UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                  Form 20-F

(Mark One)

[  ]  REGISTRATION STATEMENT PURSUANT TO SECTION 12 (b) OR (g) OF THE
      SECURITIES EXCHANGE ACT OF 1934

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

For the fiscal year ended December 31, 1998

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

For the transition period from ____ to ____

                        Commission File Number 0-26498

                             NUR MACROPRINTERS LTD.       
            (Exact Name of Registrant as specified in its charter)

                                     ISRAEL 
                 (Jurisdiction of incorporation or organization)

                             5 David Navon Street
                         Moshav Magshimim 49001, Israel 
                   (Address of principal executive offices)

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,
                              NIS 1.0 PAR VALUE
                                Title of Class

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:

                               ORDINARY SHARES,
                              NIS 1.0 PAR VALUE
                                Title of Class

      Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of December 31, 1998:

                               ORDINARY SHARES,
                        NIS 1.0 PAR VALUE 10,880,000 
                       Title of Class Number of 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 preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes    No X

      Indicate by check mark which financial statement item the registrant
has elected to follow.  Item 17   Item 18   X  

<PAGE>

           In addition to historical information, this Annual Report on Form
20-F contains forward-looking statements. The forward-looking statements
contained herein are subject to certain risks and uncertainties that could cause
actual results to differ materially from those reflected in the forward-looking
statements. Factors that might cause such difference include but are not limited
to, those discussed in "Item 1: Description of Business--Risk Factors" and "Item
9: Management's Discussion and Analysis of Financial Condition and Results of
Operations" readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's analysis as of the date
hereof. The company undertakes no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that arise after
the date hereof. In addition to the disclosure contained herein, readers should
carefully review any disclosure of risks and uncertainties contained in other
documents that the company files from time to time with the Securities and
Exchange Commission.


                                    PART I

ITEM 1:     DESCRIPTION OF BUSINESS

General

      NUR Macroprinters Ltd. (the "Company") is a world leader in the superwide
format printing market. The Company develops, manufactures, sells, and services
digital printing systems for on-demand, short-run, wide format ("WF") and
superwide format ("SWF") printing. The Company also supplies inks and print
substrates essential to the operation of the Company's printers.

      In early 1997, the Company introduced the NUR Blueboard printer, a second
generation SWF printer, which prints on substrates of variable widths from 0.9
to 5.0 meters (approximately 3 to 16.4 feet). The NUR Blueboard printer is
designed for high throughput, high print quality, and ease of use. In April
1998, the Company introduced a faster version of the NUR Blueboard printer, the
NUR Blueboard 2, in response to demand in the SWF printing industry for
increased productivity. In February 1999, the Company introduced the NUR
Blueboard HiQ, which produces higher quality prints with higher resolution than
the market leading NUR Blueboard and NUR Blueboard 2 printers. The NUR Blueboard
printer, the NUR Blueboard 2 printer, the NUR Blueboard HiQ and their upgrades
are referred to herein collectively as the "NUR Blueboard Printers." Each of the
NUR Blueboard Printers is designed specifically for SWF applications and uses
the Company's piezo continuous ink-jet technology.

      Before the introduction of the NUR Blueboard printer, the Company's
principal products were its first generation SWF printers, the Outboard and
Wideboard printers. The Outboard printer, which is capable of printing in widths
of up to 1.6 meters (approximately 5 feet), was manufactured until the fourth
quarter of 1995. In the fourth quarter of 1995, the Company introduced the
Wideboard printer, which is capable of printing on substrates of variable widths
of up to 5 meters (16.4 feet). The NUR Blueboard Printers use continuous ink-jet
technology which involves the continuous flow of electrically conductive ink
within a closed loop that is deflected to a specific location on a sheet of
paper or other medium.

      The NUR Blueboard Printers are marketed primarily to commercial printers,
design and service firms, screen printers, outdoor media companies and graphic
trade shops. They are used for a variety of SWF format printing applications
including billboards, fleet graphics, wall murals, scaffolding coverings, museum
and trade show exhibits, shopping mall and airport displays and more. Because
superwide format applications are normally viewed from a distance outdoors,
printed images measure tens to thousands of square feet on outdoor durable
substrates. The superwide width of the NUR Blueboard printers helps reduce the
number of sections or "tiles" necessary to complete such large graphics.

      In September 1998, the Company acquired from Meital Technologies Ltd.
("Meital") all rights (including all related assets) to Meital's piezo
drop-on-demand inkjet technologies for application in WF digital printers for
approximately $3.0 million. Drop-on-demand technology ("D-O-D") involves the
firing of ink drops when needed on the substrate while the printing head travels
across the substrate. Subsequently, the Company recently introduced the NUR
Fresco, a new printing system, which is still in beta testing, targeted at the
WF (widths of up to 1.8 meters (6 feet)) screen printing environment. The NUR
Fresco is a high quality digital production press, bringing a


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combination of speed and productivity to the WF market. The Company believes
that the NUR Fresco offers for the first time a more cost-effective digital
alternative to screen printing presses.

      The NUR Fresco will be marketed primarily to WF screen printers as a
technological replacement to the screen printing press. Using the NUR Fresco,
screen printers can now produce WF graphics on demand in considerably less time
and at a lower cost for most shorter runs. Images produced on the NUR Fresco are
typically much smaller than the SWF applications of the NUR Blueboard printers
and include posters, banners, point-of-purchase displays, transit advertising,
vehicular graphics, airport and mall displays, etc. The shorter viewing
distances of these graphics require the higher resolution capability of the
piezo D-O-D inkjet technology on which the NUR Fresco is based. The Outboard
printer, Wideboard printer, the NUR Blueboard printers and the NUR Fresco are
referred to collectively herein as the "Company's Printers."

      The Company also sells specialized inks and substrates for use in the
Company's Printers. The inks are manufactured by a subcontractor and the result
of extensive development and continuous testing by the Company to ensure their
purity, optical density, lightfastness and water-resistancy on a variety of
substrates. The substrates are developed by the Company's wholly-owned
subsidiary, NUR Media Solutions S.A. ("NUR Media Solutions"), and are
manufactured for the Company by several different suppliers. The Company sells
NUR-branded substrates that have outdoor durability and image quality warranties
on their performance when used with the Company's Printers and inks.

      The Company was incorporated as an Israeli corporation on July 29, 1987.
The Company's Ordinary Shares have been traded on the NASDAQ National Market
since October 1995. The Company's trading symbol is NURM.

Industry Background

      The market for printed applications requiring WF and SWF printing has
expanded over the last few years. WF and SWF printing applications include
billboards, posters, and banners; special event and trade show displays; point
of purchase displays; fleet graphics; decorations and backdrops. For example,
the retail, automotive, cigarette and tobacco, restaurant, travel, and gasoline
industries use outdoor advertising to promote their products in locations
including roadside billboards and posters displayed on streets and buildings, as
well as the outside of buses, vans, trucks, and trains, so-called vehicular
graphics. WF and SWF prints can also be found in theaters as stage decorations,
in museums and exhibitions as backdrops or displays, and on construction sites
as building site coverings. Prior to the introduction of digital printing
systems, WF and SWF short-run prints were produced either by hand painting,
which is relatively slow and expensive, and produces lesser quality images, or
by screen or offset printing, both of which are relatively expensive and time
consuming processes.

      With the cost of digital printing expected to decrease and the ability of
digital technology expected to produce shorter runs more economically, the
Company believes that the use of WF and SWF prints, such as those produced by
the Company's Printers, should grow, and that the portion of the market serviced
by digital printing should increase. The ability to produce WF and SWF images
digitally has also opened new media opportunities for advertisers, such as mural
printing, carpet printing, new forms of fleet graphics printing. The growth in
demand for WF and SWF digital printers, is fueled by both the replacement of
conventional print methods and the development of new printing applications.

Traditional WF and SWF Printing Methods

      Conventional methods of WF and SWF printing have included hand painting,
screen printing, and offset printing. Generally, producing WF and SWF color
prints by traditional methods in relatively short runs from a few copies to a
few hundred copies, depending on the application, has either been relatively
slow and expensive or of limited quality. Because of the inherent limitations of
the traditional WF and SWF printing methods, quality WF and SWF prints produced
by these methods are generally limited to long runs of identical prints,
designed and prepared well in advance or, in the case of hand painting, to
single print applications. As a result, traditional methods of producing WF and
SWF prints have not provided timely and economic solutions for the needs of the
short run printing market.

                                       3
<PAGE>

      Hand Painting. Hand painting involves either the projection of an image
onto a substrate, which is then drawn onto the substrate and subsequently
painted by hand, or the spraying of paint onto material covered by a template
that has been cut to the desired shape. The process of hand painting is an
alternative mainly in developing countries where labor costs are significantly
lower and where the significantly lower image quality is tolerated by the local
market

      Screen Printing. The screen printing process is distinguished by its
ability to print finely detailed images on practically any surface, including
paper, plastics, metals, and three-dimensional surfaces. However, the process
requires significant set-up time and materials cost before the image can be sent
to press. This cost constrains the minimum number of copies the screen printer
can produce economically. As screen printing is a highly labor-intensive
process, it is best suited for run lengths between 50 to 400 copies. Hence, this
market is a clear target in which the Company believes its digital printers can
be highly competitive.

      Offset Printing. Offset color printing generally produces very high
quality images compared to hand painting or screen printing. However, because of
the complex steps involved in offset color printing, each printing job, whether
small or large, involves substantial setup time and costs. In addition, much
like hand painting and screen printing, alterations and customizations are not
economically feasible unless the entire offset color printing process is
repeated. Another drawback is that the variety of substrate materials and widths
suitable for use with offset printing machinery is limited. In general, offset
color printing is best suited for long print runs.

   WF and SWF Digital Printing

      The introduction of digital printing is aiding in the transformation of
the WF and SWF printing industry by lowering setup costs, shortening turnaround
time, and reducing labor requirements. The Company believes that the
availability of WF and SWF digital printing should lead to an increase in demand
for limited runs for customized and localized advertising campaigns. In
addition, the Company believes that single use applications, such as the use of
banners, displays, and backdrops for trade shows, theme parks, entertainment,
and special events, should become more popular. The Company believes that the
market for WF and SWF printing should increase as current applications gain
market acceptance and as new applications are developed.

      Digital printing involves the production of hard-copy images and text from
digital data that is either generated on a computer at the printing site or
originated by a customer on the customer's computer system. The digital data is
then transferred directly from an electronic pre-press or desktop publishing
system to the digital printer. There are currently several digital printing
technologies available, including electrostatic, airbrush, D-O-D, thermal
transfer, and continuous ink-jet printing.

      Electrostatic Printing. Electrostatic printing is a non-impact printing
technique that employs an array of metal styli, selectively pulsed to a high
potential to generate a charged latent image on dielectric-coated paper, which
is then toned to develop the latent image into a visible image. The achievable
printing resolution is up to 400 dots per square inch ("DPI"). The main drawback
of the technology is the need for special and expensive substrates and toners.
This requirement inflates the cost of consumables considerably.

      Thermal Transfer Printing. Thermal transfer printing is a contact printing
technology that employs arrays of heated needles and pressure to melt and
transfer wax based inks from a carrier roll onto a restricted variety of
substrates. Like electrostatic printing, thermal transfer printing requires
relatively expensive consumables.

      Airbrush Printing. Airbrush printing is accomplished by forcing a low
viscosity colored fluid through small aperture nozzles, thus creating a spray
jet. Computer driven modulation of the spray jets deposits an image-wise colored
layer deposited onto the substrate. The strongest feature of airbrush technology
is the printer's ability to cover large areas with uniform color. One
manufacturer of airbrush printers produces a printer that can also print on both
sides of a poster at the same time, which is important for signs that are
rear-illuminated.

      Piezo Continuous Ink-Jet Printing. Continuous ink-jet technology involves
the continuous flow of electrically conductive ink within a closed loop that is
deflected to a specific location on a sheet of paper or other medium. The ink is
separated into uniform micro-drops and the micro-drops are electronically
directed to be printed


                                       4
<PAGE>

onto a selected area of the medium. Continuous ink-jet technology allows for
high speed printing and produces images with good resolutions sufficient for
viewing from distances of beyond five feet. Continuous ink-jet printers also
produce multiple copies with consistent color quality, unlike airbrush printers.
The cost of equipment using continuous ink-jet technology is relatively high in
comparison to printers using electrostatic technology. However, the cost of the
output produced with continuous ink-jet printers is lower than that of
electrostatic printers. Although the printer and printing costs of continuous
ink-jet and airbrush technology are comparable, continuous ink-jet printers
produce higher quality prints at higher speeds and with more consistent color.

      Piezo D-O-D Ink-Jet Printing ("D-O-D"). D-O-D technology involves the
firing of ink drops when needed on the substrate while the printing head travels
across the substrate. Until recently, this technology was limited to dye-based
inks that are not suitable for outdoor use. However, several new D-O-D printers
that use pigment inks, which are suitable for outdoor use, are now available.
The Company has chosen to implement the D-O-D technology in its NUR Fresco,
intended for the WF market which requires a shorter viewing distance and a
higher resolution image.

      The Company believes that its NUR Blueboard printers are currently the
only commercially available SWF digital printers using piezo continuous inkjet
technology. Although not the only D-O-D printer available for the WF market, the
Company believes that the NUR Fresco is the best suited to the WF screen
printing market. The Company believes that the Company's Printers have been
designed and engineered to fit the overall needs of their respective WF and SWF
printing markets.

      The Company's strategy is to:

            o     strengthen its position as a world leader in the SWF printing
                  market by supplying the most productive and cost-effective
                  digital SWF printers;

            o     introduce WF digital ink jet printers to replace a significant
                  portion of the WF screen printer process;

            o     be the vendor of choice for all its customers' ink and
                  substrate needs;

            o     enable its customers to develop new ways to profit from the
                  Company's printing systems; and

            o     provide its customers with highly responsive and capable
                  support, service and supplies.

Products

   Printers

      The Outboard printer, which was introduced in 1992, was the Company's
first product, and, until the end of 1995, its principal product. The Outboard
printer is capable of producing WF prints in widths of up to 1.6 meters. In the
fourth quarter of 1995, the Company introduced the Wideboard printer, which was
the Company's first generation SWF printer and its principal product in 1996.
The Wideboard printer is capable of producing prints of widths of 5 meters. The
Company has discontinued the manufacture of the Outboard printer and of the
Wideboard printer. The Company plans, however, to provide further enhancements
and upgrades to its Outboard and Wideboard installed base.

      Since the beginning of 1997, the Company has been marketing and selling
the NUR Blueboard Printer, a second-generation SWF printer that is also capable
of producing prints of up to 5 meters in width with practically no limit on the
length of the print. The NUR Blueboard is designed for high throughput, high
print quality, and ease of use. When wider widths of prints are required, the
NUR Blueboard Printer, as is the case with the other Company's Printers, creates
a print layout in sections that, when sealed and placed together, create a
continuous image due to the NUR Blueboard Printer's high level of color
consistency and accuracy.

      In April 1998, the Company introduced a faster version of the NUR
Blueboard printer, the NUR Blueboard 2 printer, in response to demand in the SWF
printing industry for increased productivity. In addition, the Company announced
that all NUR Blueboard Printers are upgradable to the new double speed version
for an additional fee. The NUR Blueboard Printers are currently the Company's
main hardware products. In February 1999, the Company


                                       5
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introduced the NUR Blueboard HiQ, part of the NUR Blueboard family of products,
with higher print quality and higher resolution than the market leading NUR
Blueboard printers. The NUR Blueboard HiQ is available both as an upgrade to
existing NUR Blueboard printers and as a new product delivered from the
manufacturer. The NUR Blueboard Printers are all based on piezo continuous
inkjet technology, which is particular suitable for the superwide format market
due to its outdoor durable inks, color consistency, high reliability and
adaptability for use with a variety of substrate materials including vinyl,
carpet, canvas, tarpaulin and mesh.

      The NUR Blueboard Printers accept a wide variety of rolled substrates,
differing in types and sizes, with a new design feeding mechanism that allows
for ease of loading and unloading of substrate rolls weighing 330 lbs. or more.
The NUR Blueboard Printers are unique in that they are able to print at their
respective top speeds (up to 320 sq. ft./hr. for the NUR Blueboard and up to 650
sq. ft./hr for the NUR Blueboard 2 and NUR Blueboard HiQ) while printing at
their respective highest visual resolutions (70 DPI for the NUR Blueboard and
NUR Blueboard 2 and 150 DPI for the NUR Blueboard HiQ). The NUR Blueboard
Printers' software accepts many popular types of image formats (such as TIFF,
CT, JPEG, BMP, and PostScript) and images with various resolutions, and converts
them automatically for printing. In addition, the NUR Blueboard Printers'
software can be connected to any communication configuration supported by the
operating system, which enables smooth integration of the printers in the
pre-press environment for higher productivity. The NUR Blueboard Printers'
operating software is based on Microsoft Corporation's Windows NT multitasking
operating system which enables printing while preparing the next job for print.
The software has sophisticated color correction tables that enable the printers
to match color output according to substrate characteristics.

      The NUR Blueboard printers are marketed primarily to commercial printers,
design and service firms, screen printers, outdoor media companies and trade
shops for shorter run, WF and SWF printing. The Company's NUR Blueboard Printers
reproduce images with visual resolutions of 70-150 DPI, which allows for
superior viewing from distances of at least 5-10 feet or more, depending on the
image file resolution. The Company's NUR Blueboard Printers are capable of
producing millions of distinctive colors. Thanks to the constant ink monitoring
and control built into its continuous ink-jet printing technology, the Company's
NUR Blueboard Printers achieve a high level of color consistency for copies
printed at different times and under different environmental conditions in the
shop. Generally, depending upon the required print resolution, the Outboard
printer operates at speeds of between 200 to 600 sq. ft./hr; the Wideboard
printer operates at speeds of between 100 to 300 sq. ft./hr; the NUR Blueboard
printer operates at speeds of up to 300 sq. ft./hr; and the NUR Blueboard 2 and
NUR Blueboard HiQ operate at up to 600 sq. ft./hr.

      The Company's NUR Blueboard Printers are digital roll-fed presses that
accept a wide range of substrates. They print directly from digital data, using
no printing plates. The Company's Printers can be operated in a standalone mode
or in conjunction with pre-press and desktop publishing systems. When configured
with a pre-press system, the pre-press workstation prepares the digital file
containing the specifications for the output to be produced.

      The Company's NUR Fresco printer, also introduced in February, 1999 and
still in beta testing, is specifically aimed at the WF markets. It produces
full-color images up to six feet wide on a variety of substrates at a much
higher 360 DPI and up to 1000 square feet per hour. The Company believes that
the NUR Fresco is one of the first commercially available WF printers that can
produce outdoor-durable WF images of almost any length from a rolled substrate
economically at run lengths up to several hundred copies. This productivity
makes the printer particularly attractive to screen printers trying to reduce
the burden of high set-up costs for shorter length runs.

      The NUR Fresco is also based on piezo D-O-D inkjet technology. Much of the
expertise used in this printer had been developed by Meital. It is highly
suitable for the WF market due to its high resolution images and faster
throughput per unit cost of the print heads. The NUR Fresco complements the NUR
Blueboard Printers in that the Company's Printers cover a more complete and full
range of indoor and outdoor graphics.

      The Company's Printers require little operator supervision, enabling one
operator to run several machines at once. While an operator must be specifically
trained in the operation of a printer, no special color mixing skills are
required unlike conventional methods such as offset printing.

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<PAGE>

      The Company's Printers can significantly reduce the setup costs associated
with each print job, the skill level of the personnel required, and the number
of skilled personnel required as compared to traditional methods of WF and SWF
printing. These advantages make WF and SWF short-run color printing
significantly more economical than conventional printing methods. Additionally,
the relatively quick turnaround for the printed product enables the Company's
Printers to produce more output in a given period, thereby lowering the costs of
labor per print.

      Unlike hand painting, screen or offset printing, the layout can be viewed
through the pre-press workstation prior to printing, permitting last minute
fine-tuning. By running a single copy of the print, corrections of text,
enhancements of images, and additions of color can all be accomplished with
minimal time, effort, and cost. Additionally, since the format can readily be
changed, the Company's Printers allow the end-user to make each print in the run
different, with little time, effort, or additional cost. For example, if so
desired, different languages, graphics, and text can be added to each print in a
run.

      During the years ended December 31, 1996 and 1997 and, 1998, sales of the
Company's Printers accounted for approximately 56%, 55%, and 52%, respectively,
of the Company's total sales. Sales of spare parts used in the Company's
Printers accounted for approximately 9%, 6% and 4.6%, of total sales for the
years ended December 31, 1996, 1997 and 1998. Currently, the retail prices of
the Company's Printers generally range from $400,000 to $500,000 per machine.

   Consumables

      The NUR Blueboard Printers use a specialized solvent-based pigmented ink
designed for the needs of the SWF market. The ink is resistant to water and
ultraviolet rays, making it fairly durable and thus well-suited for outdoor
conditions. The Company's Printers, through the utilization of the ink, can
print on almost an unlimited variety of substrates, including numerous types of
paper, vinyl, cloth, textiles, mesh, and metals. The ink enables the output of
the Company's Printers to be used both for indoor and outdoor advertising.
During the years ended December 31, 1996, 1997, and 1998 sales of the ink
accounted for approximately 15%, 21% and 23.6%, respectively, of the Company's
total sales.

      This ink was developed jointly with Imaje S.A. ("Imaje"), a French ink
manufacturer, specifically for use in the Company's Printers. The Company has an
exclusive distribution and manufacturing agreement with Imaje for inks used in
the NUR Blueboard Printers.

      The NUR Fresco uses a specialized solvent-based pigmented ink designed for
the needs of the WF market. It also is highly-resistant to water and UV and
imparts more vibrant colors in the images printed using the NUR Fresco.

      In June 1998, the Company also began supplying, through its wholly owned
subsidiary in Belgium, NUR Media Solutions, cost-effective substrates designed
to work with the Company's Printers and its ink. The Company sells substrates
under the NUR brand name that are manufactured by several different suppliers
for the Company. The substrates are made of vinyl, PVC, paper, and mesh and are
suited for indoor and outdoor use. The substrates are distributed worldwide by
the Company's sales and service organizations. All NUR-branded materials are
manufactured exclusively for NUR Media Solutions.

Sales and Marketing

      The Company currently distributes and sells its products through its
wholly-owned subsidiaries, NUR Advanced Technologies (Europe) S.A. ("NUR
Europe"), NUR America, Inc. ("NUR America"), NUR Middle East & Africa, Ltd.
("NUR Middle East & Africa") and NUR Asia Pacific Ltd. ("NUR Asia Pacific"). The
Company engages in the sale and marketing of printed material produced by the
Company's Printers through M.NUR Marketing & Communications GmbH ("NUR Germany")
in Germany, a subsidiary in which the Company owns an 84% interest.

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<PAGE>

      Until the end of 1996, most worldwide sales of the Company's Printers had
been made through Scitex Corporation. Since the beginning of 1997, the Company
moved to direct distribution of its products starting from the Americas and
Europe. In February 1999, the Company established two additional sales
organizations, NUR Asia Pacific and NUR Middle East & Africa, to replace Scitex
Corporation's role as distributor of the Company's products in the Far East, the
Middle East and Africa. NUR Asia Pacific, a Hong Kong corporation, is currently
operating out of Hong Kong with the use of an office in Shanghai. NUR Asia
Pacific will offer full support of its customer base through the Company in
Israel until completion of the full registration of a wholly-owned subsidiary of
the Company under Chinese law and the subsequent transfer of its headquarters to
Shanghai. As part of its distribution efforts, NUR Asia Pacific recently entered
into a letter of intent with Mitsui & Co. Graphic System Ltd. for distribution
of the Company's products in Japan.

      The Company marketing activities include participating in relevant
tradeshows worldwide, advertising in trade publications, marketing directly to a
target base, as well as publishing its own newsletters, participating in
services and industry forums and maintaining an internet site. The Company has
also started to sell its consumable products through a dedicated intranet site.

      In April 1998, the Company renamed its previously established wholly-owned
subsidiary, NUR International, to NUR Media Solutions. NUR Media Solutions'
objective is to develop and market a wide range of advanced consumables for the
Company's WF and SWF printers. Included in such consumables are the Company's
cost-effective substrates, which are designed to work with the Company's
existing range of printers and inks and will be distributed worldwide by the
Company's sales and service organizations.

      The Israeli Government, through the Fund for the Encouragement of
Marketing Activities of the Ministry of Industry and Commerce (the "Marketing
Fund"), awards participation grants for marketing expenses incurred overseas,
including expenses for maintaining warehouses and branches, advertising,
catalogs, exhibitions and surveys. In the years ended December 31, 1991, 1992,
1993, and 1995, the Company received grants from the Marketing Fund totaling
approximately $0.4 million for the promotion of the Outboard Printer and the
MegaLight, a discontinued printer. In 1997, the Company received $0.2 million
for the promotion of the Company's exportation of its printers. In 1998, the
Company received $0.11 million for the same purpose. The Company did not receive
any grants in 1994 or in 1996. The Company is obligated to pay a royalty of 3%
of the export added value to the Marketing Fund until 100% of the grants have
been repaid. The value of the grants are linked to the U.S. dollar. As of
December 31, 1998, the Company had made royalty payments in respect of such
grants to the Marketing Fund totaling approximately $0.08 million.

Production and Sources of Supply

      The Company manufactures and assembles, through a subcontractor, the NUR
Blueboard Printers, directly performing the installation of the Company's
proprietary software into the NUR Blueboard Printers and full system integration
and acceptance testing of the printers. The mechanical assembly of the NUR
Blueboard Printers is carried out by an independent sub-contractor (the "NUR
Blueboard Assembler") at a facility located near the Company's operations in
Israel. The Company purchases most of the components comprising the NUR
Blueboard Printers from third parties.

      The Company believes that it can expand production to meet anticipated
increases in production, either through the NUR Blueboard Assembler, by
utilizing additional sub-contractors, or by directly undertaking assembly of the
NUR Blueboard Printers. The Company installs its computer software and performs
full system integration and acceptance testing of the NUR Blueboard Printers at
the NUR Blueboard Assembler's facility. Product quality control tests and
inspections are performed at various steps throughout the manufacturing process,
and each product is subjected to a final test prior to delivery.

