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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,
2003       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:

None
(Title of Class)

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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.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|YesxNoo                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                 
|Indicate by check mark which financial statement
  item the Registration has elected to follow:                                                                                                                                                                                                                                                                  
|Item 17.o
  Item 18.x                                                                                                                                                                                                                                                                                                                                            

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 | 50                                                                                     
|       |                                                                                        
|       | 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                                                      
|       | Item 16: [reserved]                                                                    
|       | Item 16A: Audit Committed Financial Expert                                             
|       | Item 16B: Code of Ethics                                                               
|       | Item 16C: Principal Accountant Fees and Services                                       
|       | Item 16D: Exemption from the Listing Standards for
  Audit Committees                  
|       | Item 16E: Purchases of Equity Securities by the
  Issuer and Affiliated Purchasers     
|       |                                                                                        
|PART 3 | 52                                                                                     
|       |                                                                                        
|       | Item 17: Financial Statements                                                          
|       | Item 18: Financial Statements                                                          
|       | Item 19: Exhibits                                                                      

2

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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

Selected
Financial DataThe 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, 2001, 2002 and 2003 and our selected consolidated balance
sheet data as of December 31, 2002 and 2003 have been derived from our
consolidated financial statements, included elsewhere in this report.  Our selected balance sheet data for the
years ended December 31, 1999, 2000 and 2001 have been derived from our
consolidated financial statements not included in this report.  Our historical financial data prior to the
acquisition of the shares of Franz Kalff in 2001 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.

3

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Statement
of Operations Data

|                                                                                            |  | Year ended
  December 31,                                     |      
|------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------- | -----
|                                                                                            |  |                                                               |      
|                                                                                            |  | 1999                                                          |      
|                                                                                            |  |                                                               |      
|                                                                                            |  | (United
  States dollars in thousands, except per share data) |      
|                                                                                            |  |                                                               |      
|Sales                                                                                       |  |                                                               | -    
|Cost of Sales                                                                               |  |                                                               | -    
|Gross Profit                                                                                |  |                                                               | -    
|Selling and marketing expenses                                                              |  |                                                               | -    
|General and administrative expenses                                                         |  |                                                               | 294  
|                                                                                            |  |                                                               |      
|                                                                                            |  |                                                               |      
|Operating loss                                                                              |  |                                                               | (294 
|Other income                                                                                |  |                                                               | 40   
|Impairment on long-term investment                                                          |  |                                                               | -    
|Financial income (expenses), net                                                            |  |                                                               | -    
|Income (loss) before taxes on income                                                        |  |                                                               | (254 
|Taxes on income                                                                             |  |                                                               | -    
|                                                                                            |  |                                                               |      
|Gain (loss) from continuing operations before
  extraordinary items                         |  |                                                               | (254 
|Discontinued operations:                                                                    |  |                                                               |      
|Loss
  from segments
            operations                                                |  |                                                               | (954 
|Gain
  (loss) from disposal of
            segment                                          |  |                                                               | 4,812
|                                                                                            |  |                                                               |      
|Net
  gain (loss) from
            discontinued
  operations.                               |  |                                                               | 3,858
|Income (loss) before extraordinary items                                                    |  |                                                               | 3,604
|Extraordinary items                                                                         |  |                                                               | 1,220
|Equity in earnings of an affiliate                                                          |  |                                                               | --   
|Net income (loss)                                                                           |  |                                                               | 4,824
|Net earnings (loss) per share - basic and
  diluted                                         |  |                                                               | 1.01 
|                                                                                            |  |                                                               |      
|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
|                                                                                            |  |                                                               |      

* Reclassified.

Balance Sheet Data

|                                  |  | December
  31,                         |      
|--------------------------------- |  | -------------------------------------- | -----
|                                  |  |                                        |      
|                                  |  | 1999                                   |      
|                                  |  |                                        |      
|                                  |  | (United
  States dollars in thousands) |      
|                                  |  |                                        |      
|Working capital                   |  |                                        | 1,580
|Total assets                      |  |                                        | 2,372
|Total liabilities                 |  |                                        | 2,854
|Shareholders equity (deficiency) |  |                                        | (482 

4

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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, levels of trading and prices on the
Tel Aviv Stock Exchange 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 the date of this report, we primarily hold direct and indirect
interests in four 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.

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.

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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 strive to and believe that
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.

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.

6

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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.

Specific
Risks Related to Acquisitions

If we are unable to repay the loan we took from Bank
Hapoalim in order to finance our acquisition of Franz Kalff by our wholly owned
subsidiar y and insurance company investments, 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 (net the initial lease payment)
was distributed to Mersa and Mersa transferred most of the amount to Robomatix,
which we used to repay Bank Hapoalim. We also borrowed approximately $2,000,000
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. Subsequently, in June 2004 we sold our shares in ICIC 
The Israel Credit Insurance Company, and repaid a portion of the loan to Bank
Hapoalim. The remainder of our loan from Bank Hapoalim is repayable through
November 2008. 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 and the shares we hold in Israel Land Development Insurance
Company Ltd. 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 and Item  4: Information
on the Company  Recent Capital Expenditures.

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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.

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 58% of its total revenues in 2003.  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 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.

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.

8

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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. Furthermore, there are very few transactions in connection
with our ordinary shares and there is a large gap between the bid and ask
prices. There can be no assurance that a broad public market for our ordinary
shares will develop in the future. These factors make it difficult for our
shareholders to sell our ordinary shares which could sustain their low
value.  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 14 2004, Silverboim Holdings Ltd. beneficially owned approximately
55.59% of our share capital and Gilex Holdings B.V. beneficially owned 14.81%
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.

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 2004. 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.

9

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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.

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 and 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 for the
purchase of minority stakes in Israel Land Development Insurance Company Ltd.,
and ICIC  The Israel Credit Insurance Company Ltd., at the time both private
Israeli insurance companies. In May 2004, Israel Land Development Insurance
Company Ltd. listed its shares on the Tel Aviv Stock Exchange and in June 2004,
we sold our shares in ICIC  The Israel Credit Insurance Company Ltd. We plan
to acquire interests in other companies or businesses.  Our holdings in non-technology-based
companies, such as Franz Kalff and insurance companies, allows us to diversify
our business activities and thereby lessens our reliance on any particular
industry sector.

10

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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.OB. 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.

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. (Israel) Ltd.,  and in
February 1999 another subsidiary, Associative Computing Ltd., sold
substantially all of its activities in the field of parallel image processing
of color images for the video and multivideo industry.  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. 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.

Changes of Ownership and Capital Structure

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 several of our previous controlling
shareholders.  After this change of
control we focused our efforts on 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.

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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.

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 recorded 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. In 2003, we
paid Silverboim Holdings $104,000 on account of our outstanding debt.

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, for an aggregate amount of approximately $ 2,079.  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.

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 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). 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. In April and November 2003, eLady entered into stock
subscription agreements for the issuance of Series A Preferred Stock (22% of eLadys
voting rights) to strategic investors and current shareholders for a total consideration
of $1.2 million resulting in a decrease our indirect holding from 27% to
20%. The carrying amount of the investment as of December 31, 2003 is $2,685. We
estimate based on all the relevant factors, including preferred stocks
rights in case of liquidation or sale of eLady, that the fair value of the investment in
eLady exceeds the carrying amount of the investment.

Leader Tech Ltd. and Dirad Management Technologies (2000)
Ltd.

As
of  April 29, 2002, we hold
approximately 4.4% of the issued share capital of Leader Tech Ltd. Leader Tech
is a private Israeli company that invests in technology-based start-up
companies and currently has a portfolio of several companies.
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. In 2002, we provided for an impairment
loss of $390,000 based on the fair market value of its holdings in Leader Tech
at the time.

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 an external evaluating firm, 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.  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.

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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 
(net the initial lease payment) was distributed to Mersa and Mersa
transferred most of the amount to Robomatix, 
which we  used to repay Bank
Hapoalim. Currently, our Bank Hapoalim loan is repayable through November 2008
and currently bears interest at 3.5% per annum for the loan denominated in
Swiss Francs and 6.29% per annum for the loan denominated in NIS. 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.

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 Company
Ltd. and ICIC  The Israel Credit Insurance Company Ltd. 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 $1,238,000 approximately 2.4% of the shares of the Israel Land
Development Insurance Company Ltd., at the time a private multi-line insurance
company. As of May 2004, the shares of Israel Land Development Insurance
Company are listed on the Tel Aviv Stock Exchange. In connection with the
public offering, call and put options contained in the original agreement as
well as a voting agreement were terminated. As a result of the offering, our
shares are freely tradeable.

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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 $57,000 in NIS, per year, until the end of 2009.

In
addition, we purchased for $825,000 approximately 5.3% of the shares of ICIC 
The Israel Credit Insurance Company Ltd., which insures credit-based export and
local transactions. In June 2004 we sold these shares for approximately
$766,000.

Our
shares in Israel Land Development 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.

Recent
Divestments

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.

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In
September 2002, we entered into an agreement for the sale of our entire 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, agreed to pay us approximately
$570,000, payable in NIS in three equal installments, of which we have received
the first two. The third installment is linked to the Israeli cost of living
index and will be paid on the second anniversary of the transactions
closing.

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 approximately $1,083,000, net of expenses. In December 2002, we and
Associative Computing 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 approximately
$2,00,000 out of the aggregate debt of approximately $2,800,000 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 approximately $2,600,000. Following this
transaction, Associative Computing changed its name to Edco Technologies (1993)
Ltd.

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 a gross payment of approximately
$850,000 at the closing of the transaction and an additional gross sum of
approximately $425,000 will be paid in six equal quarterly installments, in NIS
linked to the Israeli consumer price index.

In
June 2004, we sold all our shareholdings in ICIC  The Israel Credit Insurance
Company Ltd. for approximately $766,000.

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.

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

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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 2003 constituted approximately 58% 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. As of the date of this report, Franz Kalff is certified under the new
standards DIN-ISO 9001:2000, EN-ISO 13485, 9342 EWG and ISO 14001 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                                                          |  | 2001                  |       | 2002                  |  | 2003                  |      
|                                                                               |  |                       |       |                       |  |                       |      
|                                                                               |  | % of total
  revenues |       | % of total
  revenues |  | % of total
  revenues |      
|                                                                               |  |                       |       |                       |  |                       |      
|First aid kits meeting
  the German Institute
  standards                      |  |                       | 89.8  |                       |  |                       | 90   
|First aid kits not
  meeting the German
  Institute standards                  |  |                       | 6.6   |                       |  |                       | 7    
|First-aid blanket                                                              |  |                       | 1.2   |                       |  |                       | --   
|First aid kits meeting
  the German Institute
  standards for industrial
  use |  |                       | 2.4   |                       |  |                       | 3    
|                                                                               |  |                       |       |                       |  |                       |      
|Total                                                                          |  |                       | 100.0 |                       |  |                       | 100.0

Franz
Kalff purchases the items for the first aid kits and empty casings from
approximately 17 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 2003, Franz Kalff
had one principal suppliers 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 9% of the total items purchased and one
supplier providing approximately 17% 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-Euro zone suppliers.

Patents
and Trademarks.          Franz
Kalff has 23 registrations of patents on designs and 26 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 partially dependent on the continued use of the name
Kalff because of the positive goodwill associated with this name. 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.

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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 uses operational space in the  Franz Kalff facilities. 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 70% 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 2002 and 2003,
there has been a significant increase in Franz Kalffs sales outside of
Germany.

