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, 2011
Jun. 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income (loss) $ (4,714,584) $ 451,548
Adjustments required to reconcile net income (loss) to net cash provided by (used in) operating activities:    
Depreciation 603,819 622,345
Amortization of intangible assets and capitalized software 961,299 838,906
Amortization of debt discount 34,841 96,000
Compensation related to shares issued to employees and directors 132,919 302,096
Adjustment to value of warrants and embedded features on the senior convertible notes (16,085) (195,647)
Capital loss from sale of property and equipment 50,507  
Deferred taxes 199,407 274,220
Changes in operating assets and liabilities:    
Severance pay, net 100,610 151,253
Trade receivables 141,170 281,997
Other accounts receivable and prepaid expenses (583,840) (959,793)
Inventories (4,269,513) 1,358,761
Unbilled receivables 137,573 (2,728,350)
Deferred revenues (979,028) 1,394,620
Trade payables 2,680,494 318,054
Other accounts payable and accrued expenses (1,162,979) (1,234,249)
Net cash provided by (used in) operating activities (6,683,390) 971,761
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchase of property and equipment, net of investment grants received from the State of Israel (545,973) (337,414)
Additions of capitalized software development (24,323) (231,516)
Proceeds from sale of property and equipment 886  
Sales of marketable securities 399,449  
Decrease (increase) in restricted collateral deposits (94,003) 100,340
Net cash used in investing activities (263,964) (468,590)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Repayment of long term debt (481,649) (527,389)
Increase in short term bank credit 2,347,964  
Purchase of treasury stock (90,257) (56,453)
Net cash provided by (used in) financing activities 1,776,058 (583,842)
DECREASE IN CASH AND CASH EQUIVALENTS (5,171,296) (80,671)
CASH ACCRETION (EROSION) DUE TO EXCHANGE RATE DIFFERENCES 8,985 (43,001)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 6,335,307 1,901,525
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 1,172,996 1,777,853
SUPPLEMENTARY INFORMATION ON NON-CASH TRANSACTIONS:    
Interest paid during the period 146,718 289,839
Taxes on income paid during the period 8,296 85,147
Note conversion to common stock $ 459,058 $ 425,647