November 29, 2005

TERADYON, Israel–(BUSINESS WIRE)–Nov. 29, 2005–B.O.S. Better Online Solutions Ltd. (the “Company” or “BOS”) (NASDAQ: BOSC – News); (TASE: BOSC) reported today its results for the quarter ended September 30, 2005.

Highlights for the 3rd quarter:

Revenues for the third quarter of 2005 were $6.2M, an increase of 326% as compared to $1.5M for the third quarter of 2004. Our revenues increased mainly due to the consolidation of Odem Electronic Technologies 1992 Ltd. (“Odem”) (related to the Electronic Component operating segment), acquired in November 2004, and Quasar Telecom (2004) Ltd. (related to the Communications operating segment), which began operating on October 1, 2004.

Gross profit for the third quarter of 2005 increased 137% to $1.8M, compared to $766,000 for the third quarter of 2004.

Operating loss for the third quarter of 2005 was $356,000, compared to an operating loss of $431,000 for the second quarter of 2005, and an operating loss of $326,000 for the third quarter of 2004.

Loss from continuing operations for the third quarter of 2005, including an equity loss of $1.5M (mainly related to the impairment of an investment in Surf Communication Solutions Ltd. (“Surf”), an affiliated company(, and other income in the amount of $273,000 (related to the Company’s sale of its PrintBOS activities), was $1.7M (or -$0.28 per share) compared to a loss of $466,000 (or -$0.11 per share), for the third quarter of 2004.

Highlights for the 9 months:

Revenues for the nine months ended September 30, 2005, amounted to $20.8 M, an increase of 414% as compared to $4M for the nine months ended September 30, 2004. Loss from continuing operations for such period amounted to $3.6M (or -$0.69 per share) compared to a net loss of $1.4M (or -$0.34 per share) for the nine months ended September 30, 2004. The loss from continuing operations for the nine months ended September 30, 2005, includes equity losses in the amount of $1.5M (mainly related to the impairment of an investment in Surf(, and other income in the amount of $273,000 (related to the Company’s sale of its PrintBOS activities).

As of September 30, 2005, the Company’s balance sheet shows financial resources (cash, cash equivalents and marketable securities) of $6.6M and loans (long and short term) of $3.9M.

In September 2005, BOS acquired an additional 23.9% of the outstanding shares of Odem, a subsidiary of the Company, from a minority shareholder, thus increasing its holdings in Odem from 63.6% in December 31, 2004, to 87.7% in September 30, 2005. In consideration for Odem’s shares, the Company issued 232,603 Ordinary Shares and made a cash payment in the amount of $716,000. On November 1, 2005, BOS announced its acquisition of the remaining shares of Odem in consideration for a cash payment in the amount of $554,105 and Odem became a wholly-owned subsidiary of the Company.

On October 27, 2005, BOS entered into a definitive agreement with Qualmax Inc., a US VoIP service and equipment provider, for the sale of the assets of its Communications Division to Qualmax. The consideration payable to BOS is approximately 4,150,000 Qualmax shares and 4% royalties from future revenues Qualmax generates from the sold business, up to $800,000. One quarter of the Qualmax shares to be received by BOS in the transaction, shall be deposited in escrow and shall be released to BOS at the end of four consecutive fiscal quarters following the closing of the transaction, contingent upon Qualmax generating by then certain revenues from the sold business. The closing of the transaction is subject to certain closing conditions, including Qualmax completing a merger into a US publicly traded company.

Adiv Baruch , BOS’ CEO stated: “We are continuing to implement our strategy as was defined in 2004. We have increased our holdings in Odem and turned it into our wholly owned subsidiary, while in parallel, we are spinning off and realizing non-core activities.”

Edouard Cukierman, Chairman of BOS commented: “Since it was acquired, Odem has become one of the main growth engines of the Company, reflecting the increased demand for RFID products.”

About BOS

B.O.S. Better Online Solutions Ltd. (the “Company” or “BOS”) (NASDAQ:BOSC; TASE: BOSC) was established in 1990. Through its wholly owned subsidiaries, BOS activities are focused on two divisions:

Connectivity division, with products marketed under the BOS?NOVA brand name. These products deliver instant and transparent connectivity from IBM iSeries computers to personal computers, thin clients and browsers.

Electronic Components division, based on Odem Electronic Technologies 1992 Ltd., providing solutions in RFID, semiconductors, electronic components, CCD, imaging, networking, telecom and automation.

An additional focus has been on the Communications division, providing easy to install and affordable VoIP and cellular gateways solutions for businesses. The Company entered into a definitive agreement for the sale of the Communications Division’s assets in October 2005.

BOS, www.boscorporate.com is traded on NASDAQ (NASDAQ: BOSC – News) and on the Tel-Aviv stock exchange (TASE: BOSC).