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

|Marketing
    Channels |  | 2001                |       | 2001                |  | 2003                |      
|---------------------- |  | ------------------- | ----- | ------------------- |  | ------------------- | -----
|                       |  |                     |       |                     |  |                     |      
|                       |  | % of total revenues |       | % of total revenues |  | % of total revenues |      
|                       |  |                     |       |                     |  |                     |      
|Retail stores          |  |                     | 74.4  |                     |  |                     | 63.4 
|                       |  |                     |       |                     |  |                     |      
|Car
  manufacturers    |  |                     | 25.6  |                     |  |                     | 36.6 
|                       |  |                     |       |                     |  |                     |      
|                       |  |                     |       |                     |  |                     |      
|Total                  |  |                     | 100.0 |                     |  |                     | 100.0
|                       |  |                     |       |                     |  |                     |      

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

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|Geographical
  Area |  | 2001                |       | 2002                |  | 2003                |      
|------------------- |  | ------------------- | ----- | ------------------- |  | ------------------- | -----
|                    |  |                     |       |                     |  |                     |      
|                    |  | % of total revenues |       | % of total revenues |  | % of total revenues |      
|                    |  |                     |       |                     |  |                     |      
|Germany             |  |                     | 86.06 | %                   |  |                     | 82.0 
|Export              |  |                     | 13.94 | %                   |  |                     | 18.0 
|                    |  |                     |       |                     |  |                     |      
|                    |  |                     |       |                     |  |                     |      
|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 2003
constituted approximately 58% 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 2003 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.

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 88% 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
4%, 4% and 4%, 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.

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In
the year 2003, 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 sub-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. 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.

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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.

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 and in our 2002 financial statements. In 2003, we
paid Silverboim Holdings $104,000 on account of our outstanding debt. 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.

Item
5:  Operating and Financial Review and
Prospects

A.     OPERATING RESULTS

Managements
Discussion and Analysis of Financial Condition and Results of Operations

The
information contained in this section should be read in conjunction with our
consolidated financial statements and related notes and the information
contained elsewhere in this annual report. Our financial statements have been
prepared in accordance with United States generally accepted accounting
principles (GAAP).

22

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Overview

The
following discussion should be read in conjunction with selected financial data
included in Item 3: Key Financial Information 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 2001, 2002 and 2003.

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:

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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, 2003, 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), as amended by SAB No. 104, 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.

Recent
Accounting Pronouncements under US GAAP as They Apply to Us

In January 2003, the
Financial Accounting Standards Board issued Interpretation No. 46,
Consolidation of Variable Interest Entities (FIN 46). The objective of FIN
46 is to improve financial reporting by companies involved with variable
interest entities. A variable interest entity is a corporation, partnership,
trust, or any other legal structure used for business purposes that either (a)
does not have equity investors with voting rights or (b) has equity investors
that do not provide sufficient financial resources for the entity to support
its activities. FIN 46 requires a variable interest entity to be consolidated
by a company if that company is subject to a majority of the risk of loss from
the variable interest entitys activities or entitled to receive a majority of
the entitys residual returns or both. FIN 46 also requires disclosures about
variable interest entities that a company is not required to consolidate but in
which it has a significant variable interest. The consolidation requirements of
FIN 46 apply immediately to variable interest entities created after January
31, 2003. The consolidation requirements apply to older entities in the first
fiscal year or interim period ending after March 15, 2004. Certain of the
disclosure requirements apply in all financial statements issued after January
31, 2003, regardless of when the variable interest entity was established. As
of December 31, 2003, we do not expect the adoption of FIN 46 to have a
material impact on its consolidated financial statements.

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Results of Operations

You should read the
following discussion and analysis of our financial condition and results of
operations in conjunction with the financial statements and the related notes
thereto included in this annual report. The following table sets forth certain
statement of operations data as a percentage of sales for the years indicated.

|                                               |  | Year Ended
  December 31, |      
|---------------------------------------------- |  | ------------------------- | -----
|                                               |  |                           |      
|                                               |  | 2001                      |      
|                                               |  |                           |      
|Statement
  of Operations Data:                |  |                           |      
|Sales                                          |  |                           | 100  
|Cost of sales                                  |  |                           | 76.8 
|Gross profit                                   |  |                           | 23.2 
|Research and development expenses, net         |  |                           | --   
|Marketing, general and administrative expenses |  |                           | 28.4 
|                                               |  |                           |      
|Operating loss                                 |  |                           | (5.1 
|Impairment of long term investment             |  |                           | 16.9 
|Financial income (expense), net                |  |                           | (3.4 
|                                               |  |                           |      
|Other income (expense)                         |  |                           | 4.4  
|                                               |  |                           |      
|Income (loss) before taxes on income           |  |                           | (21.1
|Taxes on income                                |  |                           | 1.1  
|Equity in earnings of an affiliate             |  |                           | --   
|Net income (loss)                              |  |                           | (22.1

Year
Ended December 31, 2003 Compared To Year Ended December 31, 2002

Sales.Sales in 2003 increased to $12,493,000 compared to
$8,704,000 in 2002. This increase is a result of an increase in sales by Franz
Kalff due to the expansion of its product lines and growing demands from its
customers. In addition, Franz Kalffs sales are in Euro, whose value increased
against the Dollar, while our financial statements are in Dollars.

Cost
of Sales.Costs of sales in 2003 increased to
$9,649,000compared to $6,708,000 2002 as a result of the increase in sales by
Franz Kalff and the high Euro/Dollar exchange rate.

Gross
Profit.  Gross
profit in 2003 was 2,844,000 compared with a gross profit of $ 1,996,000 for
2002. The difference is a result of increased sales by Franz Kalff, a higher
Euro/Dollar exchange rate and the fact the Franz Kalffs sales are in Euro and
our financial statements are in Dollars.

Research
and Development Expenses, Net.Following the
discontinuation of our previous business, we ceased research and development
activities. Therefore, for the years 2003, and 2002 we had no research and
development expenses.

Marketing,
General and Administrative Expenses. Marketing, general
and administrative expenses in 2003 were $2,895,000 as compared to $ 2,126,000
in 2002. The increase is a result of growth in turnover in Franz Kalff and the
start of property lease expenses for Franz Kalff.

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Operating
Loss. Operating loss in 2003 was $51,000 compared to
$130,000 in 2002. The decreased loss in 2003 was due to the higher
profitability of Franz Kalff in 2003.

Financial
Income (expenses), net. Financial expenses for the year
2003 were $10,000 compared to $191,000 in 2002. The decrease in financial
expenses in 2003 is attributable to exchange rate differentials between the
Euro and the Swiss Franc.

Other
Income (Expenses), net. 
Other income, net, in 2003 was $1,045,000 compared to other income, net,
of $ 257,000 in 2002. Other income, net for the year 2003 was primarily
attributable to the sale of our holdings in Edco Technologies and in 2002 to
lease income received by Franz Kalff.

Taxes
on Income.Taxes on income in 2003 were $195,000 compared
to $ 378,000 in 2002. Taxes on income in 2003 were primarily due to deferred
taxes of Franz Kalff and in 2002 to taxes on non-deductable expenses.

Equity
in Earnings of an Affiliate.Equity in earnings was $481,000 in 2003. This
was attributable to our share in Edco Technologies prior to its sale in March
2003.

Net
Income (Loss).For
the year 2003, we had a net income of $ 1,270,000 compared with a net loss of $
442,000 in 2002. The income was primarily due to the sale of Edco Technologies.

Year Ended December 31, 2002 Compared To Year Ended December
31, 2001

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.

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.

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.

Research
and Development Expenses, Net.Following the
discontinuation of our previous business, we ceased research and development
activities. Therefore, for the years 2002, and 2001 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. 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.

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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.

Impairment
of Long-Term Investment.In 2001 we recorded an impairment loss of
approximately $1,390,000 with respect to our holdings in eLady and LeaderTech.

Financial
Income (expenses), net. Financial expenses for  the year 2002 were $191,000 compared to
$284,000 in 2001. 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.

Other
Income (Expenses), net. 
Other income, net, in 2002 was $ 257,000 compared to other income, net,
of $362,000 in 2001. 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.

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.

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

Impact of Inflation and Currency
Fluctuations on Results of Operations, Liabilities and Assets.

General
Currency Fluctuations

We
are affected by currency fluctuations and variable interest rates. We procure loans
in order to finance acquisitions and investments, which may be denominated in
different currencies and linked to variable interest rates, such as the EUROBOR
and indexes. Specifically, any loan
connected with our investment in Franz Kalff which is not in Euro (the
operating currency of Franz Kalff) may cause an increase in our expenses if the
currency of the loan gets stronger against the Euro. With respect to loans that
finance other investments, if the loan is denominated in any currency other
than the Dollar and the currency gets stronger against the Dollar, the change
in exchange rate may cause us additional expenses.

With
respect to our operating results, the operating results of Franz Kalff play a
material role. The Euro is the operating currency of Franz Kalff. Consequently,
if the value of the Euro increases against the dollar, because our financial
statements are in Dollars, we will experience an increase in revenues, and vice
versa.

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Inflation
in Israel and Currency Fluctuations

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 from December 2003
through May 2004 from a low of NIS 4.352 to the dollar to a high of NIS 4.634
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
|------------------- | -------------------- | -----
|4.352               | 4.441                |      
|4.371               | 4.483                |      
|4.437               | 4.493                |      
|4.483               | 4.535                |      
|4.515               | 4.599                |      
|4.555               | 4.634                |      

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                               
|------------- | -------------------------------------
|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
|4.5442 NIS/$1 | January 1, 2003 - December 31,
  2003

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 operating results.  However, it could affect our financial expenses.

B.       Liquidity
and Capital Resources

Our
cash and cash equivalents aggregated $1,742,000 $381,000 and $327,000 as of
December 31, 2003, December 31, 2002 and December 31, 2001, respectively.

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Net
cash used in operating activity for the year ended December 31, 2003 was $
614,000 as compared with net cash used in operating activity of $270,000 for
the year ended December 31, 2002 and net cash provided by operating activity of
$647,000 for the year ended December 31, 2001.

Net
cash provided by investing activities for the year ended December 31, 2003 was
$ 2,298,000 as compared with net cash  
provided by investing activities for the year ended December 31, 2002 of
$ 180,000 as compared with Net cash used in investing activities for the year
ended December 31, 2001 of $6,700,000.The net cash provided by investing
activities for 2003 was attributed mostly to the sale of the property of Franz
Kalff. In 2002, our cash flow stemmed from the sale of our holdings in our
inactive subsidiary Robomatix (Israel) Ltd. while the increase of cash used in
2001 is as a result of the purchase of Franz Kalff.

Net
cash used in financing activities for the year ended December 31, 2003 was
$396,000 as compared with net cash provided by financing activities of $65,000
for the year ended December 31, 2002 and as compared to net cash provided by
financing activities of $4,976,000 for the year ended December 31, 2001.   In 2001, we borrowed funds from Bank
Hapoalim for our purchase of the share capital of Franz Kalff. In 2002 and
2003, we sold our shareholdings in inactive subsidiaries. In addition, in 2003
we returned part of the loan used to finance the purchase of Franz Kalff but we
borrowed funds from Bank Hapoalim again to invest in two privately held
insurance companies, one of which has since gone public and the other we sold
in 2004..  The net cash used in
financing activities in 2003 was due to partial repayment of loans from Bank
Hapoalim offset by the loans received from Bank Hapoalim. See Item 4:
Information on the Company - History and Development - Recent Principal Capital
Expenditures and Item  4: Information
on the Company  Recent 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, 2003, our aggregate outstanding liabilities were approximately
$9,364,000.  Currently, the loan we took
from Bank Hapoalim to finance our acquisitions is repayable through November 2008
and bears interest at 3.5% per annum for the loan denominated in Swiss Francs
and 6.29% per annum for the loan denominated in NIS. 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.   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.

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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
20.5%.  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.

C.       Research and
Development, Patents and Licenses

As
part of 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.

D.      Trend Information

In
2003, we were not materially influenced by any identifiable trends. Franz Kalff did
experience a certain an increase in demand for its products but it is difficult
to attribute this to any particular trend. In addition, in general, the value
of our holdings in LeaderTech and Israel Land Development Insurance Company
(and other holdings in public Israeli companies) could be affected by trends in
the Israeli high-tech and insurance sectors as well as the Tel Aviv Stock
Exchange. 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.

E.      Off-Balance
Sheet Arrangements

We
are not a party to any material off-balance sheet arrangements. In addition, we
have no unconsolidated special purpose financing or partnership entities that
are likely to create material contingent obligations.

