Tti Team Telecom International (TTIL) 6-K Current report (foreign)

Exhibit 99.1

TTI TEAM TELECOM INTERNATIONAL LTD. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2009

IN U.S. DOLLARS

UNAUDITED

INDEX

	Page
Review of Unaudited Interim Consolidated Financial Statements	2
Consolidated Balance Sheets	3 - 4
Consolidated Statements of Income	5
Statements of Changes in Shareholders' Equity	6
Consolidated Statements of Cash Flows	7 - 8
Notes to Consolidated Financial Statements	9 - 16

1

The Board of Directors

TTI Team Telecom International Ltd.

Re:	Review of unaudited interim consolidated financial statements
	for the nine months and three months ended September 30, 2009

At your request, we have reviewed the interim consolidated balance sheet of TTI Team Telecom International Ltd. ("the Company") and its subsidiaries as of September 30, 2009, and the related interim consolidated statements of income for the nine and three months periods ended September 30, 2008 and 2009 and the interim changes in shareholders' equity for the nine months ended September 30, 2009 and interim consolidated cash flows for the nine-month periods ended September 30, 2008 and 2009. Our review was made in accordance with procedures established by the Institute of Certified Public Accountants in Israel. These procedures included reading the above mentioned interim consolidated financial statements, reading minutes of meetings of the shareholders and the board of directors and its committees, and making inquiries of persons responsible for financial and accounting matters.

A review is substantially less in scope than an audit in accordance with generally accepted auditing standards in Israel and, accordingly, we do not express an opinion on the interim consolidated financial statements.

Based on our review, we are not aware of any material modifications that should be made to the interim consolidated financial statements in order for them to be in conformity with accounting principles generally accepted in the United States (which differ in certain respects from International Financial Reporting Standard IAS 34, "Interim Financial Reporting", and with the disclosure requirements of the Israeli Securities Regulations (Periodic and Immediate Reports), 1970 as described in Note 4).

Tel-Aviv, Israel	KOST FORER GABBAY & KASIERER
November 26, 2009	A Member of Ernst & Young Global

2

TTI TEAM TELECOM INTERNATIONAL LTD.

AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

	December 31,		September 30,
	2008		2009
			Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	24,921	$	23,749
Short-term bank deposits		-		6,327
Trade receivables (net of allowance doubtful accounts - $ 105 at September 30, 2009 and December 31, 2008)		9,790		7,870
Unbilled receivables		3,093		2,542
Related parties		459		528
Other accounts receivable and prepaid expenses		2,150		2,472
Current assets of discontinued operations		958		-
Total current assets		41,371		43,488
LONG-TERM INVESTMENTS AND RECEIVABLES:
Long-term bank deposits		-		50
Investment in a company		165		165
Severance pay fund		3,836		4,271
Total long-term investments and receivables		4,001		4,486
PROPERTY AND EQUIPMENT, NET		7,199		6,084
Total assets	$	52,571	$	54,058

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

3

TTI TEAM TELECOM INTERNATIONAL LTD.

AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

	December 31,			September 30,
	2008			2009
				Unaudited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables	$	2,187		$	1,638
Deferred revenues		3,648			4,643
Related party (Note 4)		420			78
Other accounts payable and accrued expenses		6,040			5,758
Current liabilities of discontinued operations		844			-
Total current liabilities		13,139			12,117
ACCRUED SEVERANCE PAY		6,412			6,414
LONG TERM LIABILITIES		1,372			1,256
COMMITMENTS AND CONTINGENT LIABILITIES (Note 3)
SHAREHOLDERS' EQUITY:
Share capital: Ordinary shares of NIS 0.5 par value - Authorized: 30,000,000 shares at December 31, 2008 and September 30, 2009; Issued and outstanding: 16,003,158 shares at December 31, 2008 and September 30, 2009		2,261			2,261
Preferred A shares of NIS 0.5 par value – Authorized: 6,636,391 at December 31, 2008 and September 30, 2009; Issued and outstanding: 2,936,391 shares at December 31, 2008 and September 30 2009: Aggregate liquidation preference of $ 6,460 at September 30, 2009		334			334
Additional paid-in capital		75,251			75,260
Accumulated deficit		(46,198	)		(43,584	)
Total shareholders' equity		31,648			34,271
Total liabilities and shareholders' equity	$	52,571		$	54,058

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

November 26, 2009
Date of approval of the	Meir Lipshes	Tali Cohen Tueg
financial statements	Chief Executive Officer and Chairman of the Board of Directors	Chief Financial Officer

4

TTI TEAM TELECOM INTERNATIONAL LTD.

