity	F6
Condensed Interim Consolidated Statements of Cash Flows	F7 – F8
Notes to Condensed Interim Consolidated Financial Statements	F9 – F16

- - - - - - - - - -

F-1

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

	June 30, 2021		December 31, 2020
	Unaudited		Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,929	$	1,036
Restricted bank deposits		139		140
Trade receivables		10,020		9,172
Other accounts receivable and prepaid expenses		1,089		1,311
Inventories		4,816		4,871
Total current assets		17,993		16,530
LONG TERM ASSETS		26		59
PROPERTY AND EQUIPMENT, NET		1,091		956
OPERATING LEASE RIGHT-OF-USE ASSETS, NET		987		767
OTHER INTANGIBLE ASSETS, NET		30		40
GOODWILL		4,676		4,676
Total assets	$	24,803	$	23,028

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

F-2

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands (except share and per share data)

	June 30, 2021			December 31, 2020
	Unaudited			Audited
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current maturities of long term loans	$	835		$	815
Operating lease liabilities, current		480			557
Trade payables		5,453			5,492
Employees and payroll accruals		929			985
Deferred revenues		702			601
Advances net of inventory in progress		202			68
Accrued expenses and other liabilities		89			391
Total current liabilities		8,690			8,909
LONG-TERM LIABILITIES:
Long-term loans, net of current maturities		903			1,216
Operating lease liabilities, non-current		636			367
Long-term deferred revenues		180			303
Accrued severance pay		329			364
Total long-term liabilities		2,048			2,250
COMMITMENTS AND CONTINGENT LIABILITIES
EQUITY:
Share capital
Ordinary shares: Authorized; 8,000,000 shares at June 30, 2021 and December 31, 2020; Issued and outstanding: 5,223,750 and 4,391,163 shares at June 30, 2021 and December 31, 2020, respectively		83,776			81,849
Additional paid-in capital		983			978
Accumulated other comprehensive loss		(243	)		(243	)
Accumulated deficit		(70,451	)		(70,715	)
Total equity		14,065			11,869
Total liabilities and shareholders’ equity	$	24,803		$	23,028

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

F-3

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands (except share and per share data)

	Six months period ended June 30,
	2021			2020
	Unaudited			Unaudited
Revenues	$	16,557		$	14,946
Cost of revenues		13,274			11,718
Inventory Impairment		-			671
Gross profit	$	3,283		$	2,557
Operating costs and expenses:
Research and development		114			21
Sales and marketing		1,929			1,953
General and administrative		877			843
Impairment of goodwill and intangible assets		-			988
Total operating costs and expenses		2,920			3,805
Operating income (loss)		363			(1,248	)
Financial expenses, net		(98	)		(137	)
Income (loss) before taxes on income		265			(1,385	)
Taxes on income		(1	)		-
Net income (loss)	$	264		$	(1,385	)
Basic and diluted net income (loss) per share	$	0.05		$	(0.32	)
Weighted average number of shares used in computing net income (loss) per share:
Basic		5,188,341			4,265,456
Diluted		5,365,243			4,265,456

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

F-4

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

CONSOLIDATED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

U.S. dollars in thousands, except per share data

	Six months period ended June 30,
	2021		2020
	Unaudited		Unaudited
Net income (loss)	$	264	$	(1,385	)
Cash flow hedging instruments:
Change in unrealized gains and losses		-		3
Gain in respect of derivative instruments designated for cash flow hedge, net of taxes		-		10
Other comprehensive gain		-		13
Comprehensive income (loss)	$	264	$	(1,372	)

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

F-5

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

U.S. dollars in thousands (except share data)