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F.      Tabular
Disclosure of Contractual Obligations

The
following table summarizes our contractual obligations and commercial
commitments as of December 31, 2003:

|Payments Due by Period     
|---------------------------
|                           
|(in thousands)             
|                           
|Contractual
  Obligation   
|                           
|Long-Term Debt Obligations 
|                           
|Operating Lease Obligations
|                           
|                           
|Total                      

Item
6:  Directors, Senior Management and
Employees

A.      Directors and Senior
Management

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

|Name             |  | Age |  | Position                          
|---------------- |  | --- |  | ----------------------------------
|                 |  |     |  |                                   
|                 |  |     |  |                                   
|Zvi Barinboim    |  | 33  |  | Chairman of the Board of Directors
|Yitzhak Oz       |  | 37  |  | Director                          
|Ariel Levi       |  | 34  |  | Director                          
|Ruth Breger      |  | 56  |  | External Director                 
|Nir Reshef       |  | 38  |  | External Director                 
|Amit Goldwasser  |  | 37  |  | Chief Executive Officer           
|Gunther Schuftan |  | 66  |  | Managing Director of Franz Kalff  
|                 |  |     |  |                                   

Zvi
Barinboim has 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 World Group
Holdings Ltd., both publicly traded companies in which Silverboim Holdings
holds substantial interests and other private companies.  During 1997 and 1998 Mr. Barinboim served as
the manager of Nathalia Investments Ltd.

Yitzhak
Oz has 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.

31

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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 World Group Holdings 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.

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 bachelors 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, and all directors were
reelected at the general meeting of our shareholders held on May 24, 2004.

32

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B.      Compensation

The
aggregate direct compensation paid to, or accrued for, the account of all of
our officers and directors as a group during the 2003 fiscal year was
approximately $180,000 . This amount includes directors fees, officers
compensation, bonuses, directors and officers insurance and expenses for which
directors and officers were reimbursed. In addition, approximately $ 104,000
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 2003 fiscal year was
approximately $612,000. In
addition, Mr. Schuftan, the Managing Director of Franz Kalff, is also entitled
to receive from Franz Kalff a percentage of revenues generated by Franz Kalff,
in accordance with different revenue thresholds.

C.      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.

33

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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.

The
terms of both Ms. Breger and Mr. Reshef will expire in December 2006. 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 was until March 31, 2004, but Mr. Schuftan continues
to work for Franz Kalff. The officers
of Franz Kalff do not have service agreements with Franz Kalff that provide for
benefits upon termination of employment.

D.      Employees

In
each of the fiscal years ended December 31, 2001, 2002 and 2003, 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:

34

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|                                                     |  |      |  |      |    |     
|---------------------------------------------------- |  | ---- |  | ---- | -- | ----
|Year Ended December 31,                              |  | 2003 |  | 2002 |    | 2001
|                                                     |  |      |  |      |    |     
|Administration and accounting                        |  | 6    |  |      | 6  |     
|Product development and quality control              |  | 3    |  |      | 3  |     
|Customer service, marketing and back-
  office sales |  | 5    |  |      | 5  |     
|Purchase                                             |  | 1    |  |      | 1  |     
|Warehouse and disposition of material                |  | 3    |  |      | 3  |     
|                                                    
|                                                     |  |      |  |      |    |     
|Total                                                |  | 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.

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 informs them
before it hires or releases employees.

E.      Share
Ownership

The
following table sets forth, as of June 14, 2004, the share ownership of our
directors and executives. 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:

35

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|                         |  |                                                  |           |                                                  |  |                                  |        
|------------------------ |  | ------------------------------------------------ | --------- | ------------------------------------------------ |  | -------------------------------- | -------
|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 |                                                  |  |                                  | 60,000 
|Yitzhak Oz(3)(4)         |  |                                                  | -         |                                                  |  |                                  | 60,000 
|Ariel Levi(4)            |  |                                                  | 6,000     |                                                  |  |                                  | 60,000 
|Ruth Breger(5)           |  |                                                  | -         |                                                  |  |                                  | 60,000 
|Nir Reshef (5)           |  |                                                  | -         |                                                  |  |                                  | 60,000 
|Gunther Schuftan(6)      |  |                                                  | -         |                                                  |  |                                  | 150,000
|                         |  |                                                  |           |                                                  |  |                                  |        

---

|(1) | Percentages in this column are based on 13,599,626
  ordinary shares outstanding as of June 14, 2004, 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 14,
  2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(2) | Includes 87,200 shares held directly by Zvi
  Barinboim and 8,088,150 shares held by Silverboim Holdings. The options
  include 60,000 held by Zvi Barinboim 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 (20.68%), Barhoz Holdings Ltd.
  (22.38%), Zvi Bar-Nes Nisensohn and a company under his control (17.02%),
  Gilex Holding B.V (19.27%), Shrem, Fudim, Kelner & Co. Ltd. (9.57%)and
  Hapoalim Assets (Shares) Ltd. (11.08%). 
  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 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 43.18% 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(3) | 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 22.38% of the share capital of
  Silverboim Holdings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(4) | Includes options to purchase 60,000 ordinary shares
  at a price of $0.70 per share until September 9, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(5) | Each of Ruth Breger and Nir Reshef were granted
  options to purchase 60,000 ordinary shares at a price of $0.70 per share
  exercisable as long as they continue to serve as external directors of the
  company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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|    |                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) | Gunther Schuftan, the Managing Director of Franz
  Kalff, was granted options to purchase 150,000 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 the date of this report, our directors have exercised 0 options, our chief
executive officer has exercised 0 options and Mr. Schuftan has exercised 0
options.

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 the date of this report, 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 employee 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 employee 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.

In
2004, our audit committee, Board of Directors, and shareholders (as applicable)
approved to grant  240,000 options to
Amit Goldwasser, 60,000 options to Yitzhak Oz and 60,000 options to Ariel Levi
at an exercise price of $0.40. On June 27, 2004, our Board of Directors
approved the new option plan which will govern these new options, and we will
proceed to file the plan with the Israeli Income Tax Authority.

Item
7:  Major Shareholders and Related Party
Transactions

A.      Major
Shareholders

The
following table sets forth, as of June 14, 2004, 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.

37

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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) |  |                                                    | 8,088,150 |                                                    |  |                                                           | --    
|                              |  |                                                    |           |                                                    |  |                                                           |       
|Mr. Zvi Barinboim(3)          |  |                                                    | 8,175,350 |                                                    |  |                                                           | 60,000
|                              |  |                                                    |           |                                                    |  |                                                           |       
|Gilex Holdings
  B.V.(4)      |  |                                                    | 2,758,587 |                                                    |  |                                                           | --    

|(1) | Percentages in this column are based on 13,599,626
  ordinary shares outstanding as of June 14, 2004 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 14, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(2) | Includes only shares held by Silverboim
  Holdings.  Zvi Barinboim, the chairman
  of our board of directors, who holds, directly and indirectly, approximately
  43.18% of the voting rights of Silverboim Holdings, holds 87,200 of our
  ordinary shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(3) | The shares includes 87,200 ordinary shares held by
  Zvi Barinboim and 8,088,150 shares held by Silverboim Holdings.  The options include 60,000 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 (20.68%), Barhoz Holdings Ltd. (22.38%), Zvi Bar-Nes Nisensohn and
  a company under his control (17.02%), Gilex Holding B.V (19.27%), Shrem,
  Fudim, Kelner & Co. Ltd. (9.57%) and Hapoalim Assets (Shares) Ltd.
  (11.08%).  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 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 43.18% 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.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(4) | Includes 1,558,587 shares held by Silverboim
  Holdings.  Gilex holds 19.27% 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 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.  For a detailed description of
these transactions, see Item 4: Information on the Company  History and Development.

As
of June 14, 2004, there were 454 stockholders of record holding 13,599,626 of
our ordinary shares.  To the best of our
knowledge, 234 of these stockholders, holding 1,292,687of our ordinary shares,
reside or have offices in the United States, including the American Stock
Transfer & Trust Company.

38

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B.      Related
Party Transactions

On
January 11, 2001, Mersa Holding B.V., our wholly owned subsidiary, entered into
a transaction with Gilex Holdings B.V.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.  Approximately $ 2.5 million of 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).

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.

In
September 2002, we entered into an agreement for the sale of our entire 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, agreed to pay us approximately
$570,000, payable in NIS in three equal installments, of which we have received
the first two. The third installment is linked to the Israeli cost of living
index and will be paid on the first and second anniversary of the transactions
closing.

39

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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-35.

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.

B.      Significant
Changes

In
June 2004, we sold all our shareholdings in ICIC  The Israel Credit Insurance
Company Ltd. for approximately $766,000. See Item 4  Information on
the Company  Recent Principal Capital Expenditures.

40

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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.OB. There is no
non-United States trading market for our ordinary shares.

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 1999    |      | $ | 1.10 | 
|          | Fiscal 2000    |      | $ | 5.00 | 
|          | Fiscal 2001    |      | $ | 1.03 | 
|          | Fiscal 2002    |      | $ | 0.25 | 
|          | Fiscal 2003    |      | $ | 0.25 | 
|Quarterly |                |      |   |      | 
|          |                |      |   |      | 
|          | 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 | 
|          | Second Quarter |      | $ | 0.28 | 
|          | Third Quarter  |      | $ | 0.35 | 
|          | Fourth Quarter |      | $ | 0.50 | 
|          | Fiscal 2004    |      |   |      | 
|          | First Quarter  |      | $ | 0.35 | 
|Monthly   |                |      |   |      | 
|          |                |      |   |      | 
|          | December 2003  |      | $ | 0.37 | 
|          | January 2004   |      | $ | 0.35 | 
|          | February 2004  |      | $ | 0.35 | 
|          | March 2004     |      | $ | 0.30 | 
|          | April 2004     |      | $ | 0.28 | 
|          | May 2004       |      | $ | 0.26 | 
|          |                |      |   |      | 

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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

A.      Share
Capital

Not Applicable

B.      Memorandum
and Articles of Association

The
information required by this item 10(b) is incorporated by reference from our
annual report on Form 20-F filed with the Securities and Exchange Commission on
June 30, 2003.

C.      Material
Contracts

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

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 - Recent Divestments.

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 - Recent Divestments.

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In
June 2004, we sold all our shareholdings in ICIC  The Israel Credit Insurance
Company Ltd. for approximately $766,000. See Item 4  Information on
the Company  Recent Recent Divestments.

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.

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.
Before the 2004 tax year, Israeli companies were generally subject to Company Tax at the
rate of 36% of taxable income. According to a recent amendment in Israeli tax law, the
company tax rate has been reduced to 35% for 2004; this amendment states that the company
tax rate will be further reduced in subsequent tax years, as follows: in 2005 34%,
in 2006 32%, in 2007 and thereafter 30%.

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:

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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.

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 under
this law in certain circumstances. 
However, dealers in securities may be subject to the regular tax rules
applicable to business income in Israel.

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, among others, 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; and may not
apply 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 l.  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.

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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.

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.

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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.

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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 our long-term borrowing approximates its fair value. The
fair value was estimated using discounted cash flow analyses, based on our
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.

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Item 16:  [reserved]

[reserved]

Item
16A:          Audit Committee
Financial Expert

Our
Board of Directors has determined that a member of our Audit Committee, Ruth
Breger, is an audit committee financial expert.

Item
16B:          Code of Ethics

On
April 29, 2004, we adopted a code of ethics, inter alia, to impose certain
policies relating to ethical conduct on all of our directors and employees,
including our chief executive officer, who also fulfils the function of a chief
financial officer.

Item
16C:          Principal
Accountant Fees and Services

The
following table presents fees we recorded for professional audit services
rendered by our auditors for the audit of our consolidated annual financial
statements for the years ended December 31, 2003 and 2002, and fees billed
for other services rendered by our auditors including our public offerings of
securities and tax services.

|                          |  | 2002 |        | 2003 | 
|------------------------- |  | ---- | ------ | ---- | 
|                          |  |      |        |      | 
|Audit  (1)                |  |      | 37,000 |      | 
|                          |  |      |        |      | 
|Tax Fees                  |  |      | 4,000  |      | 
|                          |  |      |        |      | 
|Other Consulting Services |  |      | 5,000  |      | 
|                          |  |      |        |      | 
|Total                     |  |      | 46,000 |      | 

|(1) | Audit fees consist of fees for professional services
  rendered for the audit of our consolidated financial statements and review of
  un-audited interim financial statements included in our quarterly reports and
  services provided by the independent auditor in connection with statutory and
  regulatory filings.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item
16D:          Exemption from
the Listing Standards for Audit Committees

As a foreign private issuer we remain exempt,
until July 31, 2005, from the NASDAQ requirement to adopt an audit committee
charter. 
Furthermore, our audit committee was established and selected
pursuant to the laws of Israel, and therefore we rely on the
exemptions set forth in Rule 10A with respect to the audit committees
independence.

