INVESTORS 

BluePhoenix Solutions Ltd.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Three months ended

March 31,

2011

2010

Unaudited

Revenues

$10,003

$17,348

Cost of revenues

8,675

10,213

Gross profit

1,328

7,135

Research and development costs

1,151

2,628

Selling, general and administrative expenses

4,154

6,486

Total operating expenses

5,305

9,114

Operating loss

(3,977)

(1,979)

Financial expenses, net

192

345

Loss before taxes

(4,169)

(2,324)

Income taxes (benefit)

            138

           (223)

Net loss

(4,307)

(2,101)

Net result attributable to noncontrolling interests

(65)

82

Net loss attributed to BluePhoenix

($4,242)

($2,183)

Net loss per share:

Basic and diluted

($0.18)

($0.09)

Shares used in per share calculation:

Basic and diluted

       24,049

       23,368

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(In thousands, except per share data)

Three months ended

March 31,

2011

2010

Unaudited

GAAP Gross Profit

$1,328

$7,135

Amortization of intangible assets

1,027

2,015

Expenses related to cost saving plan and one time charges

           1,639

         111

Non-GAAP gross profit

$3,994

$9,261

GAAP operating loss

($3,977)

($1,979)

Amortization of intangible assets

1,027

2,015

Expenses related to cost saving plan and one time charges

           3,414

         339

Stock-based compensation

378

569

Non-GAAP operating income

$842

$944

GAAP Net loss attributable to BluePhoenix

($4,242)

($2,183)

Amortization of intangible assets

1,027

2,015

Expenses related to cost saving plan and one time charges

           3,414

         339

Stock-based compensation

378

569

Revaluation of warrants and issuance costs

(197)

        (570)

Non-GAAP Net income attributable to BluePhoenix

$380

$170

Shares used in diluted earnings per share calculation

         24,279

23,562

Non - GAAP Diluted Earnings per share

$0.02

$0.01

BluePhoenix Solutions Ltd.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

March 31,

December 31,

2011

2010*

Unaudited

ASSETS

Current Assets:

Cash and cash equivalents

$8,953

$12,295

Trade accounts receivable, net

12,939

16,583

Other current assets

2,540

2,337

Total Current Assets

24,432

31,215

Non-Current Assets:

Long term receivables

452

445

Property and equipment, net

1,346

1,396

Goodwill

36,969

36,969

Intangible assets and other, net

7,947

8,974

Total Non-Current Assets

46,714

47,784

TOTAL ASSETS

$71,146

$78,999

LIABILITIES AND EQUITY

Current Liabilities:

Short-term bank credit

$11,828

$14,363

Trade accounts payable

5,231

5,129

Deferred revenues

3,164

4,472

Other current liabilities

6,925

6,604

Total Current Liabilities

27,148

30,568

Non-Current Liabilities

Accrued severance pay, net

955

1,284

Loans from banks and others

286

266

Derivative liabilities - Warrants

643

839

Total Non-Current Liabilities

1,884

2,389

Total Equity

42,114

46,042

TOTAL LIABILITIES AND EQUITY

$71,146

$78,999

*

Derived from audited financial statements

BluePhoenix Solutions Ltd.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Three months ended

March 31,

2011

2010

Unaudited

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

($4,307)

($2,101)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

1,180

2,221

Decrease in accrued severance pay, net

(329)

(330)

Stock–based compensation

378

569

Deferred income taxes, net

6

               -  

Change in fair value of warrants

(197)

(570)

Changes in operating assets and liabilities:

Reclassification adjustment to income on marketable securities

               -  

21

Decrease in trade receivables

3,639

68

Decrease (increase) in other current assets

(203)

272

Increase (decrease) in trade payables

102

(1,672)

Increase (decrease) in other current liabilities and deferred revenues

190

(521)

Net cash provided by (used in) operating activities

459

(2,043)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

(103)

(110)

Proceeds from sale of marketable securities

               -  

               48

Additional consideration of previously acquired subsidiaries and activities

(1,163)

(1,791)

Investment in newly-consolidated activity

               -  

(702)

Net cash used in investing activities

(1,266)

(2,555)

CASH FLOWS FROM FINANCING ACTIVITIES:

Receipt (repayment) short term bank credit, net

(2,535)

3,000

Repayment of long-term loans

               -  

(3,250)

Net cash used in financing activities

(2,535)

(250)

TOTAL NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(3,342)

(4,848)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

12,295

22,328

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$8,953

$17,480