	Ordinary shares		Share capital and additional paid-in capital		Accumulated other comprehensive loss			Accumulated deficit			Total shareholders’ equity
Balance as of January 1, 2020		4,257,790	$	82,545	$	(233	)	$	(69,755	)	$	12,557
Issuance of Ordinary shares, net		7,665		12		-			-			12
Exercise of options		53,451		109		-			-			109
Other comprehensive income		-		-		13			-			13
Share-based compensation expense		-		39		-			-			39
Net loss		-		-		-			(1,385	)		(1,385	)
Balance as of June 30, 2020 (unaudited)		4,318,906	$	82,705	$	(220	)	$	(71,140	)	$	11,345
Balance as of January 1, 2021		4,391,163	$	82,827	$	(243	)	$	(70,715	)	$	11,869
Issuance of ordinary shares and warrants, net		807,188		1,841		-			-			1,841
Exercise of options		25,399		59		-			-			59
Share-based compensation expense		-		32		-			-			32
Net income		-		-		-			264			264
Balance as of June 30, 2021 (unaudited)		5,223,750	$	84,759	$	(243	)	$	(70,451	)	$	14,065

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

F-6

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

	Six months period ended June 30,
	2021			2020
	Unaudited
Cash flows from operating activities:
Net income (loss)	$	264		$	(1,385	)
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		121			173
Impairment of goodwill and intangible assets		-			988
Interest and Currency fluctuation of loans		(29	)		3
Severance pay, net		(35	)		10
Share-based compensation expenses		32			39
Decrease (increase) in trade receivables, net		(848	)		1,337
Decrease (increase) in other accounts receivable and other long term assets		255			(218	)
Decrease (increase) in inventories		189			(538	)
Decrease in trade payables		(39	)		(298	)
Decrease in operating lease liabilities		(28	)		(31	)
Decrease in employees and payroll accruals, deferred revenues, accrued expenses and other liabilities		(380	)		(365	)
Net cash used in operating activities	$	(498	)	$	(285	)
Cash flows used in investing activities:
Purchase of property and equipment		(246	)		(40	)
Net cash used in investing activities	$	(246	)	$	(40	)

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

F-7

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

		Six months period ended June 30,
		2021			2020
		Unaudited
Cash flows from financing activities:
Proceeds from issuance of shares and warrants, net			1,841			12
Proceeds from issuance of shares related to options exercised, net			59			109
Proceeds from short and long-term loans			129			774
Repayment of short and long-term loans			(393	)		(527	)
Net cash provided by financing activities		$	1,636		$	368
Increase in cash and cash equivalents, and restricted cash			892			43
Cash, cash equivalents and restricted cash at the beginning of the period			1,176			579
Cash, cash equivalents and restricted cash at the end of the period		$	2,068		$	622
Supplementary cash flow activities:
(1)	Cash paid during the period for:
	Interest	$	31		$	65

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

F-8

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 1: GENERAL

a. B.O.S. Better Online Solutions Ltd. (“BOS” or “the Company”) is an Israeli corporation.

The Company’s shares are listed on NASDAQ under the ticker BOSC.

b. The Company has three operating divisions: the Intelligent Robotics, the RFID division and the Supply Chain Solutions division.

The Company’s wholly-owned subsidiaries include:

1. BOS-Dimex Ltd., (“BOS-Dimex”), is an Israeli company that comprises the RFID segment. BOS-Dimex provides comprehensive turn-key solutions for Automatic Identification and Data Collection (AIDC), combining a mobile infrastructure with software application of manufacturers that we represent. BOS-Dimex also offers on-site inventory count services in the fields of apparel, food, convenience and pharma, asset tagging and counting services for corporate and governmental entities.

2. BOS-Odem Ltd. (“BOS-Odem”), an Israeli company, is a distributor of electronic components mainly to customers in the aerospace, defense and other industries worldwide and a supply chain service provider for aviation customers that prefer to consolidate their component acquisitions through a supplier that is able to provide a comprehensive solution to their components-supply needs. BOS-Odem is part of the Supply Chain Solutions segment; and

3. Ruby-Tech Inc., a New York corporation, a wholly-owned subsidiary of BOS-Odem and a part of the Supply Chain Solutions segment.

