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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2002   
COMMISSION FILE NUMBER 1 - 12666

ROBOMATIX TECHNOLOGIES LTD.(Exact name of Registrant as specified in its charter and
translation of Registrants name into English)

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Israel
(Jurisdiction of incorporation or organization)

1
Azrieli Center, Tel Aviv 67021, Israel
(Address of principal executive offices)

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Securities
registered or to be registered pursuant to Section 12(b) of the Act:

None

Securities
registered or to be registered pursuant to Section 12(g) of the Act:

Ordinary Shares,
Par Value NIS 1.46 Per Share
(Title of Class)

Securities
for which there is reporting obligation pursuant to section 15(d) of the act:

(Title of Class)   None

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Indicate the number of
outstanding shares of each of the Issuers classes of capital or common stock
as of the close of the period covered by the annual report: 13,599,626 Ordinary
Shares

Indicate by check mark
whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
proceeding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.

Yes x
No
o

Indicate by check mark
which financial statement item the Registration has elected to follow:

Item 17.oItem
18.x

1

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This
annual report on Form 20-F includes certain forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934.  The use of the words projects, expects,
may, plans or intends, or words of similar import, identifies a statement
as forward-looking.  There can be no
assurance, however, that actual results will not differ materially from our
expectations or projections.  Factors
that could cause actual results to differ from our expectations or projections
include the risks and uncertainties relating to our business described in this
annual report at Item 3. Risk Factors.

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We
have prepared our consolidated financial statements in United States dollars
and in accordance with accounting principles generally accepted in the United
States (GAAP). All references herein to dollars or $ are to United States
dollars, all references to Shekels or NIS are to New Israeli Shekels and
all references to Euro or  are to the currency of the European Economic and
Monetary Union (EMU).

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As
used herein, Robomatix, we or us refer to Robomatix Technologies Ltd. and
its consolidated and significant subsidiaries, unless the context suggests otherwise
or when we refer to a specific subsidiary.

1

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TABLE OF
CONTENTS

|PART 1 | 3                                                                                      
|------ | ---------------------------------------------------------------------------------------
|       |                                                                                        
|       | Item 1: Identity of Directors, Senior Management and
  Advisers                        
|       | Item 2: Offer Statistics and Expected Timetable                                        
|       | Item 3: Key Information                                                                
|       | Item 4: Information on the Company                                                     
|       | Item 5: Operating and Financial Review and Prospects                                   
|       | Item 6: Directors, Senior Management and Employees                                     
|       | Item 7: Major Shareholders and Related Party
  Transactions                            
|       | Item 8: Financial Information                                                          
|       | Item 9: The Offer and Listing                                                          
|       | Item 10: Additional Information                                                        
|       | Item 11: Quantitative and Qualitative Disclosure
  about Market Risk                   
|       | Item 12: Description of Securities Other Than Equity
  Securities                      
|       |                                                                                        
|PART 2 | 62                                                                                     
|       |                                                                                        
|       | Item 13: Defaults, Dividend Arrearages and Delinquencies                               
|       | Item 14: Material Modifications to the Rights of
  Security Holders and Use of Proceeds
|       | Item 15: Controls and Procedures                                                       
|       |                                                                                        
|PART 3 | 63                                                                                     
|       |                                                                                        
|       | Item 18: Financial Statements                                                          
|       | Item 19: Exhibits                                                                      

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PART 1

Item 1:  Identity
of Directors, Senior Management and Advisers

Not
applicable.

Item 2:  Offer
Statistics and Expected Timetable

Not
applicable.

Item 3:  Key
Information

The selected financial data is incorporated by
reference to Item 5 of this annual report.

Risk
Factors

This
annual report and statements that we may make from time to time may contain
forward-looking information.  There can
be no assurance that actual results will not differ materially from our
expectations, statements or projections. 
Factors that could cause actual results to differ from our expectations,
statements or projections include the risks and uncertainties relating to our
business described below.

General Risks Affecting our Business

We have limited funds and may not be able
to raise additional funds to develop our business, which could force us to
discontinue our operations. We are a holding company
and we currently have limited funds. In addition, our ability to control the
generation of revenue from our operating companies is limited since we hold a
controlling interest in only one of our operating companies.  Furthermore, we may not be able to attract
investors to purchase our securities in future financings.

Since we are unable to control the
operations of our portfolio companies in which we hold only partial interests,
we cannot directly control the value of our business.  As a holding company our assets are
comprised of equity securities and may also include in the future debt
securities of other companies.   Therefore,
the value of our shares is influenced by the value of the interests that we
hold in other companies. If the value of these interests decline, so could the
value of our ordinary shares.  Our
ability to direct the operations of the companies in which we hold partial
interests is limited.   In addition, the
value of these companies could fluctuate due to market conditions and other
conditions over which we have no control.

We may not be able to successfully
implement our development and growth plans, and as a result, the market price
of our ordinary shares could decline.  As of May 31, 2003, we primarily hold direct
and indirect interests in five active companies.  We plan to acquire additional interests in operating companies
and businesses, in technology and other fields. We believe that our success is
dependent not only upon the success of the companies in which we already hold
interests but also upon our ability to successfully implement our development
plans.  The market price of our ordinary
shares has been volatile and if the companies in which we hold an interest are
not successful or if we are unable to accomplish our development goals, the
market price of our shares could decline. 
A decline in the value of our company would prevent us from being
financially able to acquire interests in other technology companies and prevent
us from implementing our development and growth plans, further devaluing the
price of our ordinary shares.

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Our controlling shareholders may sell a substantial amount
of their shares or cease their direct participation in the development of our
business and we may be unable to successfully locate future investments. Our controlling shareholders actively
participate and direct our fundraising and investment activity. In the event
that our controlling shareholders sell their controlling block of our ordinary
shares, there is a risk that without their expertise we would be unable to
succeed in our business plans as we could be unable to identify future
profitable investments.

If we are deemed to be an investment
company, we will be subject to certain restrictions that may prevent us from
conducting our business as currently conducted.  We may incur significant costs and suffer
other adverse consequences if we are deemed to be an investment company under
the United States Investment Company Act of 1940, as amended.  A company may be deemed to be an investment
company if it owns investment securities with a value exceeding 40% of its total
assets, subject to certain exclusions. 
Investment companies are subject to registration under, and compliance
with, the United States Investment Company Act of 1940 unless a particular
exclusion or safe harbor exemption applies. 
If we were to be deemed an investment company, we would become subject
to the requirements of the United States Investment Company Act of 1940.  As a consequence, we would be prohibited
from engaging in business, offering for sale, selling or issuing our securities
by the use of the mails or any means or instrumentality of interstate commerce
and might be subject to civil and criminal penalties for noncompliance. In
addition, our contracts with our affiliates might be voidable.

In 2000, following the
sale of all of our past operating activities and the purchase of the assets of
Silverboim Technology (1999) Ltd., we became exposed to the risk of being
deemed an investment company.  On March
23, 2000, our board of directors resolved that we conduct our business
activities, absent exemptive or other relief from the Securities and Exchange
Commission, in a manner that does not cause us to be deemed an investment
company requiring registration under the United States Investment Company Act
of 1940.  We currently meet certain
safe harbor requirements under the United States Investment Company Act of
1940, so that we are not deemed an investment company.  However, there is a risk that we could fail
to meet the safe harbor requirements and be deemed an investment company in
the future.  Moreover, because we would
like to avoid investment company status in the future, we may also be unable to
freely purchase investment securities in additional companies that may be
important to our operating strategy.

We must successfully manage and integrate
transactions.We hope to expand through the acquisition
of additional interests in operating companies and businesses in technology and
other fields. There is no assurance that we will successfully complete future
acquisitions. In addition, some of our intended acquisitions may be of interests
in early-stage companies with limited operating histories and limited or no
revenues.  We may not be able to
successfully develop these young companies or generate meaningful revenues from
acquisitions of such interests.  Any
failure in managing and integrating future acquisitions would cause us to be
unsuccessful in achieving our goals and could reduce the value of our
investments and our ordinary share market price.

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We will need to recruit and integrate qualified employees as
we grow.We have only two employees and receive
management services from Silverboim. We will need to recruit more employees in
the event that we are able to consummate our plans for development and growth.
We may not be able to attract and hire a sufficient number of qualified
employees to facilitate our growth. In addition, our growth could place a
significant strain on our managerial and financial resources and might inhibit
our ability to achieve the rapid execution necessary to successfully develop
our business.  See Item 6: Directors,
Senior Management and Employees.

If we are characterized as a passive
foreign investment company for U.S. federal income tax purposes, our U.S.
shareholders may suffer adverse tax consequences.  Generally, if for any taxable year 75% or
more of our gross income is passive income, or at least 50% of our assets are
held for the production of, or produce, passive income, we may be characterized
as a passive foreign investment company for U.S. federal income tax purposes.
If we are characterized as a passive foreign investment company, our U.S.
shareholders may suffer adverse tax consequences, including having gains
realized on the sale of our shares taxed at ordinary income rates, rather than
the capital gain rate. A determination that we are a passive foreign investment
company could have an adverse effect on the price and marketability of our
shares. We continue to monitor whether we are a passive foreign investment
company. See Item 10. Additional Information  Taxation  Passive Foreign
Investment Companies.

The Office of the Israeli Chief Scientist
could require us to pay back previously granted funds, which could affect our
profitability.  In
the past we received approximately $4.4 million in grants from the Office of
the Israeli Chief Scientist for projects relating to research and development.
Because we discontinued operations and/or sold all of our operating businesses
and research projects, there is a risk that the Office of the Israeli Chief
Scientist will require us to repay some or all of the grants previously
received plus interest, which could affect our profitability.   Edco Technologies 1993 Ltd., formerly
Associative Computing Ltd., which we sold in 2003, received $0.3 million in
grants from the Israeli Chief Scientist. 
Upon sale of substantially all of its assets to NeoMagic Israel Ltd.,
NeoMagic Israel Ltd. undertook to pay any royalties owed by Edco Technologies
to the Israeli Chief Scientist with respect to grants received by Associative
Computing.  In the event that NeoMagic
Israel Ltd. or its parent, NeoMagic Corporation, fails to comply with the
requirements of the law or fails to pay royalties, there is a risk that the
Israeli Chief Scientist will require Edco Technologies to pay any royalties
owed. Although we sold our shares in Edco Technologies, we agreed to indemnify
the purchaser of Edco Technologies for any obligation to pay such royalties.

Terrorist attacks that occurred in New York
and Washington on September 11, 2001, the war in Iraq and other acts of violence
or war may materially affect the markets on which our securities trade, the
markets in which we operate, our operations and profitability.  On September 11, 2001, the United States was
subject to terrorist attacks at the World Trade Center buildings in New York
City, at the Pentagon in Washington, D.C. and in Pennsylvania.  In the aftermath of the September 11, 2001
terrorist attacks on the United States, the United States-led coalition of
nations commenced a series of retaliatory military strikes in Afghanistan upon
strategic installations of the Taliban regime, and governmental intelligence
authorities issue from time to time warnings of the imminent threat of further
attacks against civilian and military installations. More recently, a coalition
of countries led by the United States and the United Kingdom successfully
concluded military operations in Iraq, toppling the Saddam Hussein regime.
These attacks and armed conflicts, as well as the uncertainty surrounding these
issues, have had, and we expect will continue for the unforeseeable future to
have, an adverse effect on the global economy and could result in a disruption
of our business or that of our customers.

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Corporate governance scandals and new legislation could
increase the cost of our operations.As a result of recent corporate
governance scandals and the legislative and litigation environment resulting
from those scandals, the costs of being a public company in general are
expected to increase in the near future. New legislation, such as the recently
enacted Sarbanes-Oxley Act of 2002, will have the effect of increasing the
burdens and potential liabilities of being a public reporting company. This and
other proposed legislation may increase the fees of our professional advisors
and our insurance premiums.

Specific Risks Related to Certain
Acquisitions

If we are unable to repay the loan we took
from Bank Hapoalim in order to finance the acquisition of the share capital of
Franz Kalff by our wholly owned subsidiary, we could be forced to discontinue
our operations.The
share capital of Franz Kalff was purchased by Mersa Holding B.V., our wholly
owned subsidiary, on January 24, 2001 from Gilex Holdings B.V.  For the purpose of this transaction, Mersa
borrowed from us an aggregate amount of $8.4 million, $6.3 million in cash and
in addition we issued Gilex 1.2 million ordinary shares valued at the time at
$2.1 million. On January 18, 2001, in order to finance the loan to Mersa we
took a loan from Bank Hapoalim in a principal amount in Euro equal to
approximately $5.5 million.  In December
2002, Franz Kalff sold its land in a leaseback transaction for the aggregate
amount of $3,500,000. The amount of $3,500,000 was distributed to Mersa and
Mersa transferred $ 2,500,000 to Robomatix which we used to repay Bank
Hapoalim. As of the date of this report, the terms and schedule of the
repayment of the remainder of the loan have not been finalized with Bank
Hapoalim. The loan is currently denominated in Swiss Francs and bears interest
at the variable LIBOR (applicable to Swiss Franc deposits) rate plus 2.5% per
annum. Under the loan agreement, Bank Hapoalim has a security interest in all
of our assets, whether now owned or later acquired, including payments received
from Mersa.  Therefore, if we are unable
to repay the loan, Bank Hapoalim would be entitled foreclose on our assets in
order to recover any balance still owed under the loan, which could force us to
discontinue operations. See Item 4: Information on the Company  History and
Development  Recent Principal Capital Expenditures.

As long as there is a balance due on the
loan that we took from Bank Hapoalim, we will not be able to utilize any
revenues generated by Franz Kalff, which could impair our ability to grow.   Our loan agreement with Bank Hapoalim
provides that subject to the requirements of the law and the ordinary course of
business of Mersa, we will use our best efforts to cause Mersa to pay
dividends. Payments of dividends, management fees or any other amount paid to
us by Mersa will be deposited in our bank account and will be used to repay our
loan to Bank Hapoalim.  Therefore, even
if we receive funds from Mersa, we will not be able to utilize these funds
until the balance on our loan from Bank Hapoalim is repaid.  This lack of liquidity could impair our
ability to grow if we are not able to raise funds from other resources.  See Item 4: Information on the Company 
History and Development  Recent Principal Capital Expenditures.

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If Franz Kalff loses any of its customers, its revenues may
decline and it may have difficulty fulfilling its obligations.Franz Kalff markets
and sells its products to retail stores and car manufacturers.  Its revenues from sales to its five largest
customers constitute approximately 49% of its total revenues in 2002.  If Franz Kalffs business relations with one
or more of these five customers is terminated, Franz Kalffs sales revenues
could decline. In the event that its revenues decline significantly, Franz
Kalff could have difficulty fulfilling its financial obligations, including the
payment of its annual rent. See Item 4: Information on the Company  Business
Overview.

If Franz Kalff is unable to maintain a
competitive edge, it may not continue to be profitable.The market for first aid
kits is a competitive market and is expected to become even more competitive if
the members of the European Union adopt legislation that would require car
owners to keep a first aid kit in every car. If Franz Kalff is unable to
maintain its current competitive edge and to develop its business in order to
succeed in the European market it may not continue to be profitable in the
future. See Item 4: Information on the Company  Business Overview.

If Franz Kalffs managing director departs,
it may not continue to be profitable.In
recent years, Franz Kalff has shown operational profit. A material factor in
this success is the work of Franz Kalffs managing director, Mr. Gunther
Schuftan.  If Mr. Gunther Schuftans
employment is terminated, it could adversely affect Franz Kalffs
profitability.  The term of the
employment agreement of Gunther Schuftan expires on March 31, 2005 and there is
no assurance that his employment will be extended beyond that date.  See Item 4: Information on the Company 
Business Overview and Item 6: Directors, Senior Management and Employees.

If damages are caused by its products,
Franz Kalff could be subject to liability, which may damage its reputation and
reduce its profitability.Franz Kalff could be subject to liability for damages caused by its
products.  Product liability claims are
common as a result of failures of products in the first aid kit industry.  Franz Kalff is insured against product
liability and to our knowledge, no product liability claims were raised against
Franz Kalff in the past.  However, in
the event that such claims are brought against Franz Kalff, it could cause our
reputation to be tarnished and orders of our products to be cancelled or
reduced.  See Item 4: Information on
the Company  Business Overview.

If we are unable to repay the loans we took
from Bank Hapoalim in order to finance our insurance company investments, the
Bank could take possession of the shares.We borrowed NIS
10,000,000 in connection with our investments in Israel Land Development
Insurance Company Ltd.,  and ICIC  The
Israel Credit Insurance Company Ltd., two private Israeli insurance companies.
This loan is part of our debt to Bank Hapoalim in connection with other
transactions and its repayment terms have not yet been finalized. In connection
with the loan, Bank Hapoalim has a security interest in all the shares which we
purchased in the two companies. Therefore, if we are unable to repay the loan,
Bank Hapoalim would be entitled to foreclose on these shares in order to
recover any balance still owed under the loan. See Item  4: Information on the Company  Recent
Capital Expenditures.

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Fluctuations in interest rates and the currency exchange
rate could result in a material increase in the expenses incurred in connection
with the loans that we took from Bank Hapoalim.The loans we took from Bank Hapoalim in
order to finance our acquisitions and investments may be denominated in
different currencies and linked to variable interest rates, such as the EUROBOR
and indexes. Upward fluctuations in the insurance rates or in the value of the
currency in which the loans are denominated, could result in a material
increase in expenses incurred in connection with the loan and, consequently, a
decrease in liquidity and an inability to grow our business according to our
business plan.

We have stopped
purchasing insurance for manufacturing defects in products that we manufactured
in the past.We could be held liable for manufacturing
defects in products that we or our subsidiaries manufactured in the past.
Although, to the best of our knowledge, no claims of manufacturing defects have
been raised as of the date of this report and use of these products is limited,
there is still a risk that such claims will be raised in the future and we
could be forced to pay out significant sums of money to satisfy claims. See
Item 4: Information on the Company  History and Development.

Risks Related to the Public Market for Our
Ordinary Shares

There is only a limited public market for
our ordinary shares, which limits the liquidity of our ordinary shares and may
make it difficult to sell our ordinary shares.Currently, the only public market for
our ordinary shares is the over-the-counter bulletin board.  The over-the-counter bulletin board
generally has a more limited trading market than other stock markets.  There can be no assurance that a broad
public market for our ordinary shares will develop in the future. These factors
could make it difficult for our shareholders to sell our ordinary shares and
could result in a decrease of the value of our ordinary shares.  See Item 9: The Offer and Listing  Price
History and Market Information.

Since there is a limited public market for
our ordinary shares, future issuance of equity or equity-linked securities
could result in a decrease of the value of our ordinary shares.If a broader public market for our
ordinary shares does not develop, subsequent issuance of equity or
equity-linked securities could saturate the market and depress the value of our
ordinary shares.

Since ownership of our ordinary shares is
concentrated, our principal shareholders have a significant affect on important
decisions regarding our business and they may be able to prevent takeover
attempts that could be advantageous to other shareholders and our other
shareholders ability to affect our activities could be limited.As
of June 11, 2003, Silverboim Holdings Ltd. beneficially owned approximately
60.87% of our share capital and Gilex Holdings B.V. beneficially owned 16.21%
of our share capital.  Silverboim
Holdings also provides us with management and consulting services. Therefore,
Silverboim Holdings and Gilex may be able to significantly affect important
decisions regarding our business, as well as prevent corporate transactions
such as mergers, consolidations or a sale of substantially all of our assets,
which might be favorable from our standpoint or that of other
shareholders.  The ability of our other
shareholders to affect our activities could be limited. See Item 7: Major
Shareholders and Related Party Transactions.

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Risks Related to our Operations in Israel

Security, political and economic
instability in Israel may harm our business.We are
incorporated under the laws of the State of Israel and our offices are located
in Israel. In addition, we have holdings in Israeli companies. Accordingly, we
are directly affected by economic, political and military conditions in
Israel.  Since the establishment of the
State of Israel in 1948, a number of armed conflicts have taken place between
Israel and its Arab neighbors and a state of hostility, varying from time to
time in intensity and degree, has led to security and economic problems for
Israel.  There has been an increase in hostilities,
civil unrest, terrorist activities and military action, which began in
September 2000 and which have continued with varying levels of severity into
2003. This or any future instability could result in our inability to maintain
or develop our business.  In addition,
certain countries, companies and other organizations continue to boycott
Israeli firms and others doing business in Israel or with Israeli
companies.  Furthermore, Israels
economy is currently suffering from a recession. Although the government has
proposed a significant economic plan, there is uncertainty as to the
effectiveness of the plan and the timing of any economic recovery.

If a substantial number of our officers and
directors were called for military duty, our management resources, and as a
result, our operations, could be compromised.If our chief executive officer or a
substantial number of our directors were called for military duty, our
management resources, and as a result, our operations, could be
compromised.  All nonexempt male adult
citizens of Israel are obligated to perform military reserve duty and may be
called for active duty under emergency circumstances. As of the date of this
report, our chief executive officer and most of our directors are subject to
military reserve duty.

Service of process and enforcement of
judgments on our officers and directors may be impossible.Our officers and
directors reside outside of the United States. 
Therefore, even if our shareholders were able to obtain a judgment
against us or any of our officers and directors in the United States, this
judgment could be difficult, both legally and financially, to enforce.  Our shareholders may not be able to enforce
civil actions under United States securities laws if they file a lawsuit in
Israel.  If a foreign judgment is enforced
by an Israeli court, it will be payable in Israeli currency.

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Item 4:  Information on the Company

Overview

We
are a holding company.  We currently
hold, through a wholly owned subsidiary, all of the outstanding share capital
of Franz Kalff GmbH, a German company engaged in the business of manufacturing
through contractors, marketing and sale of first aid kits primarily for the
automotive industry mainly in Germany. 
We also hold an indirect interest in eLady Ltd., a Japanese Internet commerce
portal for women, and approximately 4.4% of the issued and outstanding share
capital of Leader Tech Ltd., a public Israeli company traded in the Tel Aviv
Stock Exchange that purchases and invests in emerging technology companies. In
2002 we sold our holdings in Robomatix (Israel) Ltd. and in 2003 our holdings
in Edco Technologies 1993 Ltd., formerly Associative Computing Ltd. In November
2002, we invested approximately $2,000,000 in Israel Land Development Insurance
Company Ltd., and ICIC  The Israel Credit Insurance Company Ltd., two private
Israeli insurance companies, of which we now own a minority stake. We plan to
acquire majority or controlling interests in other companies or
businesses.  Our holdings in
non-technology-based companies, such as Franz Kalff and the insurance
companies, allows us to diversify our business activities and thereby lessens
our reliance on any particular industry sector.

We
were incorporated under the laws of the State of Israel in 1982.  Our ordinary shares are listed on the
over-the-counter bulletin board under the symbol RBMXF. There is no
non-United States trading market for our shares.  The address and phone number of our principal executive office
is:

1 Azrieli Center 
Tel-Aviv 67021, Israel
Tel.: 972-3-696-9222

A.
History and Development

Our Past Activities

We
were originally engaged in the fields of laser-based robotic components and
standardized on-line quality assurance systems.  We designed, developed, manufactured, marketed and provided
support for standard and customized systems, which employed proprietary
software to integrate and control diverse combinations of robotics, laser,
ultrasound, imaging and vision technologies. 
Such comprehensive automated systems offered solution systems for laser
cutting, measurement and inspection in aerospace, automotive and metal
industries.

D.D.I.S.
(Israel) Ltd., one of our former subsidiaries, engaged in the production and
sale in the United States of large glass substrate for the flat panel industry,
and Associative Computing Ltd., which we sold in 2003, engaged primarily in the
production of an associative parallel processor which permits parallel image
processing of color images for the video and multivideo industry.  D.D.I.S commenced production at the end of
1996 and Associative Computing Ltd. commenced production in 1998.

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At
the end of 1994, we decided to significantly reduce our activities in the
fields of laser-based robotic components and standardized on-line quality
assurance systems because we were unable to profitably sell our products in
these fields due to high costs and unfavorable financing terms. We then focused
our resources in D.D.I.S. and Associative Computing. During 1997, D.D.I.S.
generated the major part of our revenues and beginning in the last quarter of
1997, Associative Computings activities constituted the majority of our
consolidated activities.  The major part
of our research and development expenses during 1997, 1998 and 1999
($1,091,000, $1,226,000 and $47,000, respectively) were attributable to
Associative Computing.  Due to the
unsuccessful transition of D.D.I.S. and Associative Computing from the
development stage to the manufacturing stage, we sold our holdings in D.D.I.S.
in 1997 and Associative Computing sold substantially all of its assets in
1999.

According
to United States generally accepted accounting practices or GAAP, because we
discontinued and sold our original operations, the revenues we derived from our
original operations, are not reflected in our financial statements.

The Sale and
Discontinuation of Our Original Activities

We
are no longer engaged in any of our original areas of activities.  In 
1996, we discontinued or sold our activities in the field of laser-based
robotic components and standardized on-line quality assurance systems. In
November 1997, we sold our holdings in D.D.I.S. and in February 1999
Associative Computing Ltd. sold substantially all of its activities.  During 1997 and 1998, we were primarily
engaged in providing maintenance services and technical support for systems
sold by us in previous years. We no longer provide such services.  The following is a description of the major
events leading to the termination of our original activities.

In
1996, Advanced Industrial Automation Technologies, Inc. (formerly, Robomatix
International Inc. and Robomatix, Inc.), one of our non-active subsidiaries
originally engaged in the field of robotics units, sold substantially all of
its assets and activities for a purchase price of $1,337,500. The purchaser,
Utica CAD/CAM, Inc., assumed Advanced Industrials liabilities in the amount of
$575,000 and received the exclusive right to manufacture and market Advanced
Industrials products (other than the Laserobot and the Modulaser) in the
United States and the non-exclusive right to manufacture and market such
products in the Far East.  Although
Advanced Industrial retained certain rights with respect to its products, it
discontinued its operations and was eventually dissolved.

In
November 1997 we sold our holdings in D.D.I.S. to Soquel Group LLC for $8.6
million. During 1998 and 1999, Soquel failed to comply with the payment
schedule under the 1997 agreement.  As a
result, in June 1999, we entered into a novation agreement with Brown &
Sharpe Surface Inspection Systems, Inc. Pursuant to the novation agreement,
D.D.I.S., owned by Soquel, sold substantially all of its assets to Brown &
Sharpe for $1,190,000, payable to us immediately.  In addition, Brown & Sharpe was obligated to pay us royalties
at the rate of 1% of its total sales of products incorporating the Black Beam
Technology (developed by D.D.I.S. and Display Inspection Systems, Inc.) for a
period of five years, which period commenced in June 1999. We did not receive a
significant amount of royalties from Brown & Sharpe and wrote off $995,000
of the original price that was not collected under the agreement with Brown
& Sharpe.  In January 2000, we
entered into a settlement and mutual release agreement with Brown &
Sharpe.  This agreement settled our
claim for services and payments previously provided by us to D.D.I.S. in a
total amount of $112,000. Brown & Sharpe paid us $90,000 and each party
waived any claim relating to the services provided by us to D.D.I.S.  Other obligations not related to such
services, including our rights for royalties, remained intact.  In January 2001, we entered into a letter of
agreement with Brown & Sharpe where they agreed to purchase our rights for
royalties and any other remaining rights under the June 1999 and the 1997
agreements for $125,000. In connection with the letter agreement, we have
released Brown & Sharpe from any liability or obligation and will waive any
claim against Brown & Sharpe in connection with the June 1999 agreement or
any related agreement or instrument.

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In
February 1999, Associative Computing Ltd. sold substantially all of its assets
to NeoMagic Israel Ltd., a wholly owned subsidiary of NeoMagic Corporation, a
publicly traded company.  The assets
were sold for $5 million in cash and warrants to purchase 100,000 shares of
NeoMagic Corporations common stock at an exercise price of $20.00 per share,
exercisable over a period of five years commencing in February 1999.  Following this sale, Associative Computing
still owed approximately $79,000 to United Bank Hamizrachi Ltd. and on November
5, 2000, we, Associative Computing and several other of our non-active
subsidiaries entered into an agreement with the United Bank Hamizrachi, under
which United Bank Hamizrachi advanced Associative Computing two loans in an
amount equal to Associative Computings debt to the bank.

Commencing
in December 2002 we entered into a series of agreements in connection with
Associative Computing Ltd., concluding in April 2003 with the sale of all our
shareholdings in Associative Computing and its debt to us for the aggregate
amount of 6,000,000 NIS. In December 2002, Associative Computing and we entered
into a share purchase agreement with Benny Konstantin, the sole shareholder of
Edco Electronics Ltd. In accordance with the agreement, Associative Computing
issued to Konstantin shares constituting 50% of its share capital. In addition,
we agreed to refinance the debt owed to us by Associative Computing and we
assigned to Konstantin 9,675,000 NIS out of the aggregate debt of approximately
13,300,000 NIS owed to us by Associative Computing. In January 2003, in a
separate agreement, Associative Computing purchased some of the assets and
activities of Edco Electronics Ltd. for the aggregate amount of NIS 12,600,000.
In connection with these agreements, we entered into a shareholders agreement
with Konstantin, which contains, among others, provisions regarding rights of
first refusal, shareholders meetings and a put option according to which
Konstantin could require us to purchase his shares in Associative Computing. We
also entered into a management and consulting services agreement with
Associative Computing for a period of four years for an annual fee of 90,000
dollars and a bonus fee of 10% of all annual profits over 6.25 million NIS.
Following these agreements, Associative Computing changed its name to Edco
Technologies (1993) Ltd.

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In
March 2003, we entered an agreement with Berger Holdings 1 (1992) Ltd.
according to which we sold to Berger Holdings all of our shares in Edco
Technologies Ltd and assigned the remaining debt as well as all of our rights
under the shareholders agreement and the management and consulting services
agreement. In consideration, we received 4,000,000 NIS at the closing of the
transaction and 2,000,000 NIS will be paid in six equal quarterly installments,
linked to the Israeli consumer price index.

Robomatix
(Israel) Ltd., which we sold in 2002, was originally engaged in the production
of inspection and measurement systems. 
Its former United Kingdom subsidiary, Robomatix (U.K.) Ltd., provided
maintenance services to customers who bought certain systems manufactured by
Robomatix Israel.  During 1997 and 1998
Robomatix Israel eliminated its base of operations in Germany and discontinued
production of the inspection and measurement systems.  In March 1999, it sold its holdings in the United Kingdom subsidiary
to the general manager of the United Kingdom subsidiary for one-pound
sterling.  The capital loss on this
sale, taking into account the waiver of the balance of the current account with
the United Kingdom subsidiary as of the transaction date, was $28,000.  The former United Kingdom subsidiary agreed
to continue to provide services to customers of Robomatix Israel as of the date
of the transaction in Europe, North America and the Far East.

