March 27, 2006

B.O.S. Better Online Solutions Ltd. Reports Results for the Fourth Quarter and Year 2005 Reflecting a Fourth Quarter Breakeven

TERADYON, Israel–(BUSINESS WIRE)–March 27, 2006–B.O.S. Better Online Solutions Ltd. (the “Company” or “BOS”) (NASDAQ: BOSC – News ; TASE:BOSC) reported today its results for the fourth quarter and year ended December 31, 2005.

Edouard Cukierman, Chairman of BOS stated: “After an extended period of losses, we broke-even in the fourth quarter of 2005. We are pleased with the transactions we consummated in 2005. We were able to restructure the company, sell and merge those divisions which were not our growth engines and generated a loss of over $2.4M in 2005, and strengthen our position going forward, on the basis of two profitable divisions: Odem and Connectivity.”

Revenues for the fourth quarter of 2005 increased to $6.3M from $4.2M in the fourth quarter of 2004. Gross profit for the fourth quarter of 2005 represented a gross margin of 19.3%, compared to 36.7% in the fourth quarter of the year 2004. The increase in revenues and decrease in gross margin rate is attributed mainly to the consolidation, starting from November 18, 2004, of the results of operation of Odem Electronic Technologies 1992 Ltd. (“Odem”) (related to the Electronic Component division).

Profit from continuing operations for the fourth quarter of year 2005 amounted to $22 thousands compared to a loss of $620 thousands for the fourth quarter of 2004.

Other income for the fourth quarter of 2005 includes capital gain of $779 thousands that related to the sale of the Communication division to IP Gear, a subsidiary of Qualmax Inc. (Pink Sheets: QMXI – News ). The operating loss of the Communication division amounted to $517 thousands in the fourth quarter of the year 2005.

Revenues for the year 2005 were $27M, an increase of 226% compared to $8.3M in the year 2004. The increase in revenues attributed mainly to the consolidation of Odem’s results of operation since November 18, 2004.

Operating loss for the year 2005 amounted to $2.1M compared to loss of $1.5M in the year 2004. The operating loss for year 2005 attributed by the Communication division, which was sold, amounted to $2.4M.

Other income for year 2005 includes capital gain amounted to $1.1M that related to the sale of the Communication division in December 2005 and the sale of the Software Utilities product line in September 2005.

Equity in losses of an affiliated company, Surf Communication Solutions Ltd., amounted to $1.75M in the year 2005 as compared to $308 thousands in year 2004. The equity loss in the year 2005 includes a cost of $1.4M related to the impairment of the investment in Surf.

Minority interest in the earnings of a subsidiary (Odem) amounted to $223 thousands in the year 2005 as compared to $17 thousands in the year 2004. In November 2005 the Company increased its holding in Odem to 100%.

Loss from continuing operations for the year 2005 amounted to $3.6M (or -$0.64 per share) compared to a loss of $2M (or -$0.44 per share), in the year 2004.

As of December 31, 2005, the Company’s balance sheet shows financial resources (cash, cash equivalents and marketable securities) of $3.7M and loans (long and short term) of $3.6M.

The Company’s audited consolidated financial statements as of December 31, 2005, are being filed with the Securities and Exchange Commission on Form 6-K.

Adiv Baruch , BOS’s CEO commented: “In the last two years the company completed several financing and M&A transactions. As a result, it is now well positioned to enhance profitability with its core assets as well as to develop new businesses and create future growth.”

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 BOSaNOVA 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.

BOS, www.boscorporate.com is traded on NASDAQ and on the Tel-Aviv stock exchange.

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.

CONSOLIDATED BALANCE SHEETS

                       U.S. dollars in thousands

                                                       December 31,

                                                     —————–

                                                        2005     2004

                                                     ——– ——–

                                ASSETS

CURRENT ASSETS:

  Cash and cash equivalents                           $2,346   $2,578

  Marketable securities                                1,333    2,324

  Trade receivables                                    5,199    4,557

  Other accounts receivable and prepaid expenses         592      722

  Inventories                                          3,323    3,086

                                                     ——– ——–

Total current assets                                  12,793   13,267

                                                     ——– ——–

LONG-TERM ASSETS:

  Long term marketable securities                          –      757

  Severance pay fund                                     937    1,143

  Investment in an affiliated company                    722    2,472

  Investment in other companies                        4,690        –

                                                     ——– ——–

Total long-term assets                                 6,349    4,372

                                                     ——– ——–

  OTHER ASSETS                                            49      395

                                                     ——– ——–

PROPERTY, PLANT AND EQUIPMENT, NET                       667    1,019

                                                     ——– ——–

GOODWILL                                                 952    1,569

                                                     ——– ——–

CUSTOMER LIST AND OTHER INTANGIBLE ASSETS, NET         1,836    1,860

                                                     ——– ——–

ASSETS RELATED TO DISCONTINUED OPERATIONS                  –        3

                                                     ——– ——–

                                                     $22,646  $22,485

                                                     ======== ========

                      CONSOLIDATED BALANCE SHEETS

                       U.S. dollars in thousands

                                                       December 31,

                                                     —————–

                                                        2005     2004

                                                     ——– ——–

                 LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

  Short-term loans from banks                         $2,271   $1,354

  Current maturities of long-term bank loans and

   convertible note                                      354      643

  Trade payables                                       3,367    3,845

  Employees and payroll accruals                         772      664

  Deferred revenues                                      258      364

  Accrued expenses and other liabilities               1,571    1,141

                                                     ——– ——–

Total current liabilities                              8,593    8,011

                                                     ——– ——–

LONG-TERM LIABILITIES:

  Bank loans (net of current maturities)                  17       54

  Convertible note (net of current maturities)           921    1,151

  Put option issued to minority shareholders in a

   subsidiary                                              –      359

  Deferred taxes                                         422      348

  Accrued severance pay                                1,190    1,468

                                                     ——– ——–

Total long-term liabilities                            2,550    3,380

                                                     ——– ——–

MINORITY INTEREST IN A SUBSIDIARY                          –      809

                                                     ——– ——–

LIABILITIES RELATED TO DISCONTINUED OPERATIONS           237      237

                                                     ——– ——–

SHAREHOLDERS’ EQUITY:

  Share capital

   Ordinary shares of NIS 4.00 par value:

    Authorized: 8,750,000 shares at December 31,

    2005 and 2004; Issued and outstanding: 6,589,385

    and 4,737,658 shares at December 31, 2005 and

    2004, respectively;                                6,432    4,823

  Additional paid-in capital                          47,588   44,426

  Deferred stock-based compensation                     (112)    (174)

  Accumulated other comprehensive income                  21       31

  Accumulated deficit                                (42,663) (39,058)

                                                     ——– ——–

Total shareholders’ equity                            11,266   10,048

                                                     ——– ——–

Total liabilities and shareholder’s equity           $22,646  $22,485

                                                     ======== ========

                 CONSOLIDATED STATEMENTS OF OPERATIONS

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

                                     Three months

                                        ended           Year ended

                                      December 31,      December 31,

                                     ————— —————–

                                       2005    2004     2005     2004

                                     ——- ——- ——– ——–

Revenues                             $6,252  $4,239  $27,053   $8,282

Cost of revenues                      5,125   2,681   20,109    4,608

Reversal of royalties                    84       –       84        –

                                     ——- ——- ——– ——–

Gross profit                          1,211   1,558    7,028    3,674

                                     ——- ——- ——– ——–

Operating costs and expenses:

  Research and development              524     737    2,608    2,296

  Less – grants and participation       (79)   (122)    (296)    (492)

  Sales and marketing                   848     773    3,563    1,706

  General and administrative            712     553    3,267    1,705

                                     ——- ——- ——– ——–

Total operating costs and expenses    2,005   1,941    9,142    5,215

                                     ——- ——- ——– ——–

Operating  loss                        (794)   (383)  (2,114)  (1,541)

Financial expenses, net                 (88)   (107)    (448)    (158)

Other income, net                       834       –    1,134        –

                                     ——- ——- ——– ——–

Loss before taxes on income             (48)   (490)  (1,428)  (1,699)

Taxes on income                          93     (20)    (204)     (20)

                                     ——- ——- ——– ——–

Net income (loss) after taxes            45    (510)  (1,632)  (1,719)

Equity in losses of an affiliated

 company                                (30)    (93)  (1,750)    (308)

Minority interest in earnings of a

 subsidiary                               7     (17)    (223)     (17)

                                     ——- ——- ——– ——–

Income (loss) from continuing

 operations                              22    (620)  (3,605)  (2,044)

Income (loss) related to

 discontinued operations                  –       9        –       (9)

                                     ——- ——- ——– ——–

Net income (loss)                       $22   $(611) $(3,605) $(2,053)

                                     ======= ======= ======== ========

Basic and diluted net income (loss)

 per share from continuing

 operations                           $0.00  $(0.13)  $(0.64)  $(0.44)

                                     ======= ======= ======== ========

Basic and diluted net income per

 share from discontinued operations   $0.00   $0.00    $0.00    $0.00

                                     ======= ======= ======== ========

Basic and diluted net income (loss)

 per share                            $0.00  $(0.13)  $(0.64)  $(0.44)

                                     ======= ======= ======== ========

                          SEGMENT INFORMATION

                       U.S. dollars in thousands

                 Three months ended December 31, 2005

———————————————————————-

                                     Electronics    Not

          Connectivity Communication  Components  allocated  Con-

                                                             solidated

———————————————————————-

Revenues       $620         $ 679      $4,953      $   –       $6,252

Gross profit   $477         $ 208      $  526      $   –       $1,211

Operating profit

 (loss)        $138         $(517)     $ (296)     $(119)      $ (794)

                 Three months ended December 31, 2004

———————————————————————-

                                     Electronics    Not

          Connectivity Communication  Components  allocated  Con-

                                                             solidated

———————————————————————-

Revenues     $1,464         $ 867      $1,908      $   –       $4,239

Gross profit $  855         $ 376      $  327      $   –       $1,558

Operating profit

 (loss)      $  123         $(397)     $   66      $(175)      $ (383)

                     Year ended December 31, 2005

———————————————————————-

                                     Electronics    Not

          Connectivity Communication  Components  allocated  Con-

                                                             solidated

———————————————————————-

Revenues     $3,926       $ 2,954     $20,253      $ (80)     $27,053

Gross profit $2,425       $   783     $ 3,820      $   –      $ 7,028

Operating profit

 (loss)      $  235       $(2,374)    $   727      $(702)     $(2,114)

                     Year ended December 31, 2004

———————————————————————-

                                     Electronics    Not

          Connectivity Communication  Components  allocated  Con-

                                                             solidated

———————————————————————-

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)

Contact:
Gelbart-Kahana Public Relations & Investors Relations
Mr. Emanuel Kahana,  +972-3-6074717  
info@gk-biz.com

Source: B.O.S. Better Online Solutions Ltd. 

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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.