c. On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The outbreak has reached all of the regions in which we do business, and governmental authorities around the world have implemented numerous measures attempting to contain and mitigate the effects of the virus, including travel bans and restrictions, border closings, quarantines, shelter-in-place orders, shutdowns, limitations or closures of non-essential businesses, and social distancing requirements.   The global spread of COVID-19 and actions taken in response have caused and may continue to cause disruptions and/or delays in our supply chain, shipments, and caused significant economic and business disruption to our customers and vendors.   The extent of the impact of COVID-19 on our business and results of operations will depend on future developments, which are highly uncertain, including the duration and severity of the outbreak, the effects of subsequent waves of COVID-19, the ability to maintain our supply chain and restrictions on our business and personnel that may be imposed by governmental rules and regulations implemented to contain or treat COVID-19.   Management is monitoring and assessing the impact of the COVID-19 pandemic daily, including recommendations and orders issued by government and public health authorities.

F-9

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies applied in the financial statements of the Company as of December 31, 2020, were applied consistently in these financial statements.

A. Use of estimates in the preparation of financial statements

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. As applicable to these consolidated financial statements, the most significant estimates and assumptions relate to the following:

● Inventory valuation

● Impairment test of goodwill and intangible assets

● Allowance for doubtful accounts

● Revenue recognition.

B. Income (loss) per share

The Company computes net loss per share in accordance with ASC 260, “Earnings per share”. Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of ordinary shares outstanding during the period, net of the weighted average number of treasury shares (if any).

Diluted loss per ordinary share is computed similar to basic loss per share, except that the denominator is increased to include the number of additional potential ordinary shares that would have been outstanding if the potential ordinary shares had been issued and if the additional ordinary shares were dilutive. Potential ordinary shares are excluded from the computation for a period in which a net loss is reported or if their effect is anti-dilutive.

An amount of 47,500 and 574,889 weighted average outstanding stock options and stock warrants have been excluded from the calculation of the diluted net loss per share for the period of six months ended June 30, 2021 and 2020, respectively, because the effect of the ordinary shares issuable as a result of the exercise or conversion of these instruments was determined to be anti-dilutive.

C. Reclassified amounts

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications did not have a material effect on the reported results of operations, shareholder’s equity or cash flows.

F-10

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 3: UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

These unaudited condensed interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position as of June 30, 2021 have been included. Operating results for the six-month period ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ended December 31, 2021, or any other interim period in the future.

The consolidated balance sheet at December 31, 2020 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements.

The unaudited interim financial statements should be read in conjunction with the Company’s annual financial statements and accompanying notes as of December 31, 2020 included in the Company’s Annual Report on Form 20-F, filed with the Securities Exchange Commission on March 30, 2021.

NOTE 4: INVENTORIES

	June 30, 2021			December 31, 2020
Raw materials	$	166		$	116
Inventory in progress		1,280			1,299
Finished goods		4,433			4,389
Net – advances from customers		(1,063	)		(933	)
	$	4,816		$	4,871

NOTE 5: FAIR VALUE OF FINANCIAL INSTRUMENTS

From time to time the Company uses derivative instruments primarily to manage exposure to foreign currency exchange rates. The Company’s primary objective in holding derivatives is to reduce the volatility of earnings and cash flows due to changes in foreign currency exchange rates related to forecasted monthly payroll payments of employees, which are paid in NIS.

Gains on designated derivatives reclassified from Other Comprehensive Income into Consolidated Statement of Operations for the reported periods are:

	Six months period ended June 30,
	2021		2020
	Unaudited
Line Item in Statement of Operations
Derivatives designated as cash flow hedging instruments:
Cost of revenues	$	-	$	(6	)
Sales and marketing		-		(3	)
General and administrative		-		(1	)
Total loss	$	-	$	(10	)

F-11

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 5: FAIR VALUE OF FINANCIAL INSTRUMENTS – Cont.