51

---

---

Item
16E:          Purchases
of Equity Securities by the Issuer and Affiliated Purchasers

None

PART 3

Item 17:  Financial
Statements

Not
applicable.

Item
18:  Financial Statements

See pages F-1 to F-35.

52

---

---

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              |  | Guarantee Agreement, dated January 24, 2001, by and
  between Gilex Holdings B.V. and Robomatix Technologies Ltd. (1)                                                                                                                             
|                 |  |                                                                                                                                                                                                                                                   
|4.2              |  | Translation of Robomatixs Application for Provision
  of Credit from Bank Hapoalim, dated January 18, 2001 (1)                                                                                                                                   
|                 |  |                                                                                                                                                                                                                                                   
|4.3              |  | Summary Translation of a Letter of Undertaking,
  dated January 18, 2001, by Robomatix for the benefit of Bank Hapoalim (1)                                                                                                                       
|                 |  |                                                                                                                                                                                                                                                   
|4.4              |  | Translation of a Debenture, dated January 18, 2001,
  issued by Robomatix Technologies Ltd. for the benefit of Bank Hapoalim and
  Schedule A thereto  (1)                                                                                        
|                 |  |                                                                                                                                                                                                                                                   
|4.5              |  | Translation of an Undertaking, dated January 18,
  2001, by Robomatix Technologies Ltd. for the Benefit of Bank Hapoalim (1)                                                                                                                      
|                 |  |                                                                                                                                                                                                                                                   
|*4.6             |  | 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)                                         
|                 |  |                                                                                                                                                                                                                                                   
|4.7              |  | 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)
|                 |  |                                                                                                                                                                                                                                                   

53

---

---

|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|**4.8 |  | 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).
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.9   |  | 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)                                                                                                                                                                                                
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.10  |  | 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)                                                                                                                                                                                                                    
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.11  |  | 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 2002 20-F filed with the
  Securities Exchange Commission on June 30, 2002)                                                                                                                                                           
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.12  |  | Share Purchase Agreement,
  dated as of September, 2002 by and between Robomatix Technologies Ltd. and
  SPL Software Ltd. (incorporated by reference to the 2002 20-F filed
  with the Securities Exchange Commission on June 30, 2003)                                                                                                                                                                              
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.13  |  | 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.                                                                                                                                                                  
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.14  |  | 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.
  (incorporated by reference to the 2002 20-F filed with the Securities
  Exchange Commission on June 30, 2003)                                                      
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.15  |  | Summary of Consulting
  Agreement, dated as of November 19, 2002, by and between Robomatix
  Technologies Ltd. and Israel Land Development Insurance Company Ltd.
  (incorporated by reference to the 2002 20-F filed with the Securities
  Exchange Commission on June 30, 2003)                                                                                                                                     

54

---

---

|     |  |                                                                                                                                                                                                                                                                                                                                    
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.16 |  | 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 (incorporated
  by reference to the 2002 20-F filed with the Securities Exchange Commission
  on June 30, 2003)                                     
|     |  |                                                                                                                                                                                                                                                                                                                                    
|4.17 |  | Summary of Share Purchase
  Agreement, dated as of December 19, 2003 by and among Robomatix Technologies
  Ltd., Associative Computing Ltd. and Benny Konstantin (incorporated by
  reference to the 2002 20-F filed with the Securities Exchange Commission on
  June 30, 2003)                                                   
|     |  |                                                                                                                                                                                                                                                                                                                                    
|4.18 |  | 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. (incorporated by reference to the
  2002 20-F filed with the Securities Exchange Commission on June 30, 2003)
|     |  |                                                                                                                                                                                                                                                                                                                                    
|4.19 |  | Summary of Agreement,
  dated as of March 31, 2003 by and between Robomatix Technologies Ltd. and
  Berger Holdings 1 (1992) Ltd. (incorporated by reference to the 2002
  20-F filed with the Securities Exchange Commission on June 30, 2003)                                                                                    
|     |  |                                                                                                                                                                                                                                                                                                                                    
|4.20 |  | Summary of Agreement,
  dated as of June 3, 2004 by and between Robomatix Technologies Ltd. and Eyal
  Raef Adv., as trustee for un-named parties                                                                                                                                                                                  
|     |  |                                                                                                                                                                                                                                                                                                                                    
|8.1  |  | List of Significant Subsidiaries                                                                                                                                                                                                                                                                                                   
|     |  |                                                                                                                                                                                                                                                                                                                                    
|11   |  | Code of Ethics                                                                                                                                                                                                                                                                                                                     
|     |  |                                                                                                                                                                                                                                                                                                                                    
|12.1 |  | Certification by Chief Executive Officer pursuant to
  section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                               
|     |  |                                                                                                                                                                                                                                                                                                                                    
|13.1 |  | Certification by Chief Executive Officer pursuant to
  section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                               
|     |  |                                                                                                                                                                                                                                                                                                                                    

---

55

---

---

**Confidential treatment
requested as to certain portions, which portions were omitted and filed
separately with the Securities and Exchange Commission.

56

---

---

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 12th day of July 2004.

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

57

---

---

# ROBOMATIX TECHNOLOGIES
AND ITS SUBSIDIARIES

# CONSOLIDATED FINANCIAL STATEMENTS

# AS OF DECEMBER 31, 2003

# IN U.S. DOLLARS

# INDEX

|                                              | Page       
|--------------------------------------------- | -----------
|
|
|
|
|Report of Independent Auditors                | F-2- F-3   
|Consolidated Balance Sheets                   | F-4 -F- 5  
|Consolidated Statements of Operations         | F-6        
|Statements of Changes in Shareholders' Equity | F-7        
|Consolidated Statements of Cash Flows         | F-8 - F-9  
|Notes to Consolidated Financial Statements    | F-10 - F-35

---



---

---

# 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, 2003 and the related consolidated statements of
operations, changes in shareholders equity and cash flows for the year ended
December 31, 2003. 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 audit.

We conducted our audit in accordance
with the standards of the Public Company Accounting Oversight Board (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 audit provides 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,
2003 and the consolidated results of their operations and cash flows for the year ended
December 31, 2003, in conformity with accounting principles generally accepted in the
United States of America.

Brightman Almagor & Co.
Certified Public Accountants
A member firm of
Deloitte Touche Tohmatsu
Tel-Aviv, Israel
July 12, 2004

F - 2

---

---

# 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 the related
consolidated statements of income, changes in shareholders equity and cash flows for
each of the two 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 the standards of the Public Company Accounting
Oversight Board (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 the consolidated results of their operations and
cash flows for each of the two years in the period ended December 31, 2002, in conformity
with U.S. generally accepted accounting principles.

|Tel-Aviv, Israel
July 12, 2004 |  | KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
|------------------------------ |  | -------------------------------------------------------------

F - 3

---

---

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

|                                                                           | December 31,
|-------------------------------------------------------------------------- | ------------
|
|
|
|
|ASSETS                                                                     |             
|                                                                           |             
|CURRENT ASSETS:                                                            |             
|Cash and cash equivalents                                                  |             
|Marketable securities                                                      |             
|Trade receivables (net of allowance for doubtful accounts of $ 50 and $ 63 |             
|as of December 31, 2003 and 2002, respectively)                            |             
|Other accounts receivable and prepaid expenses (Note 3a)                   |             
|Inventories (Note 3b)                                                      |             
|                                                                           |             
|Totalcurrent assets                                                        |             
|                                                                           |             
|LONG-TERM INVESTMENTS AND RECEIVABLES:                                     |             
|Long-term receivables from related party (Note 1b)                         |             
|Investments in other companies (Note 4)                                    |             
|                                                                           |             
|                                                                           |             
|                                                                           |             
|PROPERTY, PLANT AND EQUIPMENT, NET (Note 5)                                |             
|                                                                           |             
|DEFERRED TAXES (Note 10)                                                   |             
|                                                                           |             
|GOODWILL (Note 1c)                                                         |             
|                                                                           |             
|Totalassets                                                                |             
|                                                                           |             

(*) Reclassified

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

F - 4

---

---

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

|                                                                           | December 31,
|-------------------------------------------------------------------------- | ------------
|
|
|
|
|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)                      |             
|                                                                           |             
|Totalcurrent liabilities                                                   |             
|                                                                           |             
|LONG-TERM LIABILITIES:                                                     |             
|Long-term loans, net of current maturities (Note 7)                        |             
|Pensions and severance pay liability                                       |             
|                                                                           |             
|                                                                           |             
|                                                                           |             
|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, 2003 and 2002; Issued and |             
|outstanding: 13,599,626 shares as of December 31, 2003                     |             
|and 2002                                                                   |             
|Additional paid-in capital                                                 |             
|Accumulated other comprehensive income (loss)                              |             
|Accumulated deficit                                                        |             
|                                                                           |             
|Totalshareholders' equity                                                  |             
|                                                                           |             
|Totalliabilities and shareholders' equity                                  |             
|                                                                           |             

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

|July 12, 2004
Date of approval of thefinancial statements | /S/ Zvi Barinboim
Zvi BarinboimChairman of theBoard of Directors | /S/ Amit Goldwasser
Amit GoldwasserChief Executive Officer
|----------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ------------------------------------------------------------------------

F - 5

---

---

|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,
|--------------------------------------------------------------- | -----------------------
|
|
|
|
|Sales, net (Note 12)                                            |                        
|Cost of sales                                                   |                        
|                                                                |                        
|Gross profit                                                    |                        
|                                                                |                        
|Selling and marketing expenses                                  |                        
|General and administrative expenses                             |                        
|                                                                |                        
|Operating loss                                                  |                        
|Impairment of long-term investments                             |                        
|Other income (Note 13a)                                         |                        
|Financial expenses, net (Note 13b)                              |                        
|                                                                |                        
|Income (loss) before taxes on income                            |                        
|Taxes on income (Note 10d)                                      |                        
|                                                                |                        
|                                                                |                        
|Equity in earnings of an affiliate                              |                        
|                                                                |                        
|Net income (loss)                                               |                        
|                                                                |                        
|Basic and diluted net earnings (loss) per share -               |                        
|                                                                |                        
|Weighted average number of shares used in computing basic net   |                        
|earnings (loss) per share                                       |                        
|                                                                |                        
|Weighted average number of shares used in computing diluted net |                        
|earnings (loss) per share                                       |                        
|                                                                |                        

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

F - 6

---

---

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

|                                              | Share
capital | Additional
paid-in
capital | Accumulated
other
comprehensive
income (loss) | Accumulated
deficit | Total
comprehensive
income (loss) | Total
shareholders
equity
|--------------------------------------------- | ------------- | -------------------------- | --------------------------------------------- | ------------------- | --------------------------------- | -------------------------
|
|
|
|
|Balance as of January 1, 2001                 |               |                            |                                               | 5,227               |                                   |                          
|Issuance of shares, net                       |               |                            |                                               | 422                 |                                   |                          
|Foreign currency translation adjustments      |               |                            |                                               | -                   |                                   |                          
|Net loss                                      |               |                            |                                               | -                   |                                   |                          
|                                              |               |                            |                                               |                     |                                   |                          
|Total comprehensive loss                      |               |                            |                                               |                     |                                   |                          
|                                              |               |                            |                                               |                     |                                   |                          
|Balance as of December 31, 2001               |               |                            |                                               | 5,649               |                                   |                          
|Capital surplus from transaction with related |               |                           
|party (see Note 1b)                           |               |                            |                                               | -                   |                                   |                          
|Other comprehensive income (losses):          |               |                           
|Foreign currency translation adjustments      |               |                            |                                               | -                   |                                   |                          
|Unrealized losses on available-for-sale       |               |                           
|marketable securities                         |               |                            |                                               | -                   |                                   |                          
|Net loss                                      |               |                            |                                               | -                   |                                   |                          
|                                              |               |                            |                                               |                     |                                   |                          
|Total comprehensive loss                      |               |                            |                                               |                     |                                   |                          
|                                              |               |                            |                                               |                     |                                   |                          
|Balance as of December 31, 2002               |               |                            |                                               | 5,649               |                                   |                          
|                                              |               |                            |                                               |                     |                                   |                          
|Other comprehensive income:                   |               |                           
|Foreign currency translation adjustments      |               |                            |                                               | -                   |                                   |                          
|Unrealized gains on available-for-sale        |               |                           
|marketable securities                         |               |                            |                                               | -                   |                                   |                          
|Net income                                    |               |                            |                                               | -                   |                                   |                          
|                                              |               |                            |                                               |                     |                                   |                          
|Total comprehensive income                    |               |                            |                                               |                     |                                   |                          
|                                              |               |                            |                                               |                     |                                   |                          
|Balance as of December 31, 2003               |               |                            |                                               | 5,649               |                                   |                          
|                                              |               |                            |                                               |                     |                                   |                          