In
September 2002, we entered into an agreement for the sale of all of our share
holdings in Robomatix (Israel) Ltd. to SPL Software Ltd., an Israeli company
also held by Silverboim Holdings Ltd., one of our principle shareholders. In
accordance with the agreement SPL Software, will pay us NIS 2,700,000, payable
in NIS in three equal installments. At the closing of the transaction, we
received the first payment of NIS 900,000. The second payment and third payment
are linked to the Israeli cost of living index and will be paid on the first
and second anniversary of the transactions closing.

The Restructuring of Our Debt

During
the years that we were engaged in our original robotics operations, we incurred
debt in an aggregate amount of approximately $20 million. At the beginning of
1999, we implemented a debt restructuring arrangement with our major creditor
banks, in cooperation with the State of Israel, which guaranteed part of the
loans, and with Heinrich Manderman, a former controlling shareholder of
Robomatix, with respect to loans made by him and a company under his control.  Under the terms of this arrangement, in
February 1999, our major creditor banks and the State of Israel received an
aggregate payment of $4.5 million and, in August 1999, they received options to
purchase an aggregate of 991,376 ordinary shares at an exercise price of $2.00
per ordinary share, exercisable over a five year period commencing March 1,
1999.  This restructuring satisfied the
then entire outstanding debt balance of approximately $14.4 million to our
major creditor banks and the State of Israel. 
Heinrich Manderman received options to purchase 2,249,893 ordinary
shares on the same terms and conditions as the options that were issued to the
banks and the government, in satisfaction of our outstanding debt obligations
to him and the company under his control, totaling approximately $5.6 million.
To the best of our knowledge, as of December 31, 1999, there was a remaining
outstanding debt of approximately $203,000 owed to a former controlling
shareholder and the company under his control by one of our then non-active
subsidiaries, Robomatix Europe GmbH.  During the year 2000, Robomatix Europe GmbH was liquidated.

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Changes of Ownership and Capital Structure

In
October 1998, Focus Capital Group Ltd. and Avikam Leef purchased control of Robomatix
from Heinrich Manderman.  Following this
change of control, as described above, we discontinued and sold all of our
remaining operating activities and implemented our debt restructuring
arrangement.  On December 30, 1999,
Silverboim Holdings Ltd., an Israeli company that acquires publicly traded
companies in need of new activities, purchased the controlling block of our
ordinary shares and various of our other securities from Focus Capital, Avikam
Leef and Heinrich Manderman.  After this
change of control we focused our efforts in raising the required capital to
allow us to explore new business opportunities. We then started, and plan to
continue, to utilize our capital and resources primarily to acquire substantial
interests in promising technology based, Internet, communication or other
operating companies or businesses.  We
have two employees and Silverboim Holdings, our principal shareholder, also
provides us with management and support services.  The following description elaborates on our activities following
the discontinuation and sale of our remaining original operations.

In
1999, we issued Focus Capital options to purchase two convertible debentures
with an aggregate principal amount of $2,080,000. Prior to the sale of the controlling
block of our ordinary shares to Silverboim Holdings, Focus Capital exercised
their options to purchase the convertible debentures for an aggregate principal
amount of $2,080,000.   Focus Capital
assigned the debentures to Silverboim Holdings in consideration of
$2,080,000.  The debentures were
convertible into 3,000,000 ordinary shares at a conversion rate of $0.36 per
share and an additional 2,000,000 ordinary shares at a conversion rate of $0.50
per share.  On January 11, 2000,
Silverboim Holdings converted the debentures into 5,000,000 ordinary shares.

On
December 30, 1999, Silverboim Holdings purchased the controlling block of our
ordinary shares, an aggregate of 2,735,950 ordinary shares, from Focus Capital,
Avikam Leef and Heinrich Manderman, for a consideration of $2,042,000.  As part of the transaction, Silverboim
Holdings also received options to purchase 200,000 ordinary shares at an
exercise price of $3.00 per ordinary share, exercisable until January 8, 2001,
and options to purchase 2,249,893 ordinary shares at an exercise price of $2.00
per ordinary share, exercisable for a period of five years commencing on March
1, 1999.  The options that were
exercisable until January 8, 2001 were not exercised and have expired.   See Item 6: Directors, Senior Management
and Employees and Item 7: Major Shareholders and Related Party Transactions.

On
January 31, 2000, we issued an aggregate of 1,750,000 ordinary shares to
certain investors for an aggregate purchase price of $3,500,000.  On March 9, 2000, we issued an aggregate of
857,150 ordinary shares to certain investors for the aggregate purchase price
of approximately $3,000,000. Under each of the share purchase agreements, we
agreed to take all necessary actions in order to register these shares for
resale under the Securities Act of 1933. 
Our registration statement on Form F-3 for the registration for resale
of 5,083,952 of our ordinary shares became effective on July 11, 2000.

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On
February 29, 2000, Shrem, Fudim, Kelner Technologies Ltd. purchased from
Silverboim Holdings 1,250,000 of our ordinary shares for an aggregate purchase
price of $3,125,000.  In addition,
Shrem, Fudim, Kelner Technologies received from Silverboim Holdings options to
purchase 1,750,638 ordinary shares at an exercise price of $2.00, exercisable
until March 1, 2004. On November 15, 2000, we entered into a consultation and
management agreement with Silverboim Holdings, effective January 1, 2000,
pursuant to which Silverboim Holdings provides management, consulting and
support services for Robomatix in consideration for monthly payments of $10,000
plus VAT and reimbursement of reasonable expenses.  Additionally, on October 2000, our shareholders approved a
services agreement with Silverboim Holdings, effective January 1, 2000,
pursuant to which Silverboim Holdings provides us support and administrative
services, including secretarial and computer services, office space and the
payment of related expenses.  The
service fees under this agreement are based on actual expenses up to $5,000 per
month.  In 2001 and 2002, we made no
actual payment to Silverboim Holdings for support, services and office space
and management and consulting services, (except for actual out of pocket
expenses in connection with the management and consulting agreement in an
amount of $10,914) but allocated in our 2001 and in our 2002 financial statements $60,000 for
support, services and office space and $120,000 for management and consulting
services.

On
January 24, 2001 we issued to Gilex Holding B.V. 1,200,000 of our ordinary
shares as partial consideration for the purchase from Gilex, through Mersa, of
Franz Kalff, at a value of $1.75 per share. 
Since the trading volume of our shares was low, the price per share was
a result of negotiations and does not reflect the public share price of
Robomatixs shares.  The total purchase
price was fully paid.

On
August 9, 2001 Silverboim Holdings purchased from Shrem, Fudim, Kelner
Technologies 1,250,000 of our ordinary shares as part of a share exchange
agreement between them.  In
consideration for our 1,250,000 ordinary shares Silverboim Holdings provided
Shrem, Fudim, Kelner Technologies with 181,057 of Crow Technologies 1977 Ltd.,
an Israeli public company traded in the NQB Pink Sheets.

Recent Principal Capital Expenditures

On
February 15, 2000, we entered into an agreement for the purchase of the assets
of Silverboim Technology (1999) Ltd., a wholly owned subsidiary of Silverboim
Holdings, for an aggregate purchase price of $885,000.  In an amendment to this agreement, dated
November 15, 2000, Silverboim Holdings and Silverboim Technology agreed to
indemnify us against any loss or damage that would result from the breach of
any of their representations or covenants under the agreement.  The assets that we purchased under this
agreement were:  an indirect interest in
eLady Ltd., a convertible debenture in Dirad Technologies (1999) Ltd. and
shares of Kasparov Chess Online Inc. Subsequently, we increased our direct and
indirect holdings in Dirad, which also were exchanged for securities of Leader
Tech Ltd. and increased our holdings in direct and indirect holdings in
eLady.   On January 24, 2001 we
purchased all of the share capital of Franz Kalff. Following reports on Kasparovs financial
difficulties, we wrote off our interests in Kasparov Chess Online Inc.

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eLady Ltd.eLady is a Japanese Internet commerce portal
for women.  eLady runs an Internet site
through which it sells fashion accessories. Our interests in eLady are held
indirectly through Belas Holdings B.V., a Dutch company. Prior to April 2003,
eLady was wholly owned by Belas (other than options issued to employees). In
April 2003, eLady entered into stock subscription agreements for the issuance
of approximately 10% of its Series A Preferred Stock to new investors. As of
May 31, 2003, Belas holds 84.73% of the share capital of eLady, on a fully
diluted basis. We indirectly hold shares in Belas through Birkale Holdings,
B.V. and Hillsborough Holdings B.V., both Dutch companies. We directly hold
approximately 90% of the shares of Hillsborough. Our shares in Birkale Holdings
B.V. are held through Niponet Holdings Ltd., an Israeli company, of which we
own approximately 36%. Based on a review by our board of directors of the fair
value of our indirect interests in eLady as of December 31, 2000, we decided to
record an impairment loss of $2,000,000 from our long-term investment in eLady
in our financial statements for the year ended December 31, 2000 and another
$1,000,000 for the year ended December 31, 2001.  See Item 5: Operating and Financial Review and Prospects.

Dirad Technologies (1999) Ltd. and Leader Tech Ltd.

Dirad
is an Israeli company that invests in technology-based start-up companies and
currently has a portfolio of approximately 20 companies.  Under the agreement with Silverboim
Technology we purchased a convertible debenture in the amount of $170,000 of
Dirad for $330,000.  The debenture
matured on November 27, 2001, accruing interest of 2% per annum, and is
convertible, only in full, into shares of Dirad in such an amount that equals
15% of the capital stock of Dirad on a fully diluted basis.  On September 17, 2000, the debenture became
convertible into 896 ordinary shares of Dirad, representing 15% of the share
capital of Dirad on that date.  Under
the terms of the debenture and until the debenture matured, we had the right to
veto any new issuance of Dirads securities, or if we chose not to veto such
issuance, we could acquire such number of newly issued shares that will allow
us to maintain a 15% share of the capital stock of Dirad.  Also, upon conversion of the debenture and
as long as we hold at least 10% of the capital stock of Dirad, we will have the
right to appoint a director or an inspector to the board of directors of
Dirad.

On
October 12, 2000, after we chose not to veto a new issuance of securities,
Dirad issued 4,028 shares to certain investors in consideration for
$3,043,250.  We participated in this
round of financing although we did not exercise our right under the debenture
to purchase such number of shares that will maintain a 15% share of the share
capital of Dirad.  We purchased 464
shares for a consideration of $350,000, resulting in our holding 13.60% of the
share capital of Dirad, on an as converted, fully diluted, basis.  In addition, we hold 5% of the share capital
of Dirad Management Technologies (2000) Ltd., an Israeli company that provided
management services to Dirad in consideration for management fees and
preference in distribution of dividends. 
The share purchase agreement provided for a nine-member board of
directors, of which we were entitled to appoint one member. Our representative
to the board of directors resigned on April 29, 2002 as part of the agreement
with Leader Tech.

On
December 10, 2001, we and the other shareholders of Dirad entered into an
agreement with Leader Tech Ltd. to sell all holdings in Dirad to Leader. This
agreement was concluded on April 29, 2002. In return for our holdings in Dirad
we received 2,167,321 ordinary shares of Leader, constituting 4.4% of the
issued share capital of Leader. In addition we continue to hold 5% of the share
capital of Dirad Management Technologies (2000) Ltd. who together with Leader
Holdings and Investments Ltd. entered into a management services agreement with
Leader Tech.  Pursuant to the services
agreement Dirad Management Technologies and Leader Holdings and Investments
shall receive in consideration for the provision of management services, a
payment equal to 3% of the paid in equity of Leader Tech and in any event not
less than $225,000 per year. Of this consideration Dirad Management
Technologies will be entitled to 1/3 of the management fees. Robomatix provided
for an impairment loss of $390,000 based on the opinion of its management of the
fair market value of its holdings in Leader Tech.

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Franz Kalff GmbH

In
January 2001, Mersa Holdings B.V., a Dutch company that is one of our
wholly-owned subsidiaries, purchased all of the outstanding share capital of
Franz Kalff from Gilex Holdings B.V. Franz Kalff is a German company engaged in
the business of manufacturing through contractors, marketing and sale of first
aid kits primarily for the automotive industry. At the time of the closing,
Gilex held 7.98% of the issued and outstanding ordinary shares of Silverboim
Holdings, and 29.8% of the capital share of Silverboim Holdings, on a fully
diluted basis.  Additionally, Gilex has
one representative on the board of directors of Silverboim Holdings.  For the current percentage of holdings of
Gilex in Silverboim Holdings, see Item 7: Major Shareholders and Related Party
Transactions.

We
paid $9 million for the share capital of Franz Kalff. The purchase price was
determined in negotiations with Gilex and was based upon our investigations as
to the German and European market for first aid kits, its growth potential and
the legal, business and financial condition and results of operations of Franz
Kalff.  The purchase price was based on
a valuation of Franz Kalff conducted by Deloite & Touche, dated December
2000 and comprised of: $6.3 million paid by Mersa in cash and $2.1 million paid
in the form of 1.2 million of our ordinary shares  , which we issued to Gilex on January 24, 2001.  In addition, Mersa issued a promissory note
in the principal amount of $600,000 to Gilex, which was cancelled on or about
February 28, 2001.  A guarantee
agreement, dated January 24, 2001, by and between us and Gilex provides for the
guarantee of Mersas representations and undertakings under the agreement for
the purchase of Franz Kalffs share capital. 
Our ordinary shares that were issued to Gilex represent approximately
8.8% of our issued and outstanding ordinary shares immediately following such
issuance.   In addition, Gilex and
Starmites Corporation N.V., agreed to assign to Mersa a number of shareholders
and other loans previously advanced to Franz Kalff and its affiliate. These
loans are non-interest bearing and are payable upon demand.

Mersa
borrowed $6.3 million of the cash purchase price from us and an additional $2.1
million, the value of the ordinary shares issued by us to Gilex as part of the
purchase price of the share capital of Franz Kalff.  We advanced $800,000 to Mersa from
our available cash reserves
and financed the remainder of the loan to Mersa through a secured loan that we
took from Bank Hapoalim in a principal amount in Euro equal to $5.5 million. In
December 2002, Franz Kalff sold its land for the aggregate amount of
$3,500,000. The amount of $3,500,000 was distributed to Mersa. Mersa paid to
us $2,500,000  which we  used to repay Bank Hapoalim. The loan is
currently denominated in Swiss Francs and bears interest at the variable LIBOR
(applicable to Swiss Franc deposits) rate plus 2.5% per annum. As of the date of
this report, the terms and schedule of the repayment of the remainder of the
loan have not been finalized with Bank Hapoalim. According to an agreement with
Bank Hapoalim, dated January 18, 2001, our obligations to the Bank remain
secured by security interests in:  all
of our assets, whether now owned or later acquired; our bank account at Bank
Hapoalim and in any moneys, assets or rights whether now or later deposited or
existing therein; and all payments to be received from Mersa as dividends or as
management fees; and Mersas bank account and in any moneys, assets or rights
whether now or later deposited or existing therein. Silverboim Holdings, our
controlling shareholder, guaranteed our loan. The agreement limits the right of
Mersa to sell its shares in Franz Kalff or to issue and sell its own shares to
third parties.   In addition, subject to
the requirements of the law and the ordinary course of business of Mersa, we
have agreed to use our best efforts to cause Mersa to pay dividends as part of
its regular course of business, and upon payments of dividends, to deposit
these payments in our bank account. 
These payments shall then be used to repay the loan.

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Insurance Company Investments

In
November 2002, we entered into two agreements with the Israel Land Development
Insurance Holdings Ltd. for the purchase of minority shareholdings in two of
its subsidiary insurance companies. Israel Land Development Insurance Holdings
is part of the Israel Land Development group, which maintains a diversified
portfolio of business enterprise, with activities in publishing and other
media, real estate development and property management, leisure products,
insurance and hotels.

In
an agreement with the Israel Land Development Insurance Holdings Ltd. we
purchased for NIS 6,000,000 approximately 2.4% of the shares of the Israel Land
Development Insurance Company Ltd., a private multi-line insurance company. In
the agreement, we received a put option to sell all the purchased shares to
Israel Land Development Insurance Holdings and to purchase shares in ICIC - The
Israeli Credit Insurance Company Ltd. at a guaranteed purchase price.  This option is exercisable from April 1,
2004 through March 31, 2005. We received a second alternative put option to
sell all the purchased shares to Israel Land Development Insurance Holdings and
to purchase its shares at a guaranteed purchase price. This option is
exercisable from April 1, 2004 through August 31, 2004. In addition, we granted
Israel Land Development Insurance Holdings a call option to purchase our shares
in the Israel Land Development Insurance Company for NIS 6,000,000 (linked to
the Israeli Consumer Price Index for October 2003) plus 150% of the agreed upon
interest rate accrued from the date of the agreement to the exercise of this
option. This call option is exercisable at any time by Israel Land Development
Insurance Holdings.

Simultaneously
with the investment, we entered into a consulting agreement with Israel Land
Development Insurance Company Ltd. 
According to the consulting agreement, we will provide Israel Land
Development Insurance Company with financial consulting services in return for
approximately NIS 250,000, per year, until the end of 2009.

In
addition, we purchased for NIS 4,000,000 approximately 5.3% of the shares of
ICIC  The Israel Credit Insurance Company Ltd., which insures credit-based
export and local transactions. In the agreement, we received a put option to
sell all the purchased shares to Israel Land Development Insurance Holdings for
NIS 4,000,000 (linked to the Israeli Consumer Price Index for October 2003)
plus interest accrued from the date of the agreement to the exercise of the
option. This option is exercisable from April 1, 2004 through August 31, 2004.
In addition, we granted Israel Land Development Insurance Holdings a call
option to purchase our shares in ICIC  The Israel Credit Insurance Company
Ltd. for NIS 4,000,000 linked to the Israeli Consumer Price Index for October
2003) plus 150% of the agreed upon interest rate accrued from the date of the
agreement to the exercise of this option. This call option is exercisable at
any time by Israel Land Development Insurance Holdings.

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Our
shares in Israel Land Development Insurance Company Ltd. and ICIC  The Israel
Credit Insurance Company Ltd. are pledged to Bank Hapoalim B.M. as security for
a credit facility provided by the bank for these transactions. In addition, as
part of the arrangement with the bank, the shares are currently held by the
banks trust company.

B.  Business Overview

As
a holding company our business is conducted through our subsidiaries and other
companies in which we hold substantial interests.  We wholly own Franz Kalff GmbH, which is an operating company.  We do not hold controlling interests in
LeaderTech, eLady and our insurance related portfolio companies and therefore
our business related discussion throughout this report focuses on the business
of Franz Kalff.

Franz Kalff GmbH

Franz
Kalff was incorporated under the laws of Germany in 1883 and was originally
engaged in the processing of cotton and production of bandages.  In the late 1980s the share capital of
Franz Kalff was purchased by Gilex, at which time Franz Kalff has already been
engaged in the business of manufacturing and selling first aid kits.  In 1996, following several unprofitable
years, Franz Kalff decided to discontinue the in-house manufacturing of first
aid kits and focus on marketing and sale while engaging outside contractors and
suppliers to manufacture the first aid kits. 
As a result, approximately 150 employees were released and portions of
the production facilities and warehouses were leased to third parties.  In 2002, Franz Kalff sold its land and
leased it back from the buyer of the land. 
Since 1997, and following the hiring of the current managing director of
Franz Kalff, Mr. Gunther Schuftan, Franz Kalff has shown profit.

Today,
Franz Kalff is among the leading suppliers of first aid kits in Germany. The
market for first aid kits in Germany is one of the largest in the world because
of legislation requiring all car owners to keep an adequate first aid kit in
their vehicles. Franz Kalffs growth potential is based, in part, on similar
legislation being enacted in the future in other member countries of the
European Union.  Since first aid
products are subject to rigid quality standards, this industry does not present
many opportunities to achieve a competitive edge.  However, Franz Kalff has achieved its competitive edge through
its patented inner design of the kits and its long lasting business relations
in the market place.

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The
address and phone number of Franz Kalffs registered office and principal place
of business is:

Franz Kalff GmbH
Dechant-Wolfgarten-Strabe 85
D-53881 Euskirchen, Germany
Tel: (49-2) 251-6260

Franz
Kalff engages two contractors who are responsible for the packaging of the
first aid kits pursuant to its specific instructions.  The contractors receive the items comprising the first aid kits
and their casings from Franz Kalff, which purchases them from various
suppliers, depending, among other things, on the items quality requirements.
Franz Kalffs customers consist of chain retail stores and automobile
manufacturers. It has approximately 200 customers with approximately 6,000
points of sale.   Franz Kalff has had
continuing relations with most of its principal customers, which include
Metro-Group, Aldi-Group, REWE-Group, LIDL-Group (leading retail stores in
Germany), Ford-Group and BMW. Revenues from sales to its five principal
customers in the year 2002 constituted approximately 49% of Franz Kalffs total
revenues.   Germany is the principal
market place for Franz Kalffs first aid kits (82% of sales) although Franz
Kalff has marketed and sold its products in other member countries of the
European Union.  Sales outside Germany
are made through outside distributors and independent agents.

Products.
Franz Kalff manufactures through contractors, markets and sells approximately
20 types of first aid kits.   The
principal differences between the various types of the first aid kits relate to
the intended use of the kit. The first aid kits that are required to be kept in
every car and motorcycle must meet very specific standards that are set by the
German Institute for Norms, the Deutsche Institut fur Normung.  The German Institute specifies not only what
items should be in each kit and their quantity but also their quality.  For example, the German Institute specifies
the length, width and material of every required bandage dressing in the
kit.  First aid kits intended for use in
places of business are also subject to specifications.

Under
German law, there are various kinds of certifications required in order to
market and sell first aid kits. Franz Kalff was certified under ISO 9002 and EN
46002. In March 2003, Franz Kalff is certified under the new standards DIN-ISO
9001:2000, EN-ISO 13485 and 9342 EWG standards. The contents of other first aid
kits which are not subject to specification are also determined by their
intended use.  For example, the first
aid kits intended for use in a household contain more items than the kits
intended for cars and motorcycles, in order to provide for more risk related
situations not encountered on the road. 
The casing of the first aid kits is the other difference between the
various types of kits.  The kits are
offered in plastic boxes or nylon bags, in various colors and with different
designs of the inner bags.  Franz Kalff
has a patent with respect to several inner bag designs, which contain visible
separate compartments for each item and appropriate illustrations on each
compartment.

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The
percentages of total revenues of Franz Kalff in the last three years by type of
first aid kits are set forth in the following table:

|Type of First Aid Kit                                                          |  | 2000                  |  | 2001                  |       | 2002                 
|------------------------------------------------------------------------------ |  | --------------------- |  | --------------------- | ----- | ---------------------
|                                                                               |  |                       |  |                       |       |                      
|                                                                               |  | % of total
  revenues |  | % of total
  revenues |       | % of total
  revenues
|First aid kits meeting
  the German Institute
  standards                      |  | 90                    |  |                       | 89.8  |                      
|First aid kits not
  meeting the German
  Institute standards                  |  | 6.2                   |  |                       | 6.6   |                      
|First-aid blanket                                                              |  | 1.4                   |  |                       | 1.2   |                      
|First aid kits meeting
  the German Institute
  standards for industrial
  use |  | 2.4                   |  |                       | 2.4   |                      
|                                                                               |  |                       |  |                       |       |                      
|Total                                                                          |  | 100.0                 |  |                       | 100.0 |                      

Franz
Kalff purchases the items for the first aid kits and empty casings from
approximately 14 suppliers in Germany and outside of Germany.  German suppliers primarily provide products
that are required to be sterile.  Other
products are purchased from, among other entities, Asian suppliers. Casings for
the first aid kits are purchased from suppliers from the Netherlands and
Italy.  In the year 2002, Franz Kalff
had four principal suppliers, each providing 10% or more of the total items
purchased by Franz Kalff (two suppliers providing approximately 10% of the
total items purchased, one supplier providing approximately 11% of the total
items purchased and one supplier providing approximately 18% of the total items
purchased).  Although Franz Kalff
continually seeks to diversify its pool of suppliers, it believes that it is
not dependant on any particular supplier because there are other alternative
suppliers that can provide the required items for similar prices.  Since many items comprising the first aid
kits are subject to German Institute specifications, Franz Kalff is required to
purchase these items from suppliers that are properly certified to provide
them.  In addition to the verification
that the suppliers are certified to provide the items, the quality assurance
personnel at Franz Kalff make regular visits to the production facilities of
its suppliers to confirm that they meet the industry requirements.

Usually,
Franz Kalff does not enter into written long-term agreements with its suppliers
to allow for flexibility in quantities according to market conditions.  At the beginning of the engagement, Franz
Kalff estimates what would be the scopes of its orders for the contract period,
which is a year at most, and the supplier sets its prices according to such
estimates.

The
prices of the first aid kits items are not inherently volatile.  Other than the effect of crude oil prices
and cellulose prices, such prices are principally affected by general economic
conditions.  Crude oil is used for the
production of the nylon bags that Franz Kalff purchases for the casing of the
first aid kits.   General economic
conditions in Germany effect not only the prices of items purchased from German
suppliers but also the exchange rate of the US dollar and British pound, which
effect the cost of items purchased from non-German suppliers.

21

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Patents
and Trademarks.   Franz Kalff has 30
registrations of patents on designs and 36 registrations of trademarks, which
protect its inner bag designs and brand names within several European
countries, such as Germany, England, Spain, Switzerland, France, Italy, The
Netherlands and Portugal.  Franz Kalff
is dependent on the continued use of the name Kalff.  Its patented inner bags provide Franz Kalff
a competitive advantage and sales of first aid kits in which items are packaged
in such patented inner bags have increased over the past few years.

Packaging.   Franz Kalff engages two contractors to package
its first aid kits.  The kits are
packaged pursuant to specifications of quality, quantity and inventory
provided, and regularly observed, by Franz Kalff.  The contractor that performs approximately two thirds of the
packaging for Franz Kalff also leases its operational space from Franz Kalffs
subsidiary. Although Franz Kalff works with only these two contractors, it is
not dependent on them because it believes that it could efficiently create a
packaging department within Franz Kalff or engage another contractor that is
located in the vicinity of its place of business.  Franz Kalff has a contract with each of its contractors for a
term of one year to be extended automatically each year for an additional one year
period each unless terminated by a six months prior notice.

Selling
and Marketing.   Franz Kalff markets
and sells its first aid kits to retail stores and car manufacturers. It is the
leading supplier of first aid kits to retail stores in Germany, selling
approximately 63% of the first aid products in this market.   The German market for first aid kits is
affected by the law requiring that a standard first aid kit be kept in every
car.  In the event that a first aid kit
is not provided by the car manufacturer, every owner of a new car needs to
purchase a first aid kit that meets the German Institute specifications. The
law requires that the sterile items of every first aid kit be replaced every
five years.  In 1998 and 1999, the
demand for first aid kits substantially increased as a result of changes to the
German Institute specifications applicable to these first aid kits.  This change forced all owners of new cars to
purchase first aid kits that would meet the new specifications.  Other car owners also purchased new first
aid kits in order to carry the best available item.  In 2001 and 2002, there has been a significant increase in Franz
Kalffs sales outside of Germany.  This
trend is expected to develop further, especially if other members of the
European Union will adopt legislation requiring car owners to keep first aid
kits in their cars.

The
percentages of total revenues of Franz Kalff in the last three years by
marketing channels are set forth in the following table:

|                    |  |                       |  |                       |       |                      
|------------------- |  | --------------------- |  | --------------------- | ----- | ---------------------
|                    |  |                       |  |                       |       |                      
|MarketingChannels   |  | 2000                  |  | 2001                  |       | 2002                 
|                    |  |                       |  |                       |       |                      
|                    |  | % of total
  revenues |  | % of total
  revenues |       | % of total
  revenues
|                    |  |                       |  |                       |       |                      
|Retail stores       |  | 75.6                  |  |                       | 74.4  |                      
|                    |  |                       |  |                       |       |                      
|Car
  manufacturers |  | 24.4                  |  |                       | 25.6  |                      
|                    |  |                       |  |                       |       |                      
|                    |  |                       |  |                       |       |                      
|Total               |  | 100.0                 |  |                       | 100.0 |                      
|                    |  |                       |  |                       |       |                      

22

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The
percentages of total revenues of Franz Kalff in the last three years by
geographic markets are set forth in the following table:

|GeographicalArea |  | 2000                  |  | 2001                  |       | 2002                 
|---------------- |  | --------------------- |  | --------------------- | ----- | ---------------------
|                 |  |                       |  |                       |       |                      
|                 |  | % of total
  revenues |  | % of total
  revenues |       | % of total
  revenues
|                 |  |                       |  |                       |       |                      
|Germany          |  | 89.7                  |  |                       | 86.06 |                      
|Export           |  | 10.3                  |  |                       | 13.94 |                      
|                 |  |                       |  |                       |       |                      
|                 |  |                       |  |                       |       |                      
|Total            |  | 100.0                 |  |                       | 100.0 |                      
|                 |  |                       |  |                       |       |                      

The
principal retail store customers of Franz Kalff are Metro-Group, Aldi Nord, Aldi
Sud, REWE-Group and Lidl-Group, and the principal car manufacturers customers
of Franz Kalff are BMW, Ford-Group and VW (Audi).  Franz Kalff is the exclusive provider for Ford and provides
specific types of first aid kits exclusively to Audi.  Generally, retail stores use only one provider and car
manufacturer use one provider for a specific car model.  Agreements with retail stores are usually
for a term of one to three years, providing for a target quantity, the type of
products to be purchased and the terms of payment.  Customers are generally provided with a credit period of 30 to 90
days.  The retail stores typically
assume responsibility for the promotion of the products.  Agreements with car manufacturers relate to
the period of production of a specific car model and they customarily provide
for a 30 days credit period.  Franz
Kalffs revenues from sales to its five principal customers in the year 2002
constituted approximately 49% of its total revenues and therefore Franz Kalffs
business is dependent on the continuation of these relations.  However, since Franz Kalff has been
providing its kits for most of these customers for many years, it believes that
its business relations with them will continue.

Sales
during the first six months of the years 1999 through 2002 have been higher
than sales during the later six months of these years because retail stores
normally conduct promotions and provide discounts with respect to first aid
kits products during the first six months of each year.