The following table presents the assets and liabilities measured at fair value on a recurring basis as of June 30, 2021 and 2020:

	June 30, 2020
	Fair Value		Level 1		Level 2		Level 3
			Unaudited
Description
Derivative liabilities	$	26		-	$	26		-
	$	26		-	$	26		-

NOTE 6: GOODWILL AND OTHER INTANGIBLE ASSETS, NET

A. Other Intangible Assets:

	June 30, 2021		December 31, 2020		Weighted average amortization period
Cost:
Brand name		946		946		4.1
Customer list		2,450		2,450		2.5
Software		111		111		3
Customer relationship		728		728		7
Backlog		90		90
		4,325		4,325
Accumulated amortization and impairments:
Brand name		946		946
Customer list		2,450		2,450
Software		111		111
Customer relationship		698		688
Backlog		90		90
		4,295		4,285
Amortized cost	$	30	$	40

F-12

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 6: GOODWILL AND OTHER INTANGIBLE ASSETS, NET – Cont.

A. Other Intangible Assets:

Amortization expenses amounted to $10 and $41 for the six months ended June 30, 2021, and for the year ended December 31, 2020, respectively.

In addition, during the six month period ended June 30, 2020 the Company recognized an impairment in an amount of $517 with respect to customer relationship of the Intelligent Robotics reporting unit.

B. The changes in the carrying amount of goodwill for the period ended June 30, 2020 are as follows:

	Goodwill
Balance as of December 31, 2019		5,147
Changes during six months ended June 30, 2020 :
Impairment of Goodwill		(471	)
Balance as of June 30, 2020	$	4,676

During the six months ended June 30, 2020, the Company recorded an Impairment of Goodwill related to the Intelligent Robotics reporting unit, in the amount of $471.

NOTE 7: LEASES

We have entered into several non-cancellable operating lease agreements for our offices and vehicles. Our leases have original lease periods expiring between 2021 and 2026. Payments due under such lease contracts include primarily fix payments. We assume renewals in our determination of the lease term. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The components of lease costs, lease term and discount rate are as follows: 

	Six Months Ended
	June 30, 2021
	(unaudited)
Operating lease cost:
Vehicles		111
Facilities rent		155
		266
Remaining Lease Term
Vehicles		0.11-2.76 years
Facilities rent		0.25-5.26 years
Weighted Average Discount Rate
Vehicles		3.36	%
Facilities rent		3.36	%

F-13

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 7: LEASES – Cont.

The following is a schedule, by years, of maturities of operating lease liabilities as of June 30, 2021: 

	June 30, 2021
	(unaudited)
Period:
The remainder of 2021		233
2022		406
2023		246
2024		126
2025		100
2026		41
Total operating lease payments		1,152
Less: imputed interest		36
Present value of lease liabilities		1,116

NOTE 8: SEGMENTS AND GEOGRAPHICAL INFORMATION

Until December 31, 2019, the Company presented two reportable segments consisting of the Intelligent Robotics and RFID Division segment and the Supply Chain Solutions segment. Commencing January 1, 2020 the Company decided to review its business operations in three reportable segments, consisting of the RFID segment, Supply Chain Solutions segment and the Intelligent Robotics segment. Previous presentation was adjusted to conform to the current presentation.

The Company’s management makes financial decisions and allocates resources, based on the information it receives from its internal management system. The Company allocates resources and assesses performance for each operating segment using information about revenues and gross profit. The Company applies ASC 280, Segment Reporting.

a. Information about the operating segments for the six months ended June 30, 2021 and 2020 is as follows:

	RFID		Supply Chain Solutions		Intelligent Robotics			Intercompany			Consolidated
Six months ended June 30, 2021:
Revenues	$	6,322	$	9,249	$	1,036		$	(50	)	$	16,557
Gross profit	$	1,553	$	1,699	$	31		$	-		$	3,283
Allocated operating expenses	$	1,112	$	1,148	$	336		$	-		$	2,596
Unallocated operating expenses											$	324
Operating Income (loss)	$	441	$	551	$	(305	)	$	-		$	363
Financial expenses and tax on income											$	(99	)
Net Income											$	264

F-14

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 8: SEGMENTS AND GEOGRAPHICAL INFORMATION – Cont.