      The Company obtains the ink-jet heads and the ink used in the NUR
Blueboard Printers from Imaje, the sole manufacturer and supplier of these
components. The Company has an exclusive distribution agreement for the ink with
Imaje dated June 26, 1995. The term of the agreement is currently on a year to
year basis and is renewed automatically on June 26 of each year, unless
terminated by either the Company or Imaje by three month advance written notice.
Pursuant to the agreement, Imaje has agreed to deposit the formula for the ink
with a public notary for the term of the agreement and a period of one year
thereafter. The Company has the right to obtain the formula


                                       8
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for the ink from Imaje, if during the term of the agreement, Imaje ceases to
operate as a going concern; ceases to manufacture the ink or to sell the ink to
the Company; or subject to certain conditions, fails to deliver the ink within
three months of a confirmed delivery date. In the case of any such event, if
Imaje does not deliver the formula to the Company within three months following
the Company's written request to obtain the formula, the public notary shall
release the formula to the Company. The Company believes that it will be able to
obtain and/or manufacture adequate supplies of the ink in the foreseeable
future.

      The Company also employs other unaffiliated subcontractors to manufacture
other components for its printers. The Company's subcontractors have, in the
past, been late in delivering components. The Company has, however, been able to
obtain adequate supplies of the components and raw materials necessary to
produce its printers and has not had any serious problems with its
subcontractors. As the Company's business grows, its will need to purchase
greater quantities of components on a timely basis; any delay in supply could
ultimately hurt its sales.

      The Company is currently establishing a facility for the manufacture
and assembly of the NUR Fresco printer from parts supplied by local and
international suppliers. Most of the components are available from several
sources, however, the D-O-D ink-jet print heads are currently purchased from
Modular Ink Technology ("MIT"), a Swedish company. The Company has contracted
with MIT to ensure the supply of print heads, however, uninterrupted supply
cannot be guaranteed.

Service and Support

      The Company's warranty to its direct customers and the Company's
distributors in most cases covers defects in the Company's Printers for a period
of six months after installation. In most cases the Company has a parallel
warranty from its suppliers and the NUR Blueboard Assembler with respect to most
of the components covered by the Company's warranty. The Company is also
committed to maintaining sufficient spare parts and materials necessary for the
operation of the Company's Printers for a period of five years after the
manufacturing date of the last NUR Blueboard Printer. Local service and support
is provided through all of the Company's subsidiaries.

Research and Development

      In September 1998, the Company purchased certain piezo D-O-D technology
from Meital. The Company purchased Meital's technology for an aggregate amount
of approximately $3 million, of which payment of $0.85 million is conditional
upon the success of the technology, and $0.9 million will be paid in future
installments. The Meital acquisition resulted in the recognition by the Company
of a one-time charge involving a write-off assigned to research and development
of $1.95 million ($1.6 million the third quarter of 1998 and $0.35 million in
the first and second quarters of 1998). As part of the purchase price, the
Company has future royalty obligations to Meital, during the next three years,
which will not exceed $1.3 million. If the Company does not meet its obligation
to pay minimum royalty payments or an amount equal thereto, the seller of the
technology will have the option to buy the technology back for approximately the
royalties paid by the Company to date.

      The Company's research and development efforts, currently engaging
approximately 30 employees, are focused on the development of new products and
technologies, as well as enhancing the quality and performance relative to price
of its existing products, reducing manufacturing costs and upgrading and
expanding its product line through the development of additional features and
improved functionality in response to market demand.

      There are two research and development facilities, the main facility at
the Company's headquarters in Israel and another smaller facility in Belgium.

      Total research and development expenses, before royalty bearing grants,
were approximately $1.53 million, and $1.73 million in the years ended December
31, 1996, and 1997, respectively, and $5.03 million in the year ended December
31, 1998, of which $1.95 million is related to the acquisition of technology
resulting in a one-time write-off assigned to research and development. Research
and development expenditures are comprised principally of salaries for
employees, the hiring of sub-contractors, capital investment in infrastructure
for software and electronic designs, and prototype material costs. Initially,
the Company relied on outside research and development.


                                       9
<PAGE>

The Company began its own research and development operations in early 1994. NUR
Europe received a grant from local authorities in Belgium for reimbursement of
up to 70% of its total research and development investment, which it carries out
in Belgium, up to approximately $1 million. If no revenues are derived from the
technologies and NUR Europe develops no products as a result thereof, then no
repayment of the grant is required. Should revenues be recognized from the
research and development efforts, a progressive 5-year repayment program would
be implemented. NUR Media Solutions has established a research and development
center in Belgium dedicated to the research and development of print substrates
and inks for use with the Company's Printers.

      In the past, the Company has received grants from the Government of
Israel, through the Office of the Chief Scientist (the "OCS"), for the
development of its systems and products, including the Outboard printer. The
Company received approximately, $0.37 million, $0.04 million and $0.82 million
in research and development grants from the OCS in the years ended December 31,
1996, 1997 and 1998, respectively. The OCS awards grants of up to 50% (and in
certain circumstances up to 66%) of a project's approved expenditures in return
for royalties. Under the terms of the Company's funding from the OCS, royalties
are payable generally at a rate of 2% to 3% on sales of products developed from
the funded project and ending when 100% to 150% of the dollar value of the grant
is repaid. No payments of such grant were made to OCS in the years ended
December 31, 1996 and 1997. As of December 31, 1998, the Company had a
contingent liability to pay OCS $1.1 million in future royalty payments. The
terms of these grants prohibit the manufacture of products developed with
government grants to be performed outside of Israel or the transfer out of
Israel of the technology developed pursuant to these grants without the prior
consent of the OCS. These restrictions do not bar exports from Israel of
products developed with such technologies. In addition, the know-how from the
research and development that is used to produce the product may not be
transferred to third parties or out of Israel without the approval of the OCS.

Competition

      The principal competitive factors affecting the Company's sales of its
products are their performance relative to price, productivity and throughput,
product features and technology, quality, reliability, cost of operation and
consumables, the quality and costs of training, support and service as well as
the flexibility of adapting to customers' applications of the products. Other
competitive factors include the ability to provide access to product financing,
the Company's reputation and customer confidence in the Company to continually
develop new products and product accessories that will help them maintain and
grow their business.

      The Company's main competitors in the SWF arena are Vutek, Signtech and
Matan Digital Systems (owned by Scitex Corporation). All three companies have
introduced products that directly compete with the NUR Blueboard Printers. In
the WF arena, the competitors are Idanit Technologies, Ltd. ("Idanit") (also
owned by Scitex), 3M Image Graphics, Vutek and Raster Graphics Inc. These
companies have introduced products that compete with the NUR Fresco printer. The
printing industry is large, and many of the Company's competitors possess
greater management, financial, technical, manufacturing, marketing, sales,
distribution, and other resources than those of the Company. As a result, there
can be no assurance that competitors will not develop and market products
utilizing new technology that are competitive in price and performance with the
Company's Printers, and there can be no assurance that the Company can compete
effectively with such products.

Trade Secrets, Patents and Proprietary Rights

      The Company currently relies on a combination of trade secrets, licenses,
and patents, together with non-disclosure and confidentiality agreements, to
establish and protect its proprietary rights in its products. No assurance can
be given that the Company's existing patents or any future patents by the
Company will not be challenged, invalidated, or circumvented, or that the
Company's competitors will not independently develop or patent technologies that
are substantially equivalent or superior to the Company's technology. See "Item
3: Legal Proceedings." There can be no assurance that further patent protection
will be obtained in Israel, the United States, or elsewhere, for existing or new
products or applications, or that such further protection, if obtained, will be
effective. In some countries, meaningful patent protection is not available. The
Company is not aware of any claims that its products infringe upon the
proprietary rights of third parties. However, there can be no assurance that
third parties will not assert infringement claims against the Company in the
future, and the cost of responding to such assertions, regardless of their
validity, could be significant. In addition, such claims may be found to be
valid and could result in awards against the Company, which could have a
material effect on the Company's business. As a result, the cost to the Company
of protecting its patent rights could be substantial. The Company believes that
its


                                       10
<PAGE>

success is less dependent upon the legal protection afforded by patent and other
proprietary rights than on the knowledge, ability, experience, and technological
expertise of its employees and its key suppliers. It is the Company's policy to
have employees sign confidentiality agreements, to have selected parties,
including key suppliers, sub-contractors, and distributors, sign non-competition
agreements, and to have third parties sign non-disclosure agreements. Although
the Company takes precautionary measures to maintain its trade secrets, no
assurance can be given that others will not acquire equivalent trade secrets or
otherwise gain access to or disclose the Company's proprietary technology, or
that the Company can meaningfully protect its rights to such proprietary
technology not subject to patent protection.

Employees and Labor Relations

      As of March 31, 1999, the Company employed approximately 120 persons
worldwide, about 25% of which in research and development. About 65 of these
employees are located at the Company's headquarters in Israel and the remainder
are located at the Company's subsidiaries. All of the Company's employees who
have access to confidential information are required to sign a non-disclosure
agreement covering all Company confidential information that they might possess
or to which they might have access.

      The Company believes its labor relations are satisfactory and has never
experienced a strike or work stoppage. The Company believes its future success
will depend, in part, on its ability to continue to attract, retain, motivate,
and develop highly qualified technical, marketing and sales, and management
personnel.

      Israeli law generally requires severance pay equal to one month's salary
for each year of employment upon the termination of employment. The Company's
liability for future severance pay obligations is fully provided for by payments
equal to 8.33% of an employee's salary each month made to various managers'
insurance policies and by accrual. The employees of the Company are usually
provided with an additional contribution towards their retirement that amounts
to 10% of wages, of which the employees' and the employer each contributes half.
Furthermore, Israeli employees and employers are required to pay predetermined
sums to the National Insurance Institute, which is similar to the United States
Social Security Administration, and additional sums towards compulsory health
insurance.

Insurance

      The Company believes that the insurance coverage for its business is in
accordance with industry standards and is adequate and appropriate in light of
the Company's businesses and the risks to which they are subject.

Risk Factors

      Investing in our shares is very risky. You should be able to bear a
complete loss of your investment. To understand the level of risk, you should
carefully consider the following risk factors, as well as the other information
found in this form.


We need additional           We  believe  that  our  revenues  from   operations
financing.                   together  with our  capital  resources  and  credit
                             facilities  will be  sufficient to fund our current
                             activities   at  their  present  rate  without  our
                             planned  expansion  through  July 2000.  If we want
      We need to raise more  to proceed with the planned expansion of our
      money to successfully  operations, we will require additional funds, to
      run our business.      be raised through public or private financing of
                             debt or equity, to ensure our ability to maintain
                             our operations after December 1999. If we are
                             unable to raise such funds, we will have to reduce
                             or eliminate certain planned expenditures for
                             research and development, production, or marketing
                             of our products, any one of which could have a
                             negative impact on our financial results. In this
                             regard, how much money we will need depends on
                             numerous factors, including the success of our
                             marketing and customer service efforts, our
                             research and development activities, and the demand
                             for our products and services. We cannot guarantee
                             that additional financing will be available or
                             that, if


                                       11
<PAGE>

                             available, it will be obtained on terms we
                             find favorable. We currently have no commitments
                             for additional financing.

We depend on a few key       We  are  highly  dependent  upon  the  sale  of our
products in a business       principal products,  the NUR Blueboard Printers and
subject to rapid             the  NUR   Fresco   printer.   Rapid   changes   in
technological change.        technology,   customer   preferences  and  evolving
                             industry standards increasingly characterize the
                             market for our printers. As a result of these
                             factors, our growth and future financial
                             performance will depend upon our ability to develop
                             and market new products and keep pace with the
                             latest technological advances in the industry. We
                             must also improve our existing products to
                             accommodate technological advances and customer
                             preferences. During 1997 and 1998, we
      Our success depends    invested approximately $1.72 million and $5.03
      on the research and    million, respectively, in research and development
      development of new     projects of which, in 1998, $1.95 million was
      products.              related to the acquisition of technology that
                             caused a one-time write-off assigned to research
                             and development. Our business could seriously
                             suffer if we fail to anticipate or respond
                             adequately to changes in technology and customer
                             preferences, or if our products are delayed in
                             their development or introduction. Other events
                             beyond our control could also hurt our business.
                             For example, one of our competitors could develop
                             and market a printer that customers prefer over our
                             printers. We cannot make assurances that we will
                             successfully develop any new products. Finally, we
                             cannot predict how the introduction of new products
                             by our competitors will affect sales of our
                             existing products.

      Our new product, the   The NUR Fresco was  introduced in February 1999 and
      NUR Fresco, is still   is still in beta  testing.  Much of our success may
      in beta testing.       depend  upon our  ability to  complete  testing and
                             introduce the product to its intended market.

Over the next three years    In  September  1998 we  acquired  all  rights  to a
we will make significant     certain D-O-D inkjet technology  suitable for large
royalty payments.            format  digital  printers.   Over  the  next  three
                             years we must pay royalty payments to the seller of
                             up to $1.3 million. If we do not make certain
                             minimum royalty payments, the seller of the
                             technology will have the option to buy-back the
                             technology. See "Item 9: Management's Discussion
                             and Analysis of Financial Condition and Results of
                             Operations--General--Certain Royalty Obligations."

Our success depends on our   We  currently  purchase all of the ink and ink-jets
suppliers and                used  in  our  NUR  Blueboard   Printers  from  one
subcontractors.              supplier,   Imaje,   a   French   manufacturer   of
                             ink-related products, and purchase all of our
                             ink-jet printheads used in the NUR Fresco from
                             another supplier. We have been able to obtain
                             adequate supplies of ink and ink-jets in the past,
                             although Imaje has occasionally delivered the
      Imaje is our only      supplies late. If these sole suppliers experience
      supplier of ink and    any problem that results in production delays, our
      ink-jets for the NUR   sales to new customers and existing customers that
      Blueboard Printers.    rely on our ink and/or ink-jet components to
                             operate their printers could be hurt. Because the
                             success of our business depends on the sale of our
                             printers, such a supply problem could have a severe
                             effect on our financial results. Also, if Imaje
                             reduces or changes the credit or payment terms it
                             extends to us, our business could be hurt.
 
      We rely on a limited   We   employ  a  limited   number  of   unaffiliated
      number of              subcontractors  to  manufacture  components for our
      subcontractors.        printers.   We  currently  employ  one  independent
                             sub-contractor to assemble our NUR Blueboard
                             printers. Our subcontractors have, in the past,
                             been late in delivering components. We have,
                             however, been able to obtain adequate supplies of
                             the components and raw materials necessary to
                             produce our printers and we have not had any
                             serious


                                       12
<PAGE>

                             problems with our subcontractors. Because we rely
                             on subcontractors, we cannot be sure that we will
                             be able to maintain an adequate supply of
                             components. Moreover, we cannot be sure that any of
                             the components we purchase will satisfy our quality
                             standards and be delivered on time. Our business
                             could suffer if we fail to maintain our
                             relationships with our subcontractors or fail to
                             develop alternative sources for our printer
                             components. Also, as our business grows, we will
                             need to purchase greater quantities of components
                             on a timely basis, and any delay in supply could
                             hurt our sales. We cannot guarantee that we will
                             develop alternative sources of production for our
                             products or that we would be able to replace the
                             sub-contractor that assembles our NUR Blueboard
                             printers, if required.

We recently replaced our     Scitex   Corporation  and  its  subsidiaries  were,
largest distributor with     through   1998,   the  most   significant   outside
our own distribution         distributors of our products,  concentrating in the
operation.                   Far East and the Middle  East.  In the fiscal years
                             ended December 31, 1997, and 1998, our sales to
                             Scitex Corporation and its subsidiaries accounted
                             for about 11.2% and 10.6% of our total sales,
                             respectively. In the first four months of 1999, we
                             replaced Scitex and its subsidiaries with our own
                             distribution operations in Shanghai, China and
                             Tel-Aviv, Israel. Our business could suffer as we
                             make such transition due to increased costs and
                             uncertainties associated with the development of
                             such business. Our business could also suffer if
                             our efforts prove unsuccessful.

Our business is extremely    The  printing   equipment   industry  is  extremely
competitive.                 competitive  and  many  of  our  competitors   have
                             greater    management,     financial,    technical,
                             manufacturing,  marketing, sales, distribution, and
                             other   resources   than  we  do.  Our  ability  to
                             compete  depends on factors both within and outside
                             of  our  control,  including  the  performance  and
      We have numerous       acceptance   of  our  current   printers   and  any
      competitors in the     products  we  develop  in the  future.  We  compete
      market for our         against  several   companies  that  market  digital
      printers.              printing  systems  based on  electrostatic,  D-O-D,
                             airbrush, and other technologies. We also face
                             competition from existing conventional WF and SWF
                             printing methods, including hand painting, screen
                             printing, and offset printing. Our competitors
                             could develop new products, with existing or new
                             technology, that could be competitive in price and
                             performance with our printers. We can offer no
                             assurance that we can compete effectively with any
                             such products.

      We also face           We also compete with  independent  manufacturers in
      competition in the     the market for  printer  supplies,  in  particular,
      market for printing    the inks we  supply.  In 1997 and  1998,  ink sales
      supplies.              accounted  for 21% and  23.6% of our  total  sales,
                             respectively. We cannot guarantee that we will be
                             able to remain the exclusive or even principal ink
                             manufacturer for our printers. We recently entered
                             the substrate business, which is also highly
                             competitive and characterized by a large number of
                             suppliers worldwide. We are developing substrates
                             through subcontractors that have a high added-value
                             when used with our printers. We believe we are well
                             positioned, both in our technical knowledge and in
                             the minds of our customers, to succeed in selling
                             high value-added substrates to our customers. We
                             can not assure you that we will be able to compete
                             effectively or achieve significant revenues in the
                             substrate business.

We depend on our key         Our success  depends to a  significant  extent upon
employees.                   the  contributions  of key personnel and our senior
                             executives. Our business could seriously suffer if
                             one or more of our key personnel or senior
                             executives were to leave our company. In addition,
                             we do not have, and do not contemplate getting,

                                       13
<PAGE>

                             "key-man" life insurance for any of our key
                             employees. Our future success will also depend in
                             part on our continuing ability to retain our key
                             personnel and senior executives and to attract
                             other highly qualified employees. We cannot assure
                             our continued success in attracting or retaining
                             highly qualified personnel.

We rely on trade secrets,    We  rely  on  a  combination   of  trade   secrets,
patents and proprietary      licenses,    patents,    and   non-disclosure   and
rights.                      confidentiality   agreements   to   establish   and
                             protect our proprietary rights in our products. We
                             cannot guarantee that our existing patents or any
                             future patents will not be challenged, invalidated,
                             or circumvented, or that our competitors will not
                             independently develop or patent technologies that
                             are substantially equivalent or superior to our
                             technology. We cannot be sure that we will receive
                             further patent protection in Israel, the United
                             States, or elsewhere, for existing or new products
                             or applications. Even if we do secure further
                             patent protection, we cannot guarantee it will be
                             effective. In some countries, meaningful patent
                             protection is not available. We are not aware of
                             any infringement claims against us involving our
                             proprietary rights. Third parties may assert
                             infringement claims against us in the future, and
                             the cost of responding to such assertions,
                             regardless of their validity, could be significant.
                             In addition, such claims could be found to be valid
                             and result in large judgments against us. Even if
                             such claims are not valid, the cost could be
                             substantial to protect our patent rights. See "Item
                             3: Legal Proceedings."

      It is difficult to     We believe that our success is less  dependent upon
      protect our            the legal  protection  afforded by patent and other
      proprietary rights.    proprietary rights than on the knowledge,  ability,
                             experience, and technological expertise of our
                             employees and our key suppliers. Our policy is to
                             have employees sign confidentiality agreements, to
                             have selected parties, including key suppliers,
                             sub-contractors, and distributors, sign
                             non-competition agreements, and to have third
                             parties that we deal with sign non-disclosure
                             agreements. Although we take precautionary measures
                             to protect our trade secrets, we cannot guarantee
                             that others will not acquire equivalent trade
                             secrets or steal our exclusive technology.
                             Moreover, we may not be able to meaningfully
                             protect our rights that are not protected by
                             patents.

We rely on international     Our printers and supplies are sold worldwide,  with
sales.                       revenues  generated  in various  currencies.  There
                             are a number of risks inherent in international
                             business activities, including unexpected changes
                             in regulatory requirements, political instability,
                             tariffs and other trade barriers, as well as the
                             burdens of complying with different foreign laws.
                             To date, fortunately, these risks have not
                             materially affected our business or financial
                             situation. We cannot predict, however, when
                             exchange or price controls or other restrictions on
                             the conversion of foreign currencies could impact
                             our business.

      Currency fluctuations  Because we have  revenues  and  expenses in various
      are a risk we face on  currencies,  including  the U.S.  dollar,  the NIS,
      a daily basis.         and  certain  European  currencies,  our  financial
                             results are subject to the effects of fluctuations
                             of foreign currency exchange rates. In the future,
                             currency fluctuations could hurt our profitability.
                             We do not hedge against fluctuations in currency
                             exchange rates, but we may do so in the future.

Environmental concerns.      We mix the ink used in our NUR  Blueboard  Printers
                             with a methyl  ethyl-ketone  ("MEK")  solvent.  MEK
                             is a hazardous  substance and is subject to


                                       14
<PAGE>

                             various government regulations relating to its
                             transfer, handling, packaging, use, and disposal.
                             We store the ink at warehouses in Europe, the
                             United States and Israel, and a shipping company
                             ships it at our direction. We face potential
                             responsibility for problems that may arise when we
                             ship the ink to customers. We believe that we are
                             in material compliance with all applicable
                             environmental laws and regulations. If we fail to
                             comply with these laws or an accident involving our
                             ink waste or MEK occurs then our business and
                             financial results could be adversely affected.

We rely on government        We have been favorably affected by certain Israeli
grants, tax benefits,        and Belgian Government programs and tax
other funding from and       legislation principally related to research and
third parties.               development and sales and marketing grants and
                             capital investment incentives. The Company's
                             operations could be adversely affected if these
                             programs or tax benefits are reduced or eliminated
                             and not replaced with equivalent programs or
                             benefits, or if the Company's ability to
                             participate in these programs were significantly
                             reduced. There can be no assurance that such
                             programs and tax legislation will continue in the
                             future or that the available benefits will not be
                             reduced or that the Company will continue to meet
                             the conditions to benefit from such programs and
                             legislation.

      We receive tax         Pursuant  to the Law of  Encouragement  of  Capital
      benefits from the      Investments,  the  Israeli  government  has granted
      Israeli government.    "Approved  Enterprise"  status  to  some  of  our
                             production facilities. Consequently, these
                             facilities are eligible for certain tax benefits
                             for the first several years in which they generate
                             taxable income. If we fail to obtain additional
                             grants, or if our tax benefits are significantly
                             reduced, our financial condition could suffer.

      We must comply with    To receive grants and tax benefits, we must comply
      conditions to receive  with a number of conditions. If we fail to comply
      grants and tax         with these conditions, the grants and tax benefits
      benefits.              that we receive could be partially or fully
                             canceled and we would be forced to refund the
                             amount of the canceled benefits received, adjusted
                             for inflation and interest. We believe that we have
                             operated and will continue to operate in compliance
                             with the required conditions, although we cannot be
                             sure. We further believe that the likelihood is
                             remote that we will be required to refund grants or
                             tax benefits that we receive from the OCS, the
                             Marketing Fund, and under our "Approved Enterprise"
                             status.

                                       15
<PAGE>

We have experienced          In    the    past    we    experienced    financial
financial difficulties in    difficulties.  As of  December  31,  1996,  we have
the past.                    written off $3.8 million due to  outstanding  debts
                             owed to us by Moshe Nur, our previous Chairman of
                             the Board and former major shareholder, and
                             companies controlled by Mr. Nur. These companies
                             are now in various insolvency proceedings. The
                             written off debts resulted, in part, from
                             ineffective controls, which failed to prevent
                             unauthorized transactions and the misappropriation
                             of funds. These difficulties resulted in losses of
                             $10.1 million in the year ended December 31, 1996,
                             and reduced our shareholders' equity to
                             approximately $1.8 million at such date. In April
                             1997, Moshe Nur transferred control of the Company
                             and subsequently resigned from the Board of
                             Directors. We have reached a settlement agreement
                             resolving all outstanding material claims related
                             to the insolvency proceedings of Moshe Nur and his
                             companies. Despite this settlement, in the future
                             we may be exposed to claims arising from Moshe
                             Nur's actions. Liabilities arising from any such
                             claims and the cost to defend our company may be
                             substantial.

We have recently changed     In April 1997, when Moshe Nur  transferred  control
our leadership and have      of NUR Macroprinters  Ltd., we replaced most of the
limited management           members  of our  Board of  Directors.  We also made
resources to manage future   several   management   changes  at  such  time  and
growth.                      recently changed our Chief Financial  Officer.  Our
                             recent growth has placed, and will continue to
                             place, a significant strain on our management team,
                             facilities, and other resources. In order to
                             support our growth, our new leadership adopted
                             financial controls and reporting systems and
                             expanded our management, facilities, financial, and
                             other resources. To avoid any negative effects on
                             our business, we must successfully implement
                             financial controls, expand our manufacturing,
                             sales, marketing, and service organizations, and
                             update our accounting, operational, and management
                             information systems. Failure to do so effectively
                             could have a material adverse effect on our
                             business and financial results.

Our operating results tend   Our  revenues may vary  significantly  from quarter
to fluctuate.                to  quarter as a result of,  among  other  factors,
                             the timing of new product announcements and
                             releases by our competitors and us. We do not
                             typically have a material backlog of orders at the
                             beginning of each quarter. We generally ship and
                             record a significant portion of our revenues for
                             orders placed within the same quarter, primarily in
                             the last month of the quarter. We may not learn of
                             shortfalls in sales until late in, or shortly after
                             the end of, such fiscal period. As a result, our
                             quarterly earnings may be subject to significant
                             variations.

      We have an uneven      We have an uneven  history  of  financial  results.
      history of financial   We  incurred  an  operating  loss of  approximately
      results.               $0.32  million  in 1991 and $0.22  million in 1992.
                             In 1993 we made an operating profit for the first
                             time, earning approximately $0.04 million, which
                             increased to approximately $0.92 million in 1994,
                             and to $1.49 million in 1995. In 1996 we incurred
                             an operating loss of $9.2 million. In 1997 we
                             achieved an operating income of $0.91 million and
                             1998 had operating income of $2.38 million. We
                             cannot assure profitability in the future.