Sales
outside of Germany and to certain car manufacturers are made through outside
distributors who receive commissions at varying percentages of the
consideration received from the sale of the kits.  Agreements between Franz Kalff and its distributors are in some
cases verbal and terminable at will, and in most cases, written and terminable
by a three months prior notice. 
Agreements with entities outside of Germany would ordinarily provide for
a single order of kits.

Competition.
 Franz Kalff is among the leading
providers of first aid kits for cars in Germany. Its major competitors are Paul
Hartman AG, Holthaus Medical, Leina Werke and Hans Hepp GmbH.

23

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According
to Franz Kalffs estimates, first aid kits that are designed for use in cars
and meet the required German Institute specifications are sold primarily
through retail stores (approximately 40%), car manufacturers (approximately
36%) and other stores, such as supermarkets, department stores and car accessories
stores (approximately 24%).  Sales of
first aid kits for cars constitute approximately 90% of the total sales of
first aid kits while sales of first aid kits for the household sector,
industrial sector and recreational activities constitute approximately 2%, 2%
and 6%, of the total sales of first aid kits, respectively.  However, due to their accessibility, more
than half of the first aid kits that are designed for use in cars, are used by
consumers in other circumstances, such as in the household, in work places or
during recreational activities.

In
the year 2002, Franz Kalff was a dominant provider of first aid kits for cars
to retail stores and car manufacturers in Germany and its leading products were
the first aid kits for cars and recreational activities.  It is difficult to estimate the share market
percentages of each competitor in each sector, but based on Franz Kalffs
knowledge of the German market for first aid kits, it has estimated that sales
of its first aid kits constitute more that a third of the total sales of first
aid kits for cars in the German market. 
Franz Kalff has further estimated that, in the retail stores level,
sales of its first aid kits constitute more than three quarters of the sales of
first aid kits for cars, and in the car manufacturers level, sales of its first
aid kits constitute a little less than a third of the sales of first aid kits.

Although
there are several companies competing in the German market for first aid kits,
most companies are dominant only in certain sectors.   Franz Kalff has maintained its competitive edge by developing
its unique inner bag designs and casings and thereby creating a distinguishable
product, and by maintaining high quality products.  Its continuous success depends on its ability to penetrate into
other sectors of the market and to maintain the quality of its products and the
level of its customer service.  In
addition, it is likely that competition will increase if the size of the market
increases as a result of the adoption by other members of the European Union of
legislation requiring car owners to maintain first aid kits in their cars.
Therefore, maintaining and developing Franz Kalffs connections outside of
Germany are also important.

Subsidiaries.
  In 2002, Franz Kalff merged with its
limited partnership subsidiary, Franz Kalff GmbH & Co.
Industrieanlagen-Kommanditgesellschaft. Pursuant to the court order, the assets
of the limited partnership accrued to Franz Kalff without liquidation. In
addition, Franz Kalff is the sole shareholder of Primacura Verwaltungs GmbH, a
German corporation.  Primacura was
originally engaged in the distribution of certain products of Franz Kalff.

Property,
Plants and Equipment.  Through its
subsidiaries, Franz Kalff was the owner of land in Euskirchen, Germany where
its offices and production and warehouse facilities are located. In 2002, as a
result of the court approved merger, Franz Kalff became the direct owner of the
land, which has a total surface area of 63,245 square meters, of which 15,003
square meters contain buildings and other facilities. Franz Kalff uses only a
small portion of these land and facilities for storage and its offices.  Other portions are leased to third parties.
In December 2002, following transfer of the land from the subsidiaries to Franz
Kalff, Franz Kalff entered into an agreement for the sale of the land to the
Israel Land Development Insurance Company Ltd. for $3,500,000. Simultaneously,
Israel Land Development Insurance Company leased back to Franz Kalff the
facilities for a fifteen year period, for annual rent of $350,000. In
connection with the leaseback of the land, we obtained a bank guarantee for the
sum of $ 350,000 from Bank Hapoalim. In addition, Silverboim gave the purchaser
(lessor) an independent guarantee in connection with the lease. Franz Kalff
continues to sublease the majority of the land to third parties. The annual
income from these sub-leases is approximately  80,000. Franz Kalff believes
that its offices are adequate to serve its needs for the foreseeable
future.

24

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Some
of the materials used by one of the tenants of Franz Kalff, Franz Kalff
Vliesstoffe GmbH, are considered environmentally hazardous.  Liability for environmental damages to the
land under German law rests with both the owner of the damaged land and the
person who caused the damage.  Franz
Kalff is insured against environmental liability under a policy that covers
Franz Kalff Vliesstoffe GmbH as well. 
Franz Kalff Vliesstoffe GmbH pays for approximately 90% of the costs of
this insurance.

C.  Organizational
Structure

Robomatix
is a member of the Silverboim Group of companies, which is a diversified
group of companies in Israel, including high-technology and real estate companies.
See Item 7- Major Shareholders and Related Party Transactions for details of
Silverboims holdings in Robomatix.

See
Exhibit 8.1 for a list of our significant subsidiaries and portfolio
investments.

D.  Property, Plants
and Equipment

Our
offices are located at 1 Azrieli Center, Tel-Aviv, Israel, where the offices of
Silverboim Holdings, our principal shareholder, are located.  On October 2000, our shareholders approved a
services agreement with Silverboim Holdings, effective January 1, 2000,
pursuant to which Silverboim Holdings provides us with support and
administrative services, including secretarial and computer services, office
space and the payment of related expenses. 
The service fees under this agreement are based on actual expenses up to
$5,000 per month.  In 2000 and 2001, we
did not pay Silverboim Holdings any amount under the services agreement but
allocated $60,000 in our 2001 financial and in our 2002 financial statements. We believe that this is the fair market value
of the services that we receive from Silverboim and the office space that we
occupy.

We
believe that our offices are adequate to serve our needs for the foreseeable
future.

For
the property of Franz Kalff, see Business Overview - Property, Plants and
Equipment.

25

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Item 5:  Operating
and Financial Review and Prospects

Selected
Financial Data

The
following selected financial data has been derived from our audited
consolidated financial statements for the periods, which have been prepared in
accordance with United States GAAP. Our audited consolidated financial
statements include, in the opinion of management, all adjustments necessary to
fairly present the financial position and results of operations of our company
for those periods.  Our selected
consolidated statements of operations data for the years ended December 31,
2000, 2001 and 2002 and our selected consolidated balance sheet data as of December
31, 2001 and 2002 have been derived from our consolidated financial statements,
included elsewhere in this report.  Our
selected balance sheet data of Robomatix for the year ended December 31, 1999
have been derived from our consolidated financial statements not included
elsewhere in this report.  Our
historical financial data prior to the acquisition of the shares of Franz Kalff
is not necessarily indicative of our future operating results or financial
condition.

The
financial data set forth below should be read in conjunction with our
consolidated financial statements and the notes thereto and the other financial
information appearing elsewhere in this annual report.

|                                                                                            |                                                             | Year ended December 31,
|------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | -----------------------
|                                                                                            |                                                             |                        
|Statement
  of Operations Data                                                              |                                                             | 1998                   
|                                                                                            |                                                             |                        
|                                                                                            | (United States dollars in thousands, except per share data)
|                                                                                            |                                                             |                        
|Sales                                                                                       |                                                             | -                      
|Cost of Sales                                                                               |                                                             | -                      
|Gross Profit                                                                                |                                                             | -                      
|Selling and marketing expenses                                                              |                                                             | -                      
|General and administrative expenses                                                         |                                                             | 222                    
|                                                                                            |                                                             |                        
|                                                                                            |                                                             |                        
|Operating loss                                                                              |                                                             | (222                   
|Other income                                                                                |                                                             | -                      
|Impairment on long-term investment                                                          |                                                             | -                      
|Financial income (expenses), net                                                            |                                                             | -                      
|Income (loss) before taxes on income                                                        |                                                             | (222                   
|Tax on income                                                                               |                                                             | -                      
|                                                                                            |                                                             |                        
|Loss from continuing operations before
  extraordinary items                                |                                                             | (222                   
|Discontinued operations:                                                                    |                                                             |                        
|                                                                                            | Loss from segments operations                              |                        
|                                                                                            | Gain (loss) from disposal of segment                        |                        
|                                                                                            |                                                             |                        
|                                                                                            | Net gain (loss) from discontinued
  operations.             |                        
|                                                                                            |                                                             |                        
|Income (loss) before extraordinary items                                                    |                                                             | (3,894                 
|Extraordinary items                                                                         |                                                             | 9,803                  
|Net income (loss)                                                                           |                                                             | 5,909                  
|Net earnings (loss) per share - basic and
  diluted                                         |                                                             | 1.24                   
|                                                                                            |                                                             |                        
|Weighted average number of shares used in
  computing basic net earnings (loss) per share   |                                                             | 4,772                  
|                                                                                            |                                                             |                        
|Weighted average number of shares used in
  computing diluted net earning (loss) per shares |                                                             | 4,772                  
|                                                                                            |                                                             |                        

26

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|                                  |  | December 31,                           |  
|--------------------------------- |  | -------------------------------------- | -
|                                  |  |                                        |  
|Balance Sheet Data                |  | 1998                                   |  
|                                  |  |                                        |  
|                                  |  | (United States dollars
  in thousands) |  
|                                  |  |                                        |  
|Working capital                   |  | (5,583                                 | )
|Total assets                      |  | 2,063                                  |  
|Total liabilities                 |  | 7,389                                  |  
|Shareholders equity (deficiency) |  | (5,326                                 | )

Overview

The
following discussion should be read in conjunction with selected financial data
included above, our Consolidated Financial Statements and the related Notes
thereto included in this report and incorporated herein by reference and Item
4: Information on the Company.

We
were originally engaged in the fields of laser-based robotic components,
standardized on-line quality assurance systems and parallel associative
computing.  However, by February 1999,
all of our operating activities in these fields were either sold or
discontinued. Pursuant to United States GAAP, the results of operations of our
sold or discontinued operations are reflected as losses from discontinued
operations.  In 2000 we implemented our
new business objectives and raised funds and purchased interests principally in
eLady and Dirad.  Due to market
conditions and the difficulties being experienced by start-up companies in
raising funds for their operations, we provided in our financial statements as
of December 31, 2000 for impairment losses from long-term investments
aggregating approximately $2,079,000 and impairment losses from long-term
investments aggregating approximately $1,390,000 in our financial statements as
of December 31, 2001.  We purchased the
shares of Franz Kalff on January 24, 2001 and therefore Franz Kalffs financial
statements are only consolidated for the year 2001.

Our
results of operations for the years 1998 and 1999 were significantly affected
by the gradual discontinuation and sale of our original activities. We
therefore believe that they are not indicative of our future results of
operations and that they are not comparable to our results of operations for
the years 2000,  2001 and 2002.

27

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Operating Results

The
following table sets forth certain statement of operations data as a percentage
of sales for the years indicated.

|                                               |  | Year Ended December 31,
|---------------------------------------------- |  | -----------------------
|                                               |  |                        
|                                               |  | 2000*                  
|                                               |  |                        
|Statement of Operations Data:                  |  |                        
|Sales                                          |  |                       
|Cost of sales                                  |  |                       
|Gross profit (loss)                            |  |                       
|Research and development expenses, net         |  |                       
|Marketing, general and administrative expenses |  |                       
|                                               |  |                        
|Operating loss                                 |  |                       
|Financial income (expense), net                |  |                       
|Other income (expense)                         |  |                       
|                                               |  |                        
|Loss before income tax benefit (expense)       |  |                       
|Income tax benefit (expense)                   |  |                       
|Net Loss                                       |  |                       

* In 2000, we had
discontinued our previous activity and not yet purchased Franz Kalff.
Hence, there are no sales figures for 2000.

Sales. Sales in 2002
increased to $8,704,000 from $ 8,235,000 in 2001. This change indicates
consistent sales since the acquisition of Franz Kalff. The difference is a
result of Euro/Dollar exchange rate fluctuations and the fact the Franz Kalffs
sales are in Euro and our financial statements are in Dollars. The sales in
these years is attributed to the sales of Franz Kalff, which we purchased on
January 24, 2001 and therefore cannot be compared to 2000.

Cost of Sales.Costs of
sales in 2002 increased to $6,708,000 compared to $6,322,000 for 2001. This
increase is attributable Euro/Dollar exchange rate fluctuations and the fact
the Franz Kalffs sales are in Euro and our financial statements are in
Dollars. The cost of sales in 2001 are attributed to Franz Kalff which we
purchased on January 24, 2001 and therefore cannot be compared to 2000.

Gross Profit.Gross
profit in 2002 was $ 1,996,000 compared with a gross profit of $ 1,913,000. The
difference is a result of Euro/Dollar exchange rate fluctuations and the fact
the Franz Kalffs sales are in Euro and our financial statements are in
Dollars. The gross profit in these years is attributed to the activity of Franz
Kalff, which we purchased on January 24, 2001 and therefore cannot be compared
to 2000.

Research and Development Expenses, Net.Following
the discontinuation of our previous business, we ceased research and
development activities. Therefore, for the years 2002, 2001 and 2000 we had no
research and development expenses.

Marketing, General and Administrative Expenses.Marketing, general and administrative
expenses in 2002 were $ 2,126,000 as compared to $ 2,337,000 in 2001 and
$ 751,000 in 2000. The decrease of $ 211,000 in the year 2002 as compared to the
year 2001 is a result of efficiency and savings measures taken in Robomatix.
The increase of $ 1,586,000 in 2001 expenses compared to 2000 was the result of
the acquisition of Kalff in January 2001.

28

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Operating Loss.Operating loss in 2002 was $130,000
compared to $424,000 in 2001 and $ 751,000 in 2000. The decreased loss in 2002
was due to efficiency and savings measure taken in Robomatix, Euro/Dollar
exchange rate fluctuations and the fact the Franz Kalffs sales are in Euro and
our financial statements are in Dollars. The figures for 2002 and 2001 are
derived primarily from Franz Kalff, which we purchased on January 24, 2001 and
therefore cannot be compared to 2000.

Financial Income (expenses), net.Financial expenses for  the year 2002 were $191,000 compared to
$284,000 in 2001 and financial income of $ 285,000 in 2000. Financial expenses
for the years 2002 and 2001 were attributable to interest paid to banks
resulting from the long-term loan we took to finance the acquisition of Kalff
compared to financial income for the year 2000 which was attributable to
interest paid on the balance of our deposits of the amounts received from the
December 30, 1999 issuance of convertible debentures, which were later
converted, and net proceeds from our private placements in January and March of
2000. See Item 4: Information on the Company - History and Development -
Changes in Capital and Capital Structure.

Other
Income (Expenses), net. 
Other income, net, in 2002 was $ 257,000 compared to other income, net,
of $362,000 in 2001 and $ 50,000 in 2000. Other income, net for the year 2002
was primarily attributable to lease income received by Franz Kalff. Other
income, net for the year 2001 was primarily attributable to income from rent,
aggregating approximately $362,000 and a one-time compensation in consideration
for the waiver of the right to royalties. 
In 2000, the other income were primarily attributable to fees that we
received from Belas Holdings B.V., the sole shareholder of eLady, for our
placing services with respect to its October 2000 round of financing, that
decreased our other expenses by approximately $50,000.  See Impairment Losses below. Other income
for the year 2000 was attributable to a commission that we received for placement
services.  See Item 4: Information on
the Company - History and Development - The Sale and Discontinuation of Our Original
Activities and Recent Principal Capital Expenditures and
Divestitures.

Taxes on Income.Taxes on income in 2002 were $ 378,000
compared to $88,000 in 2001. Taxes on income in 2002 was primarily due to taxes
on non-deductable expenses and in 2001 from non-deductable expenses and a deferred tax on losses for which valuation
allowance was provided. The figures for 2002 and 2001 are derived
primarily from Franz Kalff, which we purchased on January 24, 2001 and
therefore cannot be compared to 2000.

Loss.For the year 2002, we had a net loss of $ 442,000
compared with a net loss of $1,824,000 in 2001 and a net loss of $ 2,495,000 in
the year 2000.

Conditions
in Israel

We
are incorporated under Israeli law, its offices are located in Israel and its
officers and directors reside in Israel. 
Accordingly, political, economic and military conditions in Israel
directly affect our financial condition.

29

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Political
Conditions.Since the
establishment of the State of Israel in 1948, a number of armed conflicts have
taken place between Israel and its Arab neighbors.  A state of hostility, varying from time to time in intensity and
degree, has led to security and economic problems for Israel.  Israel signed a peace agreement with Egypt
in 1979 and with Jordan in 1994.  Since
1993, several agreements have been signed between Israel and Palestinian
representatives regarding conditions in West Bank and Gaza.  On May 2000, the Israeli Defense Forces
withdrew from Lebanon.  There has been
an increase in hostilities, civil unrest, terrorist activities and military
action, which began in September 2000 and which have continued with varying
levels of severity into 2003. We cannot predict what will be the effect of
these occurrences on the political situation in Israel and, consequently, on
our financial condition.

There
are countries, companies and organizations that continue to participate in a
boycott of Israeli firms and others doing business with Israel or with Israeli
companies.  We believe that in the past
this boycott has not had a material adverse effect on our business.  However, restrictive laws, policies or
practices directed towards Israel or Israeli businesses could possibly have an
adverse impact on the expansion of our business.

All
male adult citizens and permanent residents of Israel under the age of 48 are
obligated, unless exempt, to perform military reserve duty annually.  Additionally, all these individuals are
subject to being called to active duty at any time under emergency
circumstances.  Our chief executive
officer and all of our male Board members are currently obligated to perform
annual reserve duty.  While we have
operated effectively under these requirements in the past, we cannot assess the
full impact of these requirements on our business if conditions should
change.  In addition, we cannot predict
the effect on our business of a state of emergency in which large numbers of
individuals are called up for active duty.

Economic
Conditions.Israels economy
has been subject to numerous destabilizing factors, including a period of
rampant inflation in the early to mid-1980s, low foreign exchange reserves,
fluctuations in world commodity prices, military conflicts and civil
unrest.  The Israeli Government has, for
these and other reasons, intervened in the economy, by utilizing, among other
things, fiscal and monetary policies, import duties, foreign currency
restrictions and control of wages, prices and exchange rates.  The Israeli Government has periodically
changed its policies in all these areas.

Israeli
law limits foreign currency transactions and transactions between Israeli and non-Israeli
residents.  In May 1998, the Bank of
Israel liberalized its foreign currency regulations by issuing a new general
permit pursuant to which foreign currency transactions are generally
permitted, although certain restrictions still apply.  Restricted transactions include foreign currency transactions by
institutional investors, including futures contracts by foreign residents for
periods of more than one month, and investments outside of Israel by pension
funds and insurers.  Under the new
general permit, all foreign currency transactions must be reported to the Bank
of Israel.

The
Israeli Governments monetary policy contributed to relative price and exchange
rate stability in recent years, despite fluctuating rates of economic growth
and a high rate of unemployment.  There
can be no assurance that the Israeli Government will be successful in its
attempts to keep prices and exchange rates stable.  Price and exchange rate instability may have a material adverse
effect on our business.

30

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---

Because
exchange rates between the NIS and the dollar fluctuate continuously (albeit
with a historically declining trend in the value of the NIS), exchange rate
fluctuations and especially larger periodic devaluations could have an impact
on our profitability and period-to-period comparisons of our results.  Such impact is generally recorded in our
financial statements as financial income or expense.  We do not hedge against fluctuations in currency exchange rates,
but we may do so in the future.

Trade
Relations.Israel is a member
of the United Nations, the International Monetary Fund, the International Bank
for Reconstruction and Development and the International Finance
Corporation.  Israel is also a member of
the World Trade Organization and is a signatory of the Global Agreement on
Trade in Services and to the Agreement on Basic Telecommunications
Services.  In addition, Israel has been
granted preferences under the Generalized System of Preferences from the United
States, Australia, Canada and Japan. 
These preferences allow Israel to export the products covered by such
programs either duty-free or at reduced tariffs.

Israel
and the European Union concluded a Free Trade Agreement in 1975.  This agreement confers advantages with
respect to Israeli exports to most European countries and obligates Israel to
lower its tariffs with respect to imports from these countries over a number of
years.  In November 1995, Israel entered
into a new agreement with the European Union, which redefines rules of origin
and includes other improvements, such as providing for Israel to become a
member of the research and technology programs of the European Union.  In 1985, Israel and the United States
entered into an agreement to establish a free trade area.  The free trade area has eliminated all
tariff and some non-tariff barriers on most trade between the two
countries.  On January 1, 1993, an
agreement between Israel and the EFTA, which includes Austria, Norway, Finland,
Sweden, Switzerland, Iceland and Liechtenstein, established a free-trade zone
between Israel and the EFTA nations.  In
recent years, Israel has established commercial and trade relations with a
number of other nations, including Russia, China, India, Turkey and other nations
in Eastern Europe and Asia.

Assistance
from the United States.Israel
receives significant amounts of economic and military assistance from the
Unites States, averaging approximately $3 billion annually over the last
several years.  We cannot assure that
foreign aid from the United States will continue at or near amounts received in
the past.  If the grants for economic
and military assistance are eliminated or reduced significantly, the Israeli
economy could suffer material adverse consequences.

Liquidity
and Capital Resources

Our
cash and cash equivalents aggregated $381,000, $327,000 and $1,269,000 as of
December 31, 2002, December 31, 2001 and December 31, 2000, respectively.

Net
cash used by operating activity for the year ended December 31, 2002 was $
270,000 as compared with net cash provided by operating activity for the year
ended December 31, 2001 was $647,000 and net cash used in operating activity
for the year ended December 31, 2000, which was $410,000.

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Net
cash provided by investing activities for the year ended December 31, 2002 was
$ 180,000 as compared with Net cash used in investing activities for the year
ended December 31, 2001 of $6,700,000 and net cash used by investing activity for
the year ended December 31, 2000, of $4,466,000, the increase of cash used in
2001 is as a result of the purchase of Franz Kalff for a total amount of
$6,660,000. In 2002, our cash flow stemmed from the sale of our holdings in our
inactive subsidiary Robomatix (Israel) Ltd.

Net
cash provided by financing activities for the year ended December 31, 2002
was  $65,000 compared with $4,976,000
for the year ended December 31, 2001and as compared to net cash provided by
financing activities for the year ended December 31, 2000, which was
$6,076,000.   In 2000, we raised funds
in private placements and purchased mainly interests in eLady and Dirad for an
aggregate purchase price of approximately $6.4 million. Our activities since
2000 reflect our new business objective, which is the acquisition of interests
in operating companies and businesses, in technology and other fields. In 2001,
we borrowed funds from Bank Hapoalim for our purchase of the share capital of
Franz Kalff. We did not make any significant changes in our investment
portfolio in 2002.  See Item 4:
Information on the Company - History and Development - Recent Principal Capital
Expenditures.

In
the beginning of the year 2001, we purchased, through a wholly owned
subsidiary, the share capital of Franz Kalff. We financed most of the purchase
price through a loan from Bank Hapoalim.  
The financial statements of Franz Kalff are consolidated with the
financial statements of Robomatix. 
However, under the loan agreement with Bank Hapoalim, any cash proceeds
that will be paid to us by our subsidiary, if any, must be used to repay the
balance of the loan.  Therefore we
expect that in order to continue to implement our business goals, we would require
additional debt or equity financing.

As
of December 31, 2002, our aggregate outstanding liabilities were approximately
$8,864.  We borrowed money from Bank Hapoalim at the
beginning of 2001 and in 2002 to finance our insurance company investments. We
believe that our working capital is sufficient for our present requirements but
in order to expand our investment portfolio we expect that we will either
realize certain of our investments or will need to obtain additional debt
financing in the future.   The loan in
connection with the Franz Kalff acquisition is currently denominated in Swiss
Francs and bears interest at the variable LIBOR (applicable to Swiss Franc
deposits) plus 2.5% per annum. The loan in connection with the insurance
company investments is denominated in NIS and bears interest at 10% per annum.
As of the date of this annual report, the terms and schedule of the repayment
of the loans have not been finalized with Bank Hapoalim. We expect to derive
cash flow from future returns on existing investments, repayment of loans and
payment of dividends from our operating companies. We expect these sources to
be sufficient to meet our cash obligations. Cash dividends from Mersa, if any,
are to be used for repayment of the Bank Hapoalim loan.

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Impairment
Losses.   We provided for impairment
losses from long-term investments of approximately $2,079,000 in our financial
statements as of December 31, 2000 and of $1,390,000 in our financial
statements as of December 31, 2001.  The
impairment loss recorded with respect to indirect interests that we purchased
in eLady constitute the major part of our aggregate impairment losses.  Based on our Boards review of the fair
value of our indirect interests in eLady as of December 31, 2000 and December
31, 2001, we decided to record an impairment loss of $2,000,000 from our
long-term investment in eLady in our financial statements for the year 2000 and
an additional impairment loss of $1,000,000 in our financial statements for the
year 2001.  In our financial statements
for the year 2001, we also noted an impairment loss of $390,000 for Leader Tech
Ltd. During the year 2000, we purchased, through subsidiaries, indirect
interests in eLady for an aggregate amount of approximately $5.8 million and as
of the date of this report, our total indirect holdings in eLady amount to
16.69%.  As explained below, minor
impairment losses were recorded with respect to interests that we purchased in
Kasparov Chess Online Inc. and Homenet Ltd. 
On February 2000, we purchased shares of convertible preferred stock,
constituting approximately 0.15% of the capital stock of Kasparov Chess Online
Inc. for approximately $50,000. We later exercised our pre-emptive right to
purchase additional shares for $3,850. 
Kasparov is a Delaware corporation providing interactive Chess services
over the Internet. As we have received reports on Kasparovs financial
difficulties, we wrote these interests off in our financial statements as of
December 31, 2000.  On March 22, 2000,
we purchased approximately 2% of the shares of Homenet Ltd. (formerly Modus
Internet Holdings Ltd.) for an aggregate purchase price of $25,000.  Homenet is an Israeli company that provided
Internet services for virtual communities by creating focused content sites
that combine information and e-commerce (e.g., a portal for the real estate and
design community).  Homenet encountered
severe financial difficulties and on March 8, 2001, the Tel-Aviv District Court
ordered its liquidation. We wrote off our investment in Homenet in our
financial statements for the second quarter of 2000.

Impact of
Inflation and Devaluation on Results of Operations, Liabilities and Assets.

For
many years prior to 1986, the Israeli economy was characterized by high rates
of inflation and devaluation of the Israeli currency against the U.S. dollar
and other currencies.  However, since
the institution by the Israeli government of an economic recovery program in
1985, inflation, while continuing, has been significantly reduced and until
recently the rate of devaluation has substantially diminished. Inflation and
U.S. dollar exchange rate fluctuations, however, have some effect on our
expenses and, as a result, on our net income/loss.  The cost of our Israel operation, as expressed in U.S. dollars,
is influenced by the extent to which any increase in the rate of inflation in
Israel is not offset (or is offset on a lagging basis) by a devaluation of the
NIS in relation to the U.S. dollar.

The
exchange rate between NIS and the U.S. dollar has fluctuated during the past
six months from a low of NIS 4.373 to the dollar to a high of NIS 4.924 to the
dollar.  The high and low exchange rates
between the NIS and U.S. dollar during the six most recent months, as published
by the Bank of Israel, were as follows:

|LOW 1 U.S. dollar = |  | HIGH 1 U.S. dollar = |       | MONTH
|------------------- |  | -------------------- | ----- | -----
|                    |  |                      |       |      
|4.632               |  |                      | 4.791 |      
|4.769               |  |                      | 4.898 |      
|4.81                |  |                      | 4.924 |      
|4.687               |  |                      | 4.858 |      
|4.564               |  |                      | 4.671 |      
|4.373               |  |                      | 4.577 |      

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The average exchange rate, using
the average of the exchange rates on the last day of each month during the
period, for each of the five most recent fiscal years, was as follows:

|Exchange Rate | Period                               
|------------- | -------------------------------------
|              |                                      
|              |                                      
|3.810 NIS/$1  | January 1, 1998 - December 31,
  1998
|4.154 NIS/$1  | January 1, 1999 - December 31,
  1999
|4.067 NIS/$1  | January 1, 2000 - December 31,
  2000
|4.219 NIS/$1  | January 1, 2001 - December 31,
  2001
|4.7378 NIS/$1 | January 1, 2002 - December 31,
  2002

In  1998, the rate of devaluation of the NIS
against the U.S. Dollar exceeded the rate of inflation, a reversal from prior
years. This was not the case in 1999, when the rate of inflation was
approximately 1.3% and the rate of devaluation was -0.3%.  In 2000, the rate of inflation was approximately
0% and the devaluation rate was -2.7%. During 2001, the NIS was devalued
against the dollar by 9.3%.  As a result
of the differential between the rate of inflation and the rate of devaluation
of the NIS, we experienced increases and decreases in the costs of our Israel
operations, as expressed in U.S. dollars, in 2002, but they did not materially
affect our results of operations in such periods.

As
of the date of this report, increases or decreases in the value of the NIS in
relation to the dollar do not materially affect our business.  However, as our business develops such
increases or decreases could affect our business.

Research
and Development, Patents and Licenses

As
part of its past operations, we invested in research and development and
registered trademarks and patents. 
Currently, as a holding company, we do not invest in research and
development nor in the registration of patents and licenses, except for
extension of certain existing patents.

Trend
Information

The
recent downturn in the world economy and in particular in the high technology
sector may affect the results of our subsidiaries and affiliates and
consequently, our results. The downturn may also affect these companies
abilities to raise additional financing. In return, this may affect our ability
to sell our holdings in these companies and realize gains from our investments.
Our inability to conclude profitable exit transactions will have an adverse
affect on our ability to report profits. The effects of the recent downturn may
also require us to make additional cash investments in companies in which we
are currently invested, as they face increasing difficulties in raising funds
from other sources. In addition, due to the volatility in the securities
markets, we may have to continue to reduce the book value of a certain number of our
holdings.

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Critical Accounting Policies

The
preparation of financial statements requires management to make estimates,
assumptions, and judgments that affect both (1) the reported amounts of assets
and liabilities and the disclosure of contingent liabilities as of the date of
the financial statements, and (2) the reported amounts of revenues and expenses
during the reporting period. On an ongoing basis, management evaluates its
estimates, assumptions, and judgments. Management bases its estimates,
assumptions, and judgments on historical experience and on various other
factors that it believes to be reasonable under the circumstances, some of
which may not be readily apparent from other sources. Under different
estimates, assumptions, judgments, factors or circumstances, results might
differ from the results that were reported.