	RFID		Supply Chain Solutions		Intelligent Robotics			Intercompany			Consolidated
Six months ended June 30, 2020:
Revenues	$	5,712	$	8,976	$	301		$	(43	)	$	14,946
Gross profit	$	1,467	$	1,869	$	(779	)	$	-		$	2,557
Allocated operating expenses	$	1,006	$	1,144	$	329		$	-		$	2,479
Impairment of Goodwill and intangible assets	$	-	$	-	$	988		$	-		$	988
Unallocated operating expenses											$	338
Income (loss) from operations	$	461	$	725	$	(2,096	)	$	-		$	(1,248	)
Financial expenses and tax on income											$	(137	)
Net loss											$	(1,385	)

b. The following presents total revenues for the six months ended June 30, 2021 and 2020 based on the location of customers:

	June 30,
	2021		2020
	Unaudited
Israel	$	12,493	$	11,086
Far East		2,169		1,679
India		593		1,392
Europe		250		323
United States		1,052		466
	$	16,557	$	14,946

F-15

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 9: SHAREHOLDERS’ EQUITY

a. On June 2021, a total of 25,399 options were exercised for the amount of $59.

b. On March 31, 2021 the Company issued 7,188 Ordinary Shares (equivalent to $27) to an officer of the Company as a Bonus, which was approved by the Board of Directors and shareholders.

c. On January 4, 2021 the Company entered into a definitive agreement with several institutional investors for the purchase and sale of 800,000 Ordinary Shares and 720,000 Warrants to purchase Ordinary Shares at a combined purchase price of $2.50 in a registered direct offering with a total gross amount of $2,000 or $1,840 net of issuance expenses. The Warrants have an exercise price of $2.75 per share, are immediately exercisable and have a five-year term.

d. Issuance of Ordinary Shares in connection with a Standby Equity Distribution Agreement:

On May 8, 2017 the Company entered into a Standby Equity Distribution Agreement (“SEDA”), with YA II PN Ltd. (“YA”), for the sale of up to $2,000 of its Ordinary Shares to YA during a four-year period beginning on March 1, 2018, the date on which the Securities and Exchange Commission first declares effective a registration statement registering the resale of the Company’s Ordinary Shares by YA. For each Ordinary Share purchased under the SEDA, YA will pay 93% of the lowest daily VWAP (as defined below) of the Ordinary Shares during the three consecutive trading days, following the date of an advance notice from the Company (provided such VWAP is greater than or equal to 90% of the last closing price of the Ordinary shares at the time of delivery of the advance notice). Notwithstanding the forgoing, the notice shall not exceed $500. “VWAP” is defined as of any date, to be such date’s daily dollar volume-weighted average price of the Ordinary Shares as reported by Bloomberg, LP. The Company may terminate the SEDA at any time upon prior notice to YA, as long as there are no advance notices outstanding and the Company has paid to YA all amounts then due.

In connection with the SEDA, the Company issued 67,307 ordinary shares to YA as a commitment fee. During the year 2020, the Company issued to YA 41,090 Ordinary Shares, for a total amount of $100, net of amortization of the remaining balance of the commitment fee which amounted to $77

e. On June 2020, a total of 53,451 options were exercised for the amount of $109.

f. On March 31, 2020 the Company issued 7,665 Ordinary Shares (equivalent to $12) to an officer of the Company as a Bonus, which was approved by the Board of Directors and shareholders.

g. On February 19, 2020, the Company, through its wholly owned subsidiary, Ruby Tech Inc. entered into an agreement for a loan from YA in the principal amount of $600,000. The loan bears interest at a rate of 8% per annum, and is guaranteed by the Company and its subsidiary. The loan was paid in 12 monthly installments of principal and interest. The entire balance of the loan was repaid.

The Company issued to YA warrants to purchase up to 100,000 ordinary shares of the Company at an exercise price of $3.00 per ordinary share. If at the time of exercise, the ordinary shares underlying the warrants are not subject to an effective registration statement, the warrants may be exercised on a cashless basis. The warrants shall be exercisable for a period of two years from issuance. The Company paid to YA a commitment fee of $15,000.

F-16

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