The forward-looking statements contained herein reflect management’s current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause the actual results to differ materially from those in the forward-looking statements, all of which are difficult to predict and many of which are beyond the control of BOS, including, but not limited to, those risks and uncertainties detailed in BOS’ periodic reports and registration statements filed with the U.S. Securities Exchange Commission. BOS undertakes no obligation to publicly update or revise any such forward-looking statements to reflect any change in its expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

BALANCE SHEETS
----------------------------------------------------------------------
U.S. dollars in thousands
 
 
                                                    September December
 
                                                       30,       31,
 
                                                      2005      2004
 
                                                    --------- --------
 
                                                    Unaudited
 
                                                    ---------
 
   ASSETS
 
 
CURRENT ASSETS:
 
  Cash and cash equivalents                           $4,464   $2,578
 
  Short-term marketable securities                     1,093    2,324
 
  Trade receivables                                    5,405    4,557
 
  Other accounts receivable and prepaid expenses       1,080      722
 
  Inventories                                          4,514    3,086
 
                                                    --------- --------
 
 
Total current assets                                  16,556   13,267
 
                                                    --------- --------
 
 
LONG-TERM INVESTMENTS:
 
  Long-term marketable securities                      1,053      757
 
  Severance pay funds                                  1,119    1,143
 
  Investment in an affiliated company                    752    2,472
 
  Other assets                                             -      395
 
                                                    --------- --------
 
 
Total long-term investments                            2,924    4,767
 
                                                    --------- --------
 
 
PROPERTY AND EQUIPMENT, NET                              971    1,019
 
                                                    --------- --------
 
 
INTANGIBLE ASSETS:
 
  Goodwill                                             1,717    1,569
 
  Customer list                                        1,800    1,389
 
  Other intangible assets                                403      471
 
                                                    --------- --------
 
 
Total intangible assets                                3,920    3,429
 
                                                    --------- --------
 
 
ASSETS RELATED TO DISCONTINUED SEGMENT                     -        3
 
                                                    --------- --------
 
 
Total assets                                         $24,371  $22,485
 
                                                    ========= ========
 
BALANCE SHEETS
 
----------------------------------------------------------------------
 
U.S. dollars in thousands
 
 
                                                   September  December
 
                                                       30,       31,
 
                                                      2005      2004
 
                                                   ---------- --------
 
                                                    Unaudited
 
                                                   ----------
 
   LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
CURRENT LIABILITIES:
 
  Short term loans from banks                         $2,624   $1,354
 
  Current maturities of long-term convertible note
 
   and bank loans                                        217      643
 
  Trade payables                                       3,905    3,845
 
  Employees and payroll accruals                         788      664
 
  Deferred revenues                                      371      364
 
  Accrued expenses and other liabilities               1,854    1,141
 
                                                   ---------- --------
 
 
Total current liabilities                              9,759    8,011
 
                                                   ---------- --------
 
 
LONG-TERM LIABILITIES:
 
  Long-term convertible note                           1,064    1,151
 
  Bank loans (net of current maturities)                  21       54
 
  Deferred taxes                                         397      348
 
  Put option issued to minority shareholders in a
 
   subsidiary                                             42      359
 
  Accrued severance pay                                1,350    1,468
 
                                                   ---------- --------
 
 
Total long-term liabilities                            2,874    3,380
 
                                                   ---------- --------
 
 
MINORITY INTEREST IN A SUBSIDIARY                        346      809
 
                                                   ---------- --------
 
 
LIABILITIES RELATED TO DISCONTINUED SEGMENT              237      237
 
                                                   ---------- --------
 
 
SHAREHOLDERS' EQUITY                                  11,155   10,048
 
                                                   ---------- --------
 
 
Total liabilities and shareholders' equity           $24,371  $22,485
 
                                                   ========== ========
 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
----------------------------------------------------------------------
 
U.S. dollars in thousands, except share and per share data
 
 
                                                            Year ended
 
                      Nine months ended  Three months ended   December
 
                        September 30,        September 30,       31,
 
                    ----------------------------------------
 
                        2004      2005      2004      2005      2004
 
                    --------------------------------------------------
 
                                   Unaudited
 
                    ----------------------------------------
 
 
Revenues               $4,043   $20,801    $1,457    $6,208    $8,282
 
Cost of revenues        1,927    14,984       691     4,386     4,608
 
                    --------------------------------------------------
 
 
Gross profit            2,116     5,817       766     1,822     3,674
 
                    --------------------------------------------------
 
 
Operating expenses:
 
  Research and
 
   development          1,559     2,084       618       627     2,296
 
    Less - grants
 
     and
 
     participation       (370)     (217)     (159)      (84)     (492)
 
