Quarterly report pursuant to Section 13 or 15(d)

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

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CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (USD $)
6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:    
Loss from discontinued operations $ (1,571,201) $ (2,288,039)
Loss from continuing operations (2,389,902) (2,426,545)
Adjustments required to reconcile net profit (loss) to net cash (used in) provided by operating activities:    
Depreciation 553,404 536,368
Amortization of intangible assets and capitalized software 601,305 954,623
Amortization of debt discount   34,841
Compensation related to shares issued to employees, consultants and directors 118,574 132,919
Adjustment to value of warrants and imbedded features on the senior convertible notes   (16,085)
Deferred tax provision 299,250 199,407
Changes in operating assets and liabilities:    
Severance pay, net 124,583 17,739
Trade receivables 561,722 1,862,780
Other accounts receivable and prepaid expenses 123,114 (198,274)
Inventories (873,220) (1,312,116)
Unbilled receivables (4,421,397) 137,573
Deferred revenues (80,212) (1,295,192)
Trade payables 3,558,298 (728,927)
Accounts payable and accrued expenses (350,763) (1,159,277)
Discontinued operations 178,263 (1,123,146)
Net cash provided by (used in) operating activities (3,568,182) (6,671,351)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchase of property and equipment (312,408) (447,290)
Additions to capitalized software development (159,616) (24,324)
Investment in marketable securities   399,449
Decrease (increase) in restricted collateral deposits 1,586,586 (15,768)
Discontinued operations 30,725 (188,067)
Net cash provided by (used in) investing activities 1,145,287 (276,000)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Repayment of long term debt (13,907) (482,782)
Changes in short term bank credit 1,922,893 2,233,192
Purchase of treasury stock   (90,257)
Discontinued operations (375,649) 115,905
Net cash provided by (used in) financing activities 1,533,337 1,776,058
DECREASE IN CASH AND CASH EQUIVALENTS (889,558) (5,171,293)
CASH ACCRETION (EROSION) DUE TO EXCHANGE RATE DIFFERENCES 45,928 68,490
CASH ACCRETION (EROSION) DUE TO EXCHANGE RATE DIFFERENCES – DISCONTINUED OPERATIONS   (59,507)
NET CHANGE IN CASH AND EQUIVALENTS – DISCONTINUED OPERATIONS (88,928) 550,909
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 2,324,163 5,800,485
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 1,391,605 1,189,084
SUPPLEMENTARY INFORMATION ON NON-CASH TRANSACTIONS:    
Interest paid during the period 155,752 106,421
Taxes paid on income during the period   $ 8,296