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

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

	Year ended December 31,			Nine months ended September 30,						Three months ended September 30,
	2008			2008			2009			2008			2009
				Unaudited
Revenues:
Products	$	29,101		$	23,508		$	17,004		$	6,716		$	5,510
Services		21,232			15,573			14,795			5,992			4,814
Total revenues		50,333			39,081			31,799			12,708			10,324
Cost of revenues:
Products		15,627			12,177			9,761			4,119			3,276
Services		7,628			5,793			4,654			2,059			1,377
Total cost of revenues		23,255			17,970			14,415			6,178			4,653
Gross profit		27,078			21,111			17,384			6,530			5,671
Operating expenses:
Research and development , net		11,407			8,671			5,843			2,721			1,781
Selling and marketing		9,883			7,609			5,981			2,682			1,857
General and administrative		5,842			4,735			3,576			1,568			1,289
Total operating expenses		27,132			21,015			15,400			6,971			4,927
Operating  income (loss)		(54	)		96			1,984			(441	)		744
Financial income (expenses), net		(554	)		(114	)		1,128			(504	)		566
Income (loss)  before income taxes		(608	)		(18	)		3,112			(945	)		1,310
Income taxes		371			286			134			45			25
Income (loss) from continuing operation		(979	)		(304	)		2,978			(990	)		1,285
Income (loss) from discontinued operation		(1,022	)		423			(314	)		(24	)		-
Net income (loss)	$	(2,001	)	$	119		$	2,664		$	(1,014	)	$	1,285
Net income attributed to preferred shares from continuing and discontinued operation	$	-		$	66		$	462		$	-		$	200
Net income (loss) attributed to ordinary shares from continuing operation	$	(979	)	$	(304	)	$	2,516		$	(990	)	$	1,085
Net income (loss) attributed to ordinary shares from discontinued operation	$	(1,022	)	$	357		$	(314	)	$	(24	)	$	-
Basic and diluted net earnings (loss) per share attributed to Ordinary shareholders
From continuing operations	$	(0.06	)	$	(0.02	)	$	0.16		$	(0.06	)	$	0.07
From discontinued operations	$	(0.06	)	$	0.02		$	(0.02	)	$	0.00		$	0.00
Net income per share	$	(0.12	)	$	0.00		$	0.14		$	(0.06	)	$	0.07
Weighted average number of shares used for computing net earnings (loss) per share attributed to Ordinary shareholders:
Basic and diluted		16,003,158			16,003,158			16,003,158			16,003,158			16,003,158

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

5

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

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

	Number of				Share capital				Additional					Total			Total
	Preferred A shares		Ordinary shares		Preferred A shares		Ordinary shares		paid-in capital		Accumulated deficit			comprehensive income (loss)			shareholders' equity
Balance as of January 1, 2008		2,936,391		16,003,158	$	334	$	2,261	$	75,038	$	(44,197	)				$	33,436
Write-off of accruals for stock issuance costs		-		-		-		-		146		-						146
Share-based compensation		-		-		-		-		67		-						67
Net loss		-		-		-		-		-		(2,001	)	$	(2,001	)		(2,001	)
Total comprehensive loss														$	(2,001	)
Balance as of December 31, 2008		2,936,391		16,003,158		334		2,261		75,251		(46,198	)					31,648
Share-based compensation		-		-		-		-		9		-						9
Cumulative effect of EITF 07-5 adoption		-		-		-		-		-		(50	)	$	(50	)		(50	)
Net income		-		-		-		-		-		2,664			2,664			2,664
Total comprehensive income														$	(2,614	)
Balance as of September 30, 2009 (unaudited)		2,936,391		16,003,158	$	334	$	2,261	$	75,260	$	(43,584	)				$	34,271

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

6

TTI TEAM TELECOM INTERNATIONAL LTD.

 AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

	Year ended December 31,			Nine months ended September 30,
	2008			2008			2009
				Unaudited
Cash flows from operating activities:
Net income (loss)	$	(2,001	)	$	119		$	2,664
Adjustments required to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		2,272			1,717			1,671
Impairment of goodwill and other assets		1,533			110			-
Loss from terminating agreement with Telesens		-			-			435
Gain from sale of property and equipment		(210	)		(209	)		(51	)
Accrued severance pay, net		862			588			(433	)
Share-based compensation		67			94			9
Decrease (increase)  in trade receivables, net		(1,444	)		(1,039	)		2,162
Decrease (increase)   in unbilled receivables		(116	)		(1,390	)		673
Balances with related parties		(3,562	)		(4,209	)		(411	)
Decrease (increase) in other accounts receivable and prepaid expenses		819			1,002			(167	)
Decrease in trade payables		(504	)		(88	)		(646	)
Increase (decrease)  in deferred revenues		(1,018	)		(47	)		995
Decrease in other accounts payable and accrued expenses		(1,044	)		(766	)		(1,214	)
Accrued interest on short-term bank deposits		-			(1	)		(5	)
Accrued interest on long-term liability		22			157			8
Net cash provided by (used in) operating activities		(4,324	)		(3,962	)		5,690
Cash flows from investing activities:
Investment in short-term and long-term bank deposits		-			-			(6,372	)
Proceeds from acquisition of subsidiary		(1,071	)		(1,071	)		-
Proceeds from short-term bank deposits		99			99			-
Purchase of property and equipment		(3,533	)		(3,139	)		(643	)
Proceeds from sale of property and equipment		542			379			224
Net cash used in investing activities		(3,963	)		(3,732	)		(6,791	)

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

7

TTI TEAM TELECOM INTERNATIONAL LTD.

 AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

	Year ended December 31,			Nine months ended September 30,
	2008			2008				2009
				Unaudited
Cash flows from financing activities:
Decrease in long-term debt from landlord		(144	)			(109	)			(107	)
Net cash used in financing activities		(144	)			(109	)			(107	)
Translation differences from cash balance of subsidiary		(20	)			-				-
Increase (decrease) in cash and cash equivalents		(8,451	)			(7,803	)			(1,208	)
Cash and cash equivalents at the beginning of the period		33,408				33,408				24,957
Cash and cash equivalents at the end of the period (*)	$	24,957			$	25,605			$	23,749
Supplemental disclosure of cash flows information:
Cash paid during the period for:
Taxes, net	$	427			$	281			$	382
Non-cash activities:
Return of issuance costs	$	146			$	-			$	-
Accrual for the second payment account of the acquisition of Telesens	$	630			$	-			$	-
Cumulative effect of EITF 07-5 adoption	$	-			$	-			$	50

(*) Includes cash and cash equivalents of discontinued operations of $ 0, $ 36 and $ 116 at September 30, 2009, December 31, 2008 and September 30, 2008, respectively.

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

8

TTI TEAM TELECOM INTERNATIONAL LTD.

 AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1:                    GENERAL

a. The accompanying unaudited interim consolidated financial statements have been prepared as of September 30, 2009, and for the three months then ended in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") relating to the preparation of financial statements for interim periods. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States but which are not required for interim reporting purposes, have been condensed or omitted. See Note 4 for the reconciliation from U.S. GAAP to International Financial Reporting Standard ("IFRS").

These financial statements should be read in conjunction with the Company's annual financial statements and accompanying notes as of December 31, 2008 included in Form 20-F for the year ended December 31, 2008, filed with the Securities and Exchange Commission ("the annual financial statements").

The condensed interim consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the periods presented.

