INVESTORS 

BluePhoenix Solutions Ltd.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Three months ended

Nine months ended

September 30,

September 30,

2011

2010

2011

2010

Unaudited

Unaudited

Revenues

$10,070

$11,595

$29,987

$45,110

Cost of revenues

7,465

9,620

24,502

29,049

Gross profit

2,605

1,975

5,485

16,061

Research and development costs

1,066

1,396

3,422

5,454

Selling, general and administrative expenses

4,249

7,170

12,272

20,492

Total operating expenses

5,315

8,566

15,694

25,946

Operating loss

(2,710)

(6,591)

(10,209)

(9,885)

Financial expenses, net

525

605

836

389

Loss before taxes

(3,235)

(7,196)

(11,045)

(10,274)

Taxes on income (benefit)

              31

           (214)

83

         (291)

Net loss

(3,266)

(6,982)

(11,128)

(9,983)

Net income attributable to noncontrolling interests

(60)

37

(30)

277

Net loss attributable to BluePhoenix

($3,206)

($7,019)

($11,098)

($10,260)

Net loss per share:

Basic and diluted

($0.13)

($0.30)

($0.45)

($0.44)

Shares used in per share calculation:

Basic and diluted

 24,941

       23,662

     24,486

      23,504

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(In thousands, except per share data)

Three months ended

Nine months ended

September 30,

September 30,

2011

2010

2011

2010

Unaudited

Unaudited

GAAP Gross Profit

$2,605

$1,975

$5,485

$16,061

Amortization of intangible assets

886

1,690

2,950

5,414

Expenses related to cost saving plan and one time charges

             913

      2,534

4,237

      2,878

Non-GAAP gross profit

$4,404

$6,199

$12,672

$24,353

GAAP operating loss

($2,710)

($6,591)

($10,209)

($9,885)

Amortization of intangible assets

886

1,690

2,950

5,414

Expenses related to cost saving plan and one time charges

           2,433

      4,841

9,337

      5,697

Stock-based compensation

305

286

947

1,261

Non-GAAP operating income

$914

$226

$3,025

$2,487

GAAP Net loss attributable to BluePhoenix

($3,206)

($7,019)

($11,098)

($10,260)

Amortization of intangible assets

886

1,690

2,950

5,414

Expenses related to cost saving plan and one time charges

           2,433

      4,841

9,337

      5,697

Stock-based compensation

305

286

947

1,261

Revaluation of warrants and discount amortization

(31)

         567

(288)

     (1,450)

Non-GAAP Net income attributable to BluePhoenix

$387

$365

$1,848

$662

Shares used in diluted earnings per share calculation

         25,009

     23,796

          24,895

     23,616

Non - GAAP Diluted Earnings per share

$0.02

$0.02

$0.07

$0.03

BluePhoenix Solutions Ltd.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

Sep 30,

December 31,

2011

2010*

Unaudited

ASSETS

Current Assets:

Cash and cash equivalents

$2,990

$12,295

Trade accounts receivable, net

                  11,558

              16,583

Other current assets

                    2,671

                2,337

Total Current Assets

                  17,219

              31,215

Non-Current Assets:

Long term receivables

                       465

                   445

Property and equipment, net

                    1,061

                1,396

Goodwill

                  36,969

              36,969

Intangible assets and other, net

                    6,025

                8,974

Total Non-Current Assets

                  44,520

              47,784

TOTAL ASSETS

$61,739

$78,999

LIABILITIES AND EQUITY

Current Liabilities:

Short-term bank credit

$12,350

$14,363

Trade accounts payable

                    3,758

                5,129

Deferred revenues

                    3,253

                4,472

Other current liabilities

                    4,817

                6,604

Total Current Liabilities

                  24,178

              30,568

Non-Current Liabilities

Accrued severance pay, net

                       564

                1,284

Loans from banks and others

                       219

                   266

Derivative liabilities - Warrants

                       106

                   839

Total Non-Current Liabilities

                       889

                2,389

Total Equity

                  36,672

              46,042

TOTAL LIABILITIES AND EQUITY

$61,739

$78,999

*

Derived from audited financial statements

BluePhoenix Solutions Ltd.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Three months ended

Nine months ended

September 30,

September 30,

2011

2010

2011

2010

Unaudited

Unaudited

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

($3,266)

($6,982)

($11,128)

($9,983)

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

Depreciation and amortization

1,048

1,896

3,415

6,022

Decrease in accrued severance pay, net

(164)

111

(720)

(304)

Stock–based compensation

305

286

947

1,261

Deferred income taxes, net

(14)

            -

(14)

(150)

Long term receivable

(33)

            -

(20)

            -

Change in fair value of warrants and discount amortization

(31)

        567

(288)

(1,451)

Changes in operating assets and liabilities:

Reclassification adjustment to income on marketable securities

            -

4

              -

25

Decrease (increase) in trade receivables

(66)

1,845

5,025

2,555

Decrease (increase) in other current assets

37

(154)

(334)

23

Decrease in trade payables

(427)

(469)

(1,371)

(1,832)

Decrease in other current liabilities and deferred revenues

(1,263)

(1,349)

(1,828)

(2,684)

Net cash used in operating activities

(3,874)

(4,245)

(6,316)

(6,518)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

(20)

(29)

(161)

(284)

Proceeds from sale of property and equipment

32

          12

            32

          64

Additional consideration of previously acquired subsidiaries and activities

          -  

-

(1,163)

(1,925)

Investment in newly-consolidated activity

          -  

 -

              -

(702)

Net cash (provided by) used in investing activities

12

(17)

(1,292)

(2,847)

CASH FLOWS FROM FINANCING ACTIVITIES:

Receipt (repayment) short term bank credit, net

(1,186)

(676)

(6,054)

     4,306

Issuance of shares and loan

            -

            -

5,000

            -

Repayment of long-term loans

            -

            -

(426)

(3,750)

Receipt of long term loans

            -

            -

              -

     1,000

Dividend paid to noncontrolling interest

(76)

 -

(217)

(90)

Net cash provided by (used in) financing activities

(1,262)

(676)

(1,697)

1,466

TOTAL NET DECREASE IN CASH AND CASH EQUIVALENTS

(5,124)

(4,938)

(9,305)

(7,899)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

8,114

19,367

12,295

22,328

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$2,990

$14,429

$2,990

$14,429