Our
financial statements are prepared in accordance with accounting principles, and
audited annually in accordance with auditing standards, generally accepted in
the United States (U.S. GAAP).  A
discussion of the significant accounting policies which we follow in preparing
our financial statements is set forth in Note 2 to our consolidated financial
statements included elsewhere in this annual report and incorporated herein by
reference.  The following is a summary
of certain principles which have a substantial impact upon our financial
statements and, we believe, are most important to keep in mind in assessing our
financial condition and operating results:

Impairment
of long-lived assets.The Company and its subsidiaries
long-lived assets are reviewed for impairment in accordance with Statement of
Financial Accounting Standard No. 144 Accounting for the Impairment of
Disposal of Long-lived Assets (SFAS No. 144) whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to the future undiscounted cash
flows expected to be generated by the assets. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. As of
December 31, 2002, no impairment losses have been identified.

Revenue
recognition.The Company through its subsidiary, Franz
Kalff, generates revenues mainly from sales of first-aid kits. The Company
sells its products primarily through retail stores and car manufacturers in
Germany. Revenues from product sales are recognized in accordance with Staff
Accounting Bulletin No. 101 Revenue Recognition in Financial Statements (SAB
No. 101) when delivery has occurred, persuasive evidence of an agreement
exists, the vendors fee is fixed or determinable and collectibility is
probable. The Company maintains a provision for product returns, in accordance
with Statement of Financial Accounting Standard No. 48, Revenue Recognition
When Right of Return Exists (SFAS No. 48). The provision for returns and
other allowances are determined principally on the basis of past experience and
are deducted from revenues. The Company and its subsidiaries apply the
provisions of EITF 00-10, Accounting for Shipping and Handling Fees and
Costs, which requires that all amounts billed to a customer in a sales
transaction related to shipping and handling be classified as revenue and all
shipping and handling costs incurred are included as a component of cost of
goods sold.

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Item 6:  Directors, Senior Management and Employees

Directors
and Senior Management

The
following persons are the executive officers and directors of Robomatix :

|Name             |  | Age |  | Position                          
|---------------- |  | --- |  | ----------------------------------
|                 |  |     |  |                                   
|                 |  |     |  |                                   
|Zvi Barinboim    |  | 32  |  | Chairman of the Board of Directors
|Yitzhak Oz       |  | 36  |  | Director                          
|Ariel Levi       |  | 33  |  | Director                          
|Ruth Breger      |  | 55  |  | External Director                 
|Nir Reshef       |  | 37  |  | External Director                 
|Amit Goldwasser  |  | 36  |  | Chief Executive Officer           
|Gunther Schuftan |  | 65  |  | Managing Director of Franz Kalff  

Zvi Barinboimhas served
as chairman of our board of directors since December 30, 1999. A real estate
entrepreneur and a manager of investment companies, Mr. Barinboim serves as a director
of Orev Technologies 1977 Ltd. and World Group Holding Ltd., both publicly traded companies in which
Silverboim Holdings holds substantial interests.  During 1997 and 1998 Mr. Barinboim served as the manager of
Nathalia Investments Ltd.

Yitzhak Ozhas served as
a director since December 30, 1999. Since its establishment in March 1998 Mr.
Oz has owned Oz Insurance Agency Ltd. and currently serves as a director of Oz
- Life Insurance Agency Ltd., Gevim General Insurance Ltd. and CEO of Agam
Leaderim Insurance Agency (2001) Ltd. 
Mr. Oz served as a director of Bari-trust Investments Ltd. and has a
bachelors degree in economics and a masters degree in business
administration.

Ariel Levi has served as
a director since December 30, 1999. 
Since October 1999, Mr. Levi has been the administrative manger of
Silverboim Holdings, our principal shareholder, and a director of Super Email
Ltd. since November 1999 until June 2002. 
Prior to that, from August 1998 to October 1999 Mr. Levi was the
administrative manager of Bari-turst Investments Ltd. From 1996 until August
1998 Mr. Levi worked at Nathalia Investments Ltd. as an entrepreneur and was
the administrative manager of Orev Technologies 1977 Ltd.

Ruth Breger has served as an outside director since
September 12, 2000.     Ms. Breger is an
accountant with more than twenty years of experience in corporate financing and
investments. Ms. Breger also serves as an external director of Emblaze Systems
Ltd.  She has been a board member of
technology-based Israeli companies and the former deputy to the General Manager
of an investment company of Industrial Development Bank, Israel.

Nir Reshef has served as an outside director since
December 20, 2000.  Mr. Reshef is a lawyer
who since November 2000 has his own private practice, specializing in the
fields of taxes, securities and criminal law. 
Prior to his private practice, Mr. Reshef served for four years as a
prosecutor in the Tel - Aviv District Attorneys office.  In addition, Mr. Reshef worked as
auctioneer in the Tel-Aviv Stock Exchange.  Mr.
Reshef has a bachelors degree in Economics and a bachelor of law degree from
Tel-Aviv University.

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Amit Goldwasser served as Chief Exective Officer of
Robomatix since June 2002. Mr. Goldwasser has nearly 10 years of experience in
investment management, financial markets and corporate management. Mr.
Goldwasser is a certified public accountant and has bachelors degrees in
economics and accounting

Gunther Schuftanhas served as the managing director of
Franz Kalff since January 1997. He has over 35 years of experience in executive
management, primarily in Colombia, where he lived until 1996.  Mr. Schuftans experience includes his work
with C.P.C. Corn Products Co., where he served as a manager of several
departments, Atila De Colombia Ltda., where he served as sales and marketing
manager, Triumph International S.G., where he served as general manager,
Protabaco, where he served as commercial manager, Laboratorios Artibel:
Silueta/Schwarzkoph A.G., where he served as sales and marketing director, and
Bon Bril Ltd. and Marketing International S.A., where he served as a general
manager.  He has several academic certifications
in Sales and Marketing Management from various universities in Colombia,
including Los Andes University, Ideo and Centro Nacional De Estudios
Publicitarios.  In addition, he has
participated over the years in many special management and marketing training
programs in Europe and South America.

There
are no family relations between any of the persons named above.

Zvi
Barinboim, Yitzhak Oz and Ariel Levi were appointed by the previous members of
our board of directors on December 31, 1999, pursuant to the agreement with the
former controlling shareholders of Robomatix and in accordance with the
provisions of our articles of association allowing for an appointment by
members of the Board in order to fill vacancies. The appointing directors
resigned from the Board immediately after the appointment of Zvi Barinboim,
Yizhak Oz and Ariel Levi.  These
directors were later elected by our shareholders at the general meeting of our
shareholders that was held on September 12, 2000.

Compensation

The
aggregate direct compensation paid to, or accrued for, the account of all of
our officers and directors as a group during the 2002 fiscal year was
approximately $ 102,000. This amount includes directors fees, officers
compensation, bonuses, directors and officers insurance and expenses for which
directors and officers were reimbursed. In addition, approximately $ 127,000
was paid to, or accrued for, the account of Silverboim Holdings pursuant to our
consultation and management agreement with Silverboim Holdings.  This amount includes management fees,
administrative costs and travel expenses for which Silverboim Holdings was
reimbursed. See Item 7: Major Shareholders and Related Party Transactions.

The
aggregate direct compensation paid to or accrued for the account of all
officers as a group of Franz Kalff during the 2002 fiscal year was  399.445.
In addition, Mr. Schuftan, the Managing Director of Franz Kalff, is also
entitled to a percentage of revenues generated by Franz Kalff, in accordance
with different revenue thresholds. 
Amounts set aside or accrued during the year 2002 to provide pension,
retirement, insurance or similar benefits to our officers and directors were
approximately  1,534.

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Board Practices

Our
articles of association provide that the board of directors shall consist of
not less than four and not more that nine members.  The members of the board of directors are elected at the annual
meeting of our shareholders by regular majority.    None of our directors or officers have service contracts with
us that provide for special benefits upon termination of employment.  The consultation and management agreement
and services agreement between Robomatix and Silverboim Holdings are each for a
term of five years commencing on January 1, 2000.  These agreements do not provide for their termination.  See Item 7: Major Shareholders and Related
Party Transactions.

Pursuant
to Israeli law we are required to appoint two outside directors.  These directors must be unaffiliated with us
and our principals.  Any committee of
the Board of Directors which is authorized to exercise any function of the
board must include at least one outside director.

Outside
directors are to be elected by a majority vote at a shareholders meeting,
provided that such majority includes at least one-third of the shares held by
non-controlling shareholders voted at the meeting; or the total number of
shares held by non-controlling shareholders voted against the election of the
director does not exceed one percent of the aggregate voting rights in the
company.

The
initial term of an outside director is three years and may be extended for an
additional three-year term.  Outside
directors may be removed only by the same percentage of shareholders as is
required for their election, or by a court, and then only if the outside
directors cease to meet the statutory qualifications for their appointment or
if they violate their duty of loyalty to the company.

An
outside director is entitled to compensation as provided in regulations adopted
under the Israeli Companies Law and is otherwise prohibited from receiving any
other compensation, directly or indirectly, in connection with service provided
as an outside director.

The
Israeli Companies Law requires public companies to appoint an audit
committee.  The responsibilities of the
audit committee include identifying irregularities in the management of the
companys business and approving related party transactions as required by
law.  An audit committee must consist of
at least three directors, including the outside directors of the company.  The chairman of the board of directors, any
director employed by or otherwise providing services to the company, and a
controlling shareholder or any relative of a controlling shareholder, may not
be a member of the audit committee.

Under
the Israeli Companies Law, the board of directors must appoint an internal
auditor, recommended by the audit committee. 
The role of the internal auditor is to examine, among other matters,
whether the companys actions comply with the law and orderly business
procedure.  Under the Companies Law, the
internal auditor may be an employee of the company but not an office holder, or
an affiliate, or a relative of an office holder or affiliate, and he may not be
the companys independent accountant or its representative.

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The
initial term of both Ms. Breger and Mr. Reshef will expire in December 2003.
Both Ms. Breger and Mr. Reshef serve on our Audit Committee.

Franz Kalff.The
board of directors of Franz Kalff consists of Gunther Schuftan the managing
director, Zvi Barinboim, chairman of the board of directors of Robomatix and
Amit Goldwasser, Robomatixs chief executive officer.  The term of Gunther Schuftans employment agreement with Franz
Kalff is until March 31, 2005.  Under
the employment agreement between Franz Kalff and Erich Golles, Key Account
Manager at Franz Kalff, if either party terminates the agreement before December
31, 2003, the terminating party shall pay to the non-terminating party  approximately  44,000. The other officers
of Franz Kalff do not have service agreements with Franz Kalff that provide for
benefits upon termination of employment.

Employees

In
each of the fiscal years ended December 31, 2000, 2001 and 2002, we had two
employees. These employees are located in Israel and engage in management and
internal accounting.

Franz
Kalff.  The following
table sets forth for the last three fiscal years the number of Franz Kalffs
employees engaged in the specified activities:

|Year
  Ended December 31,                         |  | 2002 |  | 2001 |  | 2000 | 
|------------------------------------------------- |  | ---- |  | ---- |  | ---- | 
|                                                  |  |      |  |      |  |      | 
|Administration and accounting                     |  | 6    |  | 6    |  | 6    | 
|Product development and quality control           |  | 3    |  | 3    |  | 3    | 
|Customer service, marketing and back-office sales |  | 5    |  | 5    |  | 5    | 
|Purchase                                          |  | 1    |  | 1    |  | 1    | 
|Warehouse and disposition of material             |  | 3    |  | 3    |  | 3    | 
|                                                  |  |      |  |      |  |      | 
|Total                                             |  | 18   |  | 18   |  | 18   | 

Since
the end of fiscal year 2001, there has not been a significant change in that
number.  There are four managers other
than Mr. Gunther Schuftan, who is the Managing Director, at Franz Kalff:  Mr. Gunther Sief, Administration Manager,
Mr. Christof Gehlen, Quality Systems Manager and Mr. Erich Golles, Key Account
Manager and Mr. Raymund Muller, Key Account Manager and Product
Development.  In addition, pursuant to
the requirements of the German law with respect to pharmaceuticals sales, Mr.
Franz Kalff, a former owner of Franz Kalff, serves as an outside advisor.

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Franz
Kalff is a member of the Employers Federation 
(Arbeitgeberverband) VIV-Duren, an association of approximately sixty
local companies, which provides information on various issues of interest to
its members.   Franz Kalff is also a
member of the North-Rhine-Westphalian Textile Industry Association.  This membership requires that the wages paid
by Franz Kalff to its employees comply with the wages fixed by the
association.

Pursuant
to German law, every four years, the employees of Franz Kalff appoint members
to a work council within Franz Kalff. 
The work council ensures the implementation of employees rights under
the German law and they represent the employees interests before the
management of Franz Kalff.  Management
also consults them before it hires or releases employees.

E.  Share Ownership

The
following table sets forth, as of June 11, 2003, the share ownership of our
directors, executive and our former Chief Executive Officer (See Item 8:
Significant Changes). All of the information with respect to beneficial
ownership by our directors and executive officers has been furnished by the
respective director or executive officer, as the case may be.  Except as otherwise stated, we believe that
the persons named in this table have sole voting and investment power with
respect to the ordinary shares indicated:

|Name of Director/Officer |  | Number of Ordinary
  Shares Beneficially
  Owned |  | Number of Options
  Exercisable within
  60 days |         | Percentage of Total
  Shares (1)
|------------------------ |  | ------------------------------------------------ |  | ------------------------------------------------ | ------- | --------------------------------
|                         |  |                                                  |  |                                                  |         |                                 
|                         |  |                                                  |  |                                                  |         |                                 
|Zvi Barinboim(2)         |  | 8,175,350                                        |  |                                                  | 519,255 |                                 
|Yuval Zohar(3)           |  | -                                                |  |                                                  | 500,000 |                                 
|Yitzhak Oz(4)            |  | -                                                |  |                                                  | 20,000  |                                 
|Ariel Levi (5)           |  | 6,000                                            |  |                                                  | 20,000  |                                 
|Ruth Breger (6)          |  | -                                                |  |                                                  | 20,000  |                                 
|Nir Reshef (6)           |  | -                                                |  |                                                  | 20,000  |                                 
|Gunther Schuftan (7)     |  | -                                                |  |                                                  | [50,000 | ]                               

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|(1) | Percentages in this column are based on 13,599,626
  ordinary shares outstanding as of June 11, 2003, plus the number of
  underlying shares as the indicated person has the right to receive upon the
  exercise of options/warrants which are exercisable within 60 days of June 11,
  2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(2) | Includes 87,200 shares held directly by Zvi
  Barinboim and 8,088,150 shares held by Silverboim Holdings. The options
  include 499,255 held by Silverboim Holdings exercisable until February 29,
  2004 at an exercise price of $2.00 per ordinary share and 20,000 held by Zvi
  Barinboim exercisable as long as he continues to serve as a director of the
  company at an exercise price of $0.70 per ordinary share. Silverboim Holdings
  is a privately held company whose outstanding shares are held by Zvi
  Barinboim (12.67%), Barhoz Holdings Ltd. (13.72%), Sender Holdings Ltd.
  (26.38%), Zvi Bar-Nes Nisensohn and a company under his control (10.43%),
  Gilex Holding B.V (11.81%), Shrem, Fudim, Kelner & Co. Ltd. (5.86%),  Shmuel Melman (12.34%) and Hapoalim Assets
  (Shares) Ltd. (6.79%).  Zvi Barinboim
  holds, primarily through a wholly owned company, 51% of the voting rights and
  26.92% of the capital stock of Barhoz Holdings Ltd.  On May 28, 2000 Sender Holdings Ltd. gave Mr. Zvi Barinboim an
  irrevocable power of attorney under which Mr. Barinboim will have all of
  Sender Holdings Ltd.s voting rights in Silverboim Holdings.  [Two of the directors of Silverboim
  Holdings who were nominated by Sender Holdings Ltd. resigned their office on
  May 28, 2000.  On March 11, 2002,
  Poalim Nehasim Ltd. granted Zvi Barinboim an irrevocable power of attorney
  for a period of three years under which Zvi Barinboim will be entitled to
  exercise all of the voting rights of Poalim Nehasim in Silverboim Holdings
  for the election of directors.As a result, Zvi Barinboim holds, directly and indirectly,
  approximately 59.56% of the voting rights of Silverboim Holdings. Certain
  shareholders of Silverboim Holdings hold options to purchase ordinary shares
  of Silverboim Holdings and the numbers presented above do not represent
  percentages of holdings on a fully diluted basis.
|    | Zvi Barinboim disclaims beneficial ownership of the
  securities owned by Silverboim Holdings, except to the extent of his pecuniary
  interest in those securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

40

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|(3) | Includes options to purchase 200,000 ordinary shares
  at a price of $0.36 per share until December 1, 2004 and options to purchase
  300,000 ordinary shares at a price of $0.70 per share exercisable until June
  30, 2005. 
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                
|(4) | Yitzhak Oz holds, through a company under his
  control, approximately 15% of the voting rights and 15% of the capital stock
  of Barhoz Holdings Ltd., which holds 13.72% of the share capital of
  Silverboim Holdings.      
|    |                                                                                                                                                                                                                                
|(5) | Includes options to purchase 20,000 ordinary shares
  at a price of $0.70 per share exercisable as long as he continues to serve as
  a director of the company.                                                               
|    |                                                                                                                                                                                                                                
|(6) | Each of Ruth Brefer and Nir Reshef were granted
  options to purchase 20,000 ordinary shares at a price of $0.70 per share
  exercisable as long as they continue to serve as external directors of the
  company.             
|    |                                                                                                                                                                                                                                
|(7) | Gunther Schuftan, the Managing Director of Franz
  Kalff, was granted options to purchase 50,000 ordinary shares at a price of
  $0.70 per share exercisable as long as he continues to be a service provider
  to the company.

As
of June 25, 2003, our directors have exercised 0 options, our chief executive
officer has exercised 0 options and Mr. Schuftan has exercised 0 options.

41

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The
new employees and directors option plan was adopted by our board of directors
and audit committee on May 21, 2001 and approved by our shareholders on July
12, 2001.  The plan authorizes the
issuance of options to purchase a total of 1,500,000 ordinary shares to our
employees, directors and service providers. 
The term of this option plan is for ten years from the date of adoption.
As of June 25, 2003, options to purchase 910,000 ordinary shares have been
allocated under the 2001 employee and directors option plan.

Other
Employees Options Plans.  On August
8, 1999, our shareholders approved the adoption of an employees option plan
authorizing the allocation of options to purchase a total of 750,000 ordinary
shares at a minimum exercise price of NIS 1.46 per share to our future
employees and consultants.  Although our
board of directors did not adopt a formal employees option plan pursuant to
that shareholders resolution, it has granted options in accordance with it.  As of the date of this report, the board of
directors has granted options to purchase 220,000 ordinary shares in accordance
with the shareholders resolution, of which options to purchase 20,000 have been
exercised.

On
April 18, 2001, our board of directors cancelled our Key Employee Share
Incentive Plan (1993) that authorized the allocation of options to purchase
150,000 ordinary shares to key employees. 
No options were ever allocated under this plan.

In
1998 we adopted a Director Share Option Plan (1998) that authorized the
allocation of options to purchase 143,174 ordinary shares to directors of the
company.   143,174 options were
allocated under this plan.  No options
under this plan have been exercised. See Item 8: Financial Information  Legal
Proceedings.

In
November 19, 1989 we adopted an employee share plan under which 170,894 shares
were issued to employees of the company.

Item 7:  Major
Shareholders and Related Party Transactions

A.  Major Shareholders

The
following table sets forth, as of June 11, 2003, the number of ordinary shares
owned beneficially by all shareholders known to us to beneficially own more
than five percent of our ordinary shares. 
The information presented was provided to us by the named
shareholders.  Robomatix is not directly
or indirectly owned or controlled by any other corporation or by a
government.  The named shareholders in
this table do not have different voting rights with respect to the ordinary
shares indicated.

42

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|Name                                          |  | Number of
  Ordinary Shares
  Beneficially
  Owned |  | Number of
  Options
  Exercisable
  within 60 days |           | Percent of
  Total Shares
  and Exercisable
  Options (1)
|--------------------------------------------- |  | -------------------------------------------------- |  | -------------------------------------------------- | --------- | ---------------------------------------------------------
|                                              |  |                                                    |  |                                                    |           |                                                          
|Silverboim Holdings Ltd.(2)(3)                |  | 8,088,150                                          |  |                                                    | 499,255   |                                                          
|Mr. Zvi Barinboim(5)                          |  | 8,175,350                                          |  |                                                    | 519,255   |                                                          
|Shrem, Fudim, Kelner Technologies Ltd. (2)(4) |  | 250,000                                            |  |                                                    | 1,750,638 |                                                          
|Gilex Holdings B.V.(2)(6)                     |  | 2,155,211                                          |  |                                                    | 58,962    |                                                          

---

|(1) | Percentages in this column are based on 13,599,626
  ordinary shares outstanding as of June 11, 2003 plus such number of ordinary
  shares as the indicated person or group has the right to receive upon the
  exercise of options which are exercisable within 60 days of June 11, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(2) | The options listed are exercisable until February
  29, 2004 at an exercise price of $2.00 per ordinary share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(3) | Includes only shares held by Silverboim
  Holdings.  Zvi Barinboim, the chairman
  of our board of directors, who holds, directly and indirectly, approximately
  52.77% of the voting rights of Silverboim Holdings, holds 87,200 of our
  ordinary shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(4) | Includes only ordinary shares held by Shrem, Fudim,
  Kelner Technologies Ltd.  Shrem, Fudim
  Kelner & Co. Ltd., which holds 72.05% of the outstanding shares of Shrem,
  Fudim, Kelner Technologies Ltd., holds 5.86% of the ordinary shares of
  Silverboim Holdings and has a representative on the board of directors of
  Silverboim.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(5) | The shares includes 87,200 ordinary shares held by
  Zvi Barinboim and 8,088,150 shares held by Silverboim Holdings.  The options include 499,255 held by
  Silverboim Holdings exercisable until February 29, 2004 at an exercise price
  of $2.00 per ordinary share and 20,000 held by Zvi Barinboim exercisable as
  long as he continues to serve as a director of the company at an exercise
  price of $0.70 per ordinary share. Silverboim Holdings is a privately held
  company whose outstanding shares are held by Zvi Barinboim (12.67%), Barhoz
  Holdings Ltd. (13.72%), Sender Holdings Ltd. (26.38%), Zvi Bar-Nes Nisensohn
  and a company under his control (10.43%), Gilex Holding B.V (11.81%), Shrem,
  Fudim, Kelner & Co. Ltd. (5.86%), 
  Shmuel Melman (12.34%) and Hapoalim Assets (Shares) Ltd. (6.79%).  Zvi Barinboim holds, primarily through a
  wholly owned company, 51% of the voting rights and 26.92% of the capital
  stock of Barhoz Holdings Ltd.  On May
  28, 2000 Sender Holdings Ltd. gave Mr. Zvi Barinboim an irrevocable power of
  attorney under which Mr. Barinboim will have all of Sender Holdings Ltd.s
  voting rights in Silverboim Holdings. 
  Two of the directors of Silverboim Holdings who were nominated by Sender
  Holdings Ltd. resigned their office on May 28, 2000.  On March 11, 2002, Poalim Nehasim Ltd.
  granted Zvi Barinboim an irrevocable power of attorney for a period of three
  years under which Zvi Barinboim will be entitled to exercise all of the
  voting rights of Poalim Nehasim in Silverboim Holdings for the election of
  directors.As a
  result, Zvi Barinboim holds, directly and indirectly, approximately 59.56% of
  the voting rights of Silverboim Holdings. Certain shareholders of Silverboim
  Holdings hold options to purchase ordinary shares of Silverboim Holdings and
  the numbers presented above do not represent percentages of holdings on a
  fully diluted basis.
|    | Zvi Barinboim disclaims beneficial ownership of the
  securities owned by Silverboim Holdings, except to the extent of his
  pecuniary interest in those securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

43

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|(6) | Includes 1,200,000 shares held by Gilex; and 955,211
  shares held by Silverboim Holdings. 
  The options presented are also held by Silverboim Holdings.  Gilex holds 11.81% of the outstanding
  ordinary shares of Silverboim Holdings and has a representative on its board
  of directors.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Silverboim
Holdings purchased the controlling block of our ordinary shares on December 30,
1999.  On February 29, 2000, Shrem,
Fudim, Kelner Technologies purchased from Silverboim Holdings 1,250,000 of our
ordinary shares and received options to purchase 1,750,638 of our ordinary
shares.  On January 24, 2001, we issued
1,200,000 of our ordinary shares to Gilex as part of the transaction in which
Mersa, our wholly owned subsidiary, purchased the share capital of Franz
Kalff.  On August 9, 2001 Silverboim
Holdings purchased from Shrem, Fudim, Kelner Technologies 1,250,000 of our
ordinary shares. For a detailed description of these transactions, see Item 4:
Information on the Company  History and Development.

As
of June 11, 2003, there were 456 stockholders of record holding 13,599,626 of
our ordinary shares.  To the best of our
knowledge, 231 of these stockholders, holdings 3,647,756 of our ordinary
shares, reside or have offices in the United States, including the American
Stock Transfer & Trust Company.

B.  Related Party Transactions

On
February 15, 2000, we entered into an agreement for the purchase of the assets
of Silverboim Technology (1999) Ltd., a wholly owned subsidiary of Silverboim
Holdings, for an aggregate purchase price of $885,000.  Silverboim Holdings is one of our principal
shareholders and Zvi Barinboim, who has direct and indirect interests in
Silverboim Holdings, is the chairman of our board of directors.   See Item 4: Information on the Company 
History and Development.

In July and
October of 2000, we entered into transactions with Dirad and Belas.  We purchased shares of Dirad, partially exercising
our right under our debenture to participate in securities offering by Dirad,
and increased  our indirect holdings in
eLady.  These transactions, which
resulted in an expenditure of approximately $5.65 million, are more fully
described under Item 4: Information on the Company  History and Development 
Recent Principal Expenditures. 
Immediately before the October 2000 round of financing of Dirad, we held
15% of the share capital of Dirad on an as converted, fully diluted basis.  Additionally, Shrem, Fudim, Kelner
Technologies, one of our principal shareholders, held approximately 25% of the
share capital of Dirad on an as converted, fully diluted basis before the
October 2000 round of financing and also participated in it along with other
entities in which it holds substantial interests.  At the time of our transaction with Dirad for the purchase of
additional shares of Niponet on October 31, 2000, we held 13.6% of the share
capital of Dirad on an as converted, fully diluted basis.    Other related parties of Robomatix hold
indirect interests in eLady, the wholly owned subsidiary of Belas (not
including options to employees). Such related parties include Silverboim
Holdings and Shrem, Fudim, Kelner & Co., the controlling shareholder of
Shrem, Fudim, Kelner Technologies. Silverboim Holdings became a small
percentage shareholder of Belas only in February 2001, as it purchased shares
of Belas in the second closing of Belas October 2000 round of financing.  Gilex, from which we purchased the share capital
of Franz Kalff, also holds indirect interests in eLady through Niponet and
Hillsborough.

44

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On October
2000, our shareholders approved a services agreement between Robomatix and
Silverboim Holdings, effective January 1, 2000, pursuant to which Silverboim
Holdings provides us support and administrative services, including secretarial
and computer services, office space and the payment of related expenses.  The service fees under this agreement are
based on actual expenses up to $5,000 per month.  Silverboim Holdings is one of our principal shareholders.  Currently, our principal executive office is
located at 6 Wissotzky Street in Tel-Aviv, Israel, where the offices of
Silverboim Holdings are located. In our financial statements we allocated
$60,000 for support, services and office space.

On November
15, 2000, we entered into a consultation and management agreement with
Silverboim Holdings, effective January 1, 2000, pursuant to which Silverboim
Holdings provides us with management, consulting and support services in
consideration for monthly payments of $10,000 plus VAT and reimbursement of
reasonable expenses. This agreement was also approved by our shareholders on
October 2000.

On January
11, 2001, Mersa, our wholly owned subsidiary, entered into a transaction with
Gilex for the purchase of all the share capital of Franz Kalff.  See Item 4: Information on the Company 
History and Development  Recent Principal Expenditures.  At the time of the transaction, Gilex held
7.9% of the issued and outstanding ordinary shares of Silverboim Holdings, and
29.8% of the capital share of Silverboim Holdings on a fully diluted
basis.  Additionally, Gilex has one
representative on the board of directors of Silverboim Holdings.  As part of that transaction, Mersa was
assigned shareholders and others loans previously advanced to Franz Kalff.
Mersa borrowed the cash purchase price of the share capital of Franz Kalff,
aggregating $6.3 million, from us. 
Additionally, the value of our ordinary shares that we issued to Gilex
as part of that transaction is deemed a loan to Mersa in the amount of $2.1
million.   Under our loan agreement with
Mersa, dated March 2001, the cash loan will be repaid pursuant to the same
terms of the loan that we took from Bank Hapoalim in order to finance a
substantial amount of this cash loan. See Item Recent Principal Capital
Expenditures  Franz Kalff GmbH.

As stated
above, we financed a substantial part of the purchase price of the share
capital of Franz Kalff through a secured loan that we took from Bank
Hapoalim.  This loan is guaranteed by
Silverboim Holdings, one of our principal shareholders, through two guaranty
agreements with the bank.  The first
guaranty agreement, unlimited in amount, guarantees the payment of all amounts
due to the bank from Robomatix and will terminate upon the perfection of a
security interest in Mersas bank account in the Netherlands.  The other agreement guarantees our payment
of 2,658,443 Euro to Bank Hapoalim (approximately $2.5 million as of the date
of this report).

45

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---

Our
board of directors and audit committee resolved on April 18, 2001, that
subject to the adoption of a new employees and directors option plan, each
director of Robomatix (including external directors) will be granted options to
purchase 60,000 of our ordinary shares and that our chief executive officer
will be granted options to purchase an additional 240,000 of our ordinary
shares.  Furthermore, the board of
directors and the audit committee resolved that, subject to the execution of an
option agreement between Mr. Schuftan and us, Mr. Schuftan will be granted
options to purchase 250,000 of our ordinary shares.  See Item 6: Directors, Senior Management and Employees  Share
Ownership.  The new employees and
directors options plan was adopted by our board of directors and audit committee
on May 21, 2001 and were approved by our shareholders on July 12, 2001.