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

F - 7

---

---

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

|                                                                      | Year ended December 31,
|--------------------------------------------------------------------- | -----------------------
|
|
|
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                                 |                        
|Net income (loss)                                                     |                        
|Adjustments to reconcile net income (loss) to net cash provided by    |                        
|(used in) operating activities from continuing operations:            |                        
|Impairment on long-term investments                                   |                        
|Loss from sale of property and equipment                              |                        
|Equity in earnings of an affiliate                                    |                        
|Gain from sale of a subsidiary                                        |                        
|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 prepaid expenses |                        
|Increase (decease) in trade payables                                  |                        
|Increase in other accounts payable and accrued expenses               |                        
|Decrease (increase) in trade receivables                              |                        
|                                                                      |                        
|Net cash provided by (used in) operating activities                   |                        
|                                                                      |                        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                 |                        
|Purchase of property and equipment                                    |                        
|Proceeds from sale of a subsidiary to a related party                 |                        
|Investment in other companies                                         |                        
|Proceeds from sale of subsidiaries (a)                                |                        
|Payment for acquisition of a consolidated subsidiary (b)              |                        
|Proceeds from sale of marketable securities                           |                        
|Proceeds from sale of property and equipment                          |                        
|                                                                      |                        
|Net cash provided by (used in) investing activities                   |                        
|                                                                      |                        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                 |                        
|Proceeds from long-term debt                                          |                        
|Repayment of long-term debt                                           |                        
|Short-term bank credit, net                                           |                        
|                                                                      |                        
|Net cash provided by (used in) financing activities                   |                        
|                                                                      |                        
|Effect of exchange rate changes on cash and cash equivalents          |                        
|                                                                      |                        
|Increase (decrease) in cash and cash equivalents                      |                        
|Cash and cash equivalents at the beginning of the year                |                        
|                                                                      |                        
|Cash and cash equivalents at the end of the year                      |                        
|                                                                      |                        

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

F - 8

---

---

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

|                                                                        | Year ended December 31,
|----------------------------------------------------------------------- | -----------------------
|
|
|
|
|(a) Proceeds from sale of subsidiaries (Note 1b and 1d):                |                        
|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                                                           |                        
|Receivable related to sale of subsidiary                                |                        
|Investment in an affiliate                                              |                        
|Foreign currency translation adjustments                                |                        
|Capital gain                                                            |                        
|                                                                        |                        
|                                                                        |                        
|                                                                        |                        
|(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:                                               |                        
|                                                                        |                        
|Sale of long-term investment for consideration of marketable securities |                        
|                                                                        |                        

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

F - 9

---

---

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

|NOTE 1:- |  | GENERAL
|-------- |  | -------

| | a. | Nature
of operations:
| | -- | ---------------------

| | Robomatix
Technologies Ltd. ("the Company") is an Israeli holding company.
| | --------------------------------------------------------------------------

| | The
Company's shares are traded in the OTC Bulletin Board (symbol: RBMFX).
| | --------------------------------------------------------------------------

| | The
Company holds all of the outstanding  share capital of Franz Kalff GmbH  ("Kalff"),  a
                     German company  engaged in  manufacturing  through  subcontractors,
 marketing and sale of                      first aid kits,  primarily for the
 automotive  industry.  Additionally  The Company holds                      direct
 interests in Leader Tech Ltd.,  an Israeli  company that  purchases and invests in
                     companies  in the field of venture  capital and  technology  and
also holds  interests  in                      eLady Ltd., a Japanese  Internet  commerce
 portal for women.  The company holds  minority                      interests in two
Israeli insurance companies.                      Five  customers  accounted for 58% and
60% of sales in 2003 and 2002,  respectively.  (see                      also Note 12).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b. | Sale
of a subsidiary to a related party:
| | -- | ----------------------------------------

| | In
September  2002, the Company sold 100% of the share capital of Robomatix  (Israel) Ltd.
                     (a dormant  subsidiary),  to SPL Software Ltd., an Israeli company
also held by Silverboim                      Holdings Ltd., the controlling  shareholder,
 in  consideration of $ 570, payable in three                      equal  installments
 of which the company  received the first two.  The third  installment
                     will be paid on the  second  anniversary  of the  transaction's
 closing.  As a result  of                      this sale,  the Company  recorded a
capital  surplus of $ 609 resulting  from  transaction                      with related
party.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c. | Acquisition
of Kalff:
| | -- | ---------------------

| | In
January 11, 2001, the Company,  through its new wholly-owned  Dutch  subsidiary,  Mersa
                     Holding  B.V.  ("Mersa"),  a  company  registered  under  the  laws
 of  the  Netherlands,                      purchased  100%  of  the  outstanding   share
 capital  of  Kalff.  The  purchase  of  the                      outstanding share
capital of Kalff was completed in January 24, 2001.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
 purchase  price  was  $ 6,900  in  cash,  and  $  2,100  in  the  form  of  1,200,000
                     unregistered  Ordinary  shares of the Company.  Since the trading
 volume of the Company's                      shares was low,  the share  market  price
did not reflect the fair value of the  Company's                      shares and
 therefore,  the fair value was  determined to be $ 1.75 per share based on the
                     negotiations  between the parties and on a  valuation  of Kalff
 conducted  by an external                      evaluating firm.                      The
Company  financed  an amount in Euros equal to $ 5,500 of its loan to Mersa  through a
                     collateralized loan that the Company took from a bank in Israel.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company  accounted  for this  acquisition  by the purchase  method.  The excess of the
                     estimated fair value over the book value was  attributed to land,
 buildings and goodwill.                      The  operations  of Kalff are  included  in
the  consolidated  statement  from the date of                      acquisition.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 10

---

---

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

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

| | d. | In
January 1,  2003, a subsidiary of the Company acquired the assets,  liabilities and the
                     operations of Edco Technologies  Ltd.  ("Edco").  In addition,  it
was decided to allocate                      9,200  Ordinary  shares to the single
 shareholder  of Edco that will comprise 50 % of the                      subsidiary's
 issued and outstanding share capital  following the allocation.  As a result
                     the Company's holdings in the subsidiary were decreased to 49.5%.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
March 31,  2003,  the Company  entered into an agreement  with Berger  Holdings  (1992)
                     Ltd. a publicly  traded  company in the Tel Aviv Stock  Exchange,
 for the sale of all the                      Company  holdings  in the  subsidiary.  The
 consideration  was $  1,083  net of  expenses                      pertaining to the
sale  amounting to $ 192 and as a result the Company  recorded a capital
                     gain of approximately $ 993.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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                      ("SFAS") No. 52 "Foreign Currency Translation.
 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
financial  statement of Kalff, the German  subsidiary,  whose  functional  currency is
                     the Euro have been  translated  to U.S.  dollars.  All balance
 sheet  accounts  have been                      translated  using the exchange  rates in
effect at the balance  sheet date.  Statements of                      operations
 amounts have been translated  using the average  exchange rate for the period.
                     The  resulting  translation  adjustments  are  reported  as a
component  of  shareholders'                      equity in accumulated other
comprehensive income (loss).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 11

---

---

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

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

| | c. | Principles
of consolidation:
| | -- | ----------------------------

| | The
 consolidated  financial  statements  include  the  accounts  of the  Company  and its
                     wholly-owned  subsidiaries.  Inter-company  transactions and
balances have been eliminated                      upon consolidation.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | d. | Cash
equivalents:
| | -- | -----------------

| | Cash
equivalents are short-term,  highly liquid  investments that are readily  convertible
                     to cash, with original maturities of three months or less.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | e. | Marketable
securities:
| | -- | ----------------------

| | Investments
in marketable  securities  are accounted for in accordance  with SFAS No. 115,
                     "Accounting  for  Certain   Investments  in  Debt  and  Equity
  Securities".   Management                      determines  the  appropriate
 classification  of  its  investments  in  marketable  equity
                     securities at the time of purchase and  reevaluates  such
 determinations  at each balance                      sheet date.  The Company
 classified  its  marketable  securities  as  available-for-sale.
                     Accordingly,  these  securities  are  carried at fair  value,  with
 unrealized  gains and                      losses reported in a separate  component of
shareholders  equity under  "Accumulated other                      comprehensive  income
 (loss)".  Realized  gains and  losses on sales of  investments,  as
                     determined  on  a  specific   identification  basis,  are  included
 in  the  consolidated                      statement of operations.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | f. | Allowance
for doubtful accounts:
| | -- | --------------------------------

| | The
 allowance  for doubtful  accounts is  calculated  primarily  with respect to specific
                     receivables, which in the opinion of the Company's management are
doubtful of collection.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | g. | Inventories:
| | -- | ------------

| | Inventories
 are stated at the lower of cost or market  value.  Inventory  write-offs  are
                     provided to cover risks  arising from  slow-moving  items or
 technological  obsolescence.                      The Company wrote-off  approximately $
150 and $ 145 in 2003 and 2002,  respectively.  The                      write-off is
included in the cost of sales. Cost is determined as follows:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Raw
materials - average cost basis.
| | -----------------------------------

| | Finished
goods - average production costs including materials and labor.
| | ------------------------------------------------------------------------

| | Purchased
products for commercial purposes - at cost.
| | -----------------------------------------------------

F - 12

---

---

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

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

| | h. | Property,
plant and equipment:
| | -- | ------------------------------

| | 1. | Property
plant and equipment are stated at cost, net of accumulated depreciation.
| | -- | ---------------------------------------------------------------------------------

| | 2. | Depreciation
is calculated by the straight-line  method,  over the estimated useful
                            lives of the assets at the following annual rates:
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                       | %   
|-------------------------------------- | ----
|
|
|
|
|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 cost net of a permanent impairment 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 the carrying value is higher than the fair
value, the carrying value of those investments are reduced to their estimated fair value
and the impairment loss is recognized in the statement of operations. The Company
recognized impairment loss in the amount of $ 1,390 in the year 2001.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 or 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, 2003, no impairment losses have
been identified.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 13

---

---

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

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

| | k. | Goodwill:
| | -- | ---------

| | Goodwill
reflects the excess of the purchase price in an acquired subsidiary over the fair value
of the net assets acquired. Pursuant to SFAS No. 142. Goodwill and Other Intangible
Assets, effective January 1, 2002, goodwill is to be tested for impairment on
adoption and at least annually thereafter or between annual tests in certain
circumstances, and written off when impaired, rather than amortized as previous
accounting standards required. Goodwill is tested for impairment by comparing the fair
value of the reporting unit with its carrying value. Fair value is determined using
market capitalization. Significant estimates used in the fair value methodologies include
estimates of future cash flows, future short-term and long-term growth rates, weighted
average cost of capital and estimates of market multiples of the reportable unit.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | l. | Revenue
recognition:
| | -- | --------------------

| | The
Company through 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) as
amended by SAB No. 104 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 SFAS No. 48,
Revenue Recognition When Right of Return Exists. 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | m. | Sales
incentives and trade promotional allowances:
| | -- | --------------------------------------------------

| | The
Company has adopted EITF No. 01-09 Accounting for Consideration Given by a Vendor
to a Customer (including a Reseller of the Vendors Products). In accordance with
EITF 01-09, the Company offsets sales and marketing expenses deriving from sales
incentives and trade promotional allowances against sales.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 14