Important facilities and     Our most  important  facilities  and operations and
operations are located in    many of our  subcontractors are located entirely in
Israel.                      the  State  of  Israel.   Political   and  military
                             conditions in Israel directly affect operations.
                             Since Israel was established in 1948, a state of
                             hostility has existed, varying in degree and
                             intensity, between Israel and certain Arab
                             countries. Although Israel has entered into
                             agreements with some of these countries, the
                             Palestine


                                       16
<PAGE>

                             Liberation Organization and the Palestinian
                             Authority, and the feuding parties have signed
                             various declarations in hopes of resolving some of
                             the hostilities, we cannot predict the future of
                             the volatile Middle East and of Israel in
                             particular. To date, Israel has not entered into a
                             peace treaty with Lebanon or Syria, with whom
                             Israel shares its northern borders, or with certain
                             other Arab countries with whom a state of hostility
                             exists. Any major hostilities involving Israel, the
                             Palestinian Authority, or Arab countries in the
                             Middle East could have a serious negative impact on
                             our business operations.

      Some of our officers   Furthermore,  all nonexempt  male adult citizens of
      and employees are on   Israel,   including   some  of  our   officers  and
      military reserve.      employees,   are  obligated  to  perform   military
                             reserve duty and are subject to being called for
                             active duty under emergency circumstances. While we
                             have operated effectively under these conditions in
                             the past, we cannot predict the full impact of such
                             conditions on us in the future, particularly if
                             emergency circumstances occur.

We are sensitive to          Inflation  in  Israel  and  devaluation  of the NIS
economic conditions in       have an impact on our financial  results.  Although
Israel.                      Israel  has  substantially  reduced  the  rates  of
                             inflation and devaluation in recent years, they are
                             still relatively high and we could experience
                             losses due to inflation or devaluation. If
                             inflation rates in Israel increase again and hurt
                             Israel's economy as a whole, our operations and
                             financial condition could be negatively impacted.

      We do not know the     Israeli law limits  foreign  currency  transactions
      impact of recent       and  transactions  between  Israeli and non-Israeli
      policy changes on      residents.  The  Controller of Foreign  Exchange at
      foreign currency       the  Bank  of   Israel,   through   "general"   and
      transactions.          "special"  permits,  may  regulate  or waive  these
                             limitations. Until recently, transactions in
                             foreign currency were strictly regulated. In May
                             1998, the Bank of Israel liberalized its foreign
                             currency regulations by issuing a new "general
                             permit" pursuant to which foreign currency
                             transactions are generally permitted, although
                             certain restrictions still apply. Restricted
                             transactions include foreign currency transactions
                             by institutional investors, including futures
                             contracts by foreign residents for periods of more
                             than one month, and investments outside of Israel
                             by pension funds and insurers. Under the new
                             general permit, all foreign currency transactions
                             must be reported to the Bank of Israel. We cannot
                             currently assess what impact, if any, this
                             liberalization will have on us. We also cannot
                             predict its impact on the value of the NIS compared
                             to the dollar and the corresponding effect on our
                             financial statements.

Service of process and       We are  organized  under the laws of Israel and our
enforcement of judgments.    headquarters   are  in   Israel.   Certain  of  our
                             officers and directors reside outside of the United
                             States. Therefore, you may not be able to enforce
                             any judgment obtained in the U.S. against us or any
                             of such persons. You may not be able to enforce
                             civil actions under U.S. securities laws if you
                             file a lawsuit in Israel. However, we have been
                             advised by our Israeli counsel that subject to
                             certain limitations, Israeli courts may enforce a
                             final judgment of a U.S. court for liquidated
                             amounts in civil matters after a hearing in Israel.
                             If a foreign judgment is enforced by an Israeli
                             court, it will be payable in Israeli currency.

We are preparing for the     Many  computer  systems and software  products will
Year 2000.                   not function  properly  commencing in the year 2000
                             due to a once-common programming standard that
                             represents years using only the last two-digits.
                             This is known as the Year 2000 problem. We are in
                             the process of upgrading our


                                       17
<PAGE>

                             computers to avoid any material complications due
                             to the Year 2000 problem. As part of this program,
                             we will identify those systems and applications
                             that require modification, redevelopment or
                             replacement. We expect to be Year 2000 compliant by
                             July 1999 with respect to our internal systems and
                             our products. Providing upgrades and changes to our
                             older products could cost up to $15,000 in the
                             aggregate. If we do not attain compliance for our
                             products in time to avoid complications, we have a
                             contingency plan in place that we believe will
                             protect our customers. We do not believe that the
                             failure of our vendors or other third-party
                             providers' systems to be Year 2000 compliant will
                             have a materially negative impact on our business.
                             See "Item 9: Management's Discussion and Analysis
                             of Financial Condition and Results of
                             Operation-Year 2000."

Forward-looking              In this report we make  forward-looking  statements
statements.                  that involve  risks and  uncertainties.  Our actual
                             results could differ considerably due to a variety
                             of factors, including competitive developments, the
                             risk factors listed above, and the risk factors
                             listed from time to time in the reports we file
                             with the U.S. Securities and Exchange Commission.


ITEM 2:     DESCRIPTION OF PROPERTY

Israel

      The Company's main facilities in Moshav Magshimim, Israel, consist of
approximately 13,000 square feet, which the Company uses as its headquarters and
as a research and development facility. The buildings are situated on a plot of
land leased to Moshe Nur and his wife. Mr. Nur served until April 1997 as the
Company's Chairman and was its major shareholder. See "Item 3: Legal
Proceedings" and "Item 13: Interest of Management in Certain Transactions."

      The Company also subleases approximately 1,780 square feet at the NUR
Blueboard Assembler's facilities in Rosh Ha'ain, Israel, to conduct software
installation and system integration operations for the NUR Blueboard Printers.

United States

      NUR America leases office space in Newton Centre, Massachusetts,
consisting of two office suites for use as the subsidiary's headquarters, sales
office and demonstration and service center. Unless terminated by written
notice, the lease is automatically extended in one-year increments.

Belgium

      NUR Europe leases approximately 6,000 square feet of office space in
Brussels, Belgium, for use as the subsidiary's headquarters, sales office and
demonstration and service center.

Germany

      NUR Germany occupies facilities in Kassel, Germany, consisting of one
building of approximately 3,500 square feet for use as the subsidiary's
headquarters, sales office and printing center. NUR Germany does not currently
have a formal lease agreement for the facilities.

China

      NUR Asia Pacific leases a warehouse to use as such and as a demonstration
center in a free trade zone in Shanghai, China, and occupies office space in a
separate location in Shanghai.

                                       18
<PAGE>


ITEM 3:     LEGAL PROCEEDINGS

      In September 1998, the district court of Tel Aviv approved a settlement
agreement among the Company and several other parties that, together with other
settlement agreements, resolved all material claims, including those involving
the Company, relating to Mr. Moshe Nur and his affiliated companies. Mr. Nur
served until April 1997 as the Company's Chairman and was its major shareholder.

      The parties to the court approved settlement agreement were the Company,
the special manager for Moshe Nur's assets in his bankruptcy proceedings, Moshe
Nur, and other of his family members. The parties to the other settlement
agreements included two Israeli banks, and the temporary receiver of Nur Outdoor
Advertising Ltd. (a company formerly affiliated with Mr. Nur).

      According to the agreements, all material claims against the Company
relating to the lease of its facilities in Moshav Magshimim (including
confirmation of the Company's pre-payment of lease until July 2000), alleged
breach of contracts and alleged debts owed to any of the above mentioned parties
were dismissed. Separately, claims related to the ownership of the Company's
shares have been resolved and the temporary injunction on the issuance of
securities by the Company was lifted.

      As part of the various settlement agreements, the Company paid an
aggregate of $100,000 and will withdraw its lawsuit against the First
International Bank.

      Separately, in December 1998, the Company and certain parties achieved a
settlement agreement that, among other things, resolved several outstanding
legal disputes between the Company and the Matan Parties (defined below) (the
"Matan Settlement Agreement"). The Matan Settlement Agreement resolves several
lawsuits and proceedings pending in courts of Israel and the Israeli Patent
Office. The parties to the Matan Settlement Agreement include Matan Digital
Printing Ltd., Matan Y. Systems Ltd., Sprintek Ltd., Mr. Rami Dochovna (such
four parties, "Matan Parties"), the Company, Meital, Scitex, Idanit and others.

      The Matan Settlement Agreement resolved all disputes between the Company
and the Matan Parties, including disputes on patent ownership, alleged royalty
payments due to certain members of the Matan Parties, alleged debts of the
Company to certain members of the Matan Parties and different rights relating to
the technologies of such parties. Under the terms of the Matan Settlement
Agreement, the patents in dispute are the property of the Company; the Company
granted the Matan Parities, Idanit, Scitex and affiliates of Scitex a
non-exclusive perpetual license for use of such patents; the Company is no
longer obligated to pay royalty payments to the Matan Parties in connection with
the sale of the Company's printers; all past debts of the Company to the Matan
Parties are deemed paid in full; and the mutual lawsuits filed in the Tel Aviv
District Court and the Israeli Patent Office were withdrawn.

      The Matan Settlement Agreement also resolved all existing disputes and
legal proceedings between the Company, Idanit, Scitex and Meital, a company that
recently sold technology to the Company.

      As part of the Matan Settlement Agreement, the Company is required to pay
a total of $880,000, plus interest and VAT, assuming timely payments, to the
Matan Parties, which amount has been fully reserved and is payable by the
Company in equal quarterly installments over a three year period which commenced
in December 1998.

      In March 1999, the district court of Tel-Aviv approved a settlement
between the Company and Quantum Securities Ltd. whereby the Company paid Quantum
$6,000 settling all disputes with Quantum.

      In February 1999, Idanit, a competitor of the Company in the large format
digital printer market, and Idanit USA, Inc., a wholly owned subsidiary of
Idanit (collectively, the "Idanit Parties"), filed suit in the District Labour
Court, Tel Aviv, Israel, against the Company, NUR America, and a former sales
professional of Idanit currently employed with NUR America. At approximately the
same time, Idanit also filed suit in Superior Court, Commonwealth of
Massachusetts, against Nur America. The Idanit Parties claim that NUR America,
in hiring the


                                       19
<PAGE>

sales professional, interfered with non-competition and confidentiality
agreements between Idanit and the sales professional. On March 12, 1999 the
Idanit Parties filed an amended complaint in the Massachusetts action alleging
that NUR America misappropriated Idanit USA's confidential and propriety
information in connection with its hiring of the sales professional. Idanit
seeks injunctive relief to prevent the sales professional from working with the
Company and unspecified consequential and punitive monetary damages. In March
1999, the Israeli Court declined to exercise jurisdiction over the parties and
deferred the matter to the United States Courts. The Company and NUR America
plan to defend themselves vigorously in the Massachusetts action.

ITEM 4:    CONTROL OF REGISTRANT

      The following table sets forth certain information regarding the
beneficial ownership of the Company's Ordinary Shares as of April 16, 1999, by
(i) each person known by the Company to be the beneficial owner of more than 10%
of the outstanding Ordinary Shares and (ii) all of the Company's executive
officers and directors as a group (8 persons). All of the information with
respect to beneficial ownership by the Company's directors, executive officers
and beneficial owners has been furnished by the respective director, executive
officer, or beneficial owner, as the case may be. The Company believes that the
persons named in this table have sole voting and investment power with respect
to the Ordinary Shares indicated.

<TABLE>
<CAPTION>
                                                          Percentage of
                                   Ordinary Shares        Ordinary Shares
                                   Beneficially Owned     Beneficially Owned
                                   ------------------     ------------------
<S>                                   <C>                     <C>   
Dan Purjes*                            4,285,151              37.26%

WBM I, LLC**                           2,918,720              26.83%

All current executive officers                                             
and directors as a group (8
persons)                               5,190,927              45.56%
</TABLE>

---------------------

*  Dan Purjes is Chairman of the Company and Chairman of Josephthal. See
   "Item 13: Interest of  Management in Certain Transactions."
** Dan Purjes may be deemed to be the beneficial owner of shares held by WBM
   I, LLC. See "Item 13: Interest of  Management in Certain Transactions."


                                       20
<PAGE>


ITEM 5:     NATURE OF THE TRADING MARKET

      The Company's Ordinary Shares are quoted on the NASDAQ National Market
under the symbol NURM. There is no non-United States trading market for the
shares.

      As of April 16, 1999, there were 116 record holders of Ordinary Shares, of
which 98 represented United States record holders holding approximately 81.75%
the outstanding Ordinary Shares of the Company.

      The prices set forth below are high and low closing bid prices for the
Ordinary Shares of the Company as reported by NASDAQ National Market. Such
quotations reflect inter-dealer prices, without retail markup, markdown, or
commission and may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
          Quarter                          High        Low
          -------                          ----        ---
<S>                                        <C>         <C>
          1st Quarter 1997                 2-1/4       1-1/4
          2nd Quarter 1997                 1-3/4       1
          3rd Quarter 1997                 2-1/8       1-1/16
          4th Quarter 1997                 2-1/8       1-1/4
          1st Quarter 1998                 3-1/8       1-11/16
          2nd Quarter 1998                 4-1/2       2-1/4
          3rd Quarter 1998                 3-1/8       1-15/16
          4th Quarter 1998                 3-3/8       1-3/4
          1st Quarter 1999                 3-5/16      2-1/2
          2nd Quarter 1999*                3-23/32     2-7/8
</TABLE>

----------
      * Represents the period from April 1, 1999 through April 30, 1999.

      The Company does not anticipate that it will pay any cash dividend on its
Ordinary Shares in the foreseeable future. Dividends, if any, will be paid in
NIS. Dividends paid to shareholders outside Israel will be converted to U.S.
dollars, on the basis of the exchange rate prevailing at the date of payment.
The Company has determined that it will not distribute dividends out of
tax-exempt profits.

ITEM 6:     EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY
            HOLDERS

      Non-residents of Israel will be able to receive dividends, if declared,
and any amounts payable upon the dissolution, liquidation or winding-up of the
affairs of the Company. Any such payments will be paid in freely repatriable
non-Israeli currencies (including U.S. dollars). Such payments, if made, shall
be made pursuant to a general permit issued by the Controller under the Currency
Control Law, 1978 (the "Currency Control Law").

      In May 1998, a new "general permit" was issued, which removed most of the
restrictions prohibited under the law, and thus enabled Israeli citizens to
freely invest outside of Israel and freely convert Israeli currency into
non-Israeli currencies.

ITEM 7:     TAXATION

Capital Gains and Income Taxes Applicable to Non-Israeli Shareholders

      The following is a summary of the current tax laws of the State of Israel
as they relate to the Company and its shareholders. This summary does not
discuss all aspects of Israeli tax law that may be relevant to a particular
investor in light of his personal investment circumstances or to certain types
of investors subject to special treatment under Israeli law (for example,
traders in securities or persons that own, directly or indirectly, 10% or more
of the Company's outstanding voting stock). The following also includes a
discussion of certain Israeli government programs benefiting various Israeli
businesses such as the Company. To the extent that the discussion is based on
new legislation yet to be subject to judicial or administrative interpretation,
there can be no assurance that the views


                                       21
<PAGE>

expressed herein will accord with any such interpretation in the future. This
discussion is not intended and should not be construed as legal or professional
tax advice, and does not cover all possible tax considerations.

General Corporate Tax Structure

      The Company is subject to corporate tax in Israel. Commencing in the tax
year 1993 through and including 1996, the regular rate of corporate tax to which
Israeli companies are subject decreased by 1% each year, i.e., from 39% in 1993
down to 36% in 1996 and thereafter. However, the effective rate payable by a
company which derives income from an "Approved Enterprise" (as further discussed
below) may be considerably less. See "--Law for the Encouragement of Capital
Investments, 1959."

Taxation Under Inflationary Conditions

      The Income Tax Law (Adjustment for Inflation), 1985 (the "Adjustment for
Inflation Law") attempts to overcome some of the problems experienced in a
traditional tax system by an economy experiencing rapid inflation, which was the
case in Israel at the time the Adjustment for Inflation Law was enacted.
Generally, the Adjustment for Inflation Law was designed to neutralize for
Israeli tax purposes the erosion of capital investments in businesses and to
prevent unintended tax benefits resulting from the deduction of inflationary
financing expenses. The Adjustment for Inflation Law applies a supplementary set
of inflationary adjustments to a normal taxable profit computed according to
regular historical cost principles.

      The Adjustment for Inflation Law introduced a special adjustment for the
preservation of equity for Israeli tax purposes based on changes in the Israeli
CPI whereby certain corporate assets are classified broadly into fixed
(inflation resistant) assets and non-fixed assets. Where shareholders' equity,
as defined in the Adjustment for Inflation Law, exceeds the depreciated cost of
fixed assets, a corporate tax deduction which takes into account the effect of
inflationary change on such excess in allowed (up to a ceiling of 70% of taxable
income for companies in any single tax year, with the unused portion permitted
to be carried forward on a linked basis with no ceiling). If the depreciated
cost of fixed assets exceeds shareholders' equity, then such excess multiplied
by the annual rate of inflation is added to taxable income.

      In addition, subject to certain limitations, depreciation on fixed assets
and losses carried forward are adjusted for inflation based on changes in the
Israeli CPI. The net effect of the Adjustment for Inflation Law on the Company
might be that the Company's taxable income, as determined for Israeli corporate
tax purposes, will be different than the Company's U.S. dollar income, as
reflected in its financial statements, due to the difference between the annual
changes in the CPI and in the NIS exchange rate with respect to the U.S. Dollar,
causing changes in the actual tax rate.

Law for the Encouragement of Industry (Taxes), 1969

      The Company currently qualifies as an "Industrial Company" within the
definition of the Law for the Encouragement of Industry (Taxes), 1969 (the
"Industry Encouragement Law"). According to the Industry Encouragement Law, an
"Industrial Company" is a company resident in Israel, at least 90% of the income
of which in any tax year (exclusive of income from defense loans, capital gains,
interest and dividends), is derived from an "Industrial Enterprise" owned by it.
An "Industrial Enterprise" is defined by that law as an enterprise whose major
activity in a given tax year is industrial production activity.

      Included among the tax benefits for an Industrial Company are deductions
of 12.5% per annum of the purchase price of a good-faith acquisition of a patent
or of know-how, an election under certain conditions to file a consolidated
return and accelerated depreciation rates on equipment and buildings.

      Eligibility for the benefits under the Industry Encouragement Law is not
subject to receipt of prior approval from any governmental authority. No
assurance can be given that the Company will continue to qualify as an
"Industrial Company" or that the benefits described above will be available in
the future.

                                       22
<PAGE>

Law for the Encouragement of Capital Investments, 1959

      The Law for the Encouragement of Capital Investments, 1959, as amended
(the "Investment Law"), provides that a capital investment in production
facilities (or other eligible facilities) may, upon application to the Israel
Investment Center, be designated as an Approved Enterprise. Each certificate of
approval for an Approved Enterprise relates to a specific program delineated
both by its financial scope, including its capital sources, and its physical
characteristics, i.e., the equipment to be purchased and utilized pursuant to
the program. The tax benefits derived from any such certificate of approval
relate only to taxable profits attributable to the specific Approved Enterprise.

      Taxable income of a company derived from an Approved Enterprise designated
as such after October 30, 1978, is subject to corporate tax at the rate of 25%
(rather than the current regular corporate tax rate of 36%) throughout the
"Benefit Period"--a period of seven years commencing with the year in which the
Approved Enterprise first generated taxable income (limited to the earlier of
twelve years from the commencement of production or fourteen years from the date
of approval) and, under certain circumstances, extending to a maximum of ten
years therefrom. In the event a company operates under more than one approval or
only part of its capital investments are approved (a "Mixed Enterprise"), its
effective corporate tax rate is the result of a weighted combination of the
various applicable rates.

      In addition, a company owning an Approved Enterprise approval after April
1, 1986 (or prior thereto, provided no government grants or loans had previously
been granted in respect to such enterprise) may elect to forego certain
government grants extended to its Approved Enterprise in exchange for an
"alternative package" of tax benefits (the "Alternative Package"). Under the
Alternative Package, a company's undistributed income derived from an Approved
Enterprise will be exempt from corporate tax for a period of between two and ten
years, depending on the geographic location of the Approved Enterprise within
Israel, and such company will be eligible for the tax benefits under the
Investment Law described above for the remainder of the Benefits Period.

      Part of the Company's production facilities have been granted the status
of "Approved Enterprise" under the Investment Law, under two separate investment
plans. The implementation of the investments under the first plan was finalized
in 1993. The implementation of the second plan is expected to be finalized in
1999.

      According to the provisions of the Investment Law, the Company chose to
enjoy "alternative benefits"--waiver of grants in return for tax exemption.
Accordingly, the Company's income from the Approved Enterprise will be
tax-exempt for a period of two and four years for the first and second plans,
respectively, commencing with the year it first earns taxable income, and
subject to corporate tax at the rate of 25%, for additional periods of five and
three years, for the first and second plans, respectively.

      The period of tax benefits, detailed above, is subject to limits of 12
years from the commencement of production, or 14 years from receiving the
approval, whichever is earlier. Given the above mentioned conditions, the period
of benefits for the first plan commenced in the year 1994 and will terminate in
the year 2000, and the period of benefits for the second plan has not yet
commenced.

      If dividends are distributed out of such tax-exempt profits, the Company
will be liable for corporate tax at the rate which would have been applied if it
had not chosen the alternative tax benefits (currently 25% for an "Approved
Enterprise"). Therefore, income derived from the Company's "Approved Enterprise"
status is not available for distribution to shareholders as a dividend. See Note
20(a) to the Company's Financial Statements.

      The dividend recipient is taxed at the reduced rate applicable to
dividends from Approved Enterprises (15%), if the dividend is distributed during
the tax exemption period or within a specified period thereafter, or for an
unlimited period in the case of a "Foreign Investors' Company" - a company over
25% foreign-owned with an approved enterprise. This tax must be withheld by the
company at source, regardless of whether the dividend is converted into foreign
currency. See "--Capital Gains and Income Taxes Applicable to Non-Israeli
Shareholders."

      Subject to certain provisions concerning income subject to the Alternative
Package, all dividends are considered to be attributable to the entire
enterprise, and the effective tax rate is the result of a weighted combination
of the various applicable tax rates.

                                       23
<PAGE>

      The Investment Law also provides that an Approved Enterprise is entitled
to accelerated depreciation on its property and equipment that are included in
an approved investment program.

      Grants and certain other incentives received by a company in accordance
with the Investment Law remain subject to final ratification by the Israel
Investment Center, such ratification being conditional upon fulfillment of all
terms of the approved program. Failure to comply with all such terms may require
the return of such grants and incentives (inclusive of interest as of the date
of the grant).

      Receipt of grants and tax benefits from the OCS and the Marketing Fund and
under the Company's existing "Approved Enterprise" status and any new programs,
if and when approved, are or will be, as the case may be, subject to various
conditions. The tax benefits derived from the Company's "Approved Enterprise"
status are conditioned upon fulfillment of the conditions stipulated by the
Investment Law, the regulations promulgated thereunder and the criteria set
forth in the certificate of approval issued pursuant to the Investment Law. In
the event of a failure by the Company to comply with these conditions and
criteria, the grants and tax benefits could be canceled, in whole or in part,
and the Company would be required to refund the amount of the canceled benefits,
adjusted for inflation and interest. Management believes that the Company has
operated and will continue to operate in compliance with all the "Approved
Enterprise" conditions and criteria applicable to it from the OCS, the Marketing
Fund and its "Approved Enterprise" status, although there can be no assurance of
this, and that the likelihood is remote that it will be required to refund
grants or tax benefits that it derives from the OCS, the Marketing Fund and
under its "Approved Enterprise" status. There can be no assurance that the
funding and tax benefits will continue. See "Item 1: Description of
Business--Research and Development and --Risk Factors--We Rely Upon Government
Grants, Tax Benefits, and Other Funding From Third Parties."

Capital Gains and Income Taxes Applicable to Non-Israeli Shareholders

      Under existing regulations, any capital gain realized by an individual
shareholder with respect to the Ordinary Shares acquired on or after the
registration of such shares will be exempt from Israeli Capital Gains Tax if the
Ordinary Shares are listed on an approved foreign securities market (which term
includes the Nasdaq in the United States) and provided that the Company
continues to qualify as an Industrial Company under Israeli law, and provided
the individual does not hold such shares for business purposes.

      Upon a distribution of dividends other than bonus shares (stock
dividends), income tax is generally withheld at source at the rate of 25% (or
the lower rate payable with respect to Approved Enterprises, see "--Law for the
Encouragement of Capital Investments, 1959"), unless a double taxation treaty is
in effect between Israel and the shareholder's country of residence that
provides for a lower tax rate in Israel on dividends.

      A tax treaty between the United States and Israel (the "Treaty"),
effective since January 1, 1995, provides for a maximum tax of 25% on dividends
paid to a resident of the United States (as defined in the Treaty). Dividends
distributed by an Israeli company and derived from the income of an approved
enterprise are subject to a 15% dividend withholding tax in the preceding year
and the current year to the date of payment. The Treaty further provides that a
12.5% Israeli dividend withholding tax would apply to dividends paid to a United
States corporation owning 10% or more of an Israeli company's voting stock. The
12.5% rate applies only on dividends from a company that does not have an
"Approved Enterprise" in the applicable period.

      A non-resident of Israel who has had dividend income derived or accrued in
Israel from which tax was withheld at source is currently exempt from the duty
to file an annual Israeli tax return with respect to such income, provided such
income was not derived from a business carried on in Israel by such non-resident
and that such non-resident does not derive other non-passive income from sources
in Israel. Proposals are being formulated to expand the requirement to file
annual Israeli tax returns.

                                       24
<PAGE>

Tax Benefits for Research and Development

      Israeli tax law allows under certain conditions a tax deduction in the
year incurred for expenditures (including non-depreciable capital expenditures)
in scientific research and development projects, if the expenditures are
approved by the relevant Israeli Government Ministry (determined by the field of
research) and the research and development is for the promotion of the
enterprise and is carried out by or on behalf of the company seeking such
deduction. Expenditures not so approved are deductible over a three-year period.
However, according to recent Israeli Supreme Court decisions, expenditures made
out of the proceeds of government grants are not deductible, i.e., the Company
will be able to deduct the unfunded portion of the research and development
expenditures and not the gross amount.