On April
18, 2001, our board of directors and audit committee approved a retroactive
increase as of January 1, 2001 in the salary of Yuval Zohar, our former chief
executive officer, as well as an annual bonus for the year 2000 and other
benefits relating to his employment at Robomatix.  This retroactive salary increase and annual bonus were approved
by our shareholders on July 12, 2001.

In
September 2002, we entered into an agreement for the sale of all of our share
holdings in Robomatix (Israel) Ltd. to SPL Software Ltd., an Israeli company
also held by Silverboim Holdings Ltd., one of our principal shareholders. In
accordance with the agreement SPL Software, will pay us NIS 2,700,000, payable
in NIS in three equal installments. At the closing of the transaction, we
received the first payment of NIS 900,000. The second payment and third payment
are linked to the Israeli cost of living index and will be paid on the first
and second anniversary of the transactions closing.

C.  Interests of Experts and Counsel

Not
required.

Item 8: 
Financial Information

A.  Consolidated Statements and Other Financial
Information

Financial Statements

Our consolidated
financial statements are incorporated herein by reference to pages F-1 to F-36.

Legal Proceedings

Two of our
former directors claim that they have a right to exercise options they received
according to our 1998 Director Share Option Plan, pursuant to which each
received options to purchase 47,725 ordinary shares, exercisable upon
consummation of three years of service as our directors.  Based on our Israeli legal counsel ́s advice
we believe that the options granted to these two former directors are not
exercisable.  On April 17, 2000, one of
such former directors filed a pleading with the Tel-Aviv Magistrate Court for
the issuance of shares underlying the options he received under the 1998 Plan
and an ex parte motion for provisional remedies.  The court granted the former director an attachment on the
options and underlying shares, and issued a preliminary injunction, until a
hearing before both parties, preventing us or any person on our behalf from acting
in any way that might impede the exercise of the options.  On May 30, 2000, the Tel-Aviv Magistrate
Court cancelled the attachment and injunction after we agreed with the former
director that until a final judgment is issued by the Magistrate Court, we will
not act in any way which might impede the exercisability of the former
directors options. In November 2001 the Tel-Aviv Magistrate Court ruled in our
favor, however in December 2001 the former director filed an appeal with the
District Court of Tel Aviv.  To date,
there have been no material developments in connection with this appeal. We
believe that this pleading will not materially affect our operations.

46

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B.  Significant Changes

In December
2002, following transfer of the land from the subsidiaries to Franz Kalff,
Franz Kalff entered into an agreement for the sale of the land to the Israel
Land Development Insurance Company Ltd. for $3,500,000. Simultaneously, Israel
Land Development Insurance Company leased back to Franz Kalff the facilities
for a fifteen year period, for annual rent of $350,000. The sale and lease-back
were completed in February 2003.

Commencing
in December 2002 we entered into a series of agreements in connection with
Associative Computing Ltd. concluding in April 2003 with the sale of all our
shareholdings in Associative Computing and its debt to us for the aggregate
amount of 6,000,000 NIS. See Item 4 - Information on the Company - The Sale
and Discontinuation of Our Original Activities.

Item 9: 
The Offer and Listing

Price History and Market Information

In January
1994, we consummated an initial public offering in the United States of
1,750,000 of our ordinary shares.  In
late 1994, our shares were de-listed from Nasdaq and the Pacific Stock
Exchange. As of the date of this report our ordinary shares are listed on the
over-the-counter bulletin board under the Symbol RBMXF. There is no
non-United States trading market for our ordinary shares.

47

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The
following sets forth the high and low sales prices for our ordinary
shares as quoted on the over-the-counter bulletin board for the periods
indicated:

|          |                  | High |   | Low   | 
|--------- | ---------------- | ---- | - | ----- | 
|          |                  |      |   |       | 
|Annually  |                  |      |   |       | 
|          | Fiscal 1998      |      | $ | 0.44  | 
|          | Fiscal 1999      |      | $ | 1.10  | 
|          | Fiscal 2000      |      | $ | 5.00  | 
|          | Fiscal 2001      |      | $ | 1.03  | 
|          | Fiscal 2002      |      | $ | 0.25  | 
|Quarterly |                  |      |   |       | 
|          | Fiscal 2000:     |      |   |       | 
|          | First
  Quarter  |      | $ | 5.00  | 
|          | Second
  Quarter |      | $ | 3.13  | 
|          | Third
  Quarter  |      | $ | 2.03  | 
|          | Fourth
  Quarter |      | $ | 1.375 | 
|          | Fiscal 2001:     |      |   |       | 
|          | First
  Quarter  |      | $ | 1.03  | 
|          | Second
  Quarter |      | $ | 0.78  | 
|          | Third
  Quarter  |      | $ | 0.45  | 
|          | Fourth
  Quarter |      | $ | 0.32  | 
|          | Fiscal 2002:     |      |   |       | 
|          | First
  Quarter  |      | $ | 0.20  | 
|          | Second
  Quarter |      | $ | 0.23  | 
|          | Third
  Quarter  |      | $ | 0.25  | 
|          | Fourth
  Quarter |      | $ | 0.25  | 
|          | Fiscal 2003      |      |   |       | 
|          | First Quarter    |      | $ | 0.50  | 
|Monthly   |                  |      |   |       | 
|          | December
  2002  |      | $ | 0.25  | 
|          | January 2003     |      | $ | 0.25  | 
|          | February
  2003  |      | $ | 0.35  | 
|          | March 2003       |      | $ | 0.50  | 
|          | April 2003       |      | $ | 0.35  | 
|          | May 2003         |      |   |       | 
|          |                  |      |   |       | 

The foregoing
closing bid quotations reflect inter-dealer quotations without retail mark-ups,
markdowns or commissions and may not represent actual transactions.

Item 10: 
Additional Information

Memorandum and Articles of Association

The
provisions of our articles of association with respect to transactions in which
our directors have a personal interest are subject to the provisions of the
Companies Law, described under Item 6: Directors, Senior Management and
Employees  Board Practices  Approval of Transactions under the Companies
Law.  Our articles of association do
not set a higher standard for approval of interested partys transactions than
the standard set by the Companies Law 5759-1999.

48

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---

In
February 2000, the Israeli Companies Ordinance (New Version)  1983 was
replaced by the Companies Law.  Since
our articles of association were approved before the enactment of the Companies
Law, they are not always consistent with the provisions of the Companies
Law.  In all instances in which the
Companies Law differ from the Companies Ordinance, and as a result our articles
of association are not consistent with the Companies Law, the provisions of the
Companies Law prevail unless the Companies Law provides otherwise.  Similarly, where a provision of our articles
of association refer to a section of the Companies Ordinance that has been
replaced by a corresponding section in the Companies Law, such provision shall
be interpreted as referring to the relevant section of the Companies Law.

Our
articles of association do not set age limitations with respect to our
directors and the directors are not required to hold qualifying shares.

On
September 12, 2000, our shareholders authorized the increase of our authorized
share capital by 10,000,000 ordinary shares. 
As of the date of this report our authorized share capital consists of
30,000,000 ordinary shares, nominal value NIS 1.46 per share, of which
13,599,626 ordinary shares are issued and outstanding.

Dividend
and Liquidation Rights. We may declare a dividend out
of profits legally available therefor so long as the company reasonably
believes that such dividend distribution will not prevent the company from
paying all its current and future debts. 
Such dividend may be paid to holders of our ordinary shares according to
their rights and interests in our profits. 
Declaration of a dividend requires shareholder resolution, which may
decrease but not increase the amount proposed by our board of directors.  In the event of our liquidation, after
satisfaction of liabilities to creditors, our assets will be distributed to the
holders of ordinary shares in proportion to the nominal value of their
respective holdings.  Such rights may be
affected by the grant of preferential dividend or distribution rights to the
holders of a class of shares with preferential rights that may be authorized in
the future.

Voting,
Shareholder Meetings and Resolutions. Holders of our
ordinary shares have one vote for each share held on all matters submitted to a
vote of shareholders. Such voting rights may be affected by the grant of any
special voting rights to the holders of a class of shares with preferential
rights.  Our ordinary shares do not have
preemptive rights.

A general
meeting of the shareholders is held once every year at a place and time, not
being more than 15 months after the date of the last general meeting, as may be
prescribed by the board of directors. 
Upon request of any two directors or one quarter of the officiating
directors, the board of directors may convene an extraordinary shareholders
meeting.  In addition, shareholders who
hold at least 5% of the shares of Robomatix may demand in writing that the
board of directors convene an extraordinary meeting, provided that the purpose
of that meeting is stated in the written demand.  If the board of directors does not convene the meeting within
twenty-one days from the date that the written demand was received at the
offices of Robomatix, then the demanding shareholders, or any of them
representing more than one-half of the total voting rights of all of them, may
convene the meeting, provided that the meeting may not be convened if three
months has elapsed since the date that the written demand was received at the
offices of Robomatix.

49

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---

The
quorum required for a general meeting of shareholders (whether annual or
extraordinary) consists of one or more shareholders present in person or by
proxy and holding, or representing, more than one-third of the voting
rights of the issued share capital. A meeting adjourned for lack of a quorum is
adjourned to the same day of the next week at the same time and place or such
time and place as the Board determines. 
If at such reconvened meeting a quorum is not present within one half
hour from the time set for the meeting, two shareholders present in person or
by proxy will constitute a quorum, regardless of the number of shares
represented.

An ordinary
resolution (such as a resolution for the election of directors, the declaration
of dividends and the appointment of auditors) requires approval by the holders
of a majority of the shares represented at the meeting, in person or by proxy,
and voting thereon. A special or extraordinary resolution (such as a resolution
amending the memorandum or articles of association, changing the capital of the
company, winding up, authorizing a class of shares with special rights or other
changes as specified in our articles of association) requires approval of the holders
of 75% of the shares represented in person or by proxy at the meeting and
voting thereon. A special resolution can be adopted only if shareholders
receive 21 days prior notice of the meeting at which such resolution will be
voted on unless all shareholders entitled to vote agree on a shorter
period.  The 75% majority requirement is
more significant than is required by the Companies Law with respect to
amendments to articles of association.

Approval
of Transactions under the Companies Law.The Israel Companies Law codifies the
fiduciary duties that an office holder, including directors and executive
officers, owe to a company.  An office
holders fiduciary duties consist of a duty of care and a duty of loyalty.  The duty of care requires an office holder
to act with the same level of skill with which a reasonable office holder in a
similar position would have acted under the circumstances.  Such duty requires the use of reasonable
means to obtain information on the advisability of a given action brought for
an office holders approval or an action performed by the office holder by
virtue of such office holders position, and all other significant information
pertaining to those actions.  The duty
of loyalty requires an office older to act in good faith and for the benefit of
the company, and includes the following:

| |  | a duty to
  avoid conflicts of interest between such office holders position in the
  company and other positions such office holder holds, or such office holders
  personal affairs;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                         
| |  | a duty to
  avoid competition with the company;                                                                                                                                         
| |   |                                                                                                                                                                                         
| |  | a duty to
  avoid exploitation of any business opportunity of the company for such office
  holders own benefit or for the benefit of others; and                                      

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| |  | a duty to
  disclose to the company any information or documents relating to the
  companys affairs which such office holder received due to its position as an
  office holder.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

However,
a company may approve such actions, in accordance with the provisions for
approval of interested parties transactions, provided that the office
holder acts in good faith, the action or its approval is not detrimental to the
company and the office holder discloses to the company, a reasonable time prior
to its approval, the nature of its personal interest in the action.  Personal interest of an office holder is
defined as including the personal interest of a relative of the office holder
and the personal interest of a corporation in which the office holder or its
relative holds 5% or more of the capital stock, a corporation in which the
office holder or its relative is the chief executive officer or a director, or
a corporation in which such office holder or its relative has the power to
appoint the chief executive officer or a director.  There is no duty to disclose the personal interest of a relative
of the office holder in a transaction which is not an Extraordinary Transaction
(as defined herein).  An Extraordinary
Transaction is defined as a transaction outside of the ordinary course of
business, a transaction inconsistent with market terms or a transaction which
is likely to have a material impact on a companys profitability, assets or
liabilities.

Transactions
in which an office holder has a personal interest must be approved in the following
manner: non-Extraordinary Transactions, including compensation for office
holders that are not directors, require approval of the board of directors,
unless the articles of association provide for another way of approval.
Extraordinary Transactions as well as the approval of indemnification and
insurance for office holders that are not directors require the approval of the
audit committee and the board of directors. In addition to board and audit
committee approvals, shareholders consent is required for the approval of
directors compensation or when the majority of the board of directors has a
personal interest and/or the audit committee has a personal interest in an
Extraordinary Transaction.  A director
who has a personal interest in a transaction may not be present at a board or
audit committee meeting convened for the purpose of approving such transaction,
unless the majority of the board or the audit committee members have personal
interest in the transaction.

Duties
of a Shareholder.Under
the Companies Law, a shareholder has a duty to act in good faith and in a
customary manner towards the company and other shareholders and refrain from
improperly exploiting his power, including, among other things, when voting in
the general meeting of the shareholders on the following matters:

| |  | any
  amendment to the articles of association;                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase
  of the companys authorized share capital;                                                                                                                           
| |  | a merger; or                                                                                                                                                                       
| |  | approval of
  specific acts and transactions which require shareholder approval pursuant to
  the provisions relating to fiduciary duty and transactions with interested
  parties.

In
addition, any controlling shareholder, any shareholder who knows that it
possesses the power to determine the outcome of a vote at a shareholder meeting
and any shareholder that, pursuant to the provisions of the articles of
association, has the power to appoint, or to object to the appointment of, an
office holder or has any other power in the company, is under a duty to act in
fairness towards the company.  The
Companies Law does not elaborate on the substance of this duty.

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A
controlling shareholder, which is defined for the purposes of approval of transactions
with controlling shareholders as a shareholder that holds 25% or more of
the voting rights if no other shareholder holds more than 50% of the voting
rights in publicly traded companies is subject to disclosure
requirements in Extraordinary Transactions in which it has a personal
interest and such shareholder ́s compensation as office holders or employees requires the
approval of the audit committee, the board of directors and a special majority
of the shareholders of the company. 
Such special majority must include approval of at least one third of the
shareholders who have no personal interest in the transaction, or it must be
shown that the total holdings of the non-interested parties who voted against
the transaction do not represent more than one percent of the voting rights in
the company.

The
Companies Law further provides that a private placement of securities of a
publicly traded company that results in the increase of a shareholder who holds
five percent or more of such companys outstanding share capital or voting
rights, or that will cause any person to become a holder of five percent of the
companys outstanding share capital or voting rights, requires the approval of
the board of directors and the shareholders of the company.  However, regulations promulgated under the
Companies Law provide that this type of private issuance does not require these
approvals in the case of companies, such as us, whose shares are publicly
traded only outside of Israel.  If we
are successful in conducting our initial public offering in Israel, our
shareholders will be subject to these approvals.

Mergers
and Acquisitions.Under the Companies Law, a merger
must be approved by the board and shareholders of each of the merging
companies.  A majority of the
shareholders present at the meeting must approve the merger, excluding shares
held by the other merging company or any person holding at least a 25% interest
or has the right to appoint a director in the other merging company or any
party related thereto.  If the target
companys capital stock is divided into different classes of shares, the merger
must be approved at meetings of the holders of each class.  However, a court may allow a merger which is
not approved by the requisite majority or classes if the court is convinced
that such merger is reasonable and fair. 
Other than in specified situations, the Companies Law does not require
court approval of a merger.  Upon the
request of a creditor of either party to the merger, the court may delay or
prevent the merger if it concludes that there exists a reasonable concern that
as a result of the merger the surviving company will be unable to satisfy the
obligations of any party to the merger. 
In addition, a merger may be completed only after 70 days have passed
from the time that the requisite approvals for the merger have been filed with
the Israeli Registrar of Companies.  A
company whose securities are traded in a foreign exchange must publish a notice
of the merger offer in a newspaper in the country where its securities are
traded.

Notwithstanding
the approval requirements set forth in the Companies Law, such law provides
that with respect to companies which were incorporated prior to the new law
coming into effect, a merger shall require the approval of 75% of the shares
represented at the shareholders meeting and voted.  Such requirement shall apply unless the company amends its
articles of association to provide otherwise.

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Under
the Companies Law, an acquisition of shares of a publicly traded company in the
public market must be made by means of a tender offer if, as a result of
the acquisition, the purchaser will become the holder of 25% or more of the
voting rights in the company, provided that there is no other holder of 25% or
more of the voting rights in the company, or, that there is a holder of 25% or
more of the voting rights in the company, and as a result of the acquisition
the purchaser will become a holder of 45% or more of the voting rights of the
company, provided that there is no other holder of more than 50% of the voting rights
in the company.  However, if following
an acquisition of shares, the acquirer will hold 90% or more of the shares or a
class of shares of the company, the acquisition must be made through a tender
offer to acquire all of the shares or a class of shares of the company.  Such acquirer is entitled to acquire all of
the shares if the holdings of the shareholders who did not accept the offer are
less than 5% of the companys total outstanding shares, or of the relevant
class of shares.  These rules do not
apply if the acquisition is made through a merger.

Transfer
of Shares and Notice. Fully paid ordinary shares are
freely transferable in Israel subject to securities laws.  Each shareholder of record is entitled to
receive at least twenty-one days prior notice of shareholders meetings. For
purposes of determining the shareholders entitled to notice, the board of
directors may fix the record date not more than forty nor less than fourteen
days prior to the date of the meeting.

Election
of Directors. Holders of our ordinary shares do not
have cumulative voting rights in the election of directors. Therefore, the
holders of ordinary shares conferring more than 50% of the voting power have
the power to elect all of the directors. 
For the election of external directors, see Item 6: Directors, Senior
Management and Employees  Board Practices  External Directors.

Indemnification.  Our articles of association allow for
indemnification of office holders for certain liabilities incurred in
connection with acts in his/her capacity as an office holder.  On March 19, 2001, our shareholders approved
an amendment to our articles of association, pursuant to which we may exempt an
office holder in advance for his liability, or any part thereof, for damage in
consequence of a breach of his duty of care to us.  The amendment also provides that under certain circumstances, we
may indemnify an office holder retroactively for an obligation or expense imposed
on him in consequence of acts done in his capacity as an office holder of our
company; and we may give an advance undertaking vis-a-vis an office holder to
indemnify him in respect of an obligation or expense.   Any indemnity provided for in the articles of association is
limited in its scope by the Companies Law, which provides that a company may
not indemnify an officer or director for:

| |  | a breach of
  his duty of loyalty, unless the officer or director acted in good faith and
  had reasonable grounds to assume that the action would not harm the company;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an
  intentional or reckless breach of their duty of care;                                                                                                              
| |  | an act done
  with the intent to unlawfully realize personal gain; or                                                                                                   
| |  | a criminal
  fine or administrative penalty imposed on the officer or director.                                                                                         

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In
2001, following approval from our shareholders, we entered into
indemnification letters with certain of our previous directors and its current
directors and officers.  Under the
indemnification letters, we exempt in advance our directors and officers for
damage caused and/or that may be caused to us and our subsidiaries due to the
violation of such persons duty of care toward us (unless the violation was
intentional).  The total amount of
indemnification that we undertook to pay under the form of indemnification letter
will not exceed, per case and in the aggregate, the greater of: $10,000,000; or
50% of our shareholders equity.

Our
memorandum of association, articles of association and the laws of the State of
Israel do not restrict in any way the ownership or voting of our ordinary
shares by nonresidents of Israel, except with respect to subjects of countries,
which are at a state of war with Israel.

C.  Material Contracts

The
following are the material contracts to which Robomatix is or was a party to
during the preceding two years:

The
agreements and instruments relating to the transaction pursuant to which Mersa
purchased from Gilex all the share capital of Franz Kalff in consideration for
$9 million in 2001, and the loan agreements entered into in connection with the
financing of such transaction. For an elaborate description of these agreements
and instruments, see Item 4: Information on the Company  History and
Development  Recent Principal Capital Expenditures  Franz Kalff GmbH.

On December
10, 2001, we agreed to sell all of our interest in Dirad Technologies (1999)
Ltd. to Leader Tech Ltd., an Israeli company, in exchange for approximately
4.4% of the issued and outstanding share capital of Leader Tech.  The agreement closed on April 29, 2002.

In
September 2002, we entered into an agreement for the sale of all of our share
holdings in Robomatix (Israel) Ltd. to SPL Software Ltd. See Item 4 
Information on the Company - The Sale and Discontinuation of Our Original
Activities.

In November
2002, we entered into two agreements with the Israel Land Development Insurance
Holdings Ltd. for the purchase of minority shareholdings in two of its
subsidiary insurance companies. See Item 4  Information on the Company 
Recent Principal Capital Expenditures.

In December
2002, following transfer of the land from the subsidiaries to Franz Kalff,
Franz Kalff entered into an agreement for the sale of the land to the Israel
Land Development Insurance Company Ltd. for $3,500,000. Simultaneously, Israel
Land Development Insurance Company leased back to Franz Kalff the facilities
for a fifteen year period, for annual rent of $350,000. The sale and leaseback
were completed in February 2003.

Commencing
in December 2002 we entered into a series of agreements in connection with
Associative Computing Ltd. concluding in April 2003 with the sale of all our
shareholdings in Associative Computing and its debt to us for the aggregate
amount of 6,000,000 NIS. See Item 4 - Information on the Company - The Sale
and Discontinuation of Our Original Activities.

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D.  Exchange Controls

Non-residents
of Israel who purchase our ordinary shares with certain non-Israeli currencies
(including United States dollars) and through an authorized foreign currency
dealer bank, will be able to convert dividends including dividends of
liquidation distributions and proceeds from the sale of such shares into freely
repatriable non-Israeli currencies at the rate of exchange prevailing at the
time of repatriation, pursuant to a general permit issued by the Controller of
Foreign Currency at the Bank of Israel under the Currency Control Law, 1978,
provided that Israeli income tax, if due, has been paid (or withheld) on such
amounts.  See Item 5: Operating and
Financial Review and Prospects - Conditions in Israel  Economic Conditions.

E.  Taxation

The
following describes certain income tax consequences arising from the purchase,
ownership and disposition of our ordinary shares.  This discussion is for general information only and is not
intended, and should not be construed, as legal or professional tax advice and
does not cover all possible tax considerations. To the extent that the
discussion is based on legislation yet to be judicially or administratively
interpreted, there can be no assurance that the views expressed herein will
accord with any such interpretation in the future.  Accordingly, you should consult your tax advisor as to the
particular tax consequences arising from your purchase, ownership and
disposition of our ordinary shares, including the effects of applicable
Israeli, United States and other laws and possible changes in the tax laws.

Israeli
Taxation

The
following discussion represents a summary of certain material Israeli tax laws
affecting us and our shareholders, including United States and other
non-Israeli shareholders.

General
Corporate Tax Structure.Israeli
companies are generally subject to Company Tax at the rate of 36% of taxable
income.

Taxation
under Inflationary Conditions.The
Income Tax Law (Inflationary Adjustments) 1985, is intended to neutralize the
erosion of capital investments in business and to prevent tax benefits resulting
from deduction of inflationary expenses. 
This law applies a supplementary set of inflationary adjustments to the
normal taxable profits computed under regular historical cost principles.  We are taxed under this law.

| | Some
  important features of the Inflationary Adjustments Law are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | A special
  tax adjustment for the preservation of equity whereby certain corporate
  assets are classified broadly into fixed (inflation resistant) assets and
  non-fixed (soft) assets.  Where a
  companys equity, as defined in such law, exceeds the depreciated cost of
  fixed assets, a deduction from taxable income that takes into account the
  effect of the applicable annual rate of inflation on such excess is allowed
  (up to a ceiling of 70% of taxable income in any single tax year, with the
  unused portion permitted to be carried forward on a linked basis without
  limit).  If the depreciated cost of
  fixed assets exceeds a companys equity, then such excess multiplied by the
  applicable annual rate of inflation is added to taxable income.

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| | Subject to
  certain limitations, depreciation deductions on fixed assets and losses
  carried forward are adjusted for inflation, based on the increase in the
  Israeli consumer price index.                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                               
| | Gains on the
  sale of certain traded securities during the tax year are taxable in certain
  circumstances.  However, dealers in
  securities are subject to the regular tax rules applicable to business income
  in Israel.

Under
the Inflationary Adjustment Law, if the percentage of our share capital held by
foreign shareholders exceeds 25%, we may elect to be taxed based on our dollar
books of account rather than on changes in the Israeli consumer price index as
described above.

Capital
Gains Tax.Israeli
law imposes a capital gains tax on the sale of capital assets.  The law distinguishes between the real gain
and the inflationary surplus.  The real
gain is the excess of the total capital gain over the inflationary surplus,
computed on the basis of the increase in the Israeli consumer price index
between the date of purchase and the date of sale.  The inflationary surplus accumulated from and after December 31,
1993 is exempt from any capital gains tax.

Real gains
from the sale of our shares before January 1, 2003 were subject to tax at a
rate of 35%.  As of January 1, 2003,
such gains are subject to tax at a rate of 15% (including with respect to gains
accrued before that date), so long as our shares remain listed for trading on a
stock exchange in Israel or abroad. 
These reduced rates of tax do not apply to traders in securities for
whom the gains are business income; to companies subject to taxation under
Israels Income Tax (Adjustments for Inflation) Law; or to shareholders who
held our shares before they were registered for trading on the NASDAQ.  Non-residents of Israel will be exempt from
capital gains tax on the sale of our shares if they were not purchased before
the listing of our shares for trade on the NASDAQ, the shares are not held as
part of a permanent establishment the non-resident maintains in Israel, and the
shares remain listed on a stock exchange in Israel or abroad.

Dividends.Dividend
distributions by one Israeli corporation to another Israeli corporation are
generally not subject to taxation. 
Dividends paid to individuals and foreign corporations are generally
taxed at 25%.  The tax paid on dividends
is withheld at the source.  The above
tax rates may be reduced pursuant to specific rulings or an applicable tax
treaty.

United
States -Israel Tax Treaty.Pursuant
to the tax treaty between the United States and Israel (the Convention Between
the Government of the United States of America and the Government of Israel
with Respect to Taxes on Income, as amended), the sale, exchange or disposition
of ordinary shares of an Israeli company by a person who qualifies as a
resident of the United States within the meaning of the U.S.-Israel Tax Treaty
and who is entitled to claim those benefits (Treaty U.S. Resident) will not
be subject to the Israeli capital gains tax unless that Treaty U.S. Resident
holds, directly or indirectly, shares representing 10% or more of the voting
power during any part of the 12-month period preceding such sale, exchange or
disposition, subject to certain conditions. 
A sale, exchange or disposition of ordinary shares by a Treaty U.S.
Resident who holds, directly or indirectly, shares representing 10% or more of
the voting power at any time during such preceding 12-month period would be
subject to the Israeli tax, to the extent applicable; however, under the
U.S.-Israel Tax Treaty, such Treaty U.S. Resident would be permitted to claim a
credit for such taxes against the United States income tax imposed with respect
to such sale, exchange or disposition, subject to the limitations in United
States laws applicable to foreign tax credits.

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Taxation
of Non-Residents of Israel.Non-residents
of Israel are subject to income tax on income accrued or derived from sources
in Israel or received in Israel.  Such
sources of income include passive income such as dividends, royalties and
interest, as well as non-passive income from services rendered in Israel.  On distributions of dividends other than
bonus shares (stock dividends), income tax at the rate of 25%  is withheld at source, unless a different
rate is provided in a treaty between Israel and the shareholders country of
residence.  Under the U.S.-Israel Tax
Treaty, the maximum tax on dividends paid to a holder of ordinary shares who is
a Treaty U.S. Resident will be 25%.  
The tax withheld at source is the final tax in Israel on dividends for
non-resident individuals and corporations and for individual Israeli residents.

A
non-resident of Israel who has earned passive income derived from sources in
Israel, from which tax was withheld at source and which constitutes income from
interest, dividends or royalties, is generally exempt from the duty to file an
Israeli tax return with respect to such income, unless such income was from a
business carried on by the non-resident within Israel.

United
States taxpayers will generally have the option of claiming the amount of any
Israeli income taxes withheld at the source as either a deduction from gross
income or as a credit against Federal income tax liability, subject to detailed
rules and limitations contained in United States tax legislation.  At present, no estate or gift taxes are
imposed under Israeli law.

United
States Federal Income Taxation

The
following summary describes certain material federal income tax consequences
arising from the purchase, ownership and disposition of our ordinary
shares.  This summary is not a complete
analysis or description of all potential United States federal income tax
consequences to U.S. Holders (as defined below) and does not address foreign,
state, local or other tax consequences. 
Furthermore, estate and gift tax consequences generally are not
discussed herein.  This summary is based
on the provisions of the Internal Revenue Code of 1986, as amended, final,
temporary and proposed United States Treasury Regulations promulgated
thereunder, and the administrative and judicial interpretations thereof, all as
in effect on the date of this report. 
The consequences to any particular investor may differ from those
described below by reason of that investors particular circumstances.  This summary does not address the
considerations that may be applicable to particular classes of taxpayers,
including financial institutions, insurance companies, small business
investment companies, mutual funds, S corporations, broker-dealers and
tax-exempt organizations, holders with a functional currency other than the
United States dollar or holders of 10% or more of the total combined voting
power of our ordinary shares.  This
summary is addressed only to holders who are United States citizens;
individuals resident in the United States for purposes of United States federal
income tax; corporations or partnerships (or other entities properly characterized
as corporations or partnerships for United States federal income tax purposes)
created or organized under the laws of the United States or any state thereof;
estates the income of which is subject to United States federal income taxation
regardless of its source or trusts if: a United States court can exercise
primary supervision over the administration of such trust and one or more
United States persons have the authority to control all substantial decisions
of such trust (U.S. Holders).

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Treatment
of Distributions.For United
States federal income tax purposes, gross distributions (including the amount
of any Israeli taxes withheld therefrom) paid to a U.S. Holder with respect to
our ordinary shares will be includable as ordinary income to the extent made
out of current and accumulated earnings and profits of Robomatix, as determined
based on United States tax principles, at the time the distributions are
received by the holder.  Such distributions
will be treated as foreign source dividend income and will not be eligible for
the dividends-received deduction generally allowed to United States
corporations under Section 243 of the Code. 
Any Israeli withholding tax imposed on dividends will be a foreign
income tax and will therefore be eligible for credit against such U.S. Holders
United States federal income tax liability, subject to certain limitations set
out in the Code (or, alternatively, for deduction against income in determining
such tax liability).  The limitations
set out in the Code with respect to foreign tax credits include, among others,
computational rules under which foreign tax credits allowable with respect to
specific classes of income cannot exceed the United States federal income taxes
otherwise payable with respect to each class of income and a limitation on the
use of the credit in any taxable year to reduce not more than 90% of the
liability for the United States individual and corporate alternative minimum
tax.  Foreign income taxes exceeding the
credit limitation for the year of payment or accrual can be carried back for
two taxable years and forward for five taxable years, in order to reduce United
States federal income taxes, subject to the credit and alternative minimum tax
limitations applicable to each of such years and other restrictions.