---

---

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

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

| | n. | Advertising
expenses:
| | -- | ---------------------

| | Advertising
expenses are charged to the statement of operations as incurred. Advertising expenses for
the years ended December 31, 2003, 2002 and 2001 were $ 14, $ 17 and $ 18,
respectively.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o. | Income
taxes:
| | -- | -------------

| | The
Company and its subsidiaries account for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. This Statement prescribes the use of the
liability method whereby deferred tax assets and liabilities are determined based on the
differences between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. The Company and its subsidiaries provide a valuation allowance,
if necessary, to reduce deferred tax assets when it is considered more likely then not
that they will not be utilized
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | p. | Accounting
for stock based compensation:
| | -- | ----------------------------------------

| | The
Company has elected to follow Accounting Principles Board Opinion No. 25 Accounting
for Stock Issued to Employees (APB No. 25) and FASB Interpretation No.
44 Accounting for Certain Transactions Involving Stock Compensation (FIN
No. 44) in accounting for its employee stock option plans. Under APB No. 25, when
the exercise price of the Companys share options is less than the market price of
the underlying shares on the date of grant, compensation expense is recognized.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
pro-forma disclosures required by SFAS No. 123 and by SFAS No. 148 are as follows:
| | --------------------------------------------------------------------------------------

|                                             | Year ended December 31,
|-------------------------------------------- | -----------------------
|
|
|
|
|Net income (loss)  - as reported             |                        
|                                             |                        
|Deduct: Total stock-based compensation       |                        
|determined under fair value based method for |                        
|all awards                                   |                        
|                                             |                        
|Net income (loss) - pro forma                |                        
|                                             |                        
|Net income (loss) per share - as reported    |                        
|and pro-forma                                |                        
|                                             |                        

F - 15

---

---

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

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

| | p. | Accounting
for stock based compensation (cont.)
| | -- | -----------------------------------------------

| | Under
SFAS No. 123, pro forma information regarding net income (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%; dividend yield of 0% for
the year; expected volatility of 83.8%, 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, 2003.
| | --------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | q. | Net
income (loss) per share:
| | -- | ----------------------------

| | Basic
net income (loss) per share is computed based on the weighted average number of Ordinary
shares outstanding during each year. Diluted net income (loss) per share is computed
based on the weighted average number of Ordinary shares outstanding during each year,
plus dilutive potential Ordinary shares considered outstanding during the year, in
accordance with SFAS No. 128, Earnings per Share.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | All
convertible outstanding stock options and warrants have been excluded from the
calculation of the diluted net income (loss) per Ordinary share because all such
securities are anti-dilutive for the years ended December 31, 2002 and 2001. The total
weighted average number of share related to the outstanding options and warrants excluded
from the calculations of diluted net loss per share was 3,897,384 and 269,630 for the
years ended December 31, 2002 and 2001, respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 16

---

---

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

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

| | r. | Fair
value of financial instruments:
| | -- | ------------------------------------

| | The
following methods and assumptions were used by the Company and its subsidiaries in
estimating their fair value disclosures for financial instruments:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
carrying amounts of cash and cash equivalents, trade receivables, short-term bank credit
and trade payables approximate their fair values, due to the short-term maturity of such
instruments.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
fair value for marketable securities is based on quoted market price.
| | -------------------------------------------------------------------------

| | Long-term
receivables from related party are recorded at estimated present values determined based
on current rates of interest. Imputed interest is recognized, using the effective
interest method as a component of interest income in the accompanying statements.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | s. | Concentrations
of credit risk:
| | -- | ------------------------------

| | Financial
instruments that potentially subject the Company and its subsidiaries to concentrations
of credit risk consist primarily of cash and cash equivalents, trade receivables and
marketable securities.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
majority of the Companys and its subsidiaries cash and cash equivalents is
invested in banks in Israel and Germany. Management believes that the financial
institutions that hold the Companys investments are financially sound, and
accordingly, minimal credit risk exists with respect to these investments.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
subsidiarys trade receivables are mainly derived from sales to customers in
Germany. The subsidiary has adopted credit policies and standards intended to accommodate
industry growth and inherent risk. Management believes that credit risks are moderated by
obtaining credit insurance, the diversity of its customer base and geographic sales
areas. The subsidiary performs ongoing credit evaluations of its customers financial
condition and requires collateral when deemed necessary.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has no off-balance-sheet concentration of credit risk, such as foreign exchange
contracts or option contracts.
| | --------------------------------------------------------------------------------------------------------------------------

F - 17

---

---

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

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

| | t. | Pension
plans and severance pay:
| | -- | --------------------------------

| | The
Companys liability for severance pay is calculated pursuant to Israeli severance
pay law based on the most recent salary of the employees in Israel multiplied by the
number of years of employment as of balance sheet date. Employees are entitled to one
months salary for each year of employment, or a portion thereof. The Companys
liability for all of its employees in Israel is provided by monthly deposits with
insurance policies.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
deposited funds include profits accumulated up to the balance sheet date. The deposited
funds may be withdrawn only upon the fulfillment of the obligation pursuant to Israeli
severance pay law or labor agreements. The value of the deposited funds is based on the
cash surrendered value of these policies, and includes immaterial profits.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
liability for severance pay and the deposit fund were immaterial as of December 31, 2003
and 2002.
| | ------------------------------------------------------------------------------------------------------

| | The
German subsidiary maintains two defined benefit pension plans covering mostly retired and
inactive employees. For the defined benefit plans, pension benefits are based primarily
on length of service. The plans are not funded by the Company and are closed to employees
who were hired after 1987.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Components
of net periodic benefit cost are:
| | --------------------------------------------

|                          | 2003 | 2002
|------------------------- | ---- | ----
|
|
|
|
|Service cost              |      |     
|Interest cost             |      |     
|                          |      |     
|Net periodic benefit cost |      |     
|                          |      |     

F - 18

---

---

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

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

| | t. | Pension
plans and severance pay (cont.):
| | -- | ----------------------------------------

| | Change
in the projected benefit obligation for the defined benefit plans:
| | -------------------------------------------------------------------------

|                                         | 2003 | 2002
|---------------------------------------- | ---- | ----
|
|
|
|
|Benefit obligation at beginning of year  |      |     
|Service cost                             |      |     
|Interest cost                            |      |     
|Benefits paid                            |      |     
|Foreign currency translation adjustments |      |     
|                                         |      |     
|Benefit obligation at year end           |      |     
|                                         |      |     

| | The
following table sets forth the funded status of the plans as of December 31, 2003 and
2002:
| | -----------------------------------------------------------------------------------------------

|                               | 2003 | 2002
|------------------------------ | ---- | ----
|
|
|
|
|Vested benefit obligation      |      |     
|Accumulated benefit obligation |      |     
|Projected benefit obligation   |      |     
|Accrued pension cost           |      |     

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

|               | 
|-------------- | 
|
|
|
|
|Discount rate  | 
|Inflation rate | 

| | Severance
and pension expenses for the years ended December 31, 2003, 2002 and 2001, amounted to
approximately $ 99, $ 76 and $ 36, respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------------

| | u. | Net
investment hedge in a foreign currency:
| | -- | -------------------------------------------

| | The
Company uses a foreign denominated fixed rate long-term loan to hedge the value of its
investment in its foreign subsidiary in Germany. Exchange rate differences from this loan
are not included in the statement of operations but are included in other comprehensive
income (loss) as cumulative translation adjustments. In cases in which there is a portion
of the hedge that is ineffective, the hedge ineffectiveness is included in earnings.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the years ended December 31, 2003 and 2002, the Company recognized $ 480 of net gain
and $ 980 of net loss, respectively included in the cumulative translation
adjustment, related to foreign denominated fixed-rate long-term loan.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 19

---

---

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

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

| | v. | Impact
of recently issued accounting standards:
| | -- | -----------------------------------------------

| | In
January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable
Interest Entities (FIN 46). The objective of FIN 46 is to improve
financial reporting by companies involved with variable interest entities. A variable
interest entity is a corporation, partnership, trust, or any other legal structure used
for business purposes that either (a) does not have equity investors with voting rights
or (b) has equity investors that do not provide sufficient financial resources for the
entity to support its activities. FIN 46 requires a variable interest entity to be
consolidated by a company if that company is subject to a majority of the risk of loss
from the variable interest entitys activities or entitled to receive a majority of
the entitys residual returns or both. FIN 46 also requires disclosures about
variable interest entities that the company is not required to consolidate but in which
it has a significant variable interest. The consolidation requirements of FIN 46 apply
immediately to variable interest entities created after January 31, 2003. The
consolidation requirements apply to older entities in the first fiscal year or interim
period ending after March 15, 2004. Certain of the disclosure requirements apply in all
financial statements issued after January 31, 2003, regardless of when the variable
interest entity was established. As of December 31, 2003, the Company does not expect the
adoption of FIN 46 to have a material impact on its consolidated financial statements
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 20

---

---

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

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

| | a. | Other
accounts receivable and prepaid expenses:
| | -- | -----------------------------------------------

|                                                               | December 31,
|-------------------------------------------------------------- | ------------
|
|
|
|
|Government of Israel                                           |             
|Prepaid expenses                                               |             
|Receivables from the sale of subsidiary                        |             
|Receivables from a sale of subsidiary to a related party (Note |             
|1b)                                                            |             
|Other                                                          |             
|                                                               |             
|                                                               |             
|                                                               |             

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

|                            |  |  |  |       |  |  |       | 
|--------------------------- |  |  |  | ----- |  |  | ----- | 
|Raw materials               |  |  |  | 2,090 |  |  | 999   | 
|Finished products and goods |  |  |  | 2,635 |  |  | 1,763 | 
|                            |  |  |  |      
|                            |  |  |  | 4,725 |  |  | 2,762 | 
|                            |  |  |  |      

|NOTE 4:- |  | INVESTMENTS
IN OTHER COMPANIES
|-------- |  | ------------------------------

| | a. | During
2000, the Company invested in shares of eLady Ltd. (eLady), a
               Japanese company, engaged in operating a Japanese fashion and style
e-commerce                portal for women.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company does not have the ability to exercise significant influence over the operating
and financial policy of eLady, since it failed in receiving financial information from
eLady. During 2001 certain conditions were identified by management, including recurring
operating losses and downward adjustment to the Companys projections, as potential
indicators of an 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 for the year 2001. In April
and November 2003, eLady entered into stock subscription agreements for the issuance of
Series A Preferred Stock (22% of eLadys voting rights) to strategic investors and
current shareholders for a total consideration of $1.2 million resulting in a decrease of
the indirect holding of the Company from 27% to 20%. The carrying amount of the
investment as of December 31, 2003 is $2,685. The Company estimates based on all the
relevant factors, including the Companys Preferred Stock rights in case of
liquidation or sale of eLady, that the fair value of the investment in eLady exceeds the
carrying amount of the investment.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 21

---

---

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

|NOTE 4:- |  | LONG-TERM
INVESTMENTS (Cont.)
|-------- |  | -----------------------------

| | b. | 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 in 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c. | In
November 19, 2002, the Company reached two agreements with The Israel Land
               Development Insurance Holdings Company Ltd. (hereafter  ILDIH),
pursuant                to which the Company purchased 2.4% and 5.33% of the issued share
capital of two                private insurance companies controlled by ILDIH- Israel
Land Development                Insurance Company Ltd and Israel Credit Insurance Company
Ltd (hereafter                ICIC), in consideration of $ 1,238 and $825,
respectively. Bank hpoalim has a                security interest in the shares the
Company hold in Israel Land Development                Insurance Company Ltd.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Subsequent
to the balance sheet date, Israel Land Development Insurance Company Ltd. registered its
shares for trade on the Tel Aviv Stock Exchange. In June 2004 the company sold all the
shares in ICIC for approximately $ 766.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 22