              U.S. TAX CONSIDERATIONS REGARDING ORDINARY SHARES

           The following summary describes certain of the principal United
States federal income tax consequences relating to an investment in Ordinary
Shares as of the date hereof. The summary is based on the Internal Revenue Code
of 1986 (the "Code"), and existing final, temporary and proposed Treasury
Regulations, Revenue Rulings and judicial decisions, all of which are subject to
prospective and retroactive changes. The Company will not seek a ruling from the
Internal Revenue Service (the "IRS") with regard to the United States federal
income tax treatment relating to an investment in Ordinary Shares and,
therefore, there can be no assurance that the IRS will agree with the
conclusions set forth below. The summary does not purport to address all federal
income tax consequences that may be relevant to particular investors. For
example, the summary applies only to holders who hold Ordinary Shares as a
capital asset within the meaning of Section 1221 of the Code, and does not
address the tax consequences that may be relevant to investors in special tax
situations (including, for example, insurance companies, tax-exempt
organizations, dealers in securities or currency, banks or other financial
institutions, investors that hold Ordinary Shares as part of a hedge, straddle
or conversion transaction, or holders that own, directly or indirectly, five
percent or more of the Company's outstanding Ordinary Shares). Further, it does
not address the alternative minimum tax consequences of an investment in
Ordinary Shares or the indirect consequences to Holders of equity interests in
investors in Ordinary Shares. ACCORDINGLY, PERSONS CONSIDERING THE PURCHASE OF
ORDINARY SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION
OF UNITED STATES FEDERAL INCOME TAX LAWS, AS WELL AS THE LAWS OF ANY STATE,
LOCAL OR FOREIGN TAXING JURISDICTION, TO THEIR PARTICULAR SITUATIONS.

           For purposes of this discussion, "Company" refers to NUR
Macroprinters Ltd., and "U.S. Holder" means a holder of Ordinary Shares that is
a citizen or resident of the United States, a partnership or corporation created
or organized in the United States or any State thereof (including the District
of Columbia), or an estate or trust the income of which is subject to United
States federal income tax on a net income basis with respect to Ordinary Shares.
The term "non-U.S. Holder" refers to any holder of Ordinary Shares other than a
U.S. Holder.

Taxation of U.S. Holders

           Distributions on Ordinary Shares. Distributions made by the Company
with respect to Ordinary Shares generally will constitute dividends for federal
income tax purposes and will be taxable to a U.S. Holder as ordinary income to
the extent of the Company's undistributed current or accumulated earnings and
profits (as determined for United States federal income tax purposes).
Distributions in excess of the Company's current or accumulated earnings and
profits will be treated first as a nontaxable return of capital reducing the
U.S. Holder's tax basis in the Ordinary Shares, thus increasing the amount of
any gain (or reducing the amount of any loss) which might be realized by such
Holder upon the sale or exchange of such Ordinary Shares. Any such distributions
in excess of the U.S. Holder's tax basis in the Ordinary Shares will be treated
as capital gain to the U.S. Holder and will be either long term or short term
capital gain depending upon the U.S. Holder's federal income tax holding period
for the Ordinary Shares. Dividends paid by the Company generally will not be
eligible for the dividends received deduction available to certain United States
corporate shareholders under Code Sections 243 and 245. The amount of any cash
distribution paid in a foreign currency will equal the U.S. dollar value of the
distribution, calculated by reference to the exchange rate in effect at the time
the dividends are received. A U.S. Holder should not recognize any foreign
currency gain or loss if such foreign currency is converted into U.S. dollars on
the day received. If a U.S. Holder does not convert the foreign currency into
U.S. dollars on the date of receipt, however,


                                       25
<PAGE>

such Holder may recognize gain or loss upon a subsequent sale or other
disposition of the foreign currency (including an exchange of the foreign
currency for U.S. dollars). Such gain or loss, if any, will be ordinary income
or loss for United States federal income tax purposes.

           Subject to certain conditions and limitations, any Israeli
withholding tax imposed upon distributions which constitute dividends under
United States income tax law will be eligible for credit against a U.S. Holder's
federal income tax liability. Alternatively, a U.S. Holder may claim a deduction
for such amount, but only for a year in which a U.S. Holder elects to do so with
respect to all foreign income taxes. The overall limitation on foreign taxes
eligible for credit is calculated separately with respect to specific classes of
income. For this purpose, dividends distributed by the Company with respect to
Ordinary Shares will generally constitute "passive income."

           Sale or Exchange of Ordinary Shares. A. U.S. Holder of Ordinary
Shares generally will recognize capital gain or loss upon the sale or exchange
of the Ordinary Shares measured by the difference between the amount realized
and the U.S. Holder's tax basis in the Ordinary Shares. Gain or loss will be
computed separately for each block of shares sold (shares acquired separately at
different times and prices). The gain or loss on such disposition will be long
term capital gain or loss if the Ordinary Shares had been held for more than one
year. The deductibility of capital losses is restricted and generally may only
be used to reduce capital gains to the extent thereof. However, individual
taxpayers generally may deduct annually $3,000 of capital losses in excess of
their capital gains.

           Passive Foreign Investment Company. A foreign corporation generally
will be treated as a "passive foreign investment company" ("PFIC") if, after
applying certain "look-through" rules, either (i) 75% or more of its gross
income is passive income or (ii) 50% or more of the average value of its assets
is attributable to assets that produce or are held to produce passive income.
Passive income for this purpose generally includes dividends, interest, rents,
royalties and gains from securities and commodities transactions. The
look-through rules require a foreign corporation that owns at least 25%, by
value, of an operating subsidiary to treat that proportion of the subsidiaries
assets and income as held or received directly by the foreign parent.

           The Company does not believe that it is currently a PFIC nor does it
anticipate that it will be a PFIC in the future because it expects that less
than 75% of its annual gross income will be passive income and less than 50% of
its assets will be passive assets, based on the look-through rules, the current
income and assets of the Company and its subsidiaries, and the manner in which
the Company and its subsidiaries are anticipated to conduct their businesses in
the future. However, there can be no assurance that the Company is not or will
not be treated as a PFIC in the future. If the Company were to be treated as a
PFIC, all U.S. Holders may be required, in certain circumstances, to pay an
interest charge together with tax calculated at maximum rates on certain "excess
distributions," including any gain on the sale of Ordinary Shares. In order to
avoid this tax consequence, a U.S. Holder (i) may be permitted to make a
"qualified electing fund" election, in which case, in lieu of such treatment
would be required to include in their taxable income certain undistributed
amounts of the Company's income or (ii) may elect to mark-to-market the Ordinary
Shares and recognize ordinary income (or possible ordinary loss) each year with
respect to such investment and on the sale or other disposition of the Ordinary
Shares. Neither the Company nor its advisors have the duty to or will undertake
to inform U.S. Holders of changes in circumstances that would cause the Company
to become a PFIC. U.S. Holders should consult their own tax advisors concerning
the status of the Company as a PFIC at any point in time after the date of this
Form. The Company does not currently intend to take the action necessary for a
U.S. Holder to make a "qualified electing fund" election in the event the
Company is determined to be a PFIC.

           Foreign Personal Holding Company. A foreign corporation may be
classified as a foreign personal holding company (a "FPHC") for federal income
tax purposes if both of the following tests are satisfied: (i) at any time
during the taxable year five or fewer individuals who are United States citizens
or residents own or are deemed to own (under certain attribution rules) more
than 50% of its stock (vote or value) and (ii) at least 60% (50% for years
subsequent to the year in which it becomes a FPHC) of its gross income
(regardless of its source), as specifically adjusted, "is foreign personal
holding company income," which includes dividends, interest, rents, royalties
and gain from the sale of stock or securities.

                                       26
<PAGE>


           The Company does not believe that it is currently a FPHC nor does it
anticipate that it will be a FPHC in the future; however, no assurance can be
given that the Company is not or will not become a FPHC as a result of future
changes of ownership or changes in the nature of the income of the Company. If
the Company were to be classified as a FPHC, each U.S. Holder would be required
to include in income as a taxable constructive dividend its pro rata share of
the Company's undistributed foreign personal holding company income.


           Controlled Foreign Corporation. If more than 50% of the Ordinary
Shares (vote or value) of the Company is owned, directly or indirectly, by U.S.
Holders, each of whom owns or is deemed to own under certain attribution rules
10% or more of the total combined voting power of all classes of stock of the
Company ("10% Shareholder"), the Company could be treated as a "controlled
foreign corporation" (a "CFC") under Subpart F of the Code. It is unclear how
controlling blocks of stock will be valued for these purposes. Accordingly, the
Company may be treated as a CFC for United States federal income tax purposes
even though 10% Shareholders do not own more than 50% of the outstanding
Ordinary Shares.


           The Company does not believe that it is currently a CFC; however, no
assurance can be given that the Company will not become a CFC as a result of
future changes in its ownership. If the Company were to be treated as a CFC,
each 10% Shareholder would be required to include in its taxable income as a
constructive dividend its pro rata share of certain undistributed income of the
Company, and all or a portion of the gain from the sale or exchange of the
Ordinary Shares may be treated under Section 1248 of the Code as dividend
income. Neither the Company nor its advisors have the duty to or will undertake
to inform U.S. Holders of changes in circumstances that would cause the Company
to become a CFC. U.S. Holders should consult their own tax advisors concerning
the status of the Company as a CFC.


           Information Reporting. Any U.S. Holder who owns 10% or more (in
voting power or value) of the Ordinary Shares of the Company may be required to
file IRS Form 5471 with the IRS to report certain acquisitions or dispositions
of Ordinary Shares. In addition, annual filings of IRS Form 5471 would be
required (i) by any U.S. Holder of 10% or more (of the voting power in the case
of a CFC, or value in the case of a FPHC) of the Ordinary Shares of the Company,
and (ii) by any U.S. Holder owning more than 50%, in voting power or value, of
the Ordinary Shares of the Company. In addition, for taxable years beginning
after February 5, 1999, U.S. Holders are required to report certain acquisitions
of Ordinary Shares from the Company to the IRS on IRS Form 926, and that
nonreporting may subject the U.S. Holder to substantial penalties. Potential
investors of the Shares should consult with their own tax advisors regarding the
necessity of filing information returns.

Taxation of Non-U.S. Holders

           Distributions on Ordinary Shares. Distributions made by the Company
with respect to the Ordinary Shares to non-U.S. Holders who are not engaged in
the conduct of a trade or business within the United States will be subject to
United States federal income tax only if 25% or more of the gross income of the
Company (from all sources for the three-year period ending with the close of the
taxable year preceding the declaration of the distribution) was effectively
connected with the conduct of a trade or business in the United States by the
Company. The Company does not anticipate engaging in the conduct of a trade or
business within the United States, except through its subsidiaries. However, if
the 25% threshold for such period is exceeded, a portion of any distribution
paid by the Company to a non-U.S. Holder could be subject to federal income tax
withholding at the rate of 30%; the portion of the distribution that could be
subject to withholding would correspond to the portion of the Company's gross
income for the period that is effectively connected to its conduct of a trade or
business within the United States.

           Sale or Exchange of Ordinary Shares. A non-U.S. Holder will not be
subject to United States federal income tax on any gain realized upon the sale
or exchange of Ordinary Shares if such Holder has no connection with the United
States other than holding the Ordinary Shares and in particular (i) such gain is
not effectively connected with a trade or business in the United States of the
non-U.S. Holder, (ii) in the case of a non-U.S. Holder who is an individual
which has a "tax home" (as defined in Section 911(d)(3) of the Code) in the
United States, such non-U.S. Holder is not present in the United States for 183
days or more in the taxable year of such disposition, and (iii) the Company is
not and has not been at any time within 5 years preceding such disposition a
"U.S. real property holding corporation" (a "USRPHC") for federal income tax
purposes.

                                       27
<PAGE>

           The Company believes that it is not and does not currently intend to
become a USRPHC, but no assurance can be given that the Company is not or will
not become a USRPHC in the future. In general, if the Company is determined to
be a USRPHC then non-U.S. Holders may be subject to United States federal income
tax on the sale or exchange of the Ordinary Shares, and to withholding at a rate
of 10% on any such disposition. However, a non-U.S. Holder will not be subject
to these special rules even if the Company is determined to be a USRPHC provided
that (i) such non-U.S. Holder did not at any time during the five years ending
on the date of sale or disposition actually or constructively own more than 5%
of the Ordinary Shares of the Company and (ii) the Ordinary Shares are then
"regularly traded" on an established securities market in the United States.
Since the Ordinary Shares are traded on the Nasdaq stock market and since it is
regularly quoted by broker dealers, the Ordinary Shares should be considered to
be "regularly traded" on an established securities market. However, it is
possible to interpret the current Temporary Regulations as concluding that the
Ordinary Shares will not be considered "regularly traded" at any time during
which 50% or more thereof is owned by 100 or fewer persons, which will be the
case as of the date of this Form.

           United States Business. A non-U.S. Holder engaged in a trade or
business in the United States whose income from the Ordinary Shares (including
gain from the sale or exchange thereof) is effectively connected with the
conduct of such trade or business will generally be subject to regular United
States federal income tax on such income in the same manner as if it were a U.S.
Holder. In addition, if such a Holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30% of its effectively connected
earnings and profits for the taxable year, subject to adjustments.

Backup Withholding

           Distributions made by the Company with respect to the Ordinary Shares
and the gross proceeds received from the disposition of the Ordinary Shares may
be subject to certain information reporting to the IRS and to a 31% backup
withholding tax. However, backup withholding generally will not apply to
payments made to certain exempt recipients (such as a corporation or financial
institution) or to a Holder who furnishes a correct taxpayer identification
number or provides a certificate of foreign status and provides certain other
required information. If backup withholding applies, the amount withheld is not
an additional tax, but is credited against such Holder's United States federal
income tax liability.


                                       28
<PAGE>


ITEM 8:    SELECTED CONSOLIDATED FINANCIAL DATA

                           Statements of Operations
                              (In U.S. Dollars)

The following selected consolidated financial data as of December 31, 1996,
1997, and 1998 have been derived from the Company's Consolidated Financial
Statements, set forth elsewhere in this Form 20-F. These financial statements
have been prepared in accordance with generally accepted accounting principles
in the United States ("GAAP"). The selected financial data as of December 31,
1994 and 1995 and for the years ended December 31, 1994 and 1995 have been
derived from audited financial statements not included herein, which have also
been prepared in accordance with GAAP. The selected Consolidated Financial
Statements set forth below should be read in conjunction with and are qualified
by reference to "Management's Discussions and Analysis of Financial Condition
and Results of Operations" and the Company's Consolidated Financial Statements
included elsewhere in this prospectus.

<TABLE>
<CAPTION>
                                                                              Years Ended December 31,
                                                                              ------------------------
                                                         1994             1995             1996*           1997*            1998*
                                                         ----             ----             -----           ----             -----
<S>                                                   <C>              <C>              <C>              <C>             <C>    
Revenues:
Sales of printers and related products                $10,010          $13,824          $13,639          $18,874         $31,905
Sales of printed materials**                               --               --            2,998            3,085           4,540
                                                      -------          -------          -------          -------         -------
                                                       10,010           13,824           16,637           21,959          36,445
                                                      -------          -------          -------          -------         -------
Cost of revenues:
Cost of sales of printers and related products          6,939            9,374           11,528            9,627          16,368
Cost of sales of printed materials                         --               --            2,008            1,684           2,579
                                                      -------          -------          -------          -------         -------
                                                        6,939            9,374           13,536           11,311          18,947
                                                      -------          -------          -------          -------         -------
Gross profit                                            3,071            4,450            3,101           10,648          17,498
                                                      -------          -------          -------          -------         -------
Research & development expenses                           497            1,040            1,530            1,726           5,027
Less royalty-bearing grants                               161              306              372               43             818
                                                      -------          -------          -------          -------         -------
Research & development expenses, net                      336              734            1,158            1,683           4,209
                                                      -------          -------          -------          -------         -------
Selling and marketing expenses, net                       715            1,039            4,823            4,620           6,111
General & administrative expenses                       1,099            1,187            2,560            3,439           4,802
Write-off of debts from related parties                    --               --            3,757               --              --
                                                      -------          -------          -------          -------         -------
                                                        1,814            2,226           11,140            8,059          10,913
                                                      -------          -------          -------          -------         -------
Operating income (loss)                                   921            1,490           (9,197)             906           2,376
Financial expenses, net                                    65              205              589              320             501
Gain (loss) on marketable securities                      (40)              12               22               --             (91)
Other income (expenses), net                               --              110               76               (8)            (20)
                                                      -------          -------          -------          -------         -------
</TABLE>

-------------------
 * Represents financial information for the Company together with its
   subsidiaries NUR Media Solutions, NUR America, NUR Europe and NUR Germany.
** Represents sales of printed materials by NUR Germany.

                                       29
<PAGE>



<TABLE>
<CAPTION>
                                                                         Years Ended December 31,
                                                                         ------------------------
                                                       1994             1995             1996*             1997*            1998*
                                                       ----             ----             -----             ----             -----
<S>                                               <C>              <C>              <C>               <C>              <C>       
Income (loss) before taxes on income                    816            1,407           (9,688)              578             1,764
Taxes on income                                          25              221              400                67               264
                                                  ---------        ---------        ---------         ---------        ----------
Income (loss) after taxes on income                     791            1,186          (10,088)              511             1,500
Minority interest in earnings of subsidiary              --               --               --               (26)              (43)
Equity in losses of 50% owned joint venture            (987)          (1,125)              --                --                --
                                                  ---------        ---------        ---------         ---------        ----------
Net income (loss) for the year                        $(196)             $61         $(10,088)             $485            $1,457
                                                  ---------        ---------        ---------         ---------        ----------
Basic and diluted earnings (loss) per share          $(0.05)            $0.01          $(1.47)            $0.07             $0.13
                                                  ---------        ---------        ---------         ---------        ----------
Weighted average number of shares used in
computing basic and diluted earnings (loss)
per share                                         4,123,082        4,904,118        6,880,000         7,293,640        10,880,000
                                                  =========        =========        =========         =========        ==========
</TABLE>

-------------------
*  Represents financial information for the Company together with its
   subsidiaries NUR Media Solutions, NUR America, NUR Europe, and NUR Germany.


                               Balance Sheet Data
                                (In U.S. Dollars)

<TABLE>
<CAPTION>
                                             December 31,
                                             ------------
                                   1996*         1997*          1998*
                                   -----         -----          -----
<S>                               <C>           <C>            <C>    
Working capital................   $   690       $ 4,674        $ 5,441
Total assets...................    12,161        13,783         21,995
Total liabilities..............    10,325         7,998         14,565
Total shareholders' equity.....   $ 1,836       $ 5,785        $ 7,430
</TABLE>


ITEM 9:     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

General

      The Company is a world leader in the market for the sale of SWF printing
systems. The Company develops, manufacturers, sells, and services digital,
ink-jet color printing systems for on demand, short-run, WF and SWF printing.
The Company also supplies inks and substrates which are consumables products for
the operation of the Company's printers. In June 1998, the Company began
supplying substrates for use with the Company's printers. The Company's total
revenues grew from approximately $16.6 million for the year ended December 31,
1996 to approximately $22 million for the year ended December 31, 1997 and $36.4
million for the year ended December 31, 1998.

                                       30
<PAGE>

      The Company carries out its main research, development and manufacturing
operations at its facilities in Moshav Magshimim and Rosh Ha'ain, Israel. The
Company's main sales and service activities are carried out through its wholly
owned subsidiaries, NUR Europe, located in Brussels, Belgium, and NUR America,
located in Newton, Massachusetts, in the United States, NUR Asia Pacific located
in Hong Kong and Shanghai, China, and NUR Middle East and Africa located in
Moshav Magshimim, Israel. The Company also wholly owns NUR Media Solutions,
located near Brussels, Belgium, which develops and markets advanced consumables
for the Company's printers, and owns 84% of NUR Germany, located in Kassel,
Germany, which is a digital printing and outdoor advertising company.

      The Company incorporated as an Israeli corporation on July 29, 1987, and
the Company's Ordinary Shares have been traded on the NASDAQ National Market
since October 1995. The Company's trading symbol is NURM.

      Revenues from the Company's printers and related materials are derived
from the sale of the Company's printers, inks, substrates, spare parts, and
related services. Revenues from printed materials are derived from NUR Germany's
printing and advertising display services.

      Cost of sales of printers and related materials include costs related to
product shipments including materials, labor, overhead, and other direct or
allocated costs involved in the manufacture, warehousing, delivery, support, and
maintenance of products. Cost of sales of printed materials include costs
related to product materials involved in the printing and delivery of printed
materials.

      Research and development expenses include mainly labor, materials
consumed, expenses by sub-contractors, consultants, and others. Research and
development expenses are carried to the statement of operations as incurred.
Grants are netted from research and development costs on an accrual basis as the
related expenses are incurred.

      The sales and marketing expenses include the costs associated with the
staff of the sales and marketing force of the Company and its subsidiaries,
advertising and promotion of existing and new products, trade shows,
commissions, and other marketing activities.

      During 1998, the Company expended significant financial and management
resources to expand its business and product offerings. The Company invested in
strengthening the service and sales organizations in NUR Europe and NUR America,
by hiring additional sales and service staff in both territories. The Company
also invested in the creation and set-up of NUR Media Solutions, a subsidiary
dedicated to the development and marketing of substrates for the use with the
Company's products. The Company has continued to expend more resources to this
operation in 1999. The Company also established two new company owned
distribution operations in Shanghai, China and Tel-Aviv, Israel, to replace its
former distributor in February 1999.

      In September 1998, the Company acquired from Meital all rights (including
all related assets) to Meital's piezo D-O-D inkjet technologies for application
in large format digital printers for approximately $3.0 million, consisting of
an up-front payment of $0.75 million, the assumption of certain liabilities,
including the legal dispute (now settled) between Meital and Idanit, a division
of Scitex Corporation, and future sales based royalties. The Meital acquisition
resulted in the recognition by the Company of a one-time charge involving a
write-off assigned to research and development in the amount of $1.95 million
($1.6 million in the third quarter of 1998 and $0.35 million in the first and
second quarters of 1998). As part of such agreement the Company has also
retained Meital's President as a consultant to the Company. See "Item 10:
Directors and Officer of Registrant--Consulting Agreement."

Certain Accounting Policies

      The main sources of revenues for the Company are sales of the Company's
printers and related consumable products. Sales are recognized upon delivery of
the product to customers, provided that no significant vendor obligation remains
and collection is deemed probable.

      The accompanying consolidated financial statements have been prepared in
U.S. dollars. The U.S. dollar is the currency of the primary economic
environment in which the operations of the Company and NUR America are


                                       31
<PAGE>

conducted. The U.S. dollar is the functional and reporting currency of the
Company. The majority of sales are made in U.S. dollars and the majority of
purchases of materials and components are invoiced and paid in U.S. dollars. In
addition, a substantial number of other expenses are incurred outside Israel in
U.S. dollars or paid in U.S. dollars or in New Israeli Shekels ("NIS") linked to
the exchange rate of the U.S. dollar.

      See note 2 to the Company's Financial Statements included as a part of
this annual report for a discussion of the Company's accounting policy for
determining rate of exchange and linkage based amounts.

      The Company's transactions and balances denominated in U.S. dollars are
presented in their original amounts. Non-dollar transactions and balances have
been remeasured into U.S. dollars in accordance with Statement 52 of the
Financial Accounting Standards Board ("FASB"). All transaction gains and losses
from remeasurement of monetary balance sheet items denominated in non-dollar
currencies are reflected in the statement of operations as financial income or
expenses, as appropriate.

      The financial statements of certain subsidiaries and other entities
reported using the equity method of accounting, whose functional currency is not
the U.S. dollar, have been translated into U.S. dollars, in accordance with FASB
Statement No. 52, "Foreign Currency Translation." All balance sheet accounts
have been translated using the exchange rates in effect at the balance sheet
date. Statement of operations amounts have been translated using the average
exchange rate for the year. The resulting aggregate translation adjustments are
reported as a component of shareholders' equity.

      The Company's consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the U.S.

      The Company has chosen to continue accounting for stock-based compensation
in accordance with the provisions of Accounting Principles Board Opinion No.25
("APB-25"), "Accounting for Stock Issued to Employees." Under APB-25, when the
exercise price of the Company's shares options equals or is higher than the
market price of the underlying shares on the date of grant, no compensation
expense is recognized. The pro-forma information with respect to the fair value
of the options is provided in accordance with the provisions of Statement No.123
(see Note 18).

      In accounting for options granted to persons other than employees, the
provisions of Financial Accounting Standards Board Statement No. 123,
"Accounting for Stock Based Compensation" were applied. According to FASB 123,
the fair value of these options was estimated at the grant date using
Black-Scholes options pricing model.

Current and Future Trends

      The Company has estimated based on its own market research that the SWF
industry has grown at a rate of 15-20% annually for the last 3 years. The
Company's growth during 1997 and 1998 has exceeded this growth rate, mainly as a
result of increasing market share of the Company in the SWF market and the
introduction of new products. Although there can be no assurance, the Company
believes it will maintain during 1999 a growth rate similar to the general
industry's growth rate in the SWF segment of its business. The Company is also
planning to introduce products to the WF professional print market during 1999.
The gross margins of the Company are expected to continue to remain at the 1998
levels throughout 1999. Although there is a downward price pressure on the
Company's existing products, there have been certain reductions in the
manufacturing cost of these products. The Company's anticipates a launch of its
new products at gross margins similar to its existing products.

      The SWF industry has undergone significant changes in the past few years,
and additional change is anticipated in the future. The most noticeable change
in the industry during 1997 has been the adoption of inkjet technologies by all
major competitors in the industry. Until 1997, the Company had the only
continuous inkjet SWF printer in the market. During 1997, the Company's major
competitors have each introduced an inkjet-based printer to replace their
existing airbrush printers. The new printers, introduced during 1997, are based
on the D-O-D technology, as opposed to the continuous inkjet technology
currently used by the Company's printers. To date, the Company has been
successful in maintaining and increasing its growth in revenues from the
Company's printers.

                                       32
<PAGE>

      With the cost of digital printing expected to decrease and the ability of
digital technology expected to produce shorter runs more economically, the
Company believes that the use of WF and SWF printing, such as that produced by
the Company's printers, should grow, and that the portion of the market serviced
by digital printing should increase. The ability to produce SWF images digitally
has also opened new media opportunities for advertisers, such as mural printing,
carpet printing, new forms of fleet graphics printing. The growth in demand for
SWF digital printers is fueled by both the replacement of conventional print
methods and the development of new printing applications.

      Certain of the statements made in this report are forward-looking
statements that involve risks and uncertainties. Actual results could differ
materially as a result of a variety of factors.

Geographic Breakdown of Revenues

      The Company sells its products and services primarily to customers around
the world. Revenues are generally recognized at the location of the sale of the
product or service. The table below shows the breakdown of revenues (dollars in
thousands) by geographic region for the years ended December 31, 1998, 1997, and
1996.

