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 $)
9 Months Ended
Sep. 30, 2011
Sep. 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (6,240,426) $ (655,816)
Adjustments required to reconcile net loss to net cash provided by (used in) operating activities:    
Depreciation 920,265 922,746
Amortization of intangible assets and capitalized software 1,442,519 1,281,233
Amortization of debt discount 39,351 133,213
Compensation related to shares issued to employees and directors 245,372 404,192
Adjustment to value of warrants and embedded features on the senior convertible notes (161,339) (112,593)
Capital loss from sale of property and equipment 50,507  
Deferred taxes 366,143 430,457
Changes in operating assets and liabilities:    
Severance pay, net 18,743 157,749
Trade receivables 3,461,534 1,183,653
Other accounts receivable and prepaid expenses (582,551) 1,586,551
Inventories (4,938,260) 2,248,421
Unbilled receivables (1,466,643) (1,434,842)
Deferred revenues 752,896 785,538
Trade payables 7,847,029 (249,602)
Other accounts payable and accrued expenses (2,341,600) (1,784,063)
Net cash provided by (used in) operating activities (586,460) 4,896,837
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchase of property and equipment, net of investment grants received from the State of Israel (2,555,385) (539,901)
Additions of capitalized software development (46,807) (242,154)
Changes in value of investment in affiliated company (19,056) 60,000
Proceeds from sale of property and equipment 886  
Sales of marketable securities 399,449  
Decrease (increase) in restricted collateral deposits 52,953 (110,792)
Net cash used in investing activities (2,167,960) (832,847)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Change in long term debt 802,726 (996,093)
Change in short term bank credit (2,451,905) (1,546,883)
Purchase of treasury stock (113,297) (125,141)
Net cash provided by (used in) financing activities (1,762,476) (2,668,117)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,516,896) 1,395,873
CASH ACCRETION (EROSION) DUE TO EXCHANGE RATE DIFFERENCES 30,101 28,369
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 1,848,512 3,325,767
SUPPLEMENTARY INFORMATION ON NON-CASH TRANSACTIONS:    
Interest paid during the period 191,871 425,574
Taxes on income paid during the period 160,847 134,599
Note conversion to common stock $ 642,420 $ 425,647