---

---

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

|NOTE 5:- |  | PROPERTY,
PLANT AND EQUIPMENT
|-------- |  | -----------------------------

| | Composition
of assets, grouped by major classifications, is as follows:
| | -----------------------------------------------------------------------

|                                       | December 31,
|-------------------------------------- | ------------
|
|
|
|
|Cost:                                  |             
|Buildings, land and improvements       |             
|Computers (including related software) |             
|Machinery and equipment                |             
|                                       |             
|                                       |             
|Accumulated depreciation               |             
|                                       |             
|Depreciated cost                       |             
|                                       |             

| | Depreciation
expenses for the years ended December 31, 2003, 2002 and 2001, were $ 57, $ 201
and $ 177, respectively.
| | ---------------------------------------------------------------------------------------------------------------------

| | In
December 30, 2002, Kalff entered into a sale-leaseback agreement in relation to all
of its land and buildings to the Israel Land Development Insurance Company Ltd., a third
party, in consideration of $ 3,500. In accordance with the agreement, Kalff leased
the land and buildings from the third party for a minimum lease term of 15 years with
annual rental fees of $ 350. The Company obtained a bank guarantee for the sum of $
350 from Bank Hapoalim. The lease was considered in the financial statement as operating
lease. As a result from this transaction the Company recorded a loss of approximately $
234.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

F - 23

---

---

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

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

| | a. | Short-term
bank credit:
| | -- | -----------------------

|                              | Interest rate | Amount
|----------------------------- | ------------- | ------
|
|
|
|
|Short-term bank credit        |               |       
|In NIS                        |               |       
|In Euro                       |               |       
|                              |               |       
|                              |               |       
|                              |               |       
|Total authorized credit lines |               |       
|Unutilized credit lines       |               |       

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

|                               | December 31,
|------------------------------ | ------------
|
|
|
|
|Payroll and related expenses   |             
|Accrued expenses and other (1) |             
|Accrued customer bonuses       |             
|Other                          |             
|                               |             
|                               |             
|                               |             
|(1) Including a related party  |             
|                               |             

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

| | a. | Composed
as follows:
| | -- | --------------------

|                          |  | 
|------------------------- |  | 
|
|
|
|Long-term bank loans      |  | 
|Less - current maturities |  | 
|                          |  | 
|                          |  | 
|                          |  | 

F - 24

---

---

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

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

| | b. | Payments
of dividends, management fees or any other amount paid to the Company           from
Kalff, will be deposited in the bank account and will be used to repay the           loan
to the bank. In 2003 the Company repaid $2,515 to the banks.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c. | Classified
by currency, linkage terms and interest rates, the total amount of           the
liabilities (before deduction of current maturities) is as follows:
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                  | Weighted average interest rate | Amount
|--------------------------------- | ------------------------------ | ------
|
|
|
|
|In, or linked to, the U.S. dollar |                                |       
|In Swiss Franks                   |                                |       
|In Israeli currency               |                                |       
|                                  |                                |       
|                                  |                                |       
|                                  |                                |       

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

|                        | December 31, 2003
|----------------------- | -----------------
|
|
|
|
|2004 (current maturity) |                  
|2005                    |                  
|2006                    |                  
|2007                    |                  
|2008                    |                  
|                        |                  
|                        |                  
|                        |                  

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

F - 25

---

---

|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
|-------- |  | --------------------------------------

| | a. | Royalty
commitments:
| | -- | --------------------

| | The
Company and some of its Israeli subsidiaries are committed to pay royalties at the rate
of 3% to the Government of Israel on proceeds from sales of products in which the
Government participated in the research and development by way of grants, up to the
cumulative amount of such grants received (in dollar terms). At the time the
participations were received, successful development of the related projects was not
assured.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Total
amount of grants received by the Company and the abovementioned subsidiaries, net of
royalties paid or accrued, as of December 31, 2003, is approximately $ 4,400.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company and the abovementioned subsidiaries discontinued their past activities. These
companies will have to pay royalties only if they have revenues from the sale of
royalty-bearing products, or in the event of the sale of the know-how developed with the
participation of the abovementioned grants.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b. | Management
fee agreement:
| | -- | -------------------------

| | Effective
January 1, 2000, the Company entered into an agreement for payment to its parent company,
in the amount of approximately $ 10 per month, plus related expenses for a period of
five years, for rendering management and consulting services.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c. | Service
agreement:
| | -- | ------------------

| | Effective
January 1, 2000, the Company entered into an agreement for payment to its parent company,
in the amount of up to $ 5 per month, for rendering administration and support services.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | d. | Consulting
agreement
| | -- | --------------------

| | In
November 2002, the Company entered into an agreement with Israel Land Development
Insurance Company Ltd. in which the Company will receive an annual payment of $57 until
the end of 2009 for consulting services.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | e. | Litigation
| | -- | ----------

| | For
litigation against the Company, see Note 9b(1).
| | ---------------------------------------------------

F - 26

---

---

|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. | Pledges:
| | -- | --------

| | Balance
of liabilities collateralized by pledges is as follows:
| | ---------------------------------------------------------------

|                                                  | 
|------------------------------------------------- | 
|
|
|
|
|Long-term debt (including current maturities) (1) | 
|                                                  | 

| | (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.
| | -------------------------------------------------------------------------------------

| | g. | Leases:
| | -- | -------

| | The
Companys subsidiary leases automobiles and equipment under non-cancelable operating
leases. The Companys subsidiary also leases the land and building under a
sale-leaseback agreement. see Note 5.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Total
operating lease expenses amounted to approximately $436, $ 55 and $ 62 during 2003, 2002
and 2001, respectively. Future minimum lease payments under non-cancelable operating
leases with initial or remaining terms in excess of one year consisted of the following
as of December 31, 2003:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|           | Operating leases
|---------- | ----------------
|
|
|
|
|2004       |                 
|2005       |                 
|2006       |                 
|2007       |                 
|2008       |                 
|Thereafter |                 

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

| | a. | Ordinary
shares:
| | -- | ----------------

| | 1. | The
Companys shares are traded on the OTC Bulletin Board in the U.S.A.
| | -- | -----------------------------------------------------------------------

| | 2. | Ordinary
shares confer upon their holders voting rights and the right to           receive
dividends, if declared.
| | -- | ------------------------------------------------------------------------------------------------------------------

F - 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:- |  | SHAREHOLDERS EQUITY
(Cont.)
|-------- |  | ----------------------------

| | 3. | In
January 24, 2001, the Company issued an aggregate of 1,200,000 Ordinary           shares
to investor as part of the acquisition of Kalff for an aggregate amount           of
approximately $ 2,079.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b. | Stock
option plans:
| | -- | -------------------

| | 1. | In
December 29, 1997, the Company adopted the Robomatix Technologies Ltd.
          directors share option plan, promulgated under the provisions of Section (3)
(i)           of the Israeli Income Tax Ordinance (the director plan). The
          director plan provides for the grant by the Company of options to purchase
          143,174 Ordinary shares to its directors.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
exercise price of option awards issued pursuant to the director plan is the average price
of the Companys shares for each of the 60 trading days immediately prior to the
granting of such option awards.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | All
of the options covered by an option award vest three years after the grantee becomes a
director of the Company. Any awards not exercised within 60 months of the date of the
grant of any option award shall expire in such date. Ordinary shares as to which the
grantees rights have not vested will be held by a trustee designated by the Company.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
May 1, 1998, the Company granted three of its directors, who are no longer directors of
the Company, options to purchase 143,174 Ordinary shares at an exercise price of $ 0.25.
The Company applies the provisions of APB 25 in respect of options granted to directors.
No compensation cost was charged to income in respect of these options since their
exercise price exceeds the market value of the Companys share at the date of grant.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | After
December 31, 1999, two of the former directors requested to exercise their options. The
Company, based on the opinion of its legal advisors, believes that these former directors
are not entitled to exercise the said options, since they have not yet been directors of
the Company for three years. In April 17, 2000, one of such former directors filed a
claim with the Tel-Aviv Magistrates Court for the issuance of shares underlying the
options he received under the 1998 Plan and an exparte motion for provisional remedies.
In November 2001, the court rejected the claim of the former director. The former
director filed an appeal in December 2001. The Company, based on the opinion of its legal
advisor, believes that this claim and/or any other legal action which may be brought by
the other former director will not materially affect its operations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 28

---

---

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

|NOTE 9:- |  | SHAREHOLDERS EQUITY
(Cont.)
|-------- |  | ----------------------------

| | 2. | In
September 14, 1999, the Company approved the grant of options to purchase
          750,000 Ordinary shares of NIS 1.46 par value to present and future employees
          and consultants of the Company (the 1999 Plan).
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company granted, in effect as of December 1, 1999, to an employee options to purchase
200,000 Ordinary shares at an exercise price of $ 0.36. Half of the options became
exercisable commencing December 1, 1999, and the remaining half became exercisable
commencing December 1, 2000, provided that the employee is employed by the Company for a
period of at least two years. Any options not exercised within five years from the date
of grant, shall expire. The Company applies the provisions of APB 25 in respect of
options granted to the employee. No compensation cost was charged to income in respect of
these options, since their exercise price exceeds the market value of the Companys
share at date of grant.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
addition, the Company granted a consultant, for the services he rendered, options to
purchase 20,000 Ordinary shares at an exercise price of $ 0.36, exercisable
immediately for a period of three years. These options were exercised during 2000. The
Company recorded compensation expenses of $ 20, based on the fair value of the
service, which was carried to shareholders equity.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
of December 31, 2003, an aggregate of 530,000 Ordinary shares of the Company are still
available for future grant.
| | ---------------------------------------------------------------------------------------------------------------------

| | 3. | Under
the Companys 2001 stock option plan (the 2001 plan),           options
may be granted to officers, directors and employees of the Company or           its
subsidiaries.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Pursuant
to the plan, the Company reserved for issuance 1,500,000 Ordinary shares. As of December
31, 2003, an aggregate of 590,000 Ordinary shares of the Company are still available for
future grant.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | After
the balance sheet date the Company granted additional 360,000 options to directors and
the general manager.
| | -----------------------------------------------------------------------------------------------------------------

| | The
options which were granted under this plan have a three to five year vesting term and
will expire 10 years after the grant date.
| | ------------------------------------------------------------------------------------------------------------------------------------

| | Any
options that are canceled or forfeited before expiration become available for future
grants.
| | ------------------------------------------------------------------------------------------------

F - 29

---

---

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

|NOTE 9:- |  | SHAREHOLDERS EQUITY
(Cont.)
|-------- |  | ----------------------------

| | 4. | A
summary of the Companys stock option (except options to associates)
          activity and related information for the years ended December 31, is as
follows:
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                  | Number of
options | Exercise price | Weighted
average
exercise price
|--------------------------------- | ----------------- | -------------- | -------------------------------
|
|
|
|
|Outstanding at January 1, 2001    |                   |                |                                
|Granted during 2001               |                   |                |                                
|                                  |                   |                |                                
|Outstanding at December 31, 2001, |                   |               
|2002 and 2003                     |                   |                |                                
|                                  |                   |                |                                

| | The
stock options  outstanding  and  exercisable  as of December 31, 2003 have been
                            classified into exercise prices as follows:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|Options outstanding | Options exercisable
|------------------- | -------------------
|
|
|
|
|$                   | 0.36               
|$                   | 0.70               
|                    |                    
|                    |                    
|                    |                    

| | 5. | Weighted
average fair value of options granted during 2001, whose exercise price
               equals the fair value of the stock in the date of grant was $ 0.13.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6. | In
2004, the Board of Directors approved to grant 360,000 options to Directors
               at an exercise price of $0.40. Finalization of these grants is subject to
the                filing of an option plan with the Israeli Income Tax Authority.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 30