Results for the nine months ended September 30, 2009, are not necessarily indicative of the results that may be expected for the year ended December 31, 2009.

b.     Discontinued operations:

In January 2008, the Company acquired Telesens LLC ("Telesens"), a software house headquartered in the Ukraine with a presence in the CIS (Commonwealth of Independent States) market. Under the terms of the agreement, the aggregate purchase price is up to $ 2,700, subject to downward adjustments. Such adjustments are mainly based on Telesens results of operations during 2007, 2008 and 2009. According to the agreement the purchase price should have been paid in 3 annual payments.

The acquisition was accounted for under the purchase method of accounting and, accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their relative fair values as of the acquisition date.

The Company recognized $1,500 goodwill and other intangible assets impairment in its financial statements for the year ended December 31, 2008 and an accrual of $630 thousand with respect to a second installment on account of the acquisition which was never made in light of a dispute between the parties.

As disclosed in Note 3, during 2009 the Company and Telesens have entered into a dispute with respect to the purchase agreement. In July 2009, the Company signed on a settlement agreement with Telesens. Under the terms of the settlement agreement, the acquisition of Telesens was rescinded, such that the Company will transfer the 100% interest it has in Telesens to Mr. Eduard Rubin, the previous key shareholders of Telesens and in addition the Company agreed to pay approximately $200 to Telesens. Both parties' lawsuits against each other were dismissed. In addition, Telesens agreed to render development services to the Company for one year. The Company believes that the price for the future services are at market price.

9

TTI TEAM TELECOM INTERNATIONAL LTD.

 AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1:                      GENERAL (Cont.)

This transaction was accounted for in accordance with ASC 360-10 "Accounting for the Impairment or Disposal of Long Lived Assets"("ASC 360-10").

Telesens is considered to be a "component of an entity" since it comprise operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity.

Since the operations and cash flows of the Telesens were eliminated from the ongoing operations of the Company as a result of the disposal transaction and the Company will not have any significant continuing involvement in the operations of the component after the disposal transaction, subject to ASC 205-20, "Applying the Conditions in Paragraph ASC 205-20-45-1 in Determining Whether to Report Discontinued Operations" ("ASC 205-20"), the results of operations of Telesens are being reported in discontinued operations in the financial statements.

The Company recorded a loss of $435 in the second quarter of 2009 in discontinued operations in line item.

The assets and liabilities of the Telesens were classified as discontinued operations as follows:

	December 31,
	2008
Assets:
Cash and cash equivalents	$	36
Trade receivables		242
Unbilled receivables		122
Other accounts receivable and prepaid expenses		155
Property and equipment, net		84
Intangible assets		149
Foreign currency translation adjustment		170
Assets of discontinued operations		958
Liabilities:
Trade payables		97
Other accounts payable and accrued expenses		79
Payable from disposal of discontinued operation		-
Payable from purchase of discontinued operation		667
Liabilities of discontinued operations		843
Net assets (liabilities) of discontinued operations	$	115

As of September 30, 2009 Telesens is no longer consolidated with the other entities in the group.

10

TTI TEAM TELECOM INTERNATIONAL LTD.

 AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1:-                      GENERAL (Cont.)

As a result of the selling of the Telesens as mentioned above, the results of operations of the Telesens were reported separately as discontinued operations in the statement of operations for the year ended December 31, 2008 and for the three and nine months periods ended September 30,2008 and 2009 respectively, are summarized as follows:

	Year ended December 31,			Nine months ended September 30,						Three months ended September 30,
	2008			2008			2009			2008			2009
				Unaudited
Revenues:
Products	$	1,033		$	874		$	303		$	238		$	-
Services		920			606			396			282			-
Total revenues		1,953			1,480			699			520			-
Cost of revenues:
Products		754			526			314			347			-
Services		237			166			99			54			-
Total cost of revenues		991			692			413			401			-
Gross profit		962			788			286			119			-
Operating expenses:
Selling and marketing		113			79			47			26			-
General and administrative		509			220			132			71			-
Impairment of goodwill and other assets		1,401			-			-			-			-
Total operating expenses		2,023			299			179			97			-
Operating  income (loss)		(1,061	)		489			107			22			-
Financial income (expenses), net		39			(38	)		30			(31	)		-
Income (loss) before income taxes		(1,022	)		451			137			(9	)		-
Income taxes		-			28			16			15			-
Income (loss) of discontinued operation		(1,022	)		423			121			(24	)		-
Loss of disposal of discontinued operation		-			-			(435	)		-			-
Net income (loss) from discontinued operation	$	(1,022	)	$	423		$	(314	)	$	(24	)	$	-

11

TTI TEAM TELECOM INTERNATIONAL LTD.

 AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

a. The significant accounting policies followed in the preparation of these financial statements are identical to those applied in preparation of the latest annual financial statements.

b. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

c. The financial statements have been prepared in U.S. dollars, since the functional currency of the Company and its principal subsidiaries is the U.S. dollar.

d. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.

e. Impact of recently issued accounting standards:

In June 2009, the FASB issued ASC 105-10-65-1, Generally Accepted Accounting Principles (originally issued as FAS 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles", a replacement of SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”). ASU 105 is effective for financial statements for interim and annual periods ending after September 15, 2009. ASU 105-10-65-1establishes the FASB Accounting Standards Codification (Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with Generally Accepted Accounting Principles. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification. Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the Financial Statements. The Company has adopted ASC 105 and therefore all references by the Company to authoritative accounting principles recognized by the FASB reflect the Codification.

In May 2009, the FASB issued ASC 855, “Subsequent Events”, (ASC 855) (originally issued as FAS 165). ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC 855 is effective for interim and annual reporting periods ending after June 15, 2009.The Company adopted ASC 855 and it did not have an impact on the Company’s Consolidated Financial Statements. The Company evaluated all events or transactions that occurred after September 30, 2009 up through November 26, 2009. During this period no material subsequent events came to our attention.

12

NOTE 3: RELATED PARTY TRANSACTION AND BALANCE

Balance with related party-shareholder:

During the years 1998 to 2000, the Company granted Mr. Shlomo Eisenberg ("Mr. Eisenberg"), the former chairman of the board of directors and a major shareholder of the Company, an aggregate of 105,000 options to purchase ordinary shares of the Company. In the years 2001 and 2002, Mr. Eisenberg exercised a portion of his options ("the Options") and the Company withheld Israeli income tax from income realized by Mr. Eisenberg upon the exercise of the Options, as required under law.

At the end of 2005, the Company underwent a tax deductions audit by the Israeli Tax Authority ("ITA"). As a result of such audit, the ITA assessed an additional NIS 1,500 ($ 383 as of September 30, 2009) in withholding taxes with respect to income derived by Mr. Eisenberg from the exercise of the Options. Following consultation with the Company's tax advisors, the Company paid the additional withholding tax amount assessed in the audit. The Company was informed that it is required to collect such additional tax from Mr. Eisenberg otherwise such additional amount will be viewed as a benefit received by Mr. Eisenberg from the Company, resulting in additional withholding tax being charged to the Company as a result of the grant of such benefit.

The Company filed a NIS 1,600 lawsuit and demanded reimbursement for the additional withholding tax from Mr. Eisenberg. On August 12, 2008 the court rendered a judgment which accepted the Company's lawsuit in its entirety and determined that Mr. Eisenberg will pay the Company the amount of NIS 1,932 (approximately $ 493), including linkage differentials and interest, including attorney fees. On October 26, 2008, Mr. Eisenberg appealed on such judgment to the district court. The Company agreed to stay the payment after Mr. Eisenberg furnished it with a bank guarantee securing the payment in case the appeal is rejected.

NOTE 4: RECONCILIATION TO IFRS

The consolidated financial statements of the Company have been prepared in accordance with U.S. GAAP. Had the consolidated financial statements been prepared in accordance with IFRS, the effects on the financial statements would have been as follows:

a. Effect on the statement of operations:

	Year ended			Nine months ended
	December 31,			September 30,
	2008			2008			2009
				Unaudited
Income (loss) from continuing operation as reported, under U.S. GAAP	$	(979	)	$	(304	)	$	2,978
Reconciling item for IFRS reporting:
Accrued severance pay		618			308			(509	)
Income (loss) from continuing operation according to IFRS *)	$	(361	)	$	4		$	2,469

13

NOTE 4:                 RECONCILIATION TO IFRS (Cont.)