<TABLE>
<CAPTION>
     Year ended         Printers          Ink     Printed Materials   Others          Total
  December 31, 1998      (52.3%)        (23.6%)        (12.5%)        (11.6%)         (100%)
       REGION            $      %       $      %       $      %       $      %       $       %
-------------------   ------   ---    -----   ---    -----   ---    -----   ---    ------   --- 
<S>                   <C>      <C>    <C>     <C>    <C>     <C>    <C>     <C>    <C>      <C> 
Middle-East, Asia &
Africa ............    2,678    14%   2,144    25%       0     0      742    17%    5,564
Europe ............    7,369    39%   2,388    28%   4,540   100%   1,944    46%   16,241    44%
North & Latin
America ...........    9,005    47%   4,087    47%       0     0    1,548    37%   14,640
Total Revenues ....   19,052   100%   8,619   100%   4,540   100%   4,234   100%   36,445   100%
                      ======   ===    =====   ===    =====   ===    =====   ===    ======   === 

<CAPTION>
     Year ended         Printers          Ink     Printed Materials   Others          Total
  December 31, 1997       (55%)          (21%)          (14%)          (10%)           (100%)
       REGION            $      %       $      %       $      %       $      %       $       %
-------------------   ------   ---    -----   ---    -----   ---    -----   ---    ------   --- 
<S>                   <C>      <C>    <C>     <C>    <C>     <C>    <C>     <C>    <C>      <C> 
Middle-East, Asia &
Africa ............    1,344    11%   1,122    25%       0     0%     583    26%    3,049    14%
Europe ............    6,353    53%   1,549    34%   3,085   100%     862    38%   11,849    54%
North & Latin
America ...........    4,326    36%   1,900    42%       0     0%     835    37%    7,061    32%
Total Revenues ....   12,023   100%   4,571   100%   3,085   100%   2,280   100%   21,959   100%
                      ======   ===    =====   ===    =====   ===    =====   ===    ======   === 

<CAPTION>
     Year ended         Printers          Ink     Printed Materials   Others          Total
  December 31, 1996      (52.3%)        (23.6%)        (12.5%)        (11.6%)         (100%)
       REGION            $      %       $      %       $      %       $      %       $       %
-------------------   ------   ---    -----   ---    -----   ---    -----   ---    ------   --- 
<S>                   <C>      <C>    <C>     <C>    <C>     <C>    <C>     <C>    <C>      <C> 
Middle-East, Asia &
Africa ............    6,060    65%   1,400    56%       0     0%     264    14%    7,724    46%
Europe ............    2,410    26%     551    22%   2,998   100%   1,414    77%    7,373    44%
North & Latin
America ...........      847     9%     544    22%       0     0%     149     8%    1,540     9%
Total Revenues ....    9,317   100%   2,495   100%   2,998   100%   1,827   100%   16,637   100%
                      ======   ===    =====   ===    =====   ===    =====   ===    ======   === 
</TABLE>



                                       33
<PAGE>

Results of Operations

         The following table sets forth for the periods indicated certain line
items from the Company's statement of operations as a percentage of the
Company's sales:

<TABLE>
<CAPTION>
                                                                      Years ended December 31,
                                                     ----------------------------------------------------------
                                                     1994          1995         1996*        1997*        1998*
                                                     ----          ----         -----        -----        -----
                                                                           (in percents)
                                                     ----------------------------------------------------------
<S>                                                   <C>          <C>           <C>         <C>           <C> 
Revenues                                              100%         100%          100%          100%         100%
   Cost of sales of printers and related                                                                            
   products.....................................       69           68            69          43.9         44.9
   Cost of sales of printed materials...........        -            -            12           7.6          7.1
   Gross profit.................................       31           32            19          48.5         48
   Research & development expenses..............        5            8             9           7.8         13.8
   Research & development expenses net..........        3            5             7           7.7         11.5
   Selling expenses, net........................        7            7            29          21           16.8
   General & administrative expenses............       11            9            15          15.7         13.2
   Write-off debts of related parties...........        -            -            23             -            -
   Operating income (loss)......................        9           11           (55)          4.1          6.5
   Financial expenses, net......................        1            2             4           1.5          1.4
   Gain (loss) on marketable securities.........        -            -             -             -          0.2
   Other income (expense).......................        -            1             -             -          0.05
   Taxes on income (tax benefit)................        -            2             2           0.3          0.7
   Minority interest in earnings of subsidiary..        -            -             -           0.1          0.1
   Equity in loss of a 50% owned subsidiary.....      (10)          (8)            -             -            -
   Net income (loss) for the year...............       (2)           -           (61)          2.2          4.05
</TABLE>

-----------------
*    Represents the Company on a consolidated basis with its subsidiaries NUR
     Media Solutions, NUR America, NUR Europe and NUR Germany.


Year Ended December 31, 1998 Compared with Year Ended December 31, 1997

      Revenues. Total revenues increased by 66%, to approximately $36.44 million
for the year ended December 31, 1998 from approximately $21.96 million for the
year ended December 31, 1997, mainly as a result of the introduction of the NUR
Blueboard 2 and market acceptance of the NUR Blueboard Printers and as a result
of the continued move to direct distribution by the Company of the Company's
products in Europe and the United States, the Company's two major markets.
Growth was also fueled by the growth of sales of the ink as a result of the
growth of the installed base of the Company's printers.

      Sales. Sales of the Company's printers and related products increased by
69% to approximately $31.9 million for the year ended December 31, 1998 from
approximately $18.9 million for the year ended December 31, 1997. This increase
was attributed primarily to the introduction and market acceptance of the NUR
Blueboard and to increased revenues due to the move from sales through
distributors to direct sales to end users through the Company's subsidiaries in
Europe and the United States.

      Expenses. Research and development costs, net of the OCS grants, were
approximately $4.2 million in the year ended December 31, 1998, compared to
$1.68 million in the year ended December 31, 1997. The increase is mainly due to
acquired in process research and development in the amount of $1.95 million and
as a result of increased efforts in developing new products. The Company expects
to continue to invest significant resources in its research and development
programs for new products and enhancements of existing products. The Company
expects that research and development expenses will continue to increase in
absolute dollar terms as compared to previous years.

                                       34
<PAGE>

      Selling and marketing expenses were approximately $6.1 million in the year
ended December 31, 1998 compared to approximately $4.6 million in the year ended
December 31, 1997. The Company received $0.25 million in the year ended December
31, 1998 from the Marketing Fund for selling and marketing expenses as compared
to $0.2 million in the year ended December 31, 1997. The Company will not be
eligible for support from the Marketing Fund commencing in 1999 due to the
Company reaching the maximum allowed export revenues. The majority of sales and
marketing expenses are incurred by the distribution subsidiaries, NUR Europe and
NUR America.

      General and administrative expenses were approximately $4.8 million for
the year ended December 31, 1998, compared to approximately $3.4 million for the
year ended December 31, 1997, representing an approximately 40% increase. This
increase was due primarily to expansion in operation and to the re-building of
the financial and administrative infrastructures of the Company.

      Financial expenses, net increased to $0.5 million in the year ended
December 31, 1998 from $0.32 million in the year ended December 31, 1997.

      Gross Profit. Gross profit was approximately $17.5 million in the year
ended December 31, 1998, an increase of 65.1% from $10.6 million in the year
ended December 31, 1997. Gross profit as percentage of sales was 48% in the year
ended December 31, 1998 compared to 48.5% in the year ended December 31, 1997.

      Taxes. Taxes on income were $0.264 million in the year ended December 31,
1998 as compared to $0.067 million in the year ended December 31, 1997.

Year Ended December 31, 1997 Compared with Year Ended December 31, 1996

      Revenues. Total revenues increased by 32.3%, to approximately $21.96
million for the year ended December 31, 1997 from approximately $16.6 million
for the year ended December 31, 1996, mainly as a result the introduction and
market acceptance of the NUR Blueboard and as a result of the move to direct
distribution by the Company of the Company's products in Europe and the United
States, the Company's two major markets. Growth was also fueled by the growth of
sales of the ink as a result of the growth of the installed base of the
Company's printers.

      Sales. Sales of the Company's printers and related products increased by
38.4% to approximately $18.8 million for the year ended December 31, 1997 from
approximately $13.6 million for the year ended December 31, 1996. This increase
was attributed primarily to the introduction and market acceptance of the NUR
Blueboard and to increased revenues due to the move from sales through
distributors to direct sales to end users through the Company's subsidiaries in
Europe and the United States.

      Expenses. A portion of the Company's research and development expenses is
funded by the OCS pursuant to programs entitling the OCS to receive royalties on
sales of products developed with the use of OCS funds. Research and development
costs, net of the OCS grants, were approximately $1.68 million in the year ended
December 31, 1997, rising by 45% from $1.16 million in the year ended December
31, 1996, as a result of increased efforts in developing new products. The
Company expects to continue to invest significant resources in its research and
development programs for new products and enhancements of existing products. The
Company expects that research and development expenses will continue to increase
in absolute dollar terms as compared to previous years.

      Selling and marketing expenses were approximately $4.6 million in the year
ended December 31, 1997 compared to approximately $4.8 million in the year ended
December 31, 1996. The Company received $0.2 million in the year ended December
31, 1997 from the Marketing Fund for selling and marketing expenses as compared
to no receipt of such funds in the year ended December 31, 1996. The Company
will not be eligible for support from the Marketing Fund commencing in 1999 due
to the Company reaching the maximum allowed export revenues. The majority of
sales and marketing expenses are incurred by the distribution subsidiaries, NUR
Europe and NUR America.

      In early 1997, Moshe Nur, the previous Chairman of the Company and its
former major shareholder, and companies controlled by Moshe Nur, experienced
financial difficulties. These affiliated companies and Moshe Nur


                                       35
<PAGE>

had outstanding debts to the Company stemming from a combination of purchases of
printers, spare parts, ink, and cash transfers. As a result, management of the
Company decided to write-off these debts in the year ended December 31, 1996,
totaling $3.8 million. The Company was in litigation with Moshe Nur and his
court appointed receiver for the return of funds misappropriated from the
Company until September 1998 when a settlement was reached. See "Item 3: Legal
Proceedings."

      In April 1997, following Moshe Nur's financial difficulties,  a group of
investors  led  by  Dan  Purjes,   the  Chairman  of  Josephthal  &  Co.  Inc.
("Josephthal")  assumed control of the Company and  consequently  replaced all
but one of the previous directors.  The Chairman,  Chief Executive Officer and
Chief Financial  Officer of the Company were also consequently  replaced.  See
"Item 13: Interest of Management in Certain Transactions."

      In the year ended December 31, 1997, sales to related parties were 0.8%,
as opposed to 3.6% for the year ended December 31, 1996 as a result of the
change in control of the Company.

      General and administrative expenses were approximately $3.4 million for
the year ended December 31, 1997, compared to approximately $2.56 million for
the year ended December 31, 1996, representing a 34.3% increase. This increase
was due primarily to legal and extra-ordinary audit costs resulting from the
change in control and management of the Company, and to the re-building of the
financial and administrative infrastructures of the Company.

      Financial expenses, net decreased to $0.32 million in the year ended
December 31, 1997 from $0.59 million in the year ended December 31, 1996.

      Gross Profit. Gross profit was approximately $10.6 million in the year
ended December 31, 1997, an increase of $7.5 million from $3.1 million in the
year ended December 31, 1996. Gross profit as percentage of sales increased to
48.5% in the year ended December 31, 1997 from 19% in the year ended December
31, 1996. The increase in gross profit was attributed mainly to the change in
distribution strategy discussed above and reduced manufacturing costs.

      Taxes. Taxes on income decreased by 83.25% to $0.067 million in the year
ended December 31, 1997 as compared to $0.4 million in the year ended December
31, 1996, due to available carry-forward losses (including capital losses) and
deductions aggregating approximately $7.5 million.

Liquidity and Capital Resources

      Since the commencement of the Company's activities in the second half of
1991 through mid-1993, the Company financed its operations primarily through
loans and injection of equity by shareholders. In October 1993, the Company
raised, through a private placement, approximately $6 million (approximately $3
million in equity and $3 million in convertible debentures).

      Following the 1993 private placement, the Company financed its operations
primarily through cash generated from operations. For the year ended December
31, 1995, the Company's major source of cash was the $6.86 million of net
proceeds from the Company's initial public offering in October 1995.

      The Company incurred a loss of approximately $10.1 million in the year
ended December 31, 1996. This loss was comprised of approximately $4.8 million
in losses due to increased expenses associated with the setup of direct sales
and marketing efforts by the Company in Europe and in the United States, and to
the assumption of international support and service; approximately $1.2 million
in research and development expenses; approximately $0.6 million in financing
expenses; approximately $0.4 million in elimination of deferred taxes; and
approximately $3.8 million in losses due to the write-off of debts to the
Company associated with Moshe Nur and companies controlled by him. These debts
resulted, in part, from ineffective controls that failed to prevent unauthorized
transactions and failed to detect the misappropriation of funds. As a result,
the Company's shareholders' equity was reduced to approximately $1.8 million as
of December 31, 1996.

      In the year ended December 31, 1997, the Company's net income was $0.485
million. In 1997, additional capital was needed to fund accrued debts to
suppliers during the year ended December 31, 1996 and the beginning


                                       36
<PAGE>

of 1997, and to increase the Company's working capital and equity base. In the
third and fourth quarters of 1997, the Company completed a private placement of
$4.0 million of Ordinary Shares, from which the Company received net proceeds of
approximately $3.51 million (the "Private Placement").

      For the year ended December 31, 1997, the Company's major source of cash
was the $3.51 million of net proceeds from the Private Placement.

      For the year ended December 31, 1998, net cash provided by operating
activities was approximately $2.9 million. Cash provided from financing activity
was $1.7 million primarily from additional use of short-term credit line
totaling $2.3 million.

      The Company entered into several project plans with the OCS regarding the
development of the printers and the Mega Light, a discontinued product. The
Company has an obligation to pay royalties at the rate of 2% - 3% of the sales
derived from the applicable products developed within the framework of such
research and development projects, up to an amount equal to 100% - 150% of the
grant received, in NIS linked to the exchange rate of the U.S. dollar. The
Company has no obligation to repay this amount if sales are not sufficient to
satisfy the royalty obligations. As of December 31, 1998, the Company has a
contingent obligation to pay royalties in the amount of $1.152 million.

      The Company is required to pay royalties to the Marketing Fund at the rate
of 3% with respect to increases in export sales of products for which the
Company received funds for its marketing activities, up to an amount equal to
100% of the grant received. The grant is repayable only in respect of sales of
the related products, as a percentage of the growth in export sales. If there is
no increase in export sales, or if the Company ceases producing the relevant
products, the grant should not be repaid. As of December 31, 1998, the Company
has a contingent obligation to pay royalties in the amount of $0.434 million.

      The Company has future royalty obligations to Meital, which will not
exceed $1.3 million, payable during the three years ending September 2001. Such
commitment is part of the purchase price for technology acquired by the Company
from Meital.

      As part of the Matan Settlement Agreement, the Company is obligated to pay
a total of $880,000, plus interest and VAT, assuming timely payments, to the
Matan Parties. Such amount has been fully reserved and is payable by the Company
to the Matan Parties in equal quarterly installments over a three-year period
ending December 2001.

Operating activities

      In the year ended December 31, 1997, the Company had net income of $0.485
million. Net cash used in operating activities was approximately $2 million. The
main changes in the Company's working capital were (i) an increase of
approximately $1.8 million in trade accounts receivable, (ii) a decrease of
approximately $1.24 million in trade payables, and (iii) a decrease of
approximately $1.3 million in customer advances.

      In the year ended December 31, 1998, the Company had net income of $1.457
million. Net cash provided by operating activities was approximately $2.9
million. The main changes in the Company's working capital were (i) an increase
of approximately $3.03 million in trade accounts receivable, (ii) an increase of
approximately $1.4 million in inventories, and (iii) an increase of
approximately $4.1 million in trade payables.

                                       37
<PAGE>

Investing activities

      Net cash provided by investing activities was approximately $0.53 million
in the year ended December 31, 1996, and net cash used in investing activities
approximately $1.61 million in the year ended December 31, 1997. The Company
invested approximately $3.58 million in the year ended December 31, 1998
consisting of $2.54 million for equipment and $1.3 million for the acquisition
of technology.

Financing activities

      Net cash provided by financing activities in the year ended December 31,
1998 was approximately $1.763 million.

      The Company maintains long and short-term credit facilities in an
aggregate amount of approximately $4.15 million at December 31, 1998. At
December 31, 1998, the Company had approximately $1.174 million in long-term
loans from banks and others, $0.224 million of which is payable within 12
months. Most of the Company's long term loans are linked to the U.S. dollar
bearing interest at a rate ranging between 6.2% and LIBOR plus 3.12%.

      As of December 31, 1998, total current assets of the Company amounted to
approximately $17.936 million, out of which $2.39 million was in cash, cash
equivalents and marketable securities, compared with total current liabilities
of $12.495 million. The increase in current assets is attributable primarily to
growth in trade receivables resulting from the growth in the Company's revenues.
The increase of the current liabilities is attributable primarily to the
increase of trade payables and short term loans.

      Net cash provided by financing activities in the years ended December 31,
1996, 1997 and 1998 was approximately $1.07, $3.08 and $ 1.76 million,
respectively.

      The Company has granted several security interests in its assets to
various banks and leasing companies to secure bank credit lines and lease
facilities.

Impact of Inflation, Devaluation and Fluctuation of Currencies

      Most of the Company's sales are in U.S. dollars. In addition, a
substantial number of other expenses are incurred outside Israel in U.S. dollars
or paid in U.S. dollars or in NIS linked to the exchange rate of the U.S.
dollar. Approximately 50% of these costs are denominated in U.S. dollars. Costs
not effectively denominated in U.S. dollars are translated to U.S. dollars, when
recorded, at prevailing exchange rates for the purposes of the Company's
financial statements, and will increase if the rate of inflation in Israel
exceeds the devaluation of the Israeli currency against the U.S. dollar or if
the timing of such devaluations were to lag considerably behind inflation.
Consequently, the Company is and will be affected by changes in the prevailing
NIS/U.S. dollar exchange rate.

      The Company might also be affected by the U.S. dollar exchange rate to the
major European currencies - mainly the German Mark and the Belgian Franc.

      During 1992 and 1993, the value of the U.S. dollar increased relative to
major currencies and the rate of inflation in Israel exceeded the rate in the
United States. In 1995 and 1996, the value of the U.S. dollar decreased relative
to major currencies, and the rate of inflation in Israel exceeded the rate in
the United States. The annual rate of inflation in Israel in 1995 was 8.1%,
which increased to 10.6% in 1996 and decreased to 7.0% in 1997 and to 8.6% in
the year ended December 31, 1998. The NIS was devalued against the U.S. dollar
by approximately 1%, 3.9%, 3.7%, 8.8% and 17.6% in 1994, 1995, 1996, 1997 and
1998 respectively. The Company cannot predict whether the rate of devaluation of
the NIS against the U.S. dollar will continue to exceed the rate of inflation in
the future and whether these conditions will have a material adverse effect on
the Company.

      The representative dollar exchange rate for converting the NIS to dollars,
as reported by the Bank of Israel, was NIS 4.16 for one dollar US on December
31, 1998. (NIS 3.536 on December 31, 1997, NIS 3.251 on December 31, 1996 and
NIS 3.135 on December 31, 1995).

                                       38
<PAGE>

      The Company's transactions and balances denominated in U.S. dollars are
presented at their original amounts. Non-dollar transactions and balances have
been measured into U.S. dollars in accordance with Statement 52 of the FASB. All
transaction gains and losses from remeasurement of monetary balance sheet items
denominated in non-dollar currencies are reflected in the statement of
operations as financial income or expenses, as appropriate. The average exchange
rates during the years ended December 31, 1995, 1996, 1997 and 1998 were NIS
3.011, 3.187, 3.449 and 3.8 for one dollar US, respectively. The exchange rate
as of March 31, 1999 was NIS 4.034 for one dollar.

Current and Future Capital Needs

      The Company believes that its revenues from operations together with its
existing capital resources and credit facilities will be sufficient to fund the
Company's current activities at their present rate without the Company's planned
expansion through July 2000. The Company will require additional funds, to be
raised through public or private financing of debt or equity, to ensure its
ability to proceed with the planned expansion of its operations after December
1999. If such funds are not raised, the Company may have to reduce or eliminate
planned expenditures for research and development, production, or marketing of
its products, any one of which could have an adverse effect on the Company's
business. There can be no assurance that such additional financing will be
available or that, if available, it will be obtained on terms favorable to the
Company. The Company currently has no commitments for additional financing and
is exploring the possibility of raising capital through additional borrowings.

      In this regard, the Company's capital requirements and level of expenses
depend upon numerous factors, including the scope and success of the Company's
marketing and customer service efforts, and of its research and development
activities, as well as the demand for the Company's products and services.
Moreover, in the course of the bankruptcy proceedings of Moshe Nur and the
companies controlled by him, the Company in the future may be exposed to claims
arising from the actions of Moshe Nur despite the recent settlement of all
material claims related to such persons and entities. Liabilities arising from
any such claims may be material. See "Item 3: Legal Proceedings."

Year 2000

The Company's State of Readiness

      Many computer systems and software products will not function properly in
the years starting 2000 due to a once-common programming standard that
represents years using only the last two-digits. This is known as the Year 2000
problem.

      In 1998, the Company began converting its internal computer systems to be
Year 2000 compliant. As of March 31, 1999, approximately 85% of the Company's
information technology ("IT") systems and approximately 90% of the Company's
non-IT systems were compliant. All of the Company's internal IT and non-IT
systems are expected to be compliant by July 1999. Completion of the Company's
compliance program involves upgrading the operating systems of the remaining 25%
of user workstations.

      The applications used in the Company's internal IT and non-IT systems are
commercially available and certified by the vendors of the systems for full Year
2000 compliance. Additionally, the Company has verified the functional behavior
of these applications as being Year 2000 compliant.

      The Company does not believe, after contacting appropriate parties, that
the failure of its vendors' or other third-party providers' systems to be Year
2000 compliant will materially adversely affect the Company's financial
performance.

                                       39
<PAGE>

The Costs to Address the Company's Year 2000 Issues

      As of March 31, 1999, the Company had spent approximately $20,000 on its
Year 2000 compliance efforts. This figure includes the expense of updated
software licenses and updated application versions and has been fully expensed.
The total cost of attaining Year 2000 compliance is estimated to be $30,000 and
is being funded through operating cash flows. The Company plans to pay for
expenses and liabilities related to Year 2000 complications out of revenues from
operations and capital resources.

The Risks of the Company's Year 2000 Issues

      Based on its compliance efforts, the Company does not anticipate any
significant internal Year 2000 complications.

      The Company's primary concern is the compliance of its products. All of
the Company's currently manufactured products are fully compliant; however,
approximately 30 customers who purchased current Company products in the past
will require operating system upgrades. The Company estimates its exposure for
covering the costs related to these upgrades to be approximately $5,000 in the
aggregate.

      The Company has tested prior generation products and not found any Year
2000 functionality problems. Further testing is necessary, however. There is a
risk that prior generation products will require changes in application software
to be Year 2000 compliant. The Company estimates its exposure for covering the
costs related to these changes to be $5,000 to $10,000 in the aggregate.

The Company's Contingency Plans

      If the Company does not attain compliance for its prior generation
products and complications arise, customers will be advised to reset the
computer clock to a date in the 1990's. The Company has verified that resetting
the internal clock will enable the Company's products to function in accordance
with their specifications.

      While the Company believes that it is adequately addressing the Year 2000
problem, there can be no assurance that the costs and liabilities of the Year
2000 problem will not have material adverse effects on its business, financial
condition and results of operations.



ITEM 9A:    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The Company does not believe the disclosure otherwise required by Item 9A
of Form 20-F to be material to the Company.


                                       40
<PAGE>

ITEM 10:   DIRECTORS AND OFFICERS OF REGISTRANT

      The executive officers and directors of the Company are:

<TABLE>
<CAPTION>
Name                       Age      Position with the Company
----                       ---      -------------------------
<S>                         <C>     <C>
Dan Purjes(1)               49      Chairman of the Board of Directors
Erez Shachar                35      President, Chief Executive Officer and
                                    Director
Hilel Kremer                37      Chief Financial Officer and Secretary
Eyal Israeli                44      Vice President of Operations
Yoram Ben-Porat             44      Director and President of NUR Media
                                    Solutions
Robert L. Berenson(2)       60      Director
Roni Ferber (1)(2)          56      Director
Robert F. Hussey(1)(2)      50      Director
</TABLE>

---------
(1)        Member of the Company's stock option committee.
(2)        Member of the Company's audit committee.

      Dan Purjes has served as the Chairman of the Board of the Company since
April 1997. Mr. Purjes is Chairman and Chief Executive Officer of Josephthal, an
investment banking and brokerage firm which is a member of the New York Stock
Exchange. Prior to joining Josephthal in 1985, Mr. Purjes was a Vice President
with a number of securities firms, including Bear Stearns & Co. and L.F.
Rothschild Unterberg Towbin, in their corporate finance and brokerage sales
divisions. He began his Wall Street career at Morgan Stanley & Co. in 1978 as a
director of their computer systems department. Prior to that, Mr. Purjes was a
manager at Citibank and at Philip Morris International in their computer systems
areas. Mr. Purjes earned B.S. and M.S. degrees in computer science from the City
College of New York School of Engineering.

      Erez Shachar has served as the Company's President and Chief Executive
Officer since July 1997 and as a Director of the Company since October 1997. Mr.
Shachar has also served as a Director of NUR Europe, NUR America and NUR Media
Solutions since January 1998. Prior to joining the Company, from 1989 to 1997
Mr. Shachar served in various research and development, marketing, sales, and
senior management positions with Scitex Corporation. Mr. Shachar's last position
with Scitex was Vice President of Sales and Marketing of Scitex Europe, and
prior thereto Mr. Shachar held several positions in the marketing organization
of Scitex Europe. Prior to joining Scitex Europe, Mr. Shachar was a software
developer within the research and development group of Scitex. Mr. Shachar holds
a B.Sc. in mathematics and computer science from Tel Aviv University, and a
M.B.A. degree from INSEAD, France.

      Hilel Kremer has served as the Chief Financial Officer and Secretary of
the Company since December 1998. Mr. Kremer has also served as a Director of NUR
Europe, NUR America and NUR Media Solutions since December 1998. Prior to
joining the Company, from 1993 to 1998 Mr. Kremer served in various management
positions with Scitex Corporation. Mr. Kremer's last position with Scitex was
Vice President of Finance and Chief Financial Officer of Scitex Asia Pacific,
and prior thereto Mr. Kremer held several positions in the finance organization
of Scitex Europe. Prior to joining Scitex Europe, Mr. Kremer held various
positions in the budgeting department of the Israeli Finance ministry. Mr.
Kremer holds a B.A. in economics from Hebrew University, Jerusalem, and an
M.B.A. degree from INSEAD, France.