---

---

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

|NOTE 9:- |  | SHAREHOLDERS EQUITY
(Cont.)
|-------- |  | ----------------------------

| | d. | Warrants:
| | -- | ---------

| | As
for warrants granted to the Companys major creditor banks, the state of Israel and
a former controlling shareholder under the debt restructuring agreement, the state of
Israel and the banks were granted a total of 991,376 warrants (of which 462,666 warrants
were granted in respect of the guaranteed loans). Each of which is exercisable to
purchase one company share for 0.002 over a five-year period commencing March 1, 1999.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
former controlling shareholder received 2,249,893 warrants at the terms and conditions as
those applying to the warrants that were issued to the banks and the state of Israel. The
fair value of the warrants granted to the banks, the state of Israel, a former
controlling shareholder and the Company under his control, approximately $363  was
carried to capital deficiency.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | After
the balance sheet date all of the warrants were forfeited.
| | ----------------------------------------------------------------

|NOTE 10:- |  | INCOME
TAXES
|--------- |  | ------------

| | a. | Tax
in Israel:
| | -- | --------------

| | Measurement
of results for taxable income under the Income Tax (Inflationary Adjustments) Law, 1985
(the inflationary adjustments law)
| | ----------------------------------------------------------------------------------------------------------------------------------------

| | Results
for tax purposes are measured in terms of earnings in NIS after certain adjustments for
increases in the Israeli Consumer Price Index (CPI). As explained in Note 2b,
the financial statements are measured in U.S. dollars. The difference between the annual
change in the Israeli CPI and in the NIS/dollar exchange rate causes a further difference
between taxable income and the income before taxes shown in the financial statements. In
accordance with paragraph 9(f) of SFAS No. 109, the Company has not provided deferred
income taxes on the difference between the functional currency and the tax bases of
assets and liabilities. The Company and its Israeli subsidiaries are taxed under this law.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Israeli
tax reform:
| | -------------------

| | On
July 24, 2002, Amendment 132 to the Israeli Tax Ordinance (the Amendment) has
approved by the Israeli parliament and came into effect on January 1, 2003, the principal
objectives of the Amendment were to broaden the categories of taxable income and to
reduce the tax rates imposed on employees income.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
material consequences of the Amendment applicable to the Company include, among other
things, imposing a tax on all income of Israeli residents, individuals and corporations,
regardless of the territorial source of income and certain modifications in the qualified
taxation tracks of employee stock options.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
June 29 2004 an amendment to the Israeli tax law has been approved by the Israeli
parliament, which reduces the tax rates imposed on Israeli companies to 35% for 2004;
this amendment states that the company tax rate will be further reduced in subsequent tax
years to 30%.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 31

---

---

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

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

| | b. | Income
(loss) before taxes on income consists of the following:
| | -- | ---------------------------------------------------------------

|                  | Year ended December 31,
|----------------- | -----------------------
|
|
|
|
|Domestic (Israel) |                        
|Foreign           |                        
|                  |                        
|                  |                        
|                  |                        

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

|                              | Year ended December 31,
|----------------------------- | -----------------------
|
|
|
|
|Deferred taxes - foreign      |                        
|Prior years tax reimbursement |                        
|                              |                        
|                              |                        
|                              |                        

| | 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,
|------------------------------------------------ | -----------------------
|
|
|
|
|Income (loss) before taxes on income             |                        
|                                                 |                        
|Statutory tax rate                               |                        
|                                                 |                        
|Theoretical tax expenses (income)                |                        
|Tax benefits for which deferred taxes were not   |                        
|recorded                                         |                        
|Deferred tax on losses for which valuation       |                        
|allowance was provided                           |                        
|Prior years tax reimbursement                    |                        
|Utilization of operating carry forward tax       |                        
|losses for which a valuation allowance was       |                        
|provided                                         |                        
|Effect of different tax rates in other countries |                        
|Non-deductible expenses                          |                        
|Change due to currency rate fluctuation          |                        
|Other                                            |                        
|                                                 |                        
|Taxes on income in the statements of operations  |                        
|                                                 |                        

F - 32

---

---

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

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

| | e. | Current
taxes are calculated at the following rates:
| | -- | ----------------------------------------------------

|                         | Year ended December 31,
|------------------------ | -----------------------
|
|
|
|
|On Israeli operations    |                        
|On German operations (*) |                        

| | (*) | 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,
|------------------------------------------- | ------------
|
|
|
|
|Deferred tax assets:                        |             
|Net operating losses carryforwards          |             
|Other - net                                 |             
|                                            |             
|Total deferred tax assets                   |             
|Valuation allowance for deferred tax assets |             
|                                            |             
|Net deferred tax assets                     |             
|                                            |             
|Domestic                                    |             
|Foreign                                     |             
|                                            |             
|                                            |             
|                                            |             

| | (*)
Reclassified
| | ----------------

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

| | 1. | The
Company and its Israeli subsidiaries:
| | -- | -----------------------------------------

| | Carryforward
tax losses at December 31, 2003 aggregated approximately $ 14,346. The carryforward
tax losses are linked to the Israeli CPI and may be carried forward and offset against
taxable income in the future for an indefinite period
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | German
subsidiary:
| | -- | ------------------

| | As
of December 31, 2003, this subsidiary has $ 3,856 and $6,618 carryforward tax losses
for trade tax and corporate tax respectively. In Germany, there is no time limit for
utilizing carryforward tax losses.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 33

---

---

|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. | Transactions
with related parties:
| | -- | ----------------------------------

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

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

|                                               |  | 
|---------------------------------------------- |  | 
|
|
|
|
|Debt balance:                                  |  | 
|                                               |  | 
|Other accounts receivable and prepaid expenses |  | 
|                                               |  | 
|Long-term receivable                           |  | 
|                                               |  | 
|Credit balance:                                |  | 
|                                               |  | 
|Trade payables                                 |  | 
|                                               |  | 
|Other accounts payable and accrued expenses    |  | 
|                                               |  | 

|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.
| | -----------------------------------------------------------------------------------------------------------------------------

F - 34

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---

|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, 2003, 2002 and 2001:
| | --------------------------------------------------------------------------------------------------------------------------------------------------

|                | Year ended December 31,
|--------------- | -----------------------
|
|
|
|
|Germany         |                        
|Other           |                        
|                |                        
|                |                        
|Sales discounts |                        
|                |                        
|Sales, net      |                        
|                |                        

| | The
Company has 5 major customers, which constitute approximately 58% and 60% of total
revenue in 2003 and 2002, respectively.
| | ------------------------------------------------------------------------------------------------------------------------------

| | Sales
to major customers as a percentage of total sales were as follows:
| | ------------------------------------------------------------------------

|           | Year ended December 31,
|---------- | -----------------------
|
|
|
|
|Customer A |                        
|Customer B |                        
|Customer C |                        
|Customer D |                        
|Customer E |                        

|NOTE 13:- |  | SELECTED
STATMENTS OF OPERATIONS DATA
|--------- |  | -------------------------------------

| | a. | Other
income:
| | -- | -------------

|                               | Year ended December 31,
|------------------------------ | -----------------------
|
|
|
|
|Loss from sale of fixed assets |                        
|Rent                           |                        
|Gain from sale of a subsidiary |                        
|Other                          |                        
|                               |                        
|                               |                        
|                               |                        

| | b. | Financial
expenses, net:
| | -- | ------------------------

|                            |  |  | 
|--------------------------- |  |  | 
|
|
|
|
|Income from deposits        |  |  | 
|Interest on long-term loans |  |  | 
|Other                       |  |  | 
|                            |  |  | 
|                            |  |  | 
|                            |  |  | 

F - 35

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Exhibit Index

|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              |  | Guarantee Agreement, dated January 24, 2001, by and
  between Gilex Holdings B.V. and Robomatix Technologies Ltd. (1)                                                                                                                             
|                 |  |                                                                                                                                                                                                                                                   
|4.2              |  | Translation of Robomatixs Application for Provision
  of Credit from Bank Hapoalim, dated January 18, 2001 (1)                                                                                                                                   
|                 |  |                                                                                                                                                                                                                                                   
|4.3              |  | Summary Translation of a Letter of Undertaking,
  dated January 18, 2001, by Robomatix for the benefit of Bank Hapoalim (1)                                                                                                                       
|                 |  |                                                                                                                                                                                                                                                   
|4.4              |  | Translation of a Debenture, dated January 18, 2001,
  issued by Robomatix Technologies Ltd. for the benefit of Bank Hapoalim and
  Schedule A thereto  (1)                                                                                        
|                 |  |                                                                                                                                                                                                                                                   
|4.5              |  | Translation of an Undertaking, dated January 18,
  2001, by Robomatix Technologies Ltd. for the Benefit of Bank Hapoalim (1)                                                                                                                      
|                 |  |                                                                                                                                                                                                                                                   
|*4.6             |  | 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)                                         
|                 |  |                                                                                                                                                                                                                                                   
|4.7              |  | 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)

58

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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|**4.8 |  | 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).
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.9   |  | 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)                                                                                                                                                                                                
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.10  |  | 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)                                                                                                                                                                                                                    
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.11  |  | 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 2002 20-F filed with the
  Securities Exchange Commission on June 30, 2002)                                                                                                                                                           
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.12  |  | Share Purchase Agreement,
  dated as of September, 2002 by and between Robomatix Technologies Ltd. and
  SPL Software Ltd. (incorporated by reference to the 2002 20-F filed
  with the Securities Exchange Commission on June 30, 2003)                                                                                                                                                                              
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.13  |  | 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.                                                                                                                                                                  
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.14  |  | 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.
  (incorporated by reference to the 2002 20-F filed with the Securities
  Exchange Commission on June 30, 2003)                                                      

59

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|     |  |                                                                                                                                                                                                                                                                                                                                    
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.15 |  | Summary of Consulting
  Agreement, dated as of November 19, 2002, by and between Robomatix
  Technologies Ltd. and Israel Land Development Insurance Company Ltd.
  (incorporated by reference to the 2002 20-F filed with the Securities
  Exchange Commission on June 30, 2003)                                                  
|     |  |                                                                                                                                                                                                                                                                                                                                    
|4.16 |  | 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 (incorporated
  by reference to the 2002 20-F filed with the Securities Exchange Commission
  on June 30, 2003)                                     
|     |  |                                                                                                                                                                                                                                                                                                                                    
|4.17 |  | Summary of Share Purchase
  Agreement, dated as of December 19, 2003 by and among Robomatix Technologies
  Ltd., Associative Computing Ltd. and Benny Konstantin (incorporated by
  reference to the 2002 20-F filed with the Securities Exchange Commission on
  June 30, 2003)                                                   
|     |  |                                                                                                                                                                                                                                                                                                                                    
|4.18 |  | 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. (incorporated by reference to the
  2002 20-F filed with the Securities Exchange Commission on June 30, 2003)
|     |  |                                                                                                                                                                                                                                                                                                                                    
|4.19 |  | Summary of Agreement,
  dated as of March 31, 2003 by and between Robomatix Technologies Ltd. and
  Berger Holdings 1 (1992) Ltd. (incorporated by reference to the 2002
  20-F filed with the Securities Exchange Commission on June 30, 2003)                                                                                    
|     |  |                                                                                                                                                                                                                                                                                                                                    
|4.20 |  | Summary of Agreement,
  dated as of June 3, 2004 by and between Robomatix Technologies Ltd. and Eyal
  Raef Adv., as trustee for un-named parties                                                                                                                                                                                  
|     |  |                                                                                                                                                                                                                                                                                                                                    
|8.1  |  | List of Significant Subsidiaries                                                                                                                                                                                                                                                                                                   
|     |  |                                                                                                                                                                                                                                                                                                                                    
|11   |  | Code of Ethics                                                                                                                                                                                                                                                                                                                     
|     |  |                                                                                                                                                                                                                                                                                                                                    
|12.1 |  | Certification by Chief Executive Officer pursuant to
  section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                               
|     |  |                                                                                                                                                                                                                                                                                                                                    
|13.1 |  | Certification by Chief Executive Officer pursuant to
  section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                               
|     |  |                                                                                                                                                                                                                                                                                                                                    

---

(1)
Previously filed with the Securities and Exchange Commission on January 31,
2001 as part of Form 6-K for the month of January, 2001, and incorporated by
reference herein.

60

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---

*Although the agreement
has not yet been executed by the parties, the enclosed draft was the form of
agreement approved by our shareholders and the parties are acting pursuant to
its terms.
**Confidential treatment requested as to certain portions, which portions were
omitted and filed separately with the Securities and Exchange Commission.

61

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