	Year ended			Nine months ended
	December 31,			September 30,
	2008			2008		2009
				Unaudited
Income (loss) from discontinued operation as reported, under U.S. GAAP	$	(1,022	)	$	423	$	(314	)
Reconciling item for IFRS reporting:
Accrued severance pay		-			-		-
Income (loss) from discontinued operation according to IFRS *)	$	(1,022	)	$	423	$	(314	)

	Year ended			Nine months ended
	December 31,			September 30,
	2008			2008		2009
				Unaudited
Net income as reported, under U.S. GAAP	$	(2,001	)	$	119	$	2,664
Reconciling item for IFRS reporting:
Accrued severance pay		618			308		(509	)
Net income according to IFRS *)	$	(1,383	)	$	427	$	2,155

*)  Amounts in NIS presented in accordance with IFRS were translated into U.S. dollars according to the exchange rate at the end of the corresponding period.

	Year ended			Nine months ended
	December 31			September 30,
From continuing operations:	2008			2008			2009
				Unaudited
Basic and diluted net income attributed to shareholders as reported, under U.S. GAAP	$	(0.06	)	$	(0.02	)	$	0.16
Reconciling item for IFRS reporting		0.04			0.02			(0.03	)
Basic and diluted net income attributed to shareholders according to IFRS *)	$	(0.02	)	$	0.00		$	0.13

14

NOTE 4:                 RECONCILIATION TO IFRS (Cont.)

	Year ended			Nine months ended
	December 31			September 30,
From discontinued operations:	2008			2008		2009
				Unaudited
Basic and diluted net income attributed to shareholders as reported, under U.S. GAAP	$	(0.06	)	$	0.02	$	(0.02	)
Reconciling item for IFRS reporting		-			-		-
Basic and diluted net income attributed to shareholders according to IFRS *)	$	(0.06	)	$	0.02	$	(0.02	)

	Year ended			Nine months ended
	December 31			September 30,
Net income per share:	2008			2008		2009
				Unaudited
Basic and diluted net income attributed to shareholders as reported, under U.S. GAAP	$	(0.12	)	$	-	$	0.14
Reconciling item for IFRS reporting		0.04			0.02		(0.03	)
Basic and diluted net income attributed to shareholders according to IFRS *)	$	(0.08	)	$	0.02	$	0.11

According to U.S. GAAP, under FAS 128 "Earnings per Share", the number of incremental shares to be included in the denominator for year-to-date diluted EPS should be determined by computing a year-to-date weighted average of the number of incremental shares included in each quarterly diluted EPS computation (assuming all periods were profitable). According to IAS 33 "Earnings per Share" the incremental shares included in year-to-date diluted EPS weighted average would be computed using the average market price of shares for the year-to-date period. This item had no impact on the earning per share for the three months periods ended September 30, 2009 and 2008 and for the year ended December 31, 2008.

b. Shareholders' equity differences:

	December 31,		September 30,
	2008		2009
			Unaudited
Shareholders' equity as reported, under U.S. GAAP	$	31,648	$	34,271
Reconciling item for IFRS reporting:
Accrued severance pay		1,107		598
Shareholders' equity according to IFRS *)	$	32,755	$	34,869

*) Amounts in NIS presented in accordance with IFRS were translated into U.S. dollars according to the exchange rate at the end of the corresponding period.

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NOTE 4:                 RECONCILIATION TO IFRS (Cont.)

c. Material adjustments:

The abovementioned adjustments result primarily from the differences between U.S. GAAP and IFRS, as follows:

According to U.S. GAAP, the cash surrendered value of such insurance policies should be presented in the balance sheet as long-term investments and the full severance pay liability should be presented in the balance. According to IAS 19, "Employee Benefits", the Company's benefit plan is considered a defined benefit plan, and therefore, the severance pay liability is required to be calculated on an actuarial basis. The actuarial calculation takes into consideration future salary increases, the rates of employee turnover, and the estimated timing of payments.

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