      Eyal Israeli has served as the Vice President of Operations since June
1996. Prior thereto, since January 1995, Mr. Israeli served as the Director of
Customer Support for Indigo Electronic Printing Systems Ltd. From February 1993
to January 1995, Mr. Israeli served as the Manager of Corporate Customer Support
for Orbotech Ltd. In addition, from January 1989 to 1993, Mr. Israeli served as
Vice President of Customer Support for Optrotech Inc., the U.S. subsidiary of
Optrotech Ltd. Mr. Israeli holds a B.Sc. degree in electronic engineering from
Ben-Gurion University and a M.Sc. degree in electronic systems from Tel Aviv
University.

                                       41
<PAGE>

      Yoram Ben-Porat has served as a Director of the Company since March 1991.
Since October 1993, Mr. Ben-Port has served as Director and President of NUR
Media Solutions. Since October 1993, Mr. Ben-Porat has served as the Chief
Executive Officer and Deputy Chairman of the Board of Directors of NUR
International. He was among the founders of the Company and between January and
September 1993, he served as the Chief Executive Officer of the Company. From
1987 until December 1992, Mr. Ben-Porat served as Research and Development and
Business Development Manager of NUR Outdoor and NUR Focus. Prior thereto, he was
an independent consultant to metal finishing process companies in the high
technology industry. Mr. Ben-Porat holds a degree in economics and marketing
from the Tel Aviv College of Management and Administration.

      Robert L. Berenson has served as a Director of the Company since July
1998. Mr. Berenson is President of Grey Advertising Inc., the second largest
advertising agency in the United States and sixth largest in the world. He
joined Grey in 1964 as an Assistant Account Executive, rose through the ranks to
become the youngest Executive Vice President in the company's history in 1977
and took his present position as President in 1989. Mr. Berenson is also a
Director of the Better Business Bureau of New York, the Advertising Educational
Foundation and the Federal Law Enforcement Foundation. He holds a B.S./B.A.
degree in journalism and marketing from Syracuse University and an M.S. degree
in journalism from the Medill School at Northwestern University.

      Roni Ferber has served as a Director of the Company since July 1998. Since
1991, Mr. Ferber has served as a Financial and Economic Consultant. Mr. Ferber
also serves on the Board of Directors of Omnitech Eichut Ltd., International
Software Group Ltd., Zvi Zorfati Ltd. and Aflkim Consulting and Investments Ltd.
From 1986 to 1992, Mr. Ferber served as a Director and member of the executive
committee and of the investment committee of Caesarea - Edmond Benjamin de
Rothschild Foundation. During that time he also served as a Director and member
of the executive committee of the Caesarea Development Corporation. From 1967 to
1991, Mr. Ferber served as a Director and co-founder of Nikuv Computers Ltd.,
the first Israeli software company to be listed on the Tel Aviv Stock Exchange.
From 1986 to 1991, Mr. Ferber served as CEO of Nikuv Computers Ltd. Mr. Ferber
holds a B.A. in economics from Hebrew University and a B.A. in Semitic languages
from Tel Aviv University. Mr. Ferber is fluent in Hebrew, Arabic, English,
French, German and Italian.

      Robert F. Hussey has served as a Director of the Company since September
1997. Prior to joining the Company, from June 1991 to April 1997, Mr. Hussey
served as the President and Chief Executive Officer of Metrovision of North
America. Prior thereto, from 1984 to 1991, Mr. Hussey served as the President,
Chief Executive Officer and Director of POP Radio Corp., a company which he
helped form. From 1979 to 1984, Mr. Hussey served as the Vice
President/Management Supervisor for Grey Advertising, Inc. From 1977 to 1979,
Mr. Hussey was the Director of Financial Advertising for E.F. Hutton. Prior
thereto, from 1973 to 1977, Mr. Hussey served as a Senior Financial Analyst and
Product Manager for American Home Products, Inc. Mr. Hussey holds a B.S. degree
in finance and a M.B.A. degree in international finance from Georgetown
University.

Consulting Agreement

      The Company has retained the President of Meital, Kobi Markowitz, as a
consultant to the Company for a two-year period, which commenced in September
1998, in connection with the Company's acquisition of D-O-D technology from
Meital. Meital is paid monthly compensation of approximately $7,370 for these
services and has been granted the option to acquire 100,000 Ordinary Shares at
$1.00 per share at the end of the first year of the agreement.

Terms of Directors

      The members of the Board are elected annually at the Company's general
meeting and remain in office until the next annual general meeting of the
Company, unless the director has previously resigned, vacated his office, or was
removed in accordance with the Company's Articles of Association. In addition,
the Board may elect additional members to the Board.

Alternate Directors

      The Articles of Association provide that, subject to the Board's approval,
a director may appoint, by written notice to the Company, any individual
(whether or not such person is then a member of the Board) to serve as an
alternate director. Any alternate director shall have all of the rights and
obligations of the director appointing him or


                                       42
<PAGE>

her, except the power to appoint an alternate (unless the instrument appointing
him or her expressly provides otherwise). The alternate director may not act at
any meeting at which the director appointing him or her is present. Such
alternate may act as the alternate for several directors and have the
corresponding number of votes. Unless the appointing director limits the time
period or scope of any such appointment, such appointment is effective for all
purposes and for an indefinite time, but will expire upon the expiration of the
appointing director's term. There are currently no alternate directors.

Committees of the Board of Directors

      The Company's Articles of Association provide that the Board may delegate
all of its powers to committees of the Board as it deems appropriate, subject to
the provisions of the Israeli Companies Ordinance (New Version) 1983, as amended
(the "Companies Ordinance").

Approval of Certain Transactions under the Companies Ordinance; Audit
Committee

      The Companies Ordinance requires disclosure by an "Office Holder" (as
defined below) to the Company in the event that an Office Holder has a direct or
indirect personal interest in a transaction to which the Company intends to be a
party, and codifies the duty of care and fiduciary duties which an Office Holder
has to the Company. An "Office Holder" is defined in the Companies Ordinance as
a director, managing director, chief business manager, executive vice president,
vice president, other manger directly subordinate to the managing director and
any other person assuming the responsibilities of any of the foregoing positions
without regard to such person's title.

      The Companies Ordinance requires that certain transactions, actions, and
arrangements must be approved by an audit committee of the Company's Board (the
"Audit Committee") meeting certain criteria defined in the Companies Ordinance,
and by the Board itself. The Company is also required to maintain the Audit
Committee as a result of the inclusion for quotation of the Ordinary Shares on
the Nasdaq National Market. In certain circumstances, shareholder approval is
also required. The Audit Committee must be comprised of members of the Board who
are not employees of the Company, and the majority of members of the Audit
Committee may not be holders, directly or indirectly through family members, of
more than five percent of the Ordinary Shares.

      The Company has appointed an Audit Committee consisting of Robert L.
Berenson, Roni Ferber, and Robert F. Hussey. Approval by the Audit Committee and
the Board is required for (i) proposed transactions to which the Company intends
to be a party in which an Office Holder has a direct or indirect personal
interest, (ii) actions or arrangements which may otherwise be deemed to
constitute a breach of fiduciary duty or of the duty of care of an Office Holder
to the Company, (iii) arrangements with directors as to the terms of office or
compensation, and (iv) indemnification of Office Holders. Arrangements with
directors as to the terms of their service or compensation also require
shareholder approval. All arrangements as to compensation of Office Holders who
are not directors require approval of the Board. In certain circumstances, the
matters referred to in (i), (ii), and (iv) may also require shareholder
approval.

      Office holders (including directors) who have a personal interest in a
matter which is considered at a meeting of the Board or the Audit Committee may
not be present at such meeting, may not participate in the discussion, and may
not vote on any such matter, except that such Office Holders may consent in
writing to resolutions adopted by the Board and/or the Audit Committee by
unanimous consent.

Stock Option Committee

      In March 1998, the Company established a committee to administer the
Company's stock option plans (the "Stock Option Committee"). The Stock Option
Committee is charged with administering and overseeing the allocation and
distribution of stock options under the approved stock option plans of the
Company. The Stock Option Committee is presently comprised of three members: Dan
Purjes, Roni Ferber and Robert F. Hussey.

ITEM 11:    COMPENSATION OF DIRECTORS AND OFFICERS

      For the year ended December 31, 1996, the aggregate compensation paid by
the Company to the directors and executive officers of the Company (a total of
seven persons) amounted to approximately $523,000. For the year


                                       43
<PAGE>

ended December 31, 1997, the aggregate compensation paid by the Company to the
directors and executive officers of the Company (a total of 13 persons) amounted
to approximately $813,000. For the year ended December 31, 1998, the aggregate
compensation paid by the Company to the directors and executive officers of the
Company (a total of 14 persons of which eight were in office at December 31,
1998) amounted to approximately $806,000.

      In October 1997, the Company undertook to pay its Board members who are
not employees of the Company remuneration for their services as directors. This
remuneration includes an annual payment of $5,000 and an additional payment of
approximately $250 per meeting. Each non-employee Board member also receives an
annual grant of options to purchase 10,000 Ordinary Shares under the conditions
set forth in the Company's 1998 Non-Employee Director Share Option Plan.

ITEM 12:    OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES

Outstanding Warrants and Options

      As of April 22, 1999, the Company had options to purchase a total of
1,839,039 Ordinary Shares outstanding under the Company's stock option plans. Of
such 1,839,039 options, 460,039 have been issued under the 1995 Plan, 1,329,000
have been issued under the 1997 Plan and 50,000 have been issued under the 1998
Plan. The options granted under the 1995 Plan and the 1997 Plan are subject to
various vesting requirements, have been issued at exercise prices ranging from
$0.30 to $3.00 per share with various expiration dates. The options granted
under the 1998 Plan have an exercise price of $2.75 per share are not subject to
vesting requirements and expire on October 26, 2008. See Note 19 to the
Company's Financial Statements included as a part of this Form. The Company has
also granted to Meital, in connection with a consulting arrangement, an option
to acquire 100,000 Ordinary Shares at $1.00 per share in September 1998.

      As of April 22, 1999, the Company had warrants exercisable into a total of
580,000 Ordinary Shares outstanding. Of such warrants, (i) 155,000 were issued
to Josephthal as representative of the underwriters in connection with the
Company's initial public offering in October 1995 (the "IPO Warrants"), (ii)
400,000 were issued to Josephthal as placement agent in connection with the
Company's private placement between September and December 1997 (the "Private
Placement Warrants"), and (iii) 25,000 were issued to Cruttenden Roth
Incorporated in connection with its role as "qualified independent underwriter"
in the Company's current registration on behalf of certain selling security
holders of certain Ordinary Shares held thereby (the "QIU Warrants"). The
Company also agreed to issue a warrant to purchase a total of 15,000 Ordinary
Shares to Zamir & Barak in partial consideration for legal services rendered on
behalf of the Company (the "ZB Warrants"). The IPO Warrants are exercisable at
$7.20 per share no later than October 2000. The Private Placement Warrants are
exercisable at $1.00 per share no later than September and December 2002. The
QIU Warrants are exercisable at $4.50 per share from February 2000 to February
2004. The ZB Warrants will be exercisable at $2.75 per share from January 11,
2000 to January 11, 2002. Dan Purjes, the Chairman of the Company is also the
Chairman of Josephthal. See "Item 13: Interest of Management in Certain
Transactions."

1995 Stock Option Plan

      In 1995, the Company's Board adopted a Flexible Stock Incentive Plan (the
"1995 Plan") that provides for grants to employees and consultants of the
Company of stock options. An aggregate amount of not more than 500,000 stock
options is available for grant under the 1995 Plan, including options for future
services (such options, "Service Options"), options for performance (such
options, "Performance Options"), and options to consultants for service or
performance (such options, "Consultant Options").

      The Company's Board determines the employees and consultants who are
granted options under the 1995 Plan, the timing of such grants, the terms
thereof, and the number of shares to be covered thereby. The Board also
determines the exercise price for Ordinary Shares subject to the Performance and
Consultants Options under the 1995 Plan and the exercise price for the Service
Options, provided that in no case shall the exercise price of any Service Option
be less than 80% of the fair market value of such Ordinary Shares at the date of
grant (the "Date of Grant"). Service Options usually vest over a four-year
period. One-third of the Service Options vest after the second annual
anniversary of the Date of Grant with an additional one-third vesting on the
third and fourth anniversary of the Date of Grant, respectively. Performance
Options vest under the same terms as applicable to the Service


                                       44
<PAGE>

Options. Consultants Options vest over a specified period of time based on past
or future services rendered or performance targets to be achieved by the Company
as determined by the Board. Notwithstanding the foregoing, the Consultants
Options vest ten years following the Date of Grant. No option may be assigned or
transferred except by will or the laws of descent and distribution.

      The Company's 1995 Plan provides that it is to be administered by the
Board or by a committee appointed by the Board and is currently administered by
the Stock Option Committee. The Stock Option Committee has broad discretion to
determine the persons entitled to receive options under the 1995 Plan, the terms
and conditions on which options are granted, and the number of Ordinary Shares
subject thereto, up to an aggregate amount of 500,000 Ordinary Shares.

      Under the 1995 Plan for Israeli employees, options and Ordinary Shares
issuable upon the exercise of options granted to Israeli employees of the
Company can be held in a trust until the payment of all taxes due with respect
to the grant and exercise (if any) of such options.

1997 Stock Option Plan

      In 1997, the Company's Board adopted the 1997 Plan that provides for
grants to employees and consultants of the Company of stock options. An
aggregate amount of not more than 1,700,000 stock options are available for
grant under the 1997 Plan.

      The Company's 1997 Plan provides that it is to be administered by the
Board or by a committee appointed by the Board and is currently administered by
the Stock Option Committee. The Stock Option Committee has broad discretion to
determine the persons entitled to receive options under the 1997 Plan, the terms
and conditions on which options are granted, and the number of Ordinary Shares
subject thereto, up to the maximum aggregate amount permitted under the 1997
Plan. The Stock Option Committee also has discretion to determine the purchase
price to be paid upon the exercise of an option granted under the 1997 Plan.

      The exercise price of the option shares under the 1997 Plan is determined
by the Committee; provided, however, that the exercise price of any option
granted shall not be less than eighty percent (80%) of the Stock Value (as
defined below) at the time of the issuance of such options (the "Date of
Grant"). The "Stock Value" at any time is equal to the then current Fair Market
Value (as defined below) of the Company's Ordinary Shares. For purposes of the
1997 Plan, the "Fair Market Value" means, as of any date, the last reported sale
price, on such date, of the Ordinary Shares on such principal securities
exchange of the most recent prior date on which a sale of the Ordinary Shares
took place.

      The Stock Option Committee determines the term of each option granted
under the 1997 Plan; provided, however, that the term of an option shall not be
for more than ten (10) years. Upon termination of employment, all unvested
options lapse. All options granted vest over a four-year period. One-third of
such options vest after the second anniversary of the Date of Grant, one-third
after the third anniversary, and the final third after the fourth anniversary of
the Date of Grant. Notwithstanding the foregoing, the Stock Option Committee may
determine different vesting scheduled for service options granted to employees
in special circumstances.

      The options granted are subject to restrictions on transfer, sale, or
hypothecation. All options and Ordinary Shares issuable upon the exercise of
options granted to Israeli employees of the Company are held in trust for a
minimum of two years in accordance with Section 102 of the Israel Income Tax
Ordinance.

1998 Non-Employee Director Share Option Plan

      The Company's shareholders approved the 1998 Non-Employee Director Share
Option Plan at its annual meeting of shareholders on December 8, 1998 to provide
for grants of options to purchase Ordinary Shares to non-employee directors of
the Company (the "1998 Plan"). The 1998 Plan will be administered by a committee
appointed by the Board consisting of directors not eligible for awards of
options under the 1998 Plan (the "Committee"). An aggregate amount of not more
than 250,000 Ordinary Shares is reserved for grant under the 1998 Plan. The 1998
Plan will expire on December 8, 2008 (10 years after adoption), unless earlier
terminated by the Board.

                                       45
<PAGE>

      Under the 1998 Plan, each non-employee director that served on the 1998
"Grant Date," as defined below, automatically received an option to purchase
10,000 Ordinary Shares on such Grant Date and will receive an option to purchase
an additional 10,000 Ordinary Shares on each subsequent Grant Date thereafter
provided that he or she is a non-employee director on the Grant Date and has
served as such for the entire period since the last Grant Date. The "Grant Date"
means, with respect to 1998, October 26, 1998, and with respect to each
subsequent year, August 1. Directors first elected or appointed after the 1998
Grant Date, will automatically receive on such director's first day as a
director an option to purchase up to 10,000 Ordinary Shares prorated based on
the number of full months of service between the prior Grant Date and the next
Grant Date. Each such non-employee director would also automatically receive, as
of each subsequent Grant Date, an option to purchase 10,000 Ordinary Shares
provided he or she is a non-employee director on the Grant Date and has served
for the entire period since the last Grant Date.

      The exercise price of the option shares under the 1998 Plan is 100% of the
Fair Market Value (as defined below) of such Ordinary Shares at the time of
issuance of such options (the "Date of Grant"). The "Fair Market Value" means,
as of any date, the average closing bid and sale prices of the Ordinary Shares
for the date in question as furnished by the National Association of Securities
Dealers, Inc. through Nasdaq or any similar organization if Nasdaq is no longer
reporting such information, or such other market on which the Ordinary Shares
are then traded, or if not then traded, as determined in good faith (using
customary valuation methods) by resolution of the members of the Board of
Directors of the Company, based on the best information available to it. The
exercise price is required to be paid in cash.

      The term of each option granted under the 1998 Plan is ten (10) years from
the applicable Date of Grant. All options granted vest immediately after
issuance.

      The options granted would be subject to restrictions on transfer, sale or
hypothecation. All options and Ordinary Shares issuable upon the exercise of
options granted to the non-employee directors of the Company could be withheld
until the payment of taxes due with respect to the grant and exercise (if any)
of such options.

ITEM 13:   INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Private Placement and Other Payments and Grants

      Between September and December 1997, the Company effected a private
offering of its Ordinary Shares in the United States, for which Josephthal acted
as exclusive placement agent. As of April 16, 1999, the Chairman of Josephthal,
Dan Purjes, who is also the Company's Chairman, beneficially owns approximately
37.26% of the Company's Ordinary Shares, and other individuals affiliated with
Josephthal beneficially own approximately 7.13% of the Company's Ordinary
Shares. As compensation for its services as the Company's exclusive placement
agent, Josephthal received fees of $439,000 and warrants to purchase 400,000
Ordinary Shares at an exercise price of $1.00 per share. Payment to Josephthal
in consideration for the banking services rendered by Josephthal to the Company
was approved by the Company's shareholders at its annual meeting in October
1997.

      From April through October 1997, an individual employed by Josephthal was
the Company's acting Chief Financial Officer, for which he received compensation
of approximately $45,000, and Dan Purjes received $20,000 in compensation for
his services as Chairman of the Board of Directors of the Company. Dan Purjes,
Chairman of the Company and Josephthal, and two individuals who are officers of
Josephthal and were simultaneously directors of the Company were granted options
under a company stock option plan to purchase in the aggregate 500,000 Ordinary
Shares of the Company at $1.25 per share. The foregoing payments and grants were
approved by the Company's shareholders at its annual meeting in October 1997.

Certain Facilities and Related Legal Proceedings

      The Company's main facilities in Magshimim, Israel (the "Facilities"),
which the Company uses as its headquarters and as a research and development
facility, are situated on a plot of land leased to Moshe Nur and his wife. Moshe
Nur was the Company's Chairman and its major shareholder until April 1997. Moshe
Nur and certain affiliated companies, have been involved in various insolvency
proceedings which involved the Company, until a settlement was reached in
September 1998. According to the settlement agreements, all material claims
against the Company relating to the lease of the Facilities, alleged breach of
contracts and alleged debts owed to any of the above mentioned parties were
dismissed. Specifically, the Company reached an agreement with Moshe Nur's


                                       46
<PAGE>

receiver (and certain creditors) pursuant to which the Company may continue to
lease the Facilities until July 2000 without payment of rent. This rent-free use
of the Facilities was granted to the Company as set against payment previously
made and accounted for as pre-paid rent. Separately, claims related to the
ownership of the Company's shares have been resolved and the temporary
injunction on the issuance of securities by the Company was lifted.



                                   PART II

ITEM 14:    DESCRIPTION OF SECURITIES TO BE REGISTERED

Not applicable

                                   PART III

ITEM 15:    DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 16:    CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
            SECURITIES

Not applicable

                                   PART IV

ITEM 17:    FINANCIAL STATEMENTS

Not applicable

ITEM 18:    CONSOLIDATED FINANCIAL STATEMENTS

      The Consolidated Financial Statements and related notes thereto
included under Item 19: "Consolidated Financial Statements and Exhibits" are
incorporated herein by reference.


                                       47
<PAGE>

ITEM 19:    CONSOLIDATED FINANCIAL STATEMENTS AND EXHIBITS

A.          INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                            NUR MACROPINTERS LTD.

            Report of Independent Auditors          F-2
            Consolidated Balance Sheets             F-3 - F-4
            Statements of Operations                F-5
            Statements of Changes in Shareholders'                 
                        Equity                      F-6
            Statements of Cash Flows                F-7 - F-9
            Notes to Financial Statements           F-10 - F-39


B.          EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number      Description
------      -----------
<S>   <C>                                                                      
 3.1  Memorandum of Association of the Registrant, in Hebrew with a translation
      to English.(1)

 3.2  Articles of Association of the Registrant.(1)

 3.3  Certificate of Name Change.(2)

 4.1  Specimen Certificate for Ordinary Shares.(1)

 4.2  Representative's Warrant Agreement dated October 12, 1995.(1)

 4.3  Form of Representative's Warrant Certificate.(1)

 4.4  Forms of Placement Agent's Warrant Agreement and Certificate.(3)

 4.5  Forms of Qualified Independent Underwriter's Warrant Agreement and
      Certificate.(3)

10.1  1995 Stock Option / Stock Purchase Plan.(1)

10.2  Amendment to the 1995 Stock Option / Stock Purchase Plan.(3)

10.3  1997 Stock Option Plan.(4)

10.4  1998 Non-Employee Director Share Option Plan.(5)

10.5  Lease Agreement between the Registrant and Mr. Moshe Nur dated October 4,
      1993, as amended on May 29, 1995, in Hebrew with a translation to
      English.(1)

10.6  Lease Agreement for office space in Brussels, Belgium between Nivellease,
      S.A. and the Registrant dated November 25, 1996.(3)
</TABLE>

                                       48
<PAGE>

<TABLE>
<S>   <C>                                                                      
10.7  Lease Agreement for office space in Newton Centre, Massachusetts between
      WHTR Real Estate Limited Partnership and the Registrant dated July 10,
      1998.(3)

10.8  Qualified Independent Underwriting Agreement.(3)

10.9  Distribution Agreement between Imaje S.A. and the Registrant dated June
      26, 1995.(1)

10.10 Settlement Agreements relating to Moshe Nur and his affiliated 
      companies.(3)

10.16 Bank Hapoalin revolving loan agreement.(3,6)

10.17 Agreement between I.T.S. Machinery Development Ltd. and the Registrant
      dated February 10, 1997.(3)

10.18 Form of confidentiality agreement.(3)

10.19 Agreement dated September 13, 1998 between "Meital" Electronic Technology
      Ltd. and Markowitz Yaakov and NUR Macroprinters Ltd.(3)

21    List of Subsidiaries of the Registrant.

27.1  Financial Data Schedule as of and for the year ended December 31, 1995.(4)

27.2  Financial Data Schedule as of and for the year ended December 31, 1996.(4)

27.3  Financial Data Schedule as of and for the year ended December 31, 1997.(4)

27.4  Financial Data Schedule as of and for the year ended December 31, 1998.
</TABLE>

--------------
(1) Previously filed with the Company's Registration Statement (File No.
    33-93160) on Form F-1 and incorporated by reference herein.
(2) Previously filed with the Company's Form 6-K dated January 7, 1998 and
    incorporated by reference herein.
(3) Previously filed with the Company's Form F-1 (File No. 333-66103) and
    incorporated by reference herein.
(4) Previously filed with the Company's Form 20-F for the year ended December
    31, 1997 and incorporated by reference herein.
(5) Previously filed with the Company's Form 6-K dated November 13, 1998 and
    incorporated by reference herein.
(6) Filed in summary form. Original filed in paper format pursuant to Form SE.


                                       49
<PAGE>

  (a) Financial Statement Schedules

Other than as set forth below, all schedules have been omitted as the required
information is either not applicable or presented in the financial statements or
notes thereto.

                             NUR MACROPRINTERS LTD.
                 Schedule II - VALUATION AND QUALIFYING ACCOUNTS
                             US DOLLAS in THOUSANDS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                              Balance at               Charged to costs         Deductions          Balance at               
                              December 31, 1995        and expenses                                 December 31, 1996        
---------------------------------------------------------------------------------------------------------------------
<S>                               <C>                      <C>                     <C>                   <C>
Allowance for doubtful            132                      499                     (25)                  606
accounts
---------------------------------------------------------------------------------------------------------------------
Allowance for returns              --                       --                      --                    --
---------------------------------------------------------------------------------------------------------------------
Allowance for price                --                       --                      --                    --
protection
---------------------------------------------------------------------------------------------------------------------
Total                             132                      499                     (25)                  606
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                              Balance at               Charged to costs         Deductions          Balance at               
                              December 31, 1996        and expenses                                 December 31, 1997        
---------------------------------------------------------------------------------------------------------------------
<S>                               <C>                      <C>                    <C>                    <C>
Allowance for doubtful            606                      448                    (514)                  644
accounts
---------------------------------------------------------------------------------------------------------------------
Allowance for returns              --                       --                      --                    --
---------------------------------------------------------------------------------------------------------------------
Allowance for price                --                       --                      --                    --
protection
---------------------------------------------------------------------------------------------------------------------
Total                             606                      448                    (514)                  644
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                              Balance at               Charged to costs         Deductions          Balance at               
                              December 31, 1997        and expenses                                 December 31, 1995        
---------------------------------------------------------------------------------------------------------------------
<S>                               <C>                      <C>                    <C>                    <C>
Allowance for doubtful            540                      282                    (178)                  644
accounts
---------------------------------------------------------------------------------------------------------------------
Allowance for returns              --                       --                      --                    --
---------------------------------------------------------------------------------------------------------------------
Allowance for price                --                       --                      --                    --
protection
---------------------------------------------------------------------------------------------------------------------
Total                             540                      282                    (178)                  644
---------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       50
<PAGE>


                                  SIGNATURES

      Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all of 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.