Dividends
paid in New Israeli Shekels will be included in income in a United States
dollar amount based on the exchange rate at the time of their receipt.  U.S. Holders should consult their own tax
advisors regarding the treatment of any foreign currency gain or loss on any
amounts received as a dividend which are converted into United States dollars
on a date subsequent to their receipt.

Distributions
in excess of our current and accumulated earnings and profits (as determined
based on United States tax principles) are treated as a non-taxable return of
basis to the extent thereof (thus increasing the amount of gain, or reducing
the amount of loss, which may be realized by a holder upon a sale or exchange
of ordinary shares as described below). 
The amount of any distribution which exceeds a holders basis in
ordinary shares will be treated as a gain from the sale of ordinary shares.

Disposition.A U.S. Holder will
recognize gain or loss for United States federal income tax purposes upon the
sale or other disposition of ordinary shares in an amount equal to the
difference between the amount realized and the U.S. Holders adjusted tax basis
in such ordinary shares.  Such gain or
loss generally will be capital gain or loss if the ordinary shares are a
capital asset in the hands of the U.S. Holder and will be long-term capital
gain or loss if the ordinary shares have been held for more than one year.  Any gain or loss recognized on the sale or
other disposition of ordinary shares will generally be United States source
income.  However, pursuant to the
U.S.-Israel Tax Treaty, such gain may be foreign source income in certain
circumstances.  Any capital loss
realized upon the sale, exchange or other disposition of ordinary shares is
generally deductible only against capital gains and not against ordinary
income, except that in the case of non-corporate taxpayers, a capital loss is
deductible only to the extent of capital gains plus ordinary income of up to
$3,000.  If the amount realized on a
sale or exchange is not denominated in United States dollars, the amount
realized will be equal to the United States dollar value thereof, determined at
the spot rate on the date of the sale or exchange.

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Our Tax
Status for United States Federal Income Tax Purposes

Passive
Foreign Investment Companies.  A non-United States corporation will be
classified as a passive foreign investment company (a PFIC) for United States
federal income tax purposes if it satisfies either of the following two
tests:  (i) 75% or more of its gross
income is passive income or (ii) on average for the taxable year 50% or more
(by value or, if the corporation is not a publicly traded corporation as
defined in Section 1297(f) of the Code and so elects or if the corporation is a
controlled foreign corporation (as defined below), by adjusted basis) of its
assets produce or are held for the production of passive income.

Due to the
fact that the PFIC determination is made annually on the basis of facts and
circumstances that may be beyond our control and because the principles and
methodology for determining the fair market values of our assets are unclear,
there can be no assurance that we are not currently or will not become a
PFIC.  If we are a PFIC at any time
during a U.S. Holders holding period for the ordinary shares, certain excess
distributions with respect to, and gain upon the disposition of, the ordinary
shares generally will be taxed at the time of the distribution or disposition
as if the income or gain were ratably allocated over the U.S. Holders holding
period for the shares in the PFIC.  The
amount allocated to the year of the distribution or disposition or to years
prior to our becoming a PFIC will be treated as ordinary income, and the
amounts allocated to earlier years for which the corporation was a PFIC will be
taxed at the highest rate applicable to individuals or corporations, as the
case may be, for the taxable year to which the income is allocated.  Further, the tax on an amount allocated to
such an earlier year will be subject to an interest charge which accrues from
the due date of the return for that earlier year.  Additionally, if we are or were to become a PFIC, U.S. Holders
who acquire ordinary shares from decedents whose holding period for the
ordinary shares included time when we were a PFIC would be denied the normally
available step-up of income tax basis for such ordinary shares to fair market
value at the date of death and instead would have a tax basis limited to the
decedents tax basis.  The above rules
relating to distributions and dispositions generally will not apply if (i) the
U.S. Holder elects to treat us as a qualified electing fund (a QEF election)
for all taxable years that such holder has held the ordinary shares and we were
a PFIC, or (ii) the ordinary shares are marketable stock for which a
mark-to-market election can be and is made. 
If a QEF election is made, a U.S. Holder generally will pay tax
currently on its pro-rata share of our ordinary earnings and net capital gains
(at ordinary income and capital gains rates, respectively), even if no
dividends are actually paid.  Further,
in such event, the denial of the basis step-up at death described above would not
apply.  If the mark-to-market election
is made, U.S. Holders will generally account for changes in the value of the
ordinary shares on an annual basis as ordinary income or loss.

In 2000, we
engaged in a securities offering and invested the cash resulting from such
offering, which exceeded 50% of its assets, in assets held for the production
of passive income, satisfying one of the PFIC tests.  As a result of other investments in early 2001, however, we believe
that neither of the two PFIC tests will continue to be satisfied.  Pursuant to a special rule in Section
1298(b)(3) of the Code relating to certain corporations changing businesses,
and assuming that the corporation does not actually satisfy either of the PFIC
tests in 2001 or 2002, the corporation will not have become a PFIC in 2000.

59

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We
intend to notify U.S. Holders in the event that we conclude that we will be
treated as a PFIC for any taxable year to enable U.S. Holders to consider
whether to make a QEF election.  In addition,
we intend to comply with the applicable information reporting requirements for
U.S. Holders to make a QEF election.

Controlled
Foreign Corporations. 
If more than 50% of the voting power of all classes of our shares or the
total value of our shares is owned (directly, indirectly, or constructively) by
United States shareholders, each of which owns (directly, indirectly, or
constructively) at least 10% of our voting stock (the 10% Shareholders), we
(and, generally, any of our direct or indirect non-United States subsidiaries)
will be treated as a controlled foreign corporation (a CFC).  If we are a CFC, 10% Shareholders who own
our shares directly or indirectly will be required to include in their United
States income their pro rata share of our Subpart F Income (which includes,
among other things, certain passive income and income from sales or other
transactions with or on behalf of affiliated parties), and certain other items
of income, regardless of whether any distributions are made.  Subpart F Income previously included in
income by a 10% Shareholder will not be included in income again if it is
subsequently distributed.  In addition
to the current inclusion of Subpart F Income, upon the sale or exchange or our
ordinary shares, a U.S. Holder who is or was a 10% Shareholder at any time
during the five year period ending on the date of such sale or exchange when we
were a CFC would generally be required to treat a portion of the gain
recognized upon the sale or exchange as a dividend to the extent of our
earnings and profits which are attributable to those shares and which were
accumulated while the shares were owned by the 10% Shareholder and we were a
CFC.

Generally,
if we are a PFIC (as described above) as well as a CFC, we will not be treated
as a PFIC with respect to a U.S. Holder for the portion of the U.S. Holders
holding period during which the U.S. Holder is a 10% Shareholder and we are a
CFC. It is possible that, as a result of sales and additional offerings of our
ordinary shares to United States persons, we could be classified as a CFC.  Any 10 % Shareholders should consult their
tax advisors regarding the application of the United States tax rules relating
to CFCs.

Information
Reporting and Backup Withholding.U.S.
Holders are generally subject to information reporting requirements with
respect to dividends and the proceeds of the disposition of all or a part of an
ordinary share.  Under the Code, a U.S.
Holder of an ordinary share may be subject, under certain circumstances, to
backup withholding at a 31% rate on cash payments in the United States of the
proceeds of disposition of all or part of an ordinary share.  Under regulations effective for payments
made after December 31, 2000, dividends paid in the United States may also be
subject to backup withholding.  Backup
withholding will apply only if a U.S. Holder (i) fails to timely furnish to us
its social security or other taxpayer identification number (TIN), (ii)
furnishes an incorrect TIN, (iii) is notified by the IRS that it has failed to
properly report payments of interest and dividends or (iv) under certain
circumstances, fails to certify, under penalty of perjury, that it has
furnished a correct TIN and has not been notified by the Internal Revenue
Service (IRS) that it is subject to backup withholding for failure to report
interest and dividend payments.  U.S.
Holders should consult their tax advisors regarding their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption if applicable.  The amount of
any backup withholding from a payment to a U.S. Holder will be allowed as a
credit against such holders United States federal income tax liability and may
entitle such holder to a refund, provided that the required information is
furnished to the IRS.

60

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Documents
on Display

We are
required to file reports and other information with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 and the regulations thereunder
applicable to foreign private issuers. Reports and other information filed by
us with the Securities and Exchange Commission may be inspected and copied at
the Securities and Exchange Commissions public reference facilities described
below.  Although as a foreign private
issuer we are not required to file periodic information as frequently or as
promptly as United States companies, we generally do publicly announce our
quarterly and year-end results promptly and file periodic information with the
Securities and Exchange Commission under cover of Form 6-K.  As a foreign private issuer, we are also
exempt from the rules under the Exchange Act prescribing the furnishing and
content of proxy statements and our officers, directors and principal shareholders
are exempt from the reporting and other provisions in Section 16 of the
Exchange Act.

You may
review a copy of our filings with the Securities and Exchange Commission,
including any exhibits and schedules, at the Securities and Exchange Commissions
public reference facilities in Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. You may also obtain copies of such materials from
the Public Reference Section of the Securities and Exchange Commission, Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. You may call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the public reference rooms.  As a foreign private issuer we are not
required to file through the Securities and Exchange Commissions EDGAR system
and our periodic filings are therefore not available on the Securities and
Exchange Commissions Web site. You may read and copy any reports, statements
or other information that we file with the Securities and Exchange Commission
at the Securities and Exchange Commission facilities listed above. These
Securities and Exchange Commission filings are also available to the public
from commercial document retrieval services.

Any statement
in this annual report about any of our contracts or other documents is not
necessarily complete. If the contract or document is filed as an exhibit to the
registration statement, the contract or document is deemed to modify the
description contained in this annual report. We urge you to review the exhibits
themselves for a complete description of the contract or document.

61

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Item 11: 
Quantitative and Qualitative
Disclosure about Market Risk

We do not
use financial instruments for trading purposes and do not hold any derivative
financial instruments which could expose us to significant market risk.

The
carrying amount reported for cash and cash equivalents, trade receivables,
short-term bank credit and trade payables approximate their fair values, due to
the short-term maturity of these instruments.

The
carrying amount of the Companys long-term borrowing approximates its fair
value. The fair value was estimated using discounted cash flow analyses, based
on the Companys incremental borrowing rates for similar type of borrowing
arrangements.

Item 12: 
Description of Securities Other Than
Equity Securities

Not required.

PART 2

Item 13: Defaults, Dividend Arrearages and
Delinquencies

Not
applicable.

Item 14: Material Modifications to the Rights
of Security Holders and Use of Proceeds

Not
applicable.

Item 15: Controls and Procedures

An
evaluation was performed under the supervision and with the participation of
our management, including our chief executive officer of the effectiveness of
our disclosure controls and procedures (as defined in Rules 13a-14(c) and
15d-14(c) under the Securities Exchange Act of 1934, as amended). Based on that
evaluation, which was completed within 90 days of the filing date of this
annual report, our chief executive officer concluded that our disclosure
controls and procedures were effective though we are constantly engaged in the
process of improving these controls and procedures. There have been no
significant changes in our disclosure controls or in other factors that could
significantly affect disclosure controls subsequent to the date of the
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses. We do not have a chief financial officer
and this role is fulfilled by our chief executive officer.

Item 16:

[reserved]

62

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PART 3

Item 17: Financial
Statements

Not
applicable.

Item 18: Financial Statements

See pages F-1 to F-36.

63

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Item 19: Exhibits

| | Exhibit
  Number |  | Name                                                                                                                                                                                                                                                                                                                                                                                                           
| | ---------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                
| | 1.1              |  | Memorandum
  of Association (incorporated by reference to our Pre-Effective Amendment No.
  1 to our Registration Statement on Form F-1 filed with the Securities and
  Exchange Commission on October 27, 1993)                                                                                                                                                                                               
| | 1.2              |  | Articles of
  Association, as amended (incorporated by reference to the 2000 20-F filed
  with the Securities Exchange Commission on June 30, 2001).                                                                                                                                                                                                                                                           
| | 2.               |  | Specimen
  Certificate for ordinary Shares (incorporated by reference to our
  Registration Statement on Form F-1, Amendment No.3 filed with the Securities
  and Exchange Commission on December 14, 1993)                                                                                                                                                                                                    
| | 4.1              |  | Principles
  Agreement to Purchase Assets, dated February 2000, between Silverboim
  Technology (1999) Ltd., Silverboim Holdings Ltd. and Robomatix Technologies
  Ltd., excluding certain exhibits thereto, as amended on November 15, 2000;
  and a summary translation into English thereof (incorporated by reference to
  the 2000 20-F filed with the Securities Exchange Commission on June 30,
  2001).
| | 4.2              |  | Agreement,
  dated as of December 31, 2000, by and between Gilex Holdings B.V. and Mersa
  Holding                                                                                                                                                                                                                                                                                                             
| |                  |  | B.V and the Annexes thereto (1)                                                                                                                                                                                                                                                                                                                                                                                
| | 4.3              |  | Promissory
  Note payable to Gilex Holdings B.V. by Mersa Holding B.V. in the principal
  amount of $600,000 (1)                                                                                                                                                                                                                                                                                               
| | 4.4              |  | Guarantee
  Agreement, dated January 24, 2001, by and between Gilex Holdings B.V. and
  Robomatix Technologies Ltd. (1)                                                                                                                                                                                                                                                                                        
| | 4.5              |  | Translation
  of Robomatixs Application for Provision of Credit from Bank Hapoalim, dated
  January 18, 2001 (1)                                                                                                                                                                                                                                                                                              
| | 4.6              |  | Summary
  Translation of a Letter of Undertaking, dated January 18, 2001, by Robomatix
  for the benefit of Bank Hapoalim (1)                                                                                                                                                                                                                                                                                  
| | 4.7              |  | Translation
  of a Debenture, dated January 18, 2001, issued by Robomatix Technologies Ltd.
  for the benefit of Bank Hapoalim and Schedule A thereto  (1)                                                                                                                                                                                                                                                     
| | 4.8              |  | Translation
  of an Undertaking, dated January 18, 2001, by Robomatix Technologies Ltd. for
  the Benefit of Bank Hapoalim (1)                                                                                                                                                                                                                                                                                 

64

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| | *4.9   |  | Draft
  Services Agreement between Robomatix Technologies Ltd. and Silverboim
  Holdings Ltd. (incorporated by reference to the 2000 20-F filed with the
  Securities Exchange Commission on June 30, 2001)                                                                                                                                                                                                                                            
| | ------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4.10   |  | Consultation
  and Management Agreement, dated November 15, 2001, between Robomatix
  Technologies Ltd. and Silverboim Holdings Ltd. (incorporated by reference to
  the 2000 20-F filed with the Securities Exchange Commission on June 30, 2001)                                                                                                                                                                                                     
| | **4.11 |  | Translation
  into English of: Purchasing Contract by and between Franz Kalff GmbH and
  Metro MGE GmbH and Terms and Conditions Contract related thereto; Agreement
  concerning Freight Remuneration, by and between Franz Kalff GmbH and Metro
  MGE GmbH; and Supply Agreement by and between Franz Kalff GmbH and Metro MGE
  GmbH.  (incorporated by reference to
  the 2000 20-F filed with the Securities Exchange Commission on June 30, 2001)
| | **4.12 |  | Translation
  into English of: Agreement by and among Franz Kalff GmbH,
  REWE-Zentral-Aktiengesellschaft and REWE-Zentralfinanz eG and a letter of
  amendment related thereto. excluding its exhibit; 2001 Annual Agreement and
  Service Agreement between Franz Kalff GmbH and REWE-Zentralfinanz eG.(incorporated
  by reference to the 2000 20-F filed with the Securities Exchange Commission
  on June 30, 2001).                              
| | 4.13   |  | Loan
  Agreement, dated July 18, 2000, by and between Belas Holdings B.V. and
  Robomatix Technologies Ltd. (incorporated by reference to the 2000 20-F filed
  with the Securities Exchange Commission on June 30, 2001).                                                                                                                                                                                                                             
| | 4.14   |  | Share
  Purchase Agreement, dated October 2000, among Belas Holdings B.V. and the
  investors named therein, excluding the exhibits thereto. (incorporated by
  reference to the 2000 20-F filed with the Securities Exchange Commission on
  June 30, 2001)                                                                                                                                                                                           
| | 4.15   |  | Shareholders
  and Investors Rights Agreement, dated October 2000, among Belas Holdings B.V.
  and the persons named therein, excluding the exhibits thereto (incorporated
  by reference to the 2000 20-F filed with the Securities Exchange Commission
  on June 30, 2001).                                                                                                                                                                          
| | 4.16   |  | Agreement,
  dated October 12, 2000, among Dirad Technologies (1999) Ltd., Robomatix
  Technologies Ltd. and other persons named therein, excluding the exhibits
  thereto; and a summary translation into English thereof. (incorporated by
  reference to the 2000 20-F filed with the Securities Exchange Commission on
  June 30, 2001)                                                                                                            

65

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| | 4.17 |  | Agreement,
  dated as of January 18, 2001, between Robomatix Technologies Ltd. and Mersa
  Holdings B.V. (incorporated by reference to the 2001 20-F filed with the
  Securities Exchange Commission on June 30, 2002)                                       
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4.18 |  | Translation
  of a letter agreement with Bank Hapoalim, dated as of November 15,
  2001(incorporated by reference to the 2001 20-F filed with the Securities
  Exchange Commission on June 30, 2002)                                                         
| | 4.19 |  | Summary of
  Agreement, dated as of December 10, 2001, by and among the shareholders of
  Dirad Technologies (1999) Ltd. and Leader Tech Ltd. (incorporated by
  reference to the 2001 20-F filed with the Securities Exchange Commission on
  June 30, 2002)
| | 4.20 |  | Share
  Purchase Agreement, dated as of September, 2002 by and between Robomatix
  Technologies Ltd. and SPL Software Ltd.                                                                                                                                   
| | 4.21 |  | Summary of
  Share Purchase Agreement, dated as of November 19, 2002, by and between
  Robomatix Technologies Ltd. and Israel Land Development Insurance Holdings
  Ltd for the purchase of shares of Israel Land Development Insurance Company
  Ltd.       
| | 4.22 |  | Summary of
  Share Purchase Agreement, dated as of November 19, 2002, by and between
  Robomatix Technologies Ltd. and Israel Land Development Insurance Holdings
  Ltd for the purchase of shares of ICIC -Israel Credit Insurance Company Ltd.             
| | 4.23 |  | Summary of
  Consulting Agreement, dated as of November 19, 2002, by and between Robomatix
  Technologies Ltd. and Israel Land Development Insurance Company Ltd.                                                                                            
| | 4.24 |  | Agreement on
  the Sale and Transfer of Real Property of Franz Kalff GmbH and Lease
  Agreement as presented and executed before Dietrich Kleppi, notary public,
  Bonn, Germany                                                                             

66

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| | 4.25 |  | Summary of
  Share Purchase Agreement, dated as of December 19, 2003 by and among
  Robomatix Technologies Ltd., Associative Computing Ltd. and Benny Konstantin                                                     
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4.26 |  | Summary of
  Asset Purchase Agreement, dated as of January 1, 2003 (as amended on April 8,
  2003) by and among Robomatix Technologies Ltd., Associative Computing Ltd.,
  Benny Konstantin and Edco Electronics Ltd.
| | 4.27 |  | Summary of
  Agreement, dated as of March 31, 2003 by and between Robomatix Technologies
  Ltd. and Berger Holdings 1 (1992) Ltd.                                                                                    
| | 8.1  |  | List of
  Significant Subsidiaries                                                                                                                                                                                   
| | 12.1 |  | Certification
  by Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act
  of 2002                                                                                                               

---

67

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---

SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all the requirements for filing on
Form 20-F and has duly caused this annual report to be signed on its behalf by
the undersigned, thereunto duly authorized on this 25th day of June 2003.

| | ROBOMATIX
  TECHNOLOGIES LTD.
| | -----------------------------
| |                              
| |                              
| |                              
| | By:                          
| |                              
| |                              
| |                              

68

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Exhibit Index

| | ExhibitNumber |  | Name                                                                                                                                                                                                                                                                                                                                                                                                           
| | ------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |               |  |                                                                                                                                                                                                                                                                                                                                                                                                                
| | 1.1           |  | Memorandum
  of Association (incorporated by reference to our Pre-Effective Amendment No.
  1 to our Registration Statement on Form F-1 filed with the Securities and
  Exchange Commission on October 27, 1993)                                                                                                                                                                                               
| | 1.2           |  | Articles of
  Association, as amended (incorporated by reference to the 2000 20-F filed
  with the Securities Exchange Commission on June 30, 2001).                                                                                                                                                                                                                                                           
| | 2.            |  | Specimen
  Certificate for ordinary Shares (incorporated by reference to our
  Registration Statement on Form F-1, Amendment No.3 filed with the Securities
  and Exchange Commission on December 14, 1993).                                                                                                                                                                                                   
| | 4.1           |  | Principles
  Agreement to Purchase Assets, dated February 2000, between Silverboim
  Technology (1999) Ltd., Silverboim Holdings Ltd. and Robomatix Technologies
  Ltd., excluding certain exhibits thereto, as amended on November 15, 2000;
  and a summary translation into English thereof (incorporated by reference to
  the 2000 20-F filed with the Securities Exchange Commission on June 30,
  2001).
| | 4.2           |  | Agreement,
  dated as of December 31, 2000, by and between Gilex Holdings B.V. and Mersa
  Holding                                                                                                                                                                                                                                                                                                             
| |               |  | B.V and the Annexes thereto (1)                                                                                                                                                                                                                                                                                                                                                                                
| | 4.3           |  | Promissory
  Note payable to Gilex Holdings B.V. by Mersa Holding B.V. in the principal
  amount of $600,000 (1)                                                                                                                                                                                                                                                                                               
| | 4.4           |  | Guarantee
  Agreement, dated January 24, 2001, by and between Gilex Holdings B.V. and
  Robomatix Technologies Ltd. (1)                                                                                                                                                                                                                                                                                        
| | 4.5           |  | Translation
  of Robomatixs Application for Provision of Credit from Bank Hapoalim, dated
  January 18, 2001 (1)                                                                                                                                                                                                                                                                                              
| | 4.6           |  | Summary
  Translation of a Letter of Undertaking, dated January 18, 2001, by Robomatix
  for the benefit of Bank Hapoalim (1)                                                                                                                                                                                                                                                                                  
| | 4.7           |  | Translation
  of a Debenture, dated January 18, 2001, issued by Robomatix Technologies Ltd.
  for the benefit of Bank Hapoalim and Schedule A thereto  (1)                                                                                                                                                                                                                                                     

69

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| | 4.8    |  | Translation
  of an Undertaking, dated January 18, 2001, by Robomatix Technologies Ltd. for
  the Benefit of Bank Hapoalim (1)                                                                                                                                                                                                                                                                                                                         
| | ------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | *4.9   |  | Draft
  Services Agreement between Robomatix Technologies Ltd. and Silverboim
  Holdings Ltd. (incorporated by reference to the 2000 20-F filed with the
  Securities Exchange Commission on June 30, 2001)                                                                                                                                                                                                                                            
| | 4.10   |  | Consultation
  and Management Agreement, dated November 15, 2001, between Robomatix
  Technologies Ltd. and Silverboim Holdings Ltd. (incorporated by reference to
  the 2000 20-F filed with the Securities Exchange Commission on June 30, 2001)                                                                                                                                                                                                     
| | **4.11 |  | Translation
  into English of: Purchasing Contract by and between Franz Kalff GmbH and
  Metro MGE GmbH and Terms and Conditions Contract related thereto; Agreement
  concerning Freight Remuneration, by and between Franz Kalff GmbH and Metro
  MGE GmbH; and Supply Agreement by and between Franz Kalff GmbH and Metro MGE
  GmbH.  (incorporated by reference to
  the 2000 20-F filed with the Securities Exchange Commission on June 30, 2001)
| | **4.12 |  | Translation
  into English of: Agreement by and among Franz Kalff GmbH,
  REWE-Zentral-Aktiengesellschaft and REWE-Zentralfinanz eG and a letter of
  amendment related thereto. excluding its exhibit; 2001 Annual Agreement and
  Service Agreement between Franz Kalff GmbH and REWE-Zentralfinanz eG.(incorporated
  by reference to the 2000 20-F filed with the Securities Exchange Commission
  on June 30, 2001)                               
| | 4.13   |  | Loan
  Agreement, dated July 18, 2000, by and between Belas Holdings B.V. and
  Robomatix Technologies Ltd. (incorporated by reference to the 2000 20-F filed
  with the Securities Exchange Commission on June 30, 2001).                                                                                                                                                                                                                             
| | 4.14   |  | Share
  Purchase Agreement, dated October 2000, among Belas Holdings B.V. and the
  investors named therein, excluding the exhibits thereto. (incorporated by
  reference to the 2000 20-F filed with the Securities Exchange Commission on
  June 30, 2001)                                                                                                                                                                                           
| | 4.15   |  | Shareholders
  and Investors Rights Agreement, dated October 2000, among Belas Holdings B.V.
  and the persons named therein, excluding the exhibits thereto (incorporated
  by reference to the 2000 20-F filed with the Securities Exchange Commission
  on June 30, 2001).                                                                                                                                                                          
| |        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                        

70

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| | 4.16 |  | Agreement,
  dated October 12, 2000, among Dirad Technologies (1999) Ltd., Robomatix
  Technologies Ltd. and other persons named therein, excluding the exhibits
  thereto; and a summary translation into English thereof. (incorporated by
  reference to the 2000 20-F filed with the Securities Exchange Commission on
  June 30, 2001)
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4.17 |  | Agreement,
  dated as of January 18, 2001, between Robomatix Technologies Ltd. and Mersa
  Holdings B.V. (incorporated by reference to the 2000 20-F filed with the
  Securities Exchange Commission on June 30, 2001)                                                                                                                     
| | 4.18 |  | Translation
  of a letter agreement with Bank Hapoalim, dated as of November 15,
  2001(incorporated by reference to the 2001 20-F filed with the Securities
  Exchange Commission on June 30, 2002)                                                                                                                                       
| | 4.19 |  | Summary of
  Agreement, dated as of December 10, 2001, by and among the shareholders of
  Dirad Technologies (1999) Ltd. and Leader Tech Ltd. (incorporated by
  reference to the 2001 20-F filed with the Securities Exchange Commission on
  June 30, 2002)                                                                              
| | 4.20 |  | Share
  Purchase Agreement, dated as of September, 2002 by and between Robomatix
  Technologies Ltd. and SPL Software Ltd.                                                                                                                                                                                                                 
| | 4.21 |  | Summary of
  Share Purchase Agreement, dated as of November 19, 2002, by and between
  Robomatix Technologies Ltd. and Israel Land Development Insurance Holdings
  Ltd for the purchase of shares of Israel Land Development Insurance Company
  Ltd.                                                                                     
| | 4.22 |  | Summary of
  Share Purchase Agreement, dated as of November 19, 2002, by and between
  Robomatix Technologies Ltd. and Israel Land Development Insurance Holdings
  Ltd for the purchase of shares of ICIC -Israel Credit Insurance Company Ltd.                                                                                           
| | 4.23 |  | Summary of
  Consulting Agreement, dated as of November 19, 2002, by and between Robomatix
  Technologies Ltd. and Israel Land Development Insurance Company Ltd.                                                                                                                                                                          
| | 4.24 |  | Agreement on
  the Sale and Transfer of Real Property of Franz Kalff GmbH and Lease
  Agreement as presented and executed before Dietrich Kleppi, notary public,
  Bonn, Germany                                                                                                                                                           
| | 4.25 |  | Summary of
  Share Purchase Agreement, dated as of December 19, 2003 by and among
  Robomatix Technologies Ltd., Associative Computing Ltd. and Benny Konstantin                                                                                                                                                                           

71

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| | 4.26 |  | Summary of
  Asset Purchase Agreement, dated as of January 1, 2003 (as amended on April 8,
  2003) by and among Robomatix Technologies Ltd., Associative Computing Ltd.,
  Benny Konstantin and Edco Electronics Ltd.
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4.27 |  | Summary of
  Agreement, dated as of March 31, 2003 by and between Robomatix Technologies
  Ltd. and Berger Holdings 1 (1992) Ltd.                                                                                    
| | 8.1  |  | List of
  Significant Subsidiaries                                                                                                                                                                                   
| | 12.1 |  | Certification
  by Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act
  of 2002                                                                                                               

---

72

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CERTIFICATION

I, Amit Goldwasser, certify that:

1.     I have reviewed this annual report on
Form 20-F of Robomatix Technologies Ltd.;

2.     Based on my knowledge, this annual
report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with
respect to the period covered by this annual report;

3.     Based on my knowledge, the financial
statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this annual report;

4.     The registrants other certifying
officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and have:

| | a)  designed
  such disclosure controls and procedures to ensure that material information
  relating to the registrant, including its consolidated subsidiaries, is made
  known to us by others within those entities, particularly during the period
  in which this annual report is being prepared;
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                         
| | b)  evaluated
  the effectiveness of the registrants disclosure controls and procedures as
  of a date within 90 days prior to the filing date of this annual report (the
  Evaluation Date); and                                                                                                    
| |                                                                                                                                                                                                                                                                                                         
| | c)  presented
  in this annual report our conclusions about the effectiveness of the
  disclosure controls and procedures based on our evaluation as of the
  Evaluation Date;                                                                                                                          

5.     The registrants other certifying
officers and I have disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of registrants board of
directors (or persons performing the equivalent function):

| | a)  all
  significant deficiencies in the design or operation of internal controls
  which could adversely affect the registrants ability to record, process,
  summarize and report financial data and have identified for the registrants
  auditors any material weaknesses in internal controls; and
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                           
| | b)  any
  fraud, whether or not material, that involves management or other employees
  who have a significant role in the registrants internal controls; and                                                                                                                                            

73

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6.     The
registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

June 25, 2003

| | /S/AMIT GOLDWASSER      | 
| | ----------------------- | 
| |                         | 
| | Amit Goldwasser         | 
| | Chief Executive Officer | 

74

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---

EXHIBIT 12.1

CERTIFICATION PURSUANT TO
18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In
connection with the Annual Report of Robomatix Technologies Ltd. (the
Company) on Form 20-F for the year ended December 31, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, Amit
Goldwasser, as Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 2002, that to my knowledge:

| | 1. | the Report
  fully complies with the requirements of section 13(a) of the Securities
  Exchange Act of 1934; and                                        
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                         
| | 2. | the
  information contained in the Report fairly presents, in all material
  respects, the financial condition and results of operations of the Company.

|                | /S/ AMIT
  GOLDWASSER    
|--------------- | -------------------------
|                | Amit
  Goldwasser        
|June 25,
  2003 | Chief
  Executive Officer

A signed
original of this written statement required by Section 906 has been provided to
the Company and will be retained by the Company and furnished to the Securities
and Exchange Commission or its staff upon request.