  Selling and
 
   marketing              933     2,715       296       797     1,706
 
  General and
 
   administrative       1,152     2,555       337       838     1,705
 
                    --------------------------------------------------
 
 
Total operating
 
 expenses               3,274     7,137     1,092     2,178     5,215
 
                    --------------------------------------------------
 
 
Operating loss         (1,158)   (1,320)     (326)     (356)   (1,541)
 
Financial expenses,
 
 net                      (51)     (360)      (59)      (38)     (158)
 
Other income                -       300         -       273         -
 
                    --------------------------------------------------
 
Loss before taxes on
 
 income and equity
 
 in losses of an
 
 affiliated company    (1,209)   (1,380)     (385)     (121)   (1,699)
 
Taxes on income             -      (297)        -       (63)      (20)
 
Equity in losses of
 
 an affiliated
 
 company                 (215)   (1,720)      (81)   (1,480)     (308)
 
Minority interest in
 
 earnings of a
 
 subsidiary                 -      (230)        -       (80)      (17)
 
                    --------------------------------------------------
 
Net loss from
 
 continuing
 
 operations            (1,424)   (3,627)     (466)   (1,744)   (2,044)
 
 
Net loss related to
 
 discontinued
 
 operations               (18)        -         -         -        (9)
 
                    --------------------------------------------------
 
 
Net loss              $(1,442)  $(3,627)    $(466)  $(1,744)  $(2,053)
 
                    ==================================================
 
Basic and diluted
 
 net loss per share
 
 from continuing
 
 operations            $(0.34)   $(0.69)   $(0.11)   $(0.28)   $(0.44)
 
                    ==================================================
 
 
Basic and diluted
 
 net loss per share
 
 from discontinued
 
 operations            $(0.01)       $-        $-        $-    $(0.00)
 
                    ==================================================
 
 
Basic and diluted
 
 net loss of NIS
 
 4.00 par value per
 
 share                 $(0.35)   $(0.69)   $(0.11)   $(0.28)   $(0.44)
 
                    ==================================================
 
 
Weighted average
 
 number of shares
 
 used in computing
 
 basic and diluted
 
 net loss per share 4,163,166 5,287,886 4,165,224 6,261,105 4,631,106
 
                    ==================================================
 
U.S. dollars in thousands
 
 
SEGMENTS AND GEOGRAPHIC INFORMATION
 
 
Revenues, gross profit and operating profit (loss) for operating
 
segments for the nine and three month ending September 2005 and for
 
the year ended 2004 were as follow:
 
 
 
                      Nine month ended September 30, 2005
 
         -------------------------------------------------------------
 
                                                Adjustment
 
                                   Electronics     and    Consolidated
 
         Connectivity Communication components  eliminations
 
         -------------------------------------------------------------
 
 
Revenues      $3,306       $2,274    $15,301         $(80)    $20,801
 
         =============================================================
 
 
Gross
 
 profit       $1,946         $575     $3,296           $-      $5,817
 
         =============================================================
 
 
Operating
 
 profit
 
 (loss)          $97      $(1,855)    $1,023        $(583)    $(1,320)
 
         =============================================================
 
                     Three month ended September 30, 2005
 
         -------------------------------------------------------------
 
                                               Adjustment
 
                                   Electronics     and    Consolidated
 
         Connectivity Communication components eliminations
 
         -------------------------------------------------------------
 
 
Revenues        $745         $486     $5,002         $(25)     $6,208
 
         =============================================================
 
 
Gross
 
 profit         $491          $44     $1,287           $-      $1,822
 
         =============================================================
 
 
Operating
 
 profit
 
 (loss)          $24        $(709)      $318          $11       $(356)
 
         =============================================================
 
                         Year ended December 31, 2004
 
         -------------------------------------------------------------
 
                                                Adjustment
 
                                   Electronics     and    Consolidated
 
         Connectivity Communication components  eliminations
 
         -------------------------------------------------------------
 
 
Revenues      $5,011       $1,363     $1,908           $-      $8,282
 
         =============================================================
 
 
Gross
 
 profit       $2,933         $414       $327           $-      $3,674
 
         =============================================================
 
 
Operating
 
 profit
 
 (loss)       $1,009      $(1,846)       $66        $(770)    $(1,541)
 
         =============================================================
 

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Headquarters :

20 Freiman St.(entrance from Menahem Cohen Street)
Drive-In Center Building, Industrial Zone
P.O. Box 198 Rishon LeZion 75101 Israel

Directions From Route 1 - exit at Shapirim Junction, towards Rishon Lezion. Stay on Rte 412 as it crosses over Rte. 44 and becomes Derekh Hamaccabim. Turn left onto Freiman Street. BOS is located in the Drive-In Center, on the corner of Freiman and Menahem Cohen Street. Turn right onto Menachem Cohen, and enter the parking lot via the driveway. Parking is on the roof of the building, and the entrance to BOS is from Entrance 8, one flight down.