                                    NUR MACROPRINTERS LTD.




                                    By: /s/ Erez Shachar
                                        -------------------------------------
                                        Erez Shachar
                                        President and Chief Executive Officer


Dated:  May 4, 1999




                                       51
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

                             To the Shareholders of

                      M.NUR MARKETING & COMMUNICATION GmbH


     We have audited the accompanying balance sheets of M.Nur Marketing &
Communication GmbH ("the Company") as of December 31, 1997 and 1998 and the
related statements of operations, changes in shareholders equity and cash flows
for each of the two years in the period ended December 31, 1998 and the
company's statement of operations, changes in shareholders equity and cash flows
for the year ended December 1996. 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 generally accepted auditing
standards in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance as to 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 the Company's 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, based on our audits, the financial statements referred to
above present fairly, in all material respects, the financial position of the
Company as of December 31, 1997 and 1998 and the related results of their
operations and cash flows for each of the two years in the period ended
December 31, 1998, and the Company's results of operations and cash flows for
the year ended December 31, 1996, in conformity with generally accepted
accounting principles in Germany. As applicable to the Company's financial
statements, generally accepted accounting principles in the United States and in
Germany are identical in all material aspects.

Kasell, Germany
April 21, 1999

                                          Yours truly,




               [seal]                   /s/ Willy Knyrim


                                          WILLY KNYRIM
                               Certified Public Accountants (Germany)

<PAGE>


                             NUR MACROPRINTERS LTD.


            CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998


                                IN U. S. DOLLARS




                                            INDEX


                                                                      Page
                                                                   -----------

Report of Independent Auditors                                        F-2

Consolidated Balance Sheets                                        F-3 - F-4

Consolidated Statements of Operations                                 F-5

Statements of Changes in Shareholders' Equity                         F-6

Consolidated Statements of Cash Flows                              F-7 - F-9

Notes to Financial Statements                                     F-10 - F-39


                                   - - - - - - - - - - - -


<PAGE>


        ERNST & YOUNG          [ERNST & YOUNG LOGO]
     KOST FORER & GABBAY



                         REPORT OF INDEPENDENT AUDITORS

                             To the Shareholders of

                             NUR MACROPRINTERS LTD.


        We have audited the accompanying consolidated balance sheets of Nur
Macroprinters Ltd. ("the Company") and its subsidiaries as of December 31, 1997
and 1998 and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. 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 did not audit the financial
statements of a subsidiary, which statements reflect total assets constituting
4.9% and 4.2% of consolidated total assets as of December 31, 1997 and 1998,
respectively, and total revenues constituting 18%, 14% and 12% of the related
consolidated totals for each of the three years in the period ended December 31,
1998, respectively. These statements were audited by other auditors whose report
has been furnished to us, and our opinion, insofar as it relates to data
included for this subsidiary, is based solely on the reports of the other
auditors.

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

        In our opinion, based on our audits and the reports of the other
auditors, 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, 1997 and 1998 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles in the United States.




                                              /s/ Kost, Forer and Gabbay
Tel-Aviv, Israel                              --------------------------
March 1, 1999                                   KOST, FORER and GABBAY
                                         Certified Public Accountants (Israel)
                                        A Member of Ernst & Young International






                                     F - 2
<PAGE>


                                                         NUR MACROPRINTERS LTD.
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                              December 31,
                                                                    ----------------------------------
                                                                        1997                1998
                                                                    -------------       --------------
                                                                        U.S. dollars in thousands
                                                                    ----------------------------------
     ASSETS

<S>                                                                       <C>                 <C>
CURRENT ASSETS
  Cash and cash equivalents (Note 3)                                      1,234               2,327
  Marketable securities                                                       -                  63
  Trade receivables (net of allowance for doubtful accounts:
   $ 540 and $ 644 as of December 31, 1997 and 1998,
   respectively) (Note 4)                                                 5,981               9,091
  Other accounts receivable and prepaid expenses (Note 5)                 1,745               2,756
  Inventories (Note 6)                                                    2,252               3,699
                                                                    -------------       --------------

Total current assets                                                     11,212              17,936
-----
                                                                    -------------       --------------

LONG-TERM INVESTMENTS:
  Restricted long-term bank deposit                                         150                 337
  Prepaid expenses (Note 9)                                                 137                  59
  Severance pay fund (Note 15)                                              262                 369
                                                                    -------------       --------------

Total long-term investments                                                 549                 765
-----
                                                                    -------------       --------------

PROPERTY AND EQUIPMENT, NET (Note 7):                                     1,641               3,058
                                                                    -------------       --------------

 OTHER ASSETS, net (Note 8)                                                 381                 236
                                                                    -------------       --------------

Total assets                                                             13,783              21,995
-----
                                                                    =============       ==============

</TABLE>



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


                                     F - 3
<PAGE>
                                                         NUR MACROPRINTERS LTD.
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                               December 31,
                                                                    ------------------------------------
                                                                        1997                 1998
                                                                    -------------       ----------------
                                                                         U.S. dollars in thousands
                                                                    ------------------------------------

     LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                                                       <C>                 <C>
CURRENT LIABILITIES
  Short-term bank loans (Note 10)                                           652               2,972
  Current maturities of long-term bank loans (Note 13)                      527                 224
  Trade payables (Note 11)                                                3,216               6,104
  Accrued expenses and other liabilities (Note 12)                        2,126               2,926
  Customer advances                                                          17                 269
                                                                    -------------       ----------------

Total current liabilities                                                 6,538              12,495
-----
                                                                    -------------       ----------------

LONG-TERM LIABILITIES:
  Long-term loans, net (Note 13)                                          1,076                 950
  Accrued expenses (Note 14)                                                  -                 587
  Accrued severance pay (Note 15)                                           358                 464
                                                                    -------------       ----------------

Total long-term liabilities                                               1,434               2,001
-----
                                                                    -------------       ----------------

MINORITY INTEREST                                                            26                  69
                                                                    -------------       ----------------

SHAREHOLDERS' EQUITY:
  Share capital (Note 19):
   Ordinary Shares of NIS 1 per nominal value:
     Authorized: 20,000,000 shares; Issued and outstanding:
     10,880,000 shares as of December 31, 1997 and 1998                   2,729               2,729
  Additional paid-in capital                                             14,383              14,376
  Other comprehensive income (loss)                                         (30)                165
  Accumulated deficit                                                   (11,297)             (9,840)
                                                                    -------------       ----------------

Total shareholders' equity                                                5,785               7,430
-----
                                                                    -------------       ----------------

Total liabilities and shareholders' equity                               13,783              21,995
-----
                                                                    =============       ================


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




                                     F - 4
<PAGE>

                                                         NUR MACROPRINTERS LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------------------------------------------------------------


                                                                          Year ended December 31,
                                                             --------------------------------------------------
                                                                  1996            1997            1998
                                                               ------------    -----------   ---------------
                                                             U.S. dollars in thousands except per share amounts
                                                             --------------------------------------------------
<S>                                                                <C>           <C>            <C> 
Revenues (Note 21a-c)
  Sales of printers and related products                           13,639        18,874         31,905
  Sales of printed materials                                        2,998         3,085          4,540
                                                              ------------    -----------   ---------------

                                                                   16,637        21,959         36,445
                                                              ------------    -----------   ---------------
Cost of revenues:
  Cost of sales of printers and related products                   11,528         9,627         16,368
  Cost of sales of printed materials                                2,008         1,684          2,579
                                                              ------------    -----------   ---------------

                                                                   13,536        11,311         18,947
                                                              ------------    -----------   ---------------

Gross profit                                                        3,101        10,648         17,498
                                                              ------------    -----------   ---------------

Research and development expenses                                   1,530         1,726          5,027
Less - grants and royalty-bearing grants                              372            43            818
                                                              ------------    -----------   ---------------

Research and development expenses, net                              1,158         1,683          4,209
                                                              ------------    -----------   ---------------

Selling and marketing expenses, net (Note 21d)                      4,823         4,620          6,111
General and administrative expenses                                 2,560         3,439          4,802
Write-off of debts of related parties (Note 21f)                    3,757             -              -
                                                              ------------    -----------   ---------------

                                                                   11,140         8,059         10,913
                                                              ------------    -----------   ---------------

Operating income (loss)                                            (9,197)          906          2,376
Financial expenses, net (Note 21e)                                    589           320            501
Gain (loss) on marketable securities                                   22             -            (91)
Other income (expenses), net                                           76            (8)           (20)
                                                              ------------    -----------   ---------------

Income (loss) before taxes on income                               (9,688)          578          1,764
Taxes on income (Note 20e)                                            400            67            264
                                                              ------------    -----------   ---------------

Income (loss) after taxes on income                               (10,088)          511          1,500
Minority interest in earnings of subsidiary                             -           (26)           (43)
                                                              ------------    -----------   ---------------

Net income (loss)                                                 (10,088)          485          1,457
                                                              ============    ===========   ===============

Basic and diluted earnings (loss) per share (Note 2j and 19b)       (1.47)         0.07           0.13

                                                              ============    ===========   ===============
</TABLE>


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




                                     F - 5
<PAGE>

                                                         NUR MACROPRINTERS LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                     Number of
                                                       shares                                                                  
                                                     outstanding                                    Other                      
                                                     -----------                  Additional     comprehensive                 
                                                      Ordinary        Share         paid-in         income       Accumulated   
                                                       shares        capital        capital         (loss)         deficit     
                                                     -----------    -----------   ------------   -------------   ------------  
                                                                            U.S. dollars in thousands
                                                     --------------------------------------------------------------------------
<S>                                                   <C>                <C>          <C>                 <C>         <C>      
Balance as of January 1, 1996                         6,880,000          1,593        11,867              48          (1,694)  
-----------------------------                        
                                                     
Comprehensive income:                                
Net loss                                                      -              -             -               -         (10,088)  
Other comprehensive income:                          
Foreign currency translation adjustment                       -              -             -              61               -   
                                                                                                                               
Comprehensive income (loss)                                   -              -             -               -               -   
                                                                                                                               
Amortization of deferred compensation                         -              -            49               -               -   
                                                     -----------    -----------   ------------   -------------   ------------  
Balance as of December 31, 1996                       6,880,000          1,593        11,916             109         (11,782)  
-------------------------------                      
                                                     
Comprehensive income:                                
Net income                                                    -              -             -               -             485   
Other comprehensive income:                          
Foreign currency translation adjustment                       -              -             -            (139)              -   
                                                                                                                               
Comprehensive income                                          -              -             -               -               -   
                                                                                                                               
Issuance of shares, net                               4,000,000          1,136         2,376               -               -   
Amortization of deferred compensation                         -              -            91               -               -   
                                                     -----------    -----------   ------------   -------------   ------------  
Balance as of December 31, 1997                      10,880,000          2,729        14,383             (30)        (11,297)  
-------------------------------                      
                                                     
Comprehensive income:                                
Net income                                                    -              -             -               -           1,457   
Other comprehensive income:                          
Foreign currency translation adjustment                       -              -             -             195               -   
                                                                                                                               
Comprehensive income                                          -              -             -               -               -   
                                                                                                                               
Share capital issuance expenses                               -              -          (128)              -               -   
Amortization of deferred compensation                         -              -           121               -               -   
                                                     -----------    -----------   ------------   -------------   ------------  
Balance as of December 31, 1998                      10,880,000          2,729        14,376             165          (9,840)  
-------------------------------                      
                                                     ===========    ===========   ============   =============   ============  

<CAPTION>
                                                                       Total 
                                                   Comprehensive   shareholders'
                                                   income (loss)      equity
                                                   ------------    ------------
                                                    U.S. dollars in thousands
                                                   ----------------------------
<S>                                                    <C>             <C>   
Balance as of January 1, 1996                                           11,814
-----------------------------                     
                                                  
Comprehensive income:                             
Net loss                                               (10,088)        (10,088)
Other comprehensive income:                       
Foreign currency translation adjustment                     61              61
                                                   ------------
Comprehensive income (loss)                            (10,027)              -
                                                   ============
Amortization of deferred compensation                                       49
                                                                   ------------
Balance as of December 31, 1996                                          1,836
-------------------------------                   
Comprehensive income:                             
Net income                                                 485             485
Other comprehensive income:                       
Foreign currency translation adjustment                   (139)           (139)
                                                   ------------
Comprehensive income                                       346               -
                                                   ============
Issuance of shares, net                                                  3,512
Amortization of deferred compensation                                       91
                                                                   ------------
Balance as of December 31, 1997                                          5,785
-------------------------------                   
Comprehensive income:                             
Net income                                               1,457           1,457
Other comprehensive income:                       
Foreign currency translation adjustment                    195             195
                                                   ------------
Comprehensive income                                     1,652               -
                                                   ============
Share capital issuance expenses                                           (128)
Amortization of deferred compensation                                      121
                                                                   ------------
Balance as of December 31, 1998                                          7,430
-------------------------------                                    ============
</TABLE>                                

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

                                     F - 6
<PAGE>
                                                         NUR MACROPRINTERS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                        Year ended December 31,
                                                                 --------------------------------------
                                                                    1996          1997          1998
                                                                 -----------    ----------    ---------
                                                                       U.S. dollars in thousands
                                                                 --------------------------------------
<S>                                                                 <C>             <C>           <C>
Cash flows from operating activities:

Net income (loss)                                                  (10,088)           485         1,457
Adjustments to reconcile net income (loss) to net
  cash provided by (used in) operating activities:

  Minority interest in earnings of subsidiary                            -             26            43
  Depreciation and amortization                                        321            644           792
  Loss (gain) from sale of property and equipment                       (4)             8            20
  Loss (gain) on marketable securities                                 (22)             -            91
  Deferred taxes, net                                                  400             27           (34)
  Amortization of deferred compensation                                 49             91           121
  Accrued severance pay, net                                            83            (18)           (1)
  Write-off of technology assigned to research and development           -              -         1,950
  Marketable securities                                                512              -          (154)
  Decrease (increase) in trade receivables                           3,625         (1,783)       (3,026)
  Decrease (increase) in other accounts receivable
   and prepaid expenses                                               (378)            41          (953)
  Decrease (increase) in inventories                                (1,738)           317        (1,447)
  Decrease in prepaid expenses                                           -         *) 231            78
  Increase (decrease) in trade payables                              1,435         (1,248)        2,933
  Increase in accrued expenses and
   other liabilities                                                   224            502           463
  Increase (decrease) in customer advances                           1,345         (1,328)           59
  Increase in long term accrued expenses                                 -              -           504
                                                                 -----------    ----------    ---------

Net cash provided by (used in) operating activities                 (4,236)        (2,005)        2,896
                                                                 -----------    ----------    ---------
</TABLE>

*) Reclassified.

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


                                     F - 7
<PAGE>



                                                         NUR MACROPRINTERS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                       Year ended December 31,
                                                                --------------------------------------
                                                                   1996         1997         1998
                                                                -----------  ------------ ------------
                                                                     U.S. dollars in thousands
                                                               --------------------------------------

<S>                                                               <C>         <C>           <C>
Cash flows from investing activities:

Proceeds from principal of short-term loans to affiliates
  and a shareholder                                                  339           -             -
Restricted long term bank deposit                                      -        (150)         (187)
Proceeds from long-term bank deposit                                 400           -             -
Purchase of property and equipment                                  (230)     (1,479)       (2,541)
Proceeds from sale of property and equipment                         393          15           191
Grants received                                                        -           -           266
Prepaid expenses                                                    (368)       *) -             -
Acquisition of technology                                              -           -        (1,307)
                                                               -----------  ------------ ------------

Net cash provided by (used in) investing activities                  534      (1,614)       (3,578)
                                                               -----------  ------------ ------------

Cash flows from financing activities:

Share capital issuance expenses                                        -           -          (128)
Proceeds from issuance of shares, net                                  -       3,512             -
Short-term bank credit, net                                        1,424        (810)        2,320
Proceeds from principal of long-term loans                             -       1,263           106
Repayment of principal of long-term loans                           (355)       (886)         (535)
                                                               -----------  ------------ ------------

Net cash provided by financing activities                          1,069       3,079         1,763
                                                               -----------  ------------ ------------

Effect of exchange rate changes on cash and cash equivalents           6          36            12
                                                               -----------  ------------ ------------

Increase (decrease) in cash and cash equivalents                  (2,627)       (504)        1,093

Cash and cash equivalents at the beginning of the year             4,365       1,738         1,234
                                                               -----------  ------------ ------------

Cash and cash equivalents at the end of the year                   1,738       1,234         2,327
                                                               ===========  ============ ============
</TABLE>

*) Reclassified.


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



                                     F - 8
<PAGE>


                                                         NUR MACROPRINTERS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                        Year ended December 31,
                                                                  -------------------------------------
                                                                    1996           1997         1998
                                                                  ----------    -----------    --------
                                                                       U.S. dollars in thousands
                                                                  -------------------------------------
<S>                                                                   <C>           <C>            <C>
(1)  Purchase of subsidiary for cash:

     Estimated fair value of assets and liabilities acquired:

       Working capital                                                 196            -              -
       Fixed assets                                                  (585)            -              -
       Long-term loan                                                  359            -              -
       Accrued severance pay                                            30            -              -
                                                                -----------   -----------    ---------

                                                                         -            -              -
                                                                ===========   ===========    =========
     Supplemental disclosure of cash flow information:

       Cash paid during the year for:
        Interest                                                       763          367            174
                                                                ===========   ===========    =========

        Income taxes                                                    38           74            110
                                                                ===========   ===========    =========

     Non-cash investing information:

       Accrued expenses and other liabilities incurred upon
       the acquisition of technology                                     -            -            643
                                                                ===========   ===========    =========
</TABLE>


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

                                     F - 9
<PAGE>

                                                         NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------


NOTE 1:-    GENERAL

            a.    Organization:

                  1.   Nur Macroprinters Ltd. ("the Company"),  an Israeli 
                       Corporation, is an industrial company. The Company
                       develops, manufactures and sells digital continuous
                       ink-jet printing systems and related consumable products
                       for large format printing. The Company maintains
                       wholly-owned subsidiaries in Europe and United States
                       for sales support and marketing. The Company's products
                       are sold by a network of dealers and distributors. The
                       principal markets of the Company and its subsidiaries
                       are located in Europe and United States.

                  2.   Nur Media Solutions S.A. ("Nur Media Solutions"):

                       In April 1998, the Company renamed its previously
                       wholly-owned subsidiary Nur International S.A. to Nur
                       Media Solutions S.A., which is engaged in developing and
                       marketing of consumables for the Company's printers (see
                       Note 16c).

                  3.   Nur America Inc. ("Nur America"):

                       In 1996, the Company established a wholly-owned
                       subsidiary in the United States - Nur America, which is
                       engaged in the marketing of the Company's products and
                       related consumable products in South America and North
                       America.

                  4.   Nur Advanced Technologies (Europe) S.A. ("Nur Europe"):

                       In 1996, the Company established a wholly-owned
                       subsidiary in Belgium - Nur Europe which is engaged in
                       the marketing of the Company's products and related
                       consumable products in Europe.

                  5.   M. Nur Marketing & Communication GmbH ("Nur Germany"):

                       In December 1997, the Company purchased the shares of Nur
                       Germany, a 84% owned subsidiary, that were held by Nur
                       Media Solutions. Nur Germany is engaged in selling and
                       marketing of consumable printed materials.

            b.  Financial difficulties:

                During 1996, the Company experienced severe financial
                difficulties. The Company wrote off $ 3,757 thousand, due to
                outstanding debts of the Company to Moshe Nur, the Company's
                former Chairman of the Board of Directors and a former major
                shareholder, and with companies controlled by Moshe Nur, which
                are currently in bankruptcy proceedings (see also Notes 16, 18
                and 22j).



                                     F - 10
<PAGE>

                                                         NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------


            c.  Acquisition of technology:

                In December 1997, the Company signed an agreement with a private
                company, Meital Electronic Technologies Ltd. ("Meital"), which
                is engaged in research and development in fields related to the
                Company's activity. In accordance with the agreement, the
                Company provided loans to Meital in 1997 and 1998 totaling $ 50
                thousand and $ 350 thousand, respectively. During 1997 and 1998,
                the Company recorded a provision in respect of the
                aforementioned amounts since Meital is in the development stage,
                and there is an uncertainty regarding its ability to repay the
                loans.

                In September 1998, the Company acquired from Meital all rights
                (including all related assets) to Meital's piezo DoD inkjet
                technologies for application in wide format digital printers for
                approximately $3.0 million, consisting of an up-front payment of
                $750 thousand, the assumption of certain liabilities including
                those that relate to the legal dispute between Idanit
                Technologies Ltd. ("Idanit") and Meital (see Note 14) and future
                sales which are based on royalties. The Meital acquisition
                resulted in a one-time charge to research and development in the
                amount of $1.95 million. The Company has future royalty
                obligations, based on future sales, in the next three years, of
                Meital's technology-based printers, which will not exceed $1.3
                million. If certain minimum royalties are not paid, Meital has
                the option to buy back the technology in the amount of royalties
                paid by the Company.

            d.  Concentration of risks that may have a significant impact on the
                Company:

                Suppliers

                The Company purchases all of the ink and ink-jets used in its
                current printers from one supplier while using the supplier's
                credit-terms. The Company's customers rely on the ink to
                operate their printers.

                Because the Company's business depends on the sale of its
                printers, a failure in supplying or a change in credit-terms
                could have a severe adverse effect on the Company's financial
                results.

                Subcontractors

                The Company employs a limited number of unaffiliated
                subcontractors to manufacture components for its printers. The
                Company currently employs one independent sub-contractor to
                assemble its printers.

                Because the Company relies on subcontractors, its business
                could suffer if the Company fails to maintain its
                relationships with its subcontractors or fails to develop
                alternative sources for its printer components.


                                     F - 11
<PAGE>
                                                         NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------


NOTE 2:-    SIGNIFICANT ACCOUNTING POLICIES

            The Company's consolidated financial statements have been prepared
            in accordance with Generally Accepted Accounting Principles in
            Israel ("Israel GAAP"). As applicable to the Company's consolidated
            financial statements Generally Accepted Accounting Principles in the
            United States ("U.S. GAAP") and in Israel are identical in all
            material respects.

            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:

                  1.  Financial statements in U.S. dollars:

                      The accompanying consolidated financial statements have
                      been prepared in U.S. dollars. The U.S. dollar is the
                      currency of the primary economic environment in which
                      the operations of the Company and Nur America are
                      conducted. The U.S. dollar is also the functional and
                      reporting currency of the Company. The majority of sales
                      are made in U.S. dollars and the majority of purchases
                      of materials and components are invoiced and paid in
                      U.S. dollars. In addition, a substantial number of other
                      expenses are incurred outside Israel in U.S. dollars or
                      paid in U.S. dollars or in New Israeli Shekels ("NIS")
                      linked to the exchange rate of the U.S. dollar.

                      The Company's transactions and balances denominated in
                      U.S. dollars are presented at their original amounts.
                      Non-dollar transactions and balances have been
                      remeasured into U.S. dollars in accordance with
                      Statement 52 of the Financial Accounting Standards Board
                      ("FASB"). All transaction gains and losses from
                      remeasurement of monetary balance sheet items
                      denominated in non-dollar currencies are reflected in
                      the statement of operations as financial income or
                      expenses, as appropriate.



                                     F - 12
<PAGE>

                                                         NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------



                  2.  Foreign currency translation:

                      The financial statements of certain subsidiaries, whose
                      functional currency is not the U.S. dollar, have been
                      translated into U.S. dollars, in accordance with FASB
                      Statement No. 52, "Foreign Currency Translation". All
                      balance sheet accounts have been translated using the
                      exchange rates in effect at the balance sheet date.
                      Statement of operations amounts have been translated using
                      the average exchange rate for the year. The resulting
                      aggregate translation adjustments are reported as a
                      component of shareholders' equity.

            c.  Principles of consolidation:

                The consolidated financial statements include the accounts of
                the Company and its subsidiaries listed below. Intercompany
                transactions and balances, including profits from intercompany
                sales not yet realized outside the group, have been eliminated
                in consolidation.

                Subsidiaries included in consolidation:

<TABLE>
<CAPTION>
                                                                   December 31, 1998 and 1997
                                                               ------------------------------------
                                                                        Shares conferring
                                                               ------------------------------------
                                                                                      Rights to
                                                               Voting rights           profits
                                                               ---------------      ---------------
                                                                     %                    %
                                                               ---------------      ---------------

<S>                                                                  <C>                  <C>
                Nur Media-Solutions S.A.                             100                  100

                Nur Europe                                           100                  100

                Nur America                                          100                  100

                Nur Germany                                           84                   84
</TABLE>

            d.  Cash equivalents:

                The Company considers all highly liquid investments originally
                purchased with maturities of three months or less to be cash
                equivalents.


                                     F - 13
<PAGE>


                                                         NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------


            e.   Trade receivables:

                 Trade receivables include amounts billed to clients and various
                 amounts due from transactions arising in the ordinary course
                 of business. Management periodically evaluates the
                 collectibility of these receivables and adjusts the allowance
                 for doubtful accounts to reflect the amounts estimated to be
                 uncollectible.

            f.   Marketable securities:

                 Management determines the appropriate classification of its
                 investments in marketable securities at the time of purchase
                 and reevaluated such determination at each balance sheet date.
                 Marketable securities are accounted for as trading securities
                 in accordance with the provisions of Statement No. 115 of the
                 FASB. The marketable securities consist of debentures, mutual
                 funds and other securities which are carried at their market
                 value on balance sheet date. The change in the difference
                 between the market value and cost of marketable securities is
                 credited or charged to the statement of operations.

            g.   Inventories:

                 Inventories are stated at the lower of cost or market value.
                 Cost is determined as follows:

                 Raw materials - by the "first-in, first-out" method;
                 work-in-progress and finished products - on the basis of
                 computed manufacturing costs.

                 The Company annually reviews the inventory for obsolescence,
                 based on the sales activity of its products, and provides a
                 reserve where appropriate.

            h.   Restricted long term bank deposit:

                 Restricted long term bank deposit is maintained with banks to
                 secure leasing obligations of a customer. The Company is
                 restricted from withdrawing any portion of the long term bank
                 deposit at any time, until the repayment of the leasing
                 obligation by the customer. The restricted long term bank
                 deposit will mature approximately in 2001, is linked to the
                 U.S. dollar and bears interest at a rate of 5%.

            i.   Property and equipment:

                 These assets are stated at cost, net of grant received.

                 Depreciation is calculated using the straight-line method over
                 the estimated useful lives of the assets.



                                     F - 14
<PAGE>

                                                         NUR MACROPRINTERS LTD.

NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------


                 The annual depreciation rates are as follows:

<TABLE>
<CAPTION>
                                                                                  %
                                                                     -----------------------------

<S>                                                                            <C>  
                 Machinery and equipment                                       10 - 33
                 Motor vehicles                                                   15
                 Office furniture and equipment                                 6 - 10
                 Building                                                         3
                 Leasehold improvements                               Over the term of the lease
                                                                              agreement
</TABLE>

            j.   Other assets:

                 Other assets are stated at amortized cost. Amortization is
                 calculated using the straight-line method over the estimated
                 useful lives, at the following annual rates:

                                                                     %
                                                               --------------

                 Distribution rights                                20
                 Patent rights                                      10

            k.   Income taxes:

                 The Company accounts for income taxes in accordance with
                 Statement of Financial Accounting Standards (SFAS) No. 109,
                 "Accounting for Income Taxes". This statement prescribes the
                 use of the liability method, whereby deferred tax asset and
                 liability account balances are determined based on 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 provides a valuation allowance, if
                 necessary, to reduce deferred tax assets to their estimated
                 realizable value.

            l.   Basic and diluted earnings (loss) per share:

                 Basic earnings (loss) per share is computed based on the
                 weighted average number of ordinary shares outstanding during
                 each year. Diluted earnings 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 FASB Statement
                 No. 128, "Earnings Per Share".

            m.   Accounting for stock-based compensation:

                 The Company has chosen to continue accounting for stock-based
                 compensation in accordance with the provisions of Accounting
                 Principles Board Opinion No. 25 ("APB-25"), "Accounting for
                 Stock Issued to Employees". Under APB-25, when the exercise
                 price of the Company's share options equals or is higher than
                 the market price of the underlying shares on the date of
                 grant, no compensation expense is recognized. The pro-forma
                 information with respect to the fair value of the options is
                 provided in accordance with the provisions of Statement No.
                 123 (see Note 19). In accounting for option granted to other
                 than employees, the provision of SFAS 123 was applied.



                                     F - 15
<PAGE>



                                                         NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------


            n.    Revenue recognition

                  1.   Revenues from sales of products are recognized upon
                       shipment provided that no significant vendor obligations
                       remain and collection is deemed probable.

                  2.   Revenues from services are recognized ratably over the
                       term of the agreements.

                  3.   Estimated warranty costs which to date have been
                       insignificant are accrued in the financial statements (in
                       respect of most of these costs the Company has warranties
                       from its suppliers).

            o.   Research and development:

                 Research and development expenses are charged to expenses as
                 incurred.

                 Grants are netted from research and development costs on an
                 accrual basis as the related expenses are incurred.

            p.   Royalty-bearing grants:

                 Royalty-bearing grants from the Government of Israel for
                 funding of approved research projects and for funding
                 marketing activity are recognized at the time in which the
                 Company is entitled to such grants, on the basis of the
                 related costs incurred.

            q.   Advertising costs:

                 The Company expenses advertising costs as incurred.

            r.   Concentrations of credit risk:

                 SFAS No. 105, "Disclosure of Information About Financial
                 Instruments with Off-Balance-Sheet Risk and Financial
                 Instruments with Concentrations of Credit Risk", requires
                 disclosure of any significant off-balance-sheet and credit
                 risk concentrations. The Company has no significant
                 off-balance-sheet concentration of credit risk such as foreign
                 exchange contracts, option contracts or other foreign hedging
                 arrangements.

                 Financial instruments that potentially subject the Company to
                 concentrations of credit risk consist principally of cash,
                 cash equivalents, trade receivables and restricted cash. Cash,
                 cash equivalents and restricted cash are deposited with major
                 banks in Israel, the United States and Belgium. Such deposits
                 in the United States may be in excess of insured limits and
                 are not insured in other jurisdictions. 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
                 Company's trade receivables are mainly derived from sales to
                 customers in the United States and Europe. The Company has
                 adopted credit policies and standards intended to accommodate
                 industry growth and inherent risk. Management believes that
                 credit risks are moderated by the diversity of its end
                 customers and geographic sales areas. The Company performs
                 ongoing credit evaluations of its customers' financial
                 condition and requires collateral as deemed necessary.


                                     F - 16
<PAGE>
                                                         NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

            s.   Fair value of financial instruments:

                 The estimated fair value of financial instruments has been
                 determined by the Company using available market information
                 and valuation methodologies. Considerable judgment is required
                 in estimating fair values. Accordingly, the estimates may not
                 be indicative of the amounts the Company could realize in a
                 current market exchange. The carrying amounts of cash, cash
                 equivalents and restricted cash approximate fair values, due
                 to the short term maturities of these instruments and the
                 terms of the deposits.

                 The carrying amounts of the Company's borrowings under its
                 short-term credit agreements approximate their fair value. The
                 fair value of the Company's long-term loan is estimated using
                 discounted cash flow analyses, based on the Company's current
                 increment borrowing rates for similar types of borrowing
                 arrangements.

                 The carrying amounts and fair values of the Company's financial
                 instruments at December 31, 1998, are as follows:
<TABLE>
<CAPTION>
                                                                  Carrying amount       Fair value
                                                                ----------------    ----------------
                                                                     U.S. dollars in thousands
                                                                ------------------------------------

<S>                                                                   <C>                 <C>  
                  Cash and cash equivalents                           2,327               2,327
                  Restricted long-term bank deposits                    337                 337
                  Short term bank loans                               2,972               2,972
                  Long term loans                                     1,174               1,174
</TABLE>

            t.   Segment reporting:

                 The Company adopted SFAS No. 131, "Disclosures About Segments
                 of an Enterprise and Related Information", in 1998. SFAS No.
                 131 supersedes SFAS No. 14, replacing the "industry segment
                 approach" with the "management approach", whereby companies
                 report financial and descriptive information about their
                 operating segments. Operating segments are revenue-producing
                 components of the enterprise for which separate financial
                 information is produced internally and are subject to
                 evaluation by the chief operating decision-maker in deciding
                 how to allocate resources to segments (see Note 22).

            u.   Impact of recently issued accounting standards:

                 In June 1998, the Financial Accounting Standards Board issued
                 Statement of Financial Accounting Standards No. 133 ("SFAS
                 133"), "Accounting for Derivative Instruments and Hedging
                 Activities". The Statement establishes accounting and
                 reporting standards requiring that every derivative instrument
                 (including certain derivative instruments embedded in other
                 contracts) be recorded in the balance sheet as either an asset
                 or liability measured at its fair value. The Statement
                 requires that changes in the derivative's fair value be
                 recognized currently in earnings, unless specific hedge
                 accounting criteria are met. Special accounting for qualifying
                 hedges allows a derivative's gains and losses to offset
                 related results on the hedged item in the income statement,
                 and requires that a company must formally document, designate
                 and assess the effectiveness of transactions that receive
                 hedge accounting. SFAS 133 is effective for fiscal years
                 beginning after June 15, 1999, and must be applied to
                 instruments issued, acquired, or substantively modified after
                 December 31, 1997. The Company does not expect the adoption of
                 the accounting pronouncement to have a material effect on its
                 financial position or results of operations.


                                     F - 17
<PAGE>



                                                         NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------


NOTE 3:-    CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
                                                                                 December 31,
                                               Linkage        Interest     --------------------------
                                                terms           rate         1997           1998
                                             -------------    --------     ---------    -------------
                                                                 %         U.S. dollars in thousands
                                                             -----------   --------------------------
                                            <S>                   <C>         <C>          <C>  
                                             U.S. dollars         5.1         1,031        1,297
                                                  FF              9.2            61           76
                                                  DM              3.3           135          698
                                             Unlinked NIS          -              7            5
                                            Belgian Franks                        -          163
                                                 Other                            -           88
                                                                            ----------   ------------

                                                                              1,234        2,327
                                                                            ==========   ============

</TABLE>

NOTE 4:-    TRADE RECEIVABLES
<TABLE>
<S>                                                                           <C>          <C>  
            Open accounts (1)                                                 6,340        9,653
            Notes receivable                                                    181           82
                                                                            ----------   ------------

                                                                              6,521        9,735
            Less - allowance for doubtful accounts                              540          644
                                                                            ----------   ------------

                                                                              5,981        9,091
                                                                            ==========   ============
            (1) Including receivables due from one customer in the amount
                of $ 717 thousand as of December 31, 1998 
                (December 31, 1997 - $784 thousand).


NOTE 5:-    OTHER ACCOUNTS RECEIVABLE AND
            PREPAID EXPENSES

            Government authorities                                             321           665
            Participations and grants receivable                               392           683
            Related parties (1)                                                146            93
            Deferred taxes (2)                                                   8            42
            Advances to suppliers                                              353           437
            Prepaid expenses and other                                         525           836
                                                                           ----------    ------------

                                                                             1,745         2,756
                                                                           ==========    ============
</TABLE>

            (1)   Balances of two executives that are linked to the U.S. dollar
                  and bears annual interest at the rate of 2%.

            (2)   See Note 20.




                                     F - 18
<PAGE>

                                                         NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------


NOTE 6:-  INVENTORIES
<TABLE>
<CAPTION>
                                                                                December 31,
                                                                        -----------------------------
                                                                            1997            1998
                                                                        -------------   -------------
                                                                         U.S. dollars in thousands
                                                                        -----------------------------

<S>                                                                     <C>                 <C>  
          Raw materials                                                 (*    372           1,539
          Work-in-progress                                                    277             226
          Finished products                                             (*  1,603           1,934
                                                                        -------------   -------------

                                                                            2,252           3,699
                                                                        =============   =============
</TABLE>

          *) Reclassified.


NOTE 7:-  PROPERTY AND EQUIPMENT


<TABLE>
<CAPTION>
                                                              Office      Building                                           
                                 Machinery                   furniture       and      
                                    and        Motor            and       leasehold   
                                 equipment     vehicles      equipment  improvements   Grants    Total
                                -------------  ----------  -----------   ------------  -------- ---------
                                                       U.S. dollars in thousands
                                -------------------------------------------------------------------------
<S>                                <C>              <C>       <C>             <C>        <C>     <C>  
      Cost as of January 1, 1998     313            146       1,067           918           -    2,444
        Additions                  1,374            270         606           291        (266)   2,275
        Disposals                   (368)           (71)         (9)            -           -     (448)
                                -------------  ----------  -----------   ------------  -------- ---------
       Balance as of
        December 31, 1998          1,319            345       1,664         1,209        (266)   4,271
                                 ------------   ---------   ----------    -----------   -------  --------
      Accumulated depreciation
        as of January 1, 1998        131             64         487           121           -      803
        Additions                    219             59         308           111         (50)     647
        Disposals                   (217)           (18)         (2)            -           -     (237)
                                -------------  ----------  -----------   ------------  -------- ---------
      Balance as of
        December 31, 1998            133            105         793           232         (50)   1,213
                                -------------  ----------  -----------   ------------  -------- ---------
      Depreciated cost as of
        December 31, 1998          1,186            240         871           977        (216)   3,058
                                =============  ==========  ===========   ============  ======== =========
      Depreciated cost as of
        December 31, 1997            182             82         580           797           -    1,641
                                =============  ==========  ===========   ============  ======== =========
</TABLE>
            Depreciation expense amounted to $ 177 thousand, $ 496 thousand and
            $ 647 thousand, for the years ended December 31, 1996, 1997 and 1998
            respectively.

            As for charges, see Note 17.

                                     F - 19
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 8:-    OTHER ASSETS, NET
<TABLE>
<CAPTION>
                                                                                December 31,
                                                                        -----------------------------
                                                                            1997            1998
                                                                        -------------   -------------
                                                                         U.S. dollars in thousands
                                                                        -----------------------------
<S>                                                                         <C>             <C>
            Cost:
              Distribution rights                                           700             700
              Patent rights                                                  61              61
                                                                        -------------   -------------

                                                                            761             761
                                                                        -------------   -------------
            Accumulated amortization:
              Distribution rights                                           350             490
              Patent rights                                                  30              35
                                                                        -------------   -------------

                                                                            380             525
                                                                        -------------   -------------

            Depreciated cost                                                381             236
                                                                        =============   =============
</TABLE>

            Amortization of distribution and patent rights was $ 144 thousand,
            $148 thousand and $145 thousand, for the years ended December 31,
            1996, 1997 and 1998, respectively.


NOTE 9:-    LEASES

            a.    Nur America Inc. leases office space and demo-center facility
                  under a ten-year operating lease agreement ending October
                  2008.

            b.    Nur Germany leases office space for a period of 10 years
                  ending in October 2006.

            c.    Nur Europe S.A. leases office space and warehouse facilities
                  under a 15 year operating lease agreement ending in December
                  2011.

            d.    The Company entered into a lease agreement with a former
                  shareholder (Moshe Nur) according to which the Company leases
                  two adjacent buildings. Each building occupies approximately
                  6,500 square feet.

                  During 1996 and 1997, the Company paid $ 545 thousand in
                  respect of the construction of the building, on behalf of
                  Moshe Nur. In 1997, Moshe Nur experienced financial
                  difficulties, resulting in the filing of a petition for
                  bankruptcy. The amounts paid are presented as prepaid rent
                  expenses as of December 31, 1997 and 1998.

                  According to a settlement agreement signed in September 1998
                  (see Note 16e), it was agreed that the Company's payments are
                  considered as a pre-payment of the lease until July 2000. The
                  Company recorded $ 162 thousand as rent expenses, in
                  connection with such prepaid expenses.


                                      F-20
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


            e.    Future minimum rental payments as of December 31, 1998, under
                  the aforementioned non- cancelable leases, are as follows
                  (U.S. dollars in thousands):


                 1999                           $     86
                 2000                                 89
                 2001                                 91
                 2002                                 97
                 Thereafter                          820
                                                ------------

                                                $  1,183
                                                ============


            f.    Rental expenses were $ 244 thousand, $ 350 thousand and $ 220
                  thousand for the each of the years ended December 31, 1996,
                  1997 and 1998, respectively.


NOTE 10:-   SHORT-TERM BANK LOANS

<TABLE>
<CAPTION>
                                                                Weighted
                                                                 average            December 31,
                                                Linkage         interest      --------------------------
                                                 terms            rate          1997          1998
                                             ---------------   ------------   ---------   --------------
                                                                    %         U.S. dollars in thousands
                                                               ------------   --------------------------
<S>                                         <C>                <C>                <C>        <C>
            Revolving bank credit           Belgian Franks          5               -          173
            Revolving bank credit                 NIS              17             160          112
            Short-term loans                  U.S. dollar        7.2+1.5          453        1,214
            Short-term loans                      NIS             17.7             39          683
            Short-term loans                Belgian Franks     Libor+0.25           -          790
                                                                              ---------    -------------
                                                                                  652        2,972
                                                                              =========    =============
</TABLE>


            The unused line of credit, nominated in NIS, Belgian Franks and US
            dollars, at December 31, 1997 and 1998 is $ 0 and $ 1,657,
            respectively.




                                      F-21
<PAGE>


                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 11:-   TRADE PAYABLES

<TABLE>
<CAPTION>
                                                                                 December 31,
                                                                           --------------------------
                                                                             1997           1998
                                                                           ---------    -------------
                                                                           U.S. dollars in thousands
                                                                           --------------------------
<S>                                                                            <C>           <C>  
            Open accounts                                                      2,695         4,812
            Notes payable                                                        521         1,292
                                                                           ----------    ------------
                                                                               3,216         6,104
                                                                           ==========    ============
</TABLE>

NOTE 12:-   ACCRUED EXPENSES AND OTHER LIABILITIES

<TABLE>
<S>                                                                            <C>           <C>  
            Employees and payroll accruals                                       585           670
            Royalties payable                                                    390           664
            Current maturities of accrued expenses                                 -           293
            Other accrued expenses                                             1,151         1,299
                                                                           ----------    ------------
                                                                               2,126         2,926
                                                                           ==========    ============
</TABLE>

NOTE 13:-   LONG-TERM LOANS

            a.   Composed as follows:
<TABLE>
<CAPTION>
                                                               Weighted
                                                                average
                                                Linkage        interest
                                                 terms           rate
                                             ---------------  ----------
                                                                  %
                                                              ----------
<S>                                         <C>                  <C>          <C>           <C>
                 From banks                   U.S. dollar        LIBOR
                                                                 +3.12           289           20
                 From others                 Belgian Franks       6.6          1,314        1,154
                                                                            ---------    ------------

                                                                               1,603        1,174
                 Less - current maturities                                       527          224
                                                                            ---------    ------------

                                                                               1,076          950
                                                                            =========    ============
            b. Aggregate maturities of long-term loans:

                 First year (current maturities)                                 527          224
                                                                            ---------    ------------
 
                 Second year                                                     190          188
                 Third year                                                      162          170
                 Fourth year                                                     139          118
                 Fifth year and thereafter                                       585          474
                                                                            ---------    ------------

                                                                               1,076          950
                                                                            ---------    ------------

                                                                               1,603        1,174
                                                                            =========    ============
</TABLE>


                                      F-22
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 14:-   ACCRUED EXPENSES

            In connection with various claims filed by Dochovna group (the
            developer of Outboard Printer and several companies he controls),
            Idanit and the Company, a settlement was reached in December 1998,
            according to which the Company will pay a total of $ 880 thousand
            during a three year period. The Company fully provided for the said
            amount.

            Payments shall bear annual interest of 6% unless the Company pays
            the full amount by March 31, 2000.

            The parties to the settlements were Dochovna Idanit, Scitex
            corporation Ltd. (which acquired Idanit), Meital and Jacob Markovits
            (Meital CEO).


NOTE 15:-   ACCRUED SEVERANCE PAY, NET

            The Company's liability for severance pay pursuant to Israeli law is
            fully provided by an accrual. Part of the liability is funded
            through insurance policies which are designated only for severance
            payments. The value of these policies is recorded as an asset in the
            Company's balance sheet. Severance pay expenses for the years ended
            December 31, 1996, 1997 and 1998 were $ 217, $ 312 and $ 314,
            respectively.


NOTE 16:-   CONTINGENT LIABILITIES

            a.    The Company entered into several project plans with the Chief
                  Scientist of the Government of Israel regarding the
                  development of the printers and the Mega Light, a discontinued
                  product. The Company has an obligation to pay royalties at the
                  rate of 2% - 3% of the sales derived from the applicable
                  products developed within the framework of such research and
                  development projects, up to an amount equal to 100% - 150% of
                  the grant received, in NIS linked to the exchange rate of the
                  U.S. dollar.

                 The Company has no obligation to repay this amount if sales are
                  not sufficient to satisfy the royalty obligations. As of
                  December 31, 1998, the Company has a contingent obligation to
                  pay royalties in the amount of $ 1,152 thousand.



                                      F-23
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


            b.    The Company is required to pay royalties to the Fund for the
                  Encouragement of Marketing Activity at the rate of 3% of the
                  increases in export sales of products for which the Company
                  received participations for its marketing activities, up to an
                  amount equal to 100% of the grant received.

                  The grant is repayable only in respect of sales of the related
                  products, as a percentage of the growth in export sales.

                  If there is no increase in export sales, or if the Company
                  ceases producing the relevant products, the grant would not be
                  repaid. As of December 31, 1998, the Company has a contingent
                  obligation to pay royalties in the amount of $ 434 thousand.

            c.    In May 1996, the Company and Shamrock (former shareholder in
                  Nur Media Solutions) signed an agreement as follows:

                  1.   Shamrock will not be required to provide further
                       financing to Nur Media Solutions, in accordance with the
                       previous agreement.

                  2.   The Company exercised the option to purchase all of
                       Shamrock's shares in Nur Media Solutions, free and clear
                       of any liens, encumbrances, etc., for a consideration of
                       one dollar.

                  3.   Notwithstanding the above, for every year during which
                       Nur Media Solutions' net income (after taxes) will
                       exceed $ 1 million, the Company will pay Shamrock a sum
                       equal to 10% of Nur Media Solutions' net income, up to a
                       total of $ 0.5 million (accumulating from the first
                       payment). Nur Media Solutions' net income shall be
                       determined in its annual audited financial statements.
                       Shamrock's right to payments under this section will
                       expire upon the earlier of the payment of the $ 0.5
                       million thereunder, or at the end of the fiscal year
                       2002. In 1996, 1997 and 1998, Nur Media Solutions' net
                       income (after taxes) was less than $ 1 million.

                       Commencing January 1996, the accounts of Nur Media
                       Solutions are consolidated with those of the Company.

            d.    The Company has guaranteed capital lease payments in the
                  amount of $ 105 thousand for a printer that was leased by a
                  subsidiary.

            e.    During September 1998, the district court of Tel Aviv approved
                  several settlement agreements among the Company, the special
                  manager for Moshe Nur's assets in his bankruptcy proceedings,
                  Moshe Nur and some of his family members, two Israeli banks,
                  and the temporary receiver of Nur Outdoor Advertising Ltd. (a
                  company formerly affiliated with Mr. Nur).


                                      F-24
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


                  According to the settlement, all material claims against the
                  Company relating to the lease of its offices (including
                  confirmation of the Company's pre-payment of lease until July
                  2000), alleged breach of contracts and alleged debts owed to
                  any of the abovementioned parties were dismissed. The Company
                  agreed not to file any claim against the abovementioned
                  settling parties, provided that no claims will be filed
                  against the Company in connection with the bankruptcy
                  proceedings.

                  As part of the various settlement agreements, the Company paid
                  an aggregate of $100 thousand. However, in the course of the
                  bankruptcy proceedings of Moshe Nur and the companies
                  controlled by him, the Company may, in the future, be exposed
                  to claims arising from the actions of Moshe Nur, the liability
                  of whom could be material.

            f.    In 1997, claims and threats of claims were brought against the
                  Company in respect of various matters. The Company made a
                  provision in the amount of $ 50 thousand in respect of these
                  claims and threats of claims based on the opinion of the
                  Company's Israeli legal advisors. The Company's management
                  believes that these provisions are adequate.


NOTE 17:-   CHARGES, GUARANTEES AND RESTRICTED CASH

            a.    As collateral for its liabilities to the banks, the Company
                  granted an unlimited senior in priority lien on its machinery
                  and equipment, motor vehicles, receivables from Scitex, a
                  major customer ("Scitex"), a long-term bank deposit, and
                  marketable securities, as well as a floating lien (a lien on
                  the assets of the Company as they exist from time to time) on
                  all of its assets.

            b. The collateralized liabilities are as follows:

<TABLE>
<CAPTION>
                                                                               December 31,
                                                                       ------------------------------
                                                                           1997             1998
                                                                       -------------    -------------
                                                                         U.S. dollars in thousands
                                                                       ------------------------------
<S>                                                                        <C>              <C>  
                Short-term bank credit                                       652            2,972
                Long-term liabilities, including current                   1,603            1,174
                maturities
                                                                       -------------    ------------
                                                                           2,255            4,146
                                                                       =============    ============
</TABLE>


NOTE 18:-   TRANSACTIONS AND BALANCES WITH RELATED PARTIES

            a.    In March 1997, three companies in which Moshe Nur - a former
                  shareholder - has holdings in various percentages, experienced
                  financial difficulties and are in different stages of
                  insolvency. These companies are Nur Outdoor Advertising
                  (Manufacturing and Production) Ltd. ("Nur Outdoor"), Nur Focus
                  Assets and Investments Ltd. ("Nur Focus Assets") and Nur Focus
                  Production (1995) Ltd. ("Nur Focus"). Consequently, there is a
                  considerable doubt as to whether these companies will continue
                  as going concerns. As to the write-off of related parties
                  debts, see Note 21f.




                                      F-25
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                  In May 1997 the Company terminated all of the various
                  agreements entered with these companies and as part of a
                  settlement agreement (see Note 16e) it was agreed that the
                  mentioned companies, Moshe Nur, the temporary receiver of
                  those companies and the Company do not have any claims against
                  each other.

            b.    For a lease agreement with a former shareholder, see Note 9d.

            c.    Between September and December 1997, the Company effected a
                  private offering of its Ordinary Shares in the United States
                  (see also Note 19a), for which the investment banking firm of
                  Josephthal and Co. Inc. ("Josephthal") acted as an exclusive
                  placement agent. The chairman of Josephthal beneficially owns
                  approximately 37.26% of the Company's Ordinary Shares, and
                  other individuals affiliated with Josephthal beneficially own
                  approximately 7.13% of the Company's Ordinary Shares. The
                  chairman of Josephthal is the company's chairman. As
                  compensation for his services as the Company's exclusive
                  placement agent, Josephthal received fees of $ 439 thousand
                  and warrants to purchase 400,000 Ordinary Shares at an
                  exercise price of $ 1.00 per share or less than 400,000
                  Ordinary Shares of the Company if the cashless alternative
                  pursuant to the agreement has been chosen. Finally, an
                  individual employed by Josephthal was the Company's acting
                  Chief Financial Officer from April through October 1997
                  received compensation of approximately $ 45 thousand.

            d.    Transactions with related parties:

<TABLE>
<CAPTION>
                                                                      Year ended December 31,
                                                               --------------------------------------
                                                                  1996          1997         1998
                                                               -----------   -----------   ----------
                                                                     U.S. dollars in thousands
                                                               --------------------------------------
<S>                                                                 <C>           <C>         <C>    
                   Sales:
                     Nur Outdoor                                    485           159              -
                     Nur Focus                                      113            31              -
                                                               -----------   -----------   ----------
                                                                    598           190              -
                                                               ===========   ===========   ==========
                   Cost of sales:
                     Paid to:
                      Nur Outdoor                                   511            99              -
                      Nur Focus                                       7            18              -
                                                               -----------   -----------   ----------
                                                                    518           117              -
                                                               ===========   ===========   ==========
                   Selling expenses:
                     Nur Focus                                      130             -              -
                                                               ===========   ===========   ==========
</TABLE>


                                      F-26
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                  Year ended December 31,
                                                      ------------------------------------------------
                                                           1996             1997            1998
                                                      ---------------    -----------   ---------------
                                                                 U.S. dollars in thousands
                                                      ------------------------------------------------
<S>                                                           <C>                <C>            <C>
               General and administrative expenses:
                 Rent expenses                                153                204              -
                 Salary and related benefits
                   paid to two shareholders
                   (1997--three shareholders)                 244                261            238
                                                      ---------------    -------------    ------------
                                                              397                465            238
                                                      ===============    =============    ============
               Financial income:
                 Nur Focus                                    107                  -              -
                 Nur Outdoor                                  182                  -              -
                                                      ---------------    -------------    ------------
                                                              289                  -              -
                                                      ===============    =============    ============
</TABLE>

               As to the write-off of debts of related parties, see Note 21f.


NOTE 19:-   SHARE CAPITAL

            a