1

---

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ROBOMATIX TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2002

IN U.S. DOLLARS

INDEX

|                                                             | Page  
|------------------------------------------------------------ | ------
|                                                             |       
|Report of Independent Auditors                               | 2     
|                                                             |       
|Consolidated Balance Sheets                                  | 3 - 4 
|                                                             |       
|Consolidated Statements of Operations                        | 5     
|                                                             |       
|Statements of Changes in Shareholders
  Equity (Deficiency) | 6     
|                                                             |       
|Consolidated Statements of Cash Flows                        | 7 - 8 
|                                                             |       
|Notes to Consolidated Financial Statements                   | 9 - 35

- - - - - - - - - -

---

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ERNST
&YOUNG

REPORT OF INDEPENDENT
AUDITORS

To the
shareholders of

ROBOMATIX TECHNOLOGIES LTD.

We have
audited the accompanying consolidated balance sheets of Robomatix Technologies
Ltd. (the Company) and its subsidiaries as of December 31, 2002 and 2001
and the related consolidated statements of operations, changes in shareholders
equity (deficiency) and cash flows for the three years in the period ended
December 31, 2002. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our
opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company and its subsidiaries as of December 31, 2002 and 2001 and the
consolidated results of their operations and cash flows for each of the three
years in the period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States.

|Tel-Aviv,
  Israel | KOST FORER & GABBAY             
|------------------ | --------------------------------
|May 31, 2003       | A Member of Ernst & Young Global

- 2 -

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|ROBOMATIX
  TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|----------------------------------------------------
|                                                    
|CONSOLIDATED BALANCE SHEETS                         
|                                                    
|U.S. dollars in thousands                           

|                                            |                                                                                                                             | December
  31, |       
|------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | -------------- | ------
|                                            |                                                                                                                             |                |       
|                                            |                                                                                                                             | 2002           |       
|                                            |                                                                                                                             |                |       
|                                            | ASSETS                                                                                                                      |                |       
|                                            |                                                                                                                             |                |       
|CURRENT ASSETS:                             |                                                                                                                             |                |       
|                                            | Cash and cash equivalents                                                                                                   |                | $     
|                                            | Marketable securities                                                                                                       |                |       
|                                            | Trade receivables (net of allowance for
  doubtful accounts of $ 63 and $ 61
  at December 31, 2002 and 2001, respectively) |                |       
|                                            | Other accounts receivable and prepaid
  expenses (Note 3a)                                                                  |                |       
|                                            | Inventories (Note 3b)                                                                                                       |                |       
|                                            |                                                                                                                             |                |       
|                                            |                                                                                                                             |                |       
|Totalcurrent assets                         |                                                                                                                             |                | 5,290 
|                                            |                                                                                                                             |                |       
|                                            |                                                                                                                             |                |       
|LONG-TERM INVESTMENTS AND RECEIVABLES:      |                                                                                                                             |                |       
|                                            | Long-term receivables from related party
  (Note 1b)                                                                        |                |       
|                                            | Investments in other companies (Note 4)                                                                                     |                |       
|                                            |                                                                                                                             |                |       
|                                            |                                                                                                                             |                |       
|                                            |                                                                                                                             |                | 2,812 
|                                            |                                                                                                                             |                |       
|                                            |                                                                                                                             |                |       
|PROPERTY, PLANT AND EQUIPMENT, NET (Note 5) |                                                                                                                             |                | 3,740 
|                                            |                                                                                                                             |                |       
|                                            |                                                                                                                             |                |       
|DEFERRED
  TAXES (Note 10)                  |                                                                                                                             |                | 2,572 
|                                            |                                                                                                                             |                |       
|                                            |                                                                                                                             |                |       
|Total assets                                |                                                                                                                             | $              | 14,414
|                                            |                                                                                                                             |                |       
|                                            |                                                                                                                             |                |       

The
accompanying notes are an integral part of the consolidated financial
statements.

- 3 -

---

---

|ROBOMATIX
  TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|----------------------------------------------------
|                                                    
|CONSOLIDATED BALANCE SHEETS                         
|                                                    
|U.S. dollars in thousands (except share
  data)     

|                                                  |                                                                                                                                              | December
  31, |       
|------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------- | -------------- | ------
|                                                  |                                                                                                                                              |                |       
|                                                  |                                                                                                                                              | 2002           |       
|                                                  |                                                                                                                                              |                |       
|                                                  | LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                         |                |       
|                                                  |                                                                                                                                              |                |       
|CURRENT LIABILITIES:                              |                                                                                                                                              |                |       
|                                                  | Short-term bank credit (Note 6a)                                                                                                             |                | $     
|                                                  | Current maturities of long-term loans (Note
  7)                                                                                             |                |       
|                                                  | Trade payables                                                                                                                               |                |       
|                                                  | Other accounts payable and accrued expenses
  (Note 6b)                                                                                      |                |       
|                                                  |                                                                                                                                              |                |       
|                                                  |                                                                                                                                              |                |       
|Total current liabilities                         |                                                                                                                                              |                | 3,822 
|                                                  |                                                                                                                                              |                |       
|                                                  |                                                                                                                                              |                |       
|LONG-TERM LIABILITIES:                            |                                                                                                                                              |                |       
|                                                  | Long-term loans, net of current maturities
  (Note 7)                                                                                        |                |       
|                                                  | Accrued pensions and severance pay                                                                                                           |                |       
|                                                  |                                                                                                                                              |                |       
|                                                  |                                                                                                                                              |                |       
|                                                  |                                                                                                                                              |                | 5,042 
|                                                  |                                                                                                                                              |                |       
|                                                  |                                                                                                                                              |                |       
|COMMITMENTS AND CONTINGENT LIABILITIES
  (Note 8) |                                                                                                                                              |                |       
|                                                  |                                                                                                                                              |                |       
|SHAREHOLDERS EQUITY (Note 9):                    |                                                                                                                                              |                |       
|                                                  | Share capital -                                                                                                                              |                |       
|                                                  | Ordinary shares of NIS 1.46 par value:                                                                                                       |                |       
|                                                  | Authorized: 30,000,000 shares as of
  December 31, 2002 and 2001;Issued and outstanding: 13,599,626 shares as of
  December 31, 2002and 2001 |                |       
|                                                  | Additional paid-in capital                                                                                                                   |                |       
|                                                  | Accumulated other comprehensive loss                                                                                                         |                |       
|                                                  | Accumulated deficit                                                                                                                          |                |       
|                                                  |                                                                                                                                              |                |       
|                                                  |                                                                                                                                              |                |       
|Total shareholders equity                        |                                                                                                                                              |                | 5,550 
|                                                  |                                                                                                                                              |                |       
|                                                  |                                                                                                                                              |                |       
|Total liabilities and shareholders equity        |                                                                                                                                              | $              | 14,414
|                                                  |                                                                                                                                              |                |       
|                                                  |                                                                                                                                              |                |       

The
accompanying notes are an integral part of the consolidated financial
statements.

- 4
-

---

---

|ROBOMATIX
  TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES         
|-------------------------------------------------------------
|                                                             
|CONSOLIDATED STATEMENTS OF OPERATIONS                        
|                                                             
|U.S. dollars in thousands (except share and
  per share data)

|                                                                                              |  | Year ended
  December 31, |           
|--------------------------------------------------------------------------------------------- |  | ------------------------- | ----------
|                                                                                              |  |                           |           
|                                                                                              |  | 2002                      |           
|                                                                                              |  |                           |           
|Sales, net (Note 12)                                                                          |  |                           | 8,704     
|Cost of sales                                                                                 |  |                           | 6,708     
|                                                                                              |  |                           |           
|                                                                                              |  |                           |           
|Gross profit                                                                                  |  |                           | 1,996     
|                                                                                              |  |                           |           
|Selling and marketing expenses                                                                |  |                           | 655       
|General and
  administrative expenses                                                         |  |                           | 1,471     
|                                                                                              |  |                           |           
|                                                                                              |  |                           |           
|Operating loss                                                                                |  |                           | (130      
|Impairment of long-term investments                                                           |  |                           | -         
|Other income (Note 13a)                                                                       |  |                           | 257       
|Financial
  income (expenses), net (Note 13b)                                                 |  |                           | (191      
|                                                                                              |  |                           |           
|                                                                                              |  |                           |           
|Loss before
  taxes on income                                                                 |  |                           | (64       
|Taxes on
  income (Note 10d)                                                                  |  |                           | 378       
|                                                                                              |  |                           |           
|                                                                                              |  |                           |           
|Net loss                                                                                      |  | $                         | (442      
|                                                                                              |  |                           |           
|                                                                                              |  |                           |           
|Basic and diluted net earnings (loss) per
  share -                                           |  | $                         | (0.03     
|                                                                                              |  |                           |           
|                                                                                              |  |                           |           
|Weighted
  average number of shares used in computing basic
  net earnings (loss) per share   |  |                           | 13,599,626
|                                                                                              |  |                           |           
|                                                                                              |  |                           |           
|Weighted
  average number of shares used in computing diluted
  net earnings (loss) per share |  |                           | 13,599,626
|                                                                                              |  |                           |           
|                                                                                              |  |                           |           

*)        Reclassified.

The
accompanying notes are an integral part of the consolidated financial statements.

- 5 -

---

---

|ROBOMATIX
  TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES        
|------------------------------------------------------------
|                                                            
|STATEMENTS OF CHANGES IN SHAREHOLDERS
  EQUITY (DEFICIENCY)
|                                                            
|U.S. dollars in thousands                                   

|                                                                    |                                                                   | Share
  capital |       | Additional
  paid-in
  capital |  | Accumulated
  other
  comprehensive
  loss |        | Accumulated
  deficit |   | Total
  comprehensive
  income (loss) |     | Total
  shareholders
  equity |  
|------------------------------------------------------------------- | ----------------------------------------------------------------- | --------------- | ----- | ------------------------------ |  | ------------------------------------------ | ------ | --------------------- | - | ------------------------------------- | --- | ----------------------------- | -
|                                                                    |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|                                                                    |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|Balance as
  of January 1, 2000                                     |                                                                   | $               | 2,503 |                                |  | $                                          | 22,450 |                       |   | $                                     | -   |                               |  
|                                                                    | Conversion
  of convertible debentures intoshares, net            |                 |       | 1,758                          |  |                                            |        | 322                   |   |                                       |     | -                             |  
|                                                                    | Issuance of
  shares, net                                         |                 |       | 959                            |  |                                            |        | 5,102                 |   |                                       |     | -                             |  
|                                                                    | Exercise of
  options                                             |                 |       | 7                              |  |                                            |        | (7                    | ) |                                       |     | -                             |  
|                                                                    | Net loss                                                          |                 |       | -                              |  |                                            |        | -                     |   |                                       |     | -                             |  
|                                                                    |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|                                                                    |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|Total
  comprehensive loss                                          |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|                                                                    |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|                                                                    |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|Balance as
  of December 31, 2000                                   |                                                                   |                 | 5,227 |                                |  |                                            | 27,867 |                       |   |                                       | -   |                               |  
|                                                                    | Issuance of
  shares, net                                         |                 |       | 422                            |  |                                            |        | 1,657                 |   |                                       |     | -                             |  
|                                                                    | Foreign
  currency translation adjustments                        |                 |       | -                              |  |                                            |        | -                     |   |                                       |     | (69                           | )
|                                                                    | Net loss                                                          |                 |       | -                              |  |                                            |        | -                     |   |                                       |     | -                             |  
|                                                                    |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|                                                                    |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|Total
  comprehensive loss                                          |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|                                                                    |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|                                                                    |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|Balance as
  of December 31, 2001                                   |                                                                   |                 | 5,649 |                                |  |                                            | 29,524 |                       |   |                                       | (69 | )                             |  
|Capital
  surplus from transaction with related party (see Note 1b) |                                                                   |                 | -     |                                |  |                                            | 609    |                       |   |                                       | -   |                               |  
|Other
  comprehensive income (losses):                              |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|                                                                    | Foreign
  currency translation adjustments                        |                 |       | -                              |  |                                            |        | -                     |   |                                       |     | 162                           |  
|                                                                    | Unrealized
  losses on available-for-sale
  marketable securities |                 |       | -                              |  |                                            |        | -                     |   |                                       |     | (129                          | )
|                                                                    | Net loss                                                          |                 |       | -                              |  |                                            |        | -                     |   |                                       |     | -                             |  
|                                                                    |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|                                                                    |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|Total
  comprehensive loss                                          |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|                                                                    |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|                                                                    |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  
|Balance as
  of December 31, 2002                                   |                                                                   | $               | 5,649 |                                |  | $                                          | 30,133 |                       |   | $                                     | (36 | )                             |  
|                                                                    |                                                                   |                 |       |                                |  |                                            |        |                       |   |                                       |     |                               |  

The
accompanying notes are an integral part of the consolidated financial
statements.

- 6 -

---

---

|ROBOMATIX
  TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|----------------------------------------------------
|                                                    
|CONSOLIDATED STATEMENTS OF CASH FLOWS               
|                                                    
|U.S. dollars in thousands                           

|                                                               |                                                                                                                                        | Year ended December 31, |     
|-------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | ----------------------- | ----
|                                                               |                                                                                                                                        |                         |     
|                                                               |                                                                                                                                        | 2002                    |     
|                                                               |                                                                                                                                        |                         |     
|CASH FLOWS FROM OPERATING
  ACTIVITIES:                        |                                                                                                                                        |                         |     
|                                                               | Net loss                                                                                                                               |                         | $   
|                                                               | Adjustments to reconcile
  net income (loss) to net cash provided by      (used in) operating activities from
  continuing operations: |                         |     
|                                                               | Impairment on long-term
  investments                                                                                                  |                         |     
|                                                               | Deferred income taxes                                                                                                                  |                         |     
|                                                               | Accrued interest of
  long-term loans                                                                                                  |                         |     
|                                                               | Depreciation                                                                                                                           |                         |     
|                                                               | Decrease (increase) in
  inventories                                                                                                   |                         |     
|                                                               | Accrued pensions and
  severance pay                                                                                                   |                         |     
|                                                               | Decrease (increase) in
  other accounts receivable and prepaidexpenses                                                                 |                         |     
|                                                               | Increase (decease) in
  trade payables                                                                                                 |                         |     
|                                                               | Increase in other accounts
  payable and accrued expenses                                                                              |                         |     
|                                                               | Increase in trade
  receivables                                                                                                        |                         |     
|                                                               |                                                                                                                                        |                         |     
|                                                              
|Net cash provided by (used
  in) operating activities          |                                                                                                                                        |                         | (270
|                                                               |                                                                                                                                        |                         |     
|CASH FLOWS FROM INVESTING
  ACTIVITIES:                        |                                                                                                                                        |                         |     
|                                                               | Purchase of property and
  equipment                                                                                                   |                         |     
|                                                               | Investment in long-term
  investments                                                                                                  |                         |     
|                                                               | Proceeds from sale of a
  subsidiary (a)                                                                                               |                         |     
|                                                               | Payment for acquisition of
  a consolidated subsidiary (b)                                                                             |                         |     
|                                                               | Proceeds from restricted
  cash deposit                                                                                                |                         |     
|                                                               | Proceeds from sale of
  property and equipment                                                                                         |                         |     
|                                                               |                                                                                                                                        |                         |     
|                                                              
|Net cash provided by (used
  in) investing activities          |                                                                                                                                        |                         | 180 
|                                                               |                                                                                                                                        |                         |     
|CASH FLOWS FROM FINANCING
  ACTIVITIES:                        |                                                                                                                                        |                         |     
|                                                               | Issuance of shares                                                                                                                     |                         |     
|                                                               | Proceeds from long-term
  debt                                                                                                         |                         |     
|                                                               | Repayment of long-term
  debt                                                                                                          |                         |     
|                                                               | Short-term bank credit,
  net                                                                                                          |                         |     
|                                                               |                                                                                                                                        |                         |     
|                                                              
|Net cash provided by
  financing activities                    |                                                                                                                                        |                         | 65  
|                                                               |                                                                                                                                        |                         |     
|                                                              
|Effect of exchange rate
  changes on cash and cash equivalents |                                                                                                                                        |                         | 79  
|                                                               |                                                                                                                                        |                         |     
|Increase (decrease) in
  cash and cash equivalents             |                                                                                                                                        |                         | 54  
|Cash and cash equivalents
  at the beginning of the year       |                                                                                                                                        |                         | 327 
|                                                               |                                                                                                                                        |                         |     
|                                                              
|Cash and cash equivalents
  at the end of the year             |                                                                                                                                        | $                       | 381 
|                                                               |                                                                                                                                        |                         |     
|                                                               |                                                                                                                                        |                         |     

The accompanying notes are an integral part of the consolidated
financial statements.

- 7 -

---

---

|ROBOMATIX
  TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|----------------------------------------------------
|                                                    
|CONSOLIDATED STATEMENTS OF CASH FLOWS               
|                                                    
|U.S. dollars in thousands                           

|                                                                                |                                                                                   |                                                                               | Year ended
  December 31, |     
|------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ------------------------- | ----
|                                                                                |                                                                                   |                                                                               |                           |     
|                                                                                |                                                                                   |                                                                               | 2002                      |     
|                                                                                |                                                                                   |                                                                               |                           |     
|(a)                                                                             | Proceeds from sale of a subsidiary (Note 1b):                                     |                                                                               |                           |     
|                                                                                | Assets and liabilities of the subsidiaries
  at date of disposal:                 |                                                                               |                           |     
|                                                                                |                                                                                   | Working capital (excluding cash and cash
  equivalents)                       |                           | $   
|                                                                                |                                                                                   | Related party receivable related to sale of
  subsidiary from
  related party |                           |     
|                                                                                |                                                                                   | Capital gain                                                                  |                           |     
|                                                                                |                                                                                   |                                                                               |                           |     
|                                                                                |                                                                                   |                                                                               |                           |     
|                                                                                |                                                                                   |                                                                               | $                         | (208
|                                                                                |                                                                                   |                                                                               |                           |     
|                                                                                |                                                                                   |                                                                               |                           |     
|(b)                                                                             | Payment for acquisition of a consolidated
  subsidiary(see Note 1c):              |                                                                               |                           |     
|                                                                                |                                                                                   |                                                                               |                           |     
|                                                                                | Fair value of assets acquired and
  liabilities assumed at date of
  acquisition: |                                                                               |                           |     
|                                                                                |                                                                                   |                                                                               |                           |     
|                                                                                |                                                                                   | Working capital (excluding cash and cash
  equivalents)                       |                           | $   
|                                                                                |                                                                                   | Property, plant and equipment                                                 |                           |     
|                                                                                |                                                                                   | Accrued severance pay                                                         |                           |     
|                                                                                |                                                                                   | Deferred income taxes                                                         |                           |     
|                                                                                |                                                                                   | Issuance of shares, net                                                       |                           |     
|                                                                                |                                                                                   |                                                                               |                           |     
|                                                                                |                                                                                   |                                                                               |                           |     
|                                                                                |                                                                                   |                                                                               | $                         | -   
|                                                                                |                                                                                   |                                                                               |                           |     
|(c)                                                                             | Supplemental
  disclosure of cash flows activities:                               |                                                                               |                           |     
|                                                                                |                                                                                   | Cash paid during the year for interest                                        |                           | $   
|                                                                                |                                                                                   |                                                                               |                           |     
|                                                                                |                                                                                   |                                                                               |                           |     
|Supplementary information on financing
  activities
  not involving cash flows: |                                                                                   |                                                                               |                           |     
|                                                                                |                                                                                   |                                                                               |                           |     
|Conversion of convertible debentures into
  shares, net                         |                                                                                   | $                                                                             | -                         |     
|                                                                                |                                                                                   |                                                                               |                           |     
|                                                                                |                                                                                   |                                                                               |                           |     
|Sale of long-term investment for
  consideration of marketable
  securities     |                                                                                   | $                                                                             | 264                       |     
|                                                                                |                                                                                   |                                                                               |                           |     

The
accompanying notes are an integral part of the consolidated financial
statements.

- 8 -

---

---

|ROBOMATIX
  TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|----------------------------------------------------
|                                                    
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS          
|                                                    
|U.S. dollars in thousands (except per share
  data) 

|NOTE 1:- | GENERAL
|-------- | -------
|         |        
|         | a.     
|         |        
|         |        
|         |        
|         |        
|         |        
|         |        
|         |        
|         | b.     
|         |        
|         |        
|         |        
|         | c.     
|         |        
|         |        
|         |        
|         |        
|         |        
|         |        
|         |        

- 9 -

---

---

|ROBOMATIX
  TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|----------------------------------------------------
|                                                    
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS          
|                                                    
|U.S. dollars in thousands                           

|NOTE 1:- | GENERAL
  (Cont.)
|-------- | -----------------
|         |                  
|         |                  

| |                                        |  | Year ended
  December 31,
  2000 |       
| | -------------------------------------- |  | -------------------------------- | ------
| |                                        |  |                                  |       
| |                                        |  |                                  |       
| | Sales, net                             |  | $                                | 9,864 
| |                                        |  |                                  |       
| | Net loss                               |  | $                                | (3,393
| |                                        |  |                                  |       
| | Basic and
  diluted net loss per share |  | $                                | (0.23 
| |                                        |  |                                  |       

|         | d.                                                                                                                                                           | During the
  years prior to 2000, the Company discontinued all of its past operations,
  which were in the field of robotics, laser, ultrasound, imaging and vision
  technologies.                                                                                                                                                                                                                                               
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|NOTE 2:- | SIGNIFICANT
  ACCOUNTING POLICIES                                                                                                                           
|         |                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         | The
  consolidated financial statements have been prepared in conformity with
  generally accepted accounting principles in the United States (U.S. GAAP).
|         |                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         | a.                                                                                                                                                           | Use of
  estimates:                                                                                                                                                                                                                                                                                                                                                                                                               
|         |                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         |                                                                                                                                                              | The
  preparation of financial statements in conformity with generally accepted
  accounting principles requires management to make estimates and assumptions that
  affect the amounts reported in the financial statements and accompanying
  notes. Actual results could differ from those estimates.                                                                                                                          
|         |                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         | b.                                                                                                                                                           | Financial
  statements in U.S. dollars:                                                                                                                                                                                                                                                                                                                                                                                           
|         |                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         |                                                                                                                                                              | A majority
  of the costs of the Company and certain of its subsidiaries is generated in
  U.S. dollars (dollars). The Companys management believes that the dollar
  is the primary currency of the economic environment in which the Company and
  certain of its subsidiaries operate. Thus, the functional and reporting
  currency of the Company and certain of its subsidiaries is the dollar.                          
|         |                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         |                                                                                                                                                              | Accordingly,
  monetary accounts maintained in currencies other than the dollar are
  remeasured into dollars in accordance with Statement of Financial Accounting
  Standard No. 52 Foreign Currency Translation (SFAS No. 52). All
  transactions gains and losses from the remeasurement of monetary balance
  sheet items are reflected in the statements of operations as financial income
  or expenses, as appropriate.

- 10 -

---

---

|ROBOMATIX
  TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|----------------------------------------------------
|                                                    
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS          
|                                                    
|U.S. dollars in thousands                           

|NOTE 2:- | SIGNIFICANT
  ACCOUNTING POLICIES (Cont.)
|-------- | -----------------------------------------
|         |                                          
|         |                                          
|         |                                          
|         | c.                                       
|         |                                          
|         |                                          
|         |                                          
|         | d.                                       
|         |                                          
|         |                                          
|         |                                          
|         | e.                                       
|         |                                          
|         |                                          
|         |                                          
|         | f.                                       
|         |                                          
|         |                                          
|         |                                          
|         | g.                                       
|         |                                          
|         |                                          

- 11 -

---

---

|ROBOMATIX
  TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|----------------------------------------------------
|                                                    
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS          
|                                                    
|U.S. dollars in thousands                           

|NOTE 2:- | SIGNIFICANT
  ACCOUNTING POLICIES (Cont.)
|-------- | -----------------------------------------
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         | h.                                       
|         |                                          
|         |                                          
|         |                                          
|         |                                          

| |                                        |  |  | %    | 
| | -------------------------------------- |  |  | ---- | 
| |                                        |  |  |      | 
| | Buildings and improvements             |  |  | 5-25 | 
| | Computers (including related software) |  |  | 33   | 
| | Motor
  vehicles                       |  |  | 15   | 
| | Machinery and equipment                |  |  | 5-20 | 

| | i. | Investment
  in other companies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | Investment
  in non-marketable securities are recorded at the lower of cost or estimated
  fair value since the Company does not have the ability to exercise
  significant influence over the operating and financial policy of the companies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The carrying
  value of investment in shares of the companies is periodically reviewed by
  management based upon the difference between the carrying amount and fair
  value of such investments. If this review indicates that there are differences
  between the carrying value and the fair value, the carrying value of those
  investments are reduced to their estimate fair value and the impairment loss
  is recognized in the statement of operation. The Company recognized
  impairment losses in the amount of $ 2,079 and $ 1,390 in the year 2000 and
  2001, respectively.                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | j. | Impairment
  of long-lived assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The Company
  and its subsidiaries long-lived assets are reviewed for impairment in
  accordance with Statement of Financial Accounting Standard No. 144
  Accounting for the Impairment of Disposal of Long-lived Assets (SFAS No.
  144) whenever events or changes in circumstances indicate that the carrying
  amount of an asset may not be recoverable. Recoverability of assets to be
  held and used is measured by a comparison of the carrying amount of an asset
  to the future undiscounted cash flows expected to be generated by the assets.
  If such assets are considered to be impaired, the impairment to be recognized
  is measured by the amount by which the carrying amount of the assets exceeds
  the fair value of the assets. As of December 31, 2002, no impairment losses
  have been identified.

- 12 -

---

---

|ROBOMATIX
  TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|----------------------------------------------------
|                                                    
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS          
|                                                    
|U.S. dollars in thousands                           

|NOTE 2:- | SIGNIFICANT
  ACCOUNTING POLICIES (Cont.)
|-------- | -----------------------------------------
|         |                                          
|         | k.                                       
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         | l.                                       
|         |                                          
|         |                                          
|         |                                          
|         | m.                                       
|         |                                          
|         |                                          
|         |                                          
|         | n.                                       
|         |                                          
|         |                                          
|         |                                          

- 13 -

---

---

|ROBOMATIX
  TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|----------------------------------------------------
|                                                    
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS          
|                                                    
|U.S. dollars in thousands                           

|NOTE 2:- | SIGNIFICANT
  ACCOUNTING POLICIES (Cont.)
|-------- | -----------------------------------------
|         |                                          
|         | o.                                       
|         |                                          
|         |                                          
|         |                                          
|         |                                          

| |                                                                                                      |  | Year ended
  December 31, |      
| | ---------------------------------------------------------------------------------------------------- |  | ------------------------- | -----
| |                                                                                                      |  |                           |      
| |                                                                                                      |  | 2002                      |      
| |                                                                                                      |  |                           |      
| |                                                                                                      |  |                           |      
| | Net loss -
  as reported                                                                             |  | $                         | (442 
| |                                                                                                      |  |                           |      
| | Deduct:
  Total stock-based compensation
  determined under fair value based method
  for all awards |  | $                         | (44  
| |                                                                                                      |  |                           |      
| |                                                                                                      |  |                           |      
| | Net loss -
  pro forma                                                                               |  | $                         | (486 
| |                                                                                                      |  |                           |      
| |                                                                                                      |  |                           |      
| | Net loss per
  share - as reported and pro-
  forma                                                  |  | $                         | (0.03
| |                                                                                                      |  |                           |      

| |  | Under SFAS
  No. 123, pro forma information regarding net earnings (loss) is required and
  determined as if the Company had accounted for its employee stock options
  under the fair value method of SFAS No.123. The fair value of each option
  granted was estimated at the date of grant using the Black-Scholes
  option-pricing model with the following weighted average assumptions for
  2001: risk-free interest rates 2.75%, respectively; dividend yield of 0% for
  the year; expected volatility of 
  83.8%, respectively, and expected life of 10 years.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Options to
  employees were issued at fair value. No compensation expenses were recognized
  during the period of three years ended December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | The Company applies SFAS No. 123 and EITF
  96-18 Accounting for Equity Instruments that are Issued to Other than
  Employees for Acquiring, or in Conjunction with Selling, Goods or Services
  with respect to options issued to non-employees. SFAS 123 requires use of an
  option valuation model to measure the fair value of the options at the grant
  date.                                                                                                                                                                                                    

- 14 -

---

---

|ROBOMATIX
  TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|----------------------------------------------------
|                                                    
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS          
|                                                    
|U.S. dollars in thousands                           

|NOTE 2:- | SIGNIFICANT
  ACCOUNTING POLICIES (Cont.)
|-------- | -----------------------------------------
|         |                                          
|         | p.                                       
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         | q.                                       
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         | r.                                       
|         |                                          
|         |                                          
|         |                                          

- 15 -

---

---

|ROBOMATIX
  TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|----------------------------------------------------
|                                                    
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS          
|                                                    
|U.S. dollars in thousands                           

|NOTE 2:- | SIGNIFICANT
  ACCOUNTING POLICIES (Cont.)
|-------- | -----------------------------------------
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         | s.                                       
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          

| |                           |  | 2002 |    | 2001 | 
| | ------------------------- |  | ---- | -- | ---- | 
| |                           |  |      |    |      | 
| | Service cost              |  | $    | 1  |      | 
| | Interest cost             |  |      | 28 |      | 
| |                           |  |      |    |      | 
| |                           |  |      |    |      | 
| | Net periodic benefit cost |  | $    | 29 |      | 
| |                           |  |      |    |      | 

- 16 -

---

---

|ROBOMATIX
  TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|----------------------------------------------------
|                                                    
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS          
|                                                    
|U.S. dollars in thousands                           

|NOTE 2:- | SIGNIFICANT
  ACCOUNTING POLICIES (Cont.)
|-------- | -----------------------------------------
|         |                                          
|         |                                          

| |                                          |  | 2002 |     | 2001 | 
| | ---------------------------------------- |  | ---- | --- | ---- | 
| |                                          |  |      |     |      | 
| | Benefit obligation at beginning of year  |  | $    | 474 |      | 
| | Service cost                             |  |      | 1   |      | 
| | Interest cost                            |  |      | 28  |      | 
| | Benefits paid                            |  |      | (38 | )    | 
| | Foreign currency translation adjustments |  |      | 88  |      | 
| |                                          |  |      |     |      | 
|
| | Benefit obligation at year end           |  | $    | 553 |      | 
| |                                          |  |      |     |      | 

| |  | The
  following table sets forth the funded status of the plans at December 31,
  2002 and 2001:
| |  | ------------------------------------------------------------------------------------------------

| |                                |  | 2002 |     | 2001 | 
| | ------------------------------ |  | ---- | --- | ---- | 
| |                                |  |      |     |      | 
| | Vested benefit obligation      |  | $    | 530 |      | 
| | Accumulated benefit obligation |  | $    | 553 |      | 
| | Projected benefit obligation   |  | $    | 553 |      | 
| | Accrued pension cost           |  | $    | 553 |      | 

| |  | The Company
  used the following assumptions to measure its pension obligation for the
  years reported:
| |  | --------------------------------------------------------------------------------------------------------

| | Discount rate  |  | 5.75% (6% in 2001)
| | -------------- |  | ------------------
| | Inflation rate |  | 2%                

| |    | Severance
  and pension expenses for the years ended December 31, 2002, 2001 and 2000,
  amounted to approximately $ 76, $ 36 and $ 10, respectively.                                                                                                                                                                                                 
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                       
| | t. | Net
  investment hedge in a foreign currency:                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                       
| |    | The Company
  uses a foreign denominated fixed rate long-term loan to protect the value of
  its investment in its foreign subsidiary in Germany. Realized and unrealized
  gains and losses from this hedge are not included in the statement of
  operations but are included in other comprehensive losses as cumulative
  translation adjustments.
| |    |                                                                                                                                                                                                                                                                                                                                                       
| |    | During the
  years ended December 31, 2002 and 2001, the Company recognized $ 980 of
  net loss and $ 354 of net gains, respectively included in the cumulative
  translation adjustment, related to foreign denominated fixed-rate long-term
  loan.                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                       
| | u. | Reclassification:                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                       
| |    | Certain
  amounts from prior years have been reclassified ton conform to the current
  years presentation.                                                                                                                                                                                                                                           

- 17 -

---

---

|ROBOMATIX TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|--------------------------------------------------
|NOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS      
|                                                  
|U.S.
  dollars in thousands                       

|NOTE 2:- | SIGNIFICANT
  ACCOUNTING POLICIES (Cont.)
|-------- | -----------------------------------------
|         |                                          
|         | v.                                       
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          

- 18 -

---

---

|ROBOMATIX TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|--------------------------------------------------
|NOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS      
|                                                  
|U.S.
  dollars in thousands                       

|NOTE 2:- | SIGNIFICANT
  ACCOUNTING POLICIES (Cont.)
|-------- | -----------------------------------------
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          
|         |                                          

- 19 -

---

---

|ROBOMATIX TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|--------------------------------------------------
|NOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS      
|                                                  
|U.S.
  dollars in thousands                       

|NOTE 3:- | SUPPLEMENTARY
  INFORMATION ON CURRENT ASSETS
|-------- | ---------------------------------------------
|         |                                              
|         | a.                                           

| |                                                                               |  | December 31, |    
| | ----------------------------------------------------------------------------- |  | ------------ | ---
| |                                                                               |  |              |    
| |                                                                               |  | 2002         |    
| |                                                                               |  |              |    
| | Government of Israel                                                          |  | $            | 4  
| | Prepaid expenses                                                              |  |              | 159
| | Receivables on related to sale of
  subsidiary to a related
  party (Note 1b) |  |              | 190
| | Other                                                                         |  |              | 3  
| |                                                                               |  |              |    
|
| |                                                                               |  | $            | 356
| |                                                                               |  |              |    

| | b. | Inventories:
| | -- | ------------

| | Raw
  materials             |  | $ | 999   |  |  | $ | 984   |  | 
| | --------------------------- |  | - | ----- |  |  | - | ----- |  | 
| | Finished products and goods |  |   | 1,763 |  |  |   | 1,271 |  | 
| |                             |  |   |       |  |  |   |       |  | 
|
| |                             |  | $ | 2,762 |  |  | $ | 2,255 |  | 
| |                             |  |   |       |  |  |   |       |  | 

|NOTE 4:- | INVESTMENTS
  IN OTHER COMPANIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | During 2000,
  the Company invested in shares of eLady Ltd., a Japanese company, engaged in
  operating a Japanese fashion and style e-commerce portal for women.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | The total
  cost of the Companys indirect holdings in eLady Ltd. was approximately
  $ 5,640 (net of placement fee for capital raising of $ 263). In
  August 2001, some investors, including related parties of the Company,
  advanced a convertible loan to Belas Holding B.V. resulting an increase of
  the indirect holding of the Company from approximately 16.5% to approximately
  27%. Although the increase, resulting from a ratchet the company had, the
  Company does not have the ability to exercise significant influence over the
  operating and financial policy, since it failed in receiving financial
  information from eLady. During 2000 and 2001, certain conditions were
  identified by management, including recurring operating losses and downward
  adjustment to the Companys projections, as potential indicators of
  intangible asset impairment. As a result of the above conditions, management
  conducted an evaluation of the carrying value of the Companys investment in
  eLady. The evaluation resulted in an impairment charge of $ 1,000 and
  $ 2,000 for the years 2001 and 2000, respectively.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | In February
  2000, the Company purchased shares of Kasparov Chess Online Inc. for
  approximately $ 54. The Company wrote off in full the investment in the
  amount of $ 54 during the fourth quarter of 2000, based on the
  evaluation of its management of the fair value of its holdings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

- 20 -

---

---

|ROBOMATIX TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|--------------------------------------------------
|NOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS      
|                                                  
|U.S.
  dollars in thousands                       

|NOTE 4:- | LONG-TERM
  INVESTMENTS (Cont.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         | In March
  2000, the Company purchased shares of Homenet Ltd. for approximately
  $ 25. During the second quarter of 2000, the Company provided for an
  impairment loss of $ 25, due to the fact that Homenet Ltd. was under
  liquidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         | During 2000
  and 2001, the Company purchased shares of Dirad Technologies (1999) Ltd.
  (Dirad), which is engaged in investing in high-tech companies an amount of
  $ 680. The Companys holdings in Dirad reached approximately 13.6% as of
  December 31, 2001. In addition, the Company received 5% of the share capital
  of Dirad Management Technologies (2000) Ltd., an Israeli company that
  provides management services to Dirad in consideration for management fees
  and preference in distribution of dividends. The share purchase agreement
  provides for a nine member board of directors, of which the Company is
  entitled to appoint one member.                                                                                                                                                                                                                                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         | In December
  2001, the Company was a part of an agreement between Leader Tech Ltd., a
  public company traded in Israel, Dirad and all Dirads shareholders, among
  them the Company. According to the agreement, Leader Tech is to purchase from
  all of Dirads shareholders their holdings in Dirad in consideration for
  Leader Tech shares. The closing of the agreement was on April 29, 2002.
  Pursuant to the closing of the agreement, the Company sold all of its shares
  in Dirad to Leader Tech, in consideration for 2,167,321 Ordinary shares of
  Leader Tech, constituting approximately 4.4% of the issued share capital of
  Leader Tech. The Company provided for an impairment loss of $ 390 during 2001
  based on the opinion of its management of the fair value of its holding in
  Dirad. The investment in Leader Techs shares is presented as marketable
  securities and classified as available for sale.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|NOTE 5:- | PROPERTY,
  PLANT AND EQUIPMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         | Composition
  of assets, grouped by major classifications, is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| |                                          |  | December 31, |       
| | ---------------------------------------- |  | ------------ | ------
| |                                          |  |              |       
| |                                          |  | 2002         |       
| |                                          |  |              |       
| | Cost:                                    |  |              |       
| | Buildings, land and
  improvements *)    |  | $            | 5,152 
| | Computers (including related
  software) |  |              | 83    
| | Motor vehicles                           |  |              | -     
| | Machinery and equipment                  |  |              | 2,031 
| |                                          |  |              |       
| |                                          |  |              |       
| |                                          |  |              | 7,266 
| |                                          |  |              |       
| | Accumulated depreciation                 |  |              | (3,526
| |                                          |  |              |       
| |                                          |  |              |       
| | Depreciated cost                         |  | $            | 3,740 
| |                                          |  |              |       

| | Depreciation
  expenses for the years ended December 31, 2002, 2001 and 2000, were
  $ 201, $ 177 and $ 5, respectively.
| | ------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                         
| | As for
  pledges, see Note 8e.                                                                                          
| |                                                                                                                         
| | *) See also
  Note 14a.                                                                                                 

- 21 -

---

---

|ROBOMATIX TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|--------------------------------------------------
|NOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS      
|                                                  
|U.S.
  dollars in thousands                       

|NOTE 6:- | SUPPLEMENTARY
  INFORMATION ON CURRENT LIABILITIES
|-------- | --------------------------------------------------
|         |                                                   
|         | a.                                                

| |                               |  | Interest rate  |   | Amount         | 
| | ----------------------------- |  | -------------- | - | -------------- | 
| |                               |  |                |   |                | 
| |                               |  | December
  31, |   | December
  31, | 
| |                               |  |                |   |                | 
| |                               |  | 2002           |   | 2001           | 
| |                               |  |                |   |                | 
| |                               |  | %              |   |                | 
| |                               |  |                |   |                | 
| | Short-term bank credit        |  |                |   |                | 
| | In NIS                        |  |                | - |                | 
| | In Euro                       |  |                | 9 |                | 
| |                               |  |                |   |                | 
|
| |                               |  |                |   |                | 
| |                               |  |                |   |                | 
|
| | Total authorized credit lines |  |                |   |                | 
| |                               |  |                |   |                | 
|
| | Unutilized credit lines       |  |                |   |                | 
| |                               |  |                |   |                | 

| | b. | Other
  accounts payable and accrued expenses:
| | -- | ----------------------------------------------

| |                                   |  | December
  31, |      
| | --------------------------------- |  | -------------- | -----
| |                                   |  |                |      
| |                                   |  | 2002           |      
| |                                   |  |                |      
| |                                   |  |                |      
| | Customer
  advances               |  | $              | -    
| | Payroll and
  related expenses    |  |                | 120  
| | Accrued expenses and other (1)    |  |                | 873  
| | Accrued customer bonuses          |  |                | 456  
| | Other                             |  |                | 141  
| |                                   |  |                |      
|
| |                                   |  | $              | 1,590
| |                                   |  |                |      
|
| | (1)   Including a related
  party |  | $              | 360  
| |                                   |  |                |      

|NOTE 7:- | LONG-TERM
  LOANS
|-------- | -----------------
|         |                  
|         | a.               

| | Long-term bank loans      |  | $ | 4,933 |  |  | $ | 4,513 |  | 
| | ------------------------- |  | - | ----- |  |  | - | ----- |  | 
| | Less - current maturities |  |   | 444   |  |  |   | 577   |  | 
| |                           |  |   |       |  |  |   |       |  | 
| |                           |  |   |       |  |  |   |       |  | 
| |                           |  | $ | 4,489 |  |  | $ | 3,936 |  | 
| |                           |  |   |       |  |  |   |       |  | 

- 22 -

---

---

|ROBOMATIX TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|--------------------------------------------------
|NOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS      
|                                                  
|U.S.
  dollars in thousands                       

|NOTE 7:- | LONG-TERM
  LOAN (Cont.)
|-------- | ------------------------
|         |                         
|         | b.                      
|         |                         
|         | c.                      

| |                                     |  | Interest rate  |      | Amount         | 
| | ----------------------------------- |  | -------------- | ---- | -------------- | 
| |                                     |  |                |      |                | 
| |                                     |  | December
  31, |      | December
  31, | 
| |                                     |  |                |      |                | 
| |                                     |  | 2002           |      | 2001           | 
| |                                     |  |                |      |                | 
| |                                     |  | %              |      |                | 
| |                                     |  |                |      |                | 
| |                                     |  |                |      |                | 
| | In, or linked to, the U.S. dollar   |  |                | 3.25 |                | 
| | In Euro                             |  |                | -    |                | 
| | In Swiss Franks                     |  |                | 3.25 |                | 
| | In Israeli currency - linked to CPI |  |                | 8.5  |                | 
| |                                     |  |                |      |                | 
|
| |                                     |  |                |      |                | 
| |                                     |  |                |      |                | 

| | e. | The
  liabilities mature as follows:
| | -- | ------------------------------------

| |                         |  | December 31,
  2002 |      
| | ----------------------- |  | ------------------- | -----
| |                         |  |                     |      
| |                         |  |                     |      
| | 2002 (current maturity) |  | $                   | 444  
| | 2003                    |  |                     | 429  
| | 2004                    |  |                     | 429  
| | 2005                    |  |                     | 429  
| | 2006                    |  |                     | 429  
| | Thereafter              |  |                     | 2,773
| |                         |  |                     |      
|
| |                         |  | $                   | 4,933
| |                         |  |                     |      

| | f. | As for
  pledges, see Note 8e.
| | -- | ------------------------------

- 23 -

---

---

|ROBOMATIX TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|--------------------------------------------------
|NOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS      
|                                                  
|U.S.
  dollars in thousands                       

|NOTE 8:- | COMMITMENTS
  AND CONTINGENT LIABILITIES
|-------- | ----------------------------------------
|         |                                         
|         | a.                                      
|         |                                         
|         |                                         
|         |                                         
|         |                                         
|         |                                         
|         |                                         
|         |                                         
|         | b.                                      
|         |                                         
|         |                                         
|         |                                         
|         | c.                                      
|         |                                         
|         |                                         
|         |                                         
|         | d.                                      
|         |                                         
|         |                                         
|         |                                         
|         | e.                                      
|         |                                         
|         |                                         

| |                                                     |  | December 31,
  2002 |      
| | --------------------------------------------------- |  | ------------------- | -----
| |                                                     |  |                     |      
| |                                                     |  |                     |      
| | Long-term
  debt (including current maturities) (1) |  | $                   | 4,933
| |                                                     |  |                     |      

| |  | (1)     The
  Company has a floating charge on all of its assets in favor of the banks.
| |  | ---------------------------------------------------------------------------------------
| |  |                                                                                        
| |  | Silverboim
  Holdings Ltd., the controlling shareholder, guaranteed the long-term debt.
| |  |                                                                                        

- 24 -

---

---

|ROBOMATIX TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES           
|-------------------------------------------------------------
|NOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS                 
|                                                             
|U.S.
  dollars in thousands (except share and per share data)

|NOTE 8:- | COMMITMENTS
  AND CONTINGENT LIABILITIES (Cont.)
|-------- | ------------------------------------------------
|         |                                                 
|         | f.                                              
|         |                                                 
|         |                                                 
|         |                                                 
|         |                                                 

| |      |  | Operating
  leases |   
| | ---- |  | ------------------ | --
| |      |  |                    |   
| |      |  |                    |   
| | 2003 |  | $                  | 66
| | 2004 |  | $                  | 50
| | 2005 |  | $                  | 26
| | 2006 |  | $                  | 9 
| | 2007 |  | $                  | - 



|NOTE 9:- | SHAREHOLDERS
  EQUITY
|-------- | ----------------------
|         |                       
|         | a.                    
|         |                       
|         |                       
|         |                       
|         |                       
|         |                       
|         |                       
|         |                       
|         |                       
|         |                       
|         |                       
|         |                       
|         |                       

- 25 -

---

---

|ROBOMATIX TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES           
|-------------------------------------------------------------
|NOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS                 
|                                                             
|U.S.
  dollars in thousands (except share and per share data)

|NOTE 9:- | SHARE
  CAPITAL (Cont.)
|-------- | -----------------------
|         |                        
|         | b.                     
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        

- 26 -

---

---

|ROBOMATIX TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES           
|-------------------------------------------------------------
|NOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS                 
|                                                             
|U.S.
  dollars in thousands (except share and per share data)

|NOTE 9:- | SHARE
  CAPITAL (Cont.)
|-------- | -----------------------
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        
|         |                        

- 27 -

---

---

|ROBOMATIX TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES           
|-------------------------------------------------------------
|NOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS                 
|                                                             
|U.S.
  dollars in thousands (except share and per share data)

|NOTE 9:- | SHARE
  CAPITAL (Cont.)
|-------- | -----------------------
|         |                        
|         |                        

| |                                             |  | Number of
  options |           | Exercise price |  | Weighted
  average
  exercise price |     
| | ------------------------------------------- |  | ------------------- | --------- | -------------- |  | ----------------------------------- | ----
| |                                             |  |                     |           |                |  |                                     |     
| |                                             |  |                     |           |                |  |                                     |     
| | Outstanding at January 1, 2000              |  |                     | 220,000   |                |  |                                     |     
| | Exercised                                   |  |                     | (20,000   | )              |  | $                                   | 0.36
| |                                             |  |                     |           |                |  |                                     |     
| |                                             |  |                     |           |                |  |                                     |     
| | Outstanding at December 31, 2000            |  |                     | 200,000   |                |  |                                     |     
| | Granted                                     |  |                     | 910,000   |                |  | $                                   | 0.70
| |                                             |  |                     |           |                |  |                                     |     
| | Outstanding at December 31, 2001
  and 2002 |  |                     | 1,110,000 |                |  |                                     |     
| |                                             |  |                     |           |                |  |                                     |     

| |  |  | The stock
  options outstanding and exercisable as of December 31, 2002 have been
  classified into exercise prices as follows:
| |  |  | -------------------------------------------------------------------------------------------------------------------------------

| | Options outstanding |      | Options exercisable                       | 
| | ------------------- | ---- | ----------------------------------------- | 
| |                     |      |                                           | 
| | Exercise
  Price    |      | Outstanding
  as of
  December 31,
  2002 | 
| |                     |      |                                           | 
| |                     |      |                                           | 
| | $                   | 0.36 |                                           | 
| | $                   | 0.70 |                                           | 
| |                     |      |                                           | 
| |                     |      |                                           | 
| |                     |      |                                           | 
| |                     |      |                                           | 

| |    | 5.                                                                                                                                                                                                                                                                                                                                                                                                                     | Weighted
  average fair value of options granted during 2001, whose exercise price
  equals the fair value of the stock on the date grant was $ 0.13.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                      
| | c. | Dividends:                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | In the event
  cash dividends are declared by the Company, such dividends will be paid in
  Israeli currency. Under current Israeli regulations, any cash dividend in
  Israeli currency paid in respect of Ordinary shares purchased by
  non-residents of Israel with non-Israeli currency may be freely repatriated
  in such non-Israeli currency, at the rate of exchange prevailing at the time
  of conversion.

- 28 -

---

---

|ROBOMATIX TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|--------------------------------------------------
|NOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS      
|                                                  
|U.S.
  dollars in thousands                       

|NOTE 9:-  | SHARE
  CAPITAL (Cont.)
|--------- | -----------------------
|          |                        
|          | d.                     
|          |                        
|          |                        
|          |                        
|          |                        
|          |                        
|          |                        
|          |                        
|NOTE 10:- | INCOME
  TAXES         
|          |                        
|          | a.                     
|          |                        
|          |                        
|          |                        
|          |                        
|          |                        
|          |                        
|          |                        
|          |                        

- 29 -

---

---

|ROBOMATIX TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|--------------------------------------------------
|NOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS      
|                                                  
|U.S. dollars
  in thousands                       

|NOTE 10:- | INCOME
  TAXES (Cont.)
|--------- | ----------------------
|          |                       
|          | b.                    

| |                   |  | Year ended
  December 31, |    
| | ----------------- |  | ------------------------- | ---
| |                   |  |                           |    
| |                   |  | 2002                      |    
| |                   |  |                           |    
| |                   |  |                           |    
| | Domestic (Israel) |  | $                         | (18
| | Foreign           |  |                           | (46
| |                   |  |                           |    
|
| |                   |  | $                         | (64
| |                   |  |                           |    

| | c. | The
  provision for taxes on income comprises the following:
| | -- | ------------------------------------------------------------

| |                          |  | Year ended
  December 31, |    
| | ------------------------ |  | ------------------------- | ---
| |                          |  |                           |    
| |                          |  | 2002                      |    
| |                          |  |                           |    
| |                          |  |                           |    
| | Deferred taxes - foreign |  | $                         | 378
| |                          |  |                           |    

| | d. | Reconciliation
  between theoretical tax expenses to actual tax expenses:                                                                                                                                                          
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                    
| |    | A
  reconciliation between theoretical tax income, assuming all income is taxed
  at the statutory rate applicable to income of the Company and the actual
  income tax as reported in the statements of operations, is as follows:

| |                                                                                                   |  | Year ended
  December 31, |    
| | ------------------------------------------------------------------------------------------------- |  | ------------------------- | ---
| |                                                                                                   |  |                           |    
| |                                                                                                   |  | 2002                      |    
| |                                                                                                   |  |                           |    
| |                                                                                                   |  |                           |    
| | Loss before
  taxes on income                                                                     |  | $                         | (64
| |                                                                                                   |  |                           |    
| | Statutory tax rate                                                                                |  |                           | 36 
| |                                                                                                   |  |                           |    
| | Theoretical tax expenses (income)                                                                 |  |                           | (23
| | Deferred tax on losses for which valuation
  allowance was provided.                              |  |                           | -  
| | Utilization of operating carryforward tax
  losses for which a valuation allowance was
  provided |  |                           | -  
| | Effect of different tax rates in other
  countries                                                |  |                           | 16 
| | Non-deductible expenses                                                                           |  |                           | 405
| | Change due to currency rate fluctuation                                                           |  |                           | -  
| | Other                                                                                             |  |                           | (20
| |                                                                                                   |  |                           |    
| |                                                                                                   |  |                           |    
| | Taxes on income in the statements of
  operations                                                 |  | $                         | 378
| |                                                                                                   |  |                           |    

- 30 -

---

---

|ROBOMATIX TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|--------------------------------------------------
|NOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS      
|                                                  
|U.S.
  dollars in thousands                       

|NOTE 10:- | TAXES ON INCOME (Cont.)
|--------- | -----------------------
|          |                        
|          | e.                     

| |                         |  | Year ended
  December 31, |     
| | ----------------------- |  | ------------------------- | ----
| |                         |  |                           |     
| |                         |  | 2002                      |     
| |                         |  |                           |     
| |                         |  | %                         |     
| |                         |  |                           |     
| |                         |  |                           |     
| | On Israeli operations   |  |                           | 36  
| | On German operations *) |  |                           | 38.5

| |  | *) | The German
  subsidiary is taxed on the basis of the tax laws prevailing in its country of
  residence.
| |  | -- | -------------------------------------------------------------------------------------------------------

| | f. | Deferred
  taxes:                                                                                                                                                                                                                                                                                                   
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                     
| |    | Deferred
  income taxes reflect the net tax effect of temporary differences between the
  carrying amounts of assets and liabilities for financial reporting purposes,
  and amounts used for income tax purposes. Significant components of the
  Company and its subsidiaries deferred tax assets are as follows:

| |                                               |  | December 31, |        
| | --------------------------------------------- |  | ------------ | -------
| |                                               |  |              |        
| |                                               |  | 2002         |        
| |                                               |  |              |        
| | Deferred tax
  assets:                        |  |              |        
| | Net
  operating losses carryforwards          |  | $            | 13,282 
| | Other
  - net                                 |  |              | 900    
| |                                               |  |              |        
| |                                               |  |              |        
| | Total
  deferred tax assets                   |  |              | 14,182 
| | Valuation
  allowance for deferred tax assets |  |              | (11,610
| |                                               |  |              |        
| |                                               |  |              |        
| | Net deferred
  tax assets                     |  | $            | 2,572  
| |                                               |  |              |        
| |                                               |  |              |        
| | Domestic                                      |  | $            | -      
| | Foreign                                       |  |              | 2,572  
| |                                               |  |              |        
| |                                               |  |              |        
| |                                               |  | $            | 2,572  
| |                                               |  |              |        

| | g. | Net
  operating carryforward tax losses:
| | -- | ----------------------------------------
| |    |                                         
| |    | 1.                                      
| |    |                                         
| |    |                                         
| |    |                                         
| |    | 2.                                      
| |    |                                         
| |    |                                         

- 31 -

---

---

|ROBOMATIX TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|--------------------------------------------------
|NOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS      
|                                                  
|U.S.
  dollars in thousands                       

|NOTE 11:- | RELATED
  PARTIES TRANSACTIONS                                                  
|--------- | --------------------------------------------------------------------------------
|          |                                                                                 
|          | The balances and the transactions derived
  from related parties are as follows:
|          |                                                                                 
|          | a.                                                                              

| |                                                     |  | Year ended December 31, |    
| | --------------------------------------------------- |  | ----------------------- | ---
| |                                                     |  |                         |    
| |                                                     |  | 2002                    |    
| |                                                     |  |                         |    
| | Management fees (see Note 8b)                       |  | $                       | 120
| |                                                     |  |                         |    
| | Administrative
  and support services (see Note 8c) |  | $                       | 60 
| |                                                     |  |                         |    

| | b. | Balances
  with related party:
| | -- | ------------------------------

| | Debt balance:                                  |  |   |     |  |  |   |     |  | 
| | ---------------------------------------------- |  | - | --- |  |  | - | --- |  | 
| |                                                |  |   |     |  |  |   |     |  | 
| | Other accounts receivable and prepaid expenses |  | $ | 190 |  |  | $ | -   |  | 
| |                                                |  |   |     |  |  |   |     |  | 
|
| | Long-term receivable                           |  | $ | 172 |  |  | $ | -   |  | 
| |                                                |  |   |     |  |  |   |     |  | 
| | Credit balance:                                |  |   |     |  |  |   |     |  | 
| |                                                |  |   |     |  |  |   |     |  | 
| | Trade payables                                 |  | $ | 66  |  |  | $ | 66  |  | 
| |                                                |  |   |     |  |  |   |     |  | 
| | Other accounts payable and accrued expenses    |  | $ | 360 |  |  | $ | 180 |  | 
| |                                                |  |   |     |  |  |   |     |  | 

|NOTE 12:- | SEGMENT,
  CUSTOMERS AND GEOGRAPHIC INFORMATION                                                                                                                                                                                                                                              
|--------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          |                                                                                                                                                                                                                                                                                              
|          | Summary
  information about geographic areas:                                                                                                                                                                                                                                                
|          |                                                                                                                                                                                                                                                                                              
|          | The Company manages its
  business on a basis of one reportable segment, see Note 1 for a brief
  description of the Companys business. All of the Companys long-lived assets
  are located in Germany. Total revenues are attributed to geographic areas
  based on location of customers.
|          |                                                                                                                                                                                                                                                                                              
|          | This data is presented in
  accordance with SFAS No. 131 Disclosures about Segments of an Enterprise and
  Related Information.                                                                                                                                                            

- 32 -

---

---

|ROBOMATIX TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|--------------------------------------------------
|NOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS      
|                                                  
|U.S.
  dollars in thousands                       

|NOTE 12:- | SEGMENT,
  CUSTOMERS AND GEOGRAPHIC INFORMATION (Cont.)                                                                                               
|--------- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|          |                                                                                                                                                       
|          | The
  following table presents total revenues classified according to geographical
  destination for the years ended December 31, 2002, 2001 and 2000:

| |                 |  | Year ended December 31, |       
| | --------------- |  | ----------------------- | ------
| |                 |  |                         |       
| |                 |  | 2002                    |       
| |                 |  |                         |       
| |                 |  |                         |       
| | Germany         |  | $                       | 8,263 
| | Other           |  |                         | 1,845 
| |                 |  |                         |       
| |                 |  |                         | 10,108
| | Sales discounts |  |                         | (1,404
| |                 |  |                         |       
|
| | Sales, net      |  | $                       | 8,704 
| |                 |  |                         |       

|          | The Company
  has 5 major customers which constitute approximately 66% and 68% of total
  revenue in 2002 and 2001, respectively.
|--------- | ---------------------------------------------------------------------------------------------------------------------------------
|          |                                                                                                                                  
|NOTE 13:- | SELECTED
  STATEMENTS OF OPERATIONS DATA                                                                                         
|          |                                                                                                                                  
|          | a.                                                                                                                               

| |                                   |  | Year ended December 31, |    
| | --------------------------------- |  | ----------------------- | ---
| |                                   |  |                         |    
| |                                   |  | 2002                    |    
| |                                   |  |                         |    
| |                                   |  |                         |    
| | Placement fee for capital raising |  | $                       | -  
| | Rent                              |  |                         | 256
| | Other                             |  |                         | 1  
| |                                   |  |                         |    
|
| |                                   |  | $                       | 257
| |                                   |  |                         |    

| | b. | Financial
  income (expenses), net:
| | -- | -----------------------------------

| | Income from deposits        |  | $ | -    |   |  | $ | -    |   |  | $ | 238 |  | 
| | --------------------------- |  | - | ---- | - |  | - | ---- | - |  | - | --- |  | 
| | Interest on long-term loans |  |   | (215 | ) |  |   | (304 | ) |  |   | 47  |  | 
| | Other                       |  |   | 24   |   |  |   | 20   |   |  |   | -   |  | 
| |                             |  |   |      |   |  |   |      |   |  |   |     |  | 
|
| |                             |  | $ | (191 | ) |  | $ | (284 | ) |  | $ | 285 |  | 
| |                             |  |   |      |   |  |   |      |   |  |   |     |  | 

- 33 -

---

---

|ROBOMATIX TECHNOLOGIES LTD.
  AND ITS SUBSIDIARIES
|--------------------------------------------------
|NOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS      
|                                                  
|U.S.
  dollars in thousands                       

|NOTE 14: | SUBSEQUENT
  EVENTS
|-------- | -------------------
|         |                    
|         | a.                 
|         |                    
|         | b.                 
|         |                    
|         |                    
|         |                    
|         |                    
|         |                    
|         |                    
|         |                    
|         |                    
|         |                    
|         | c.                 

- - - - - - - - -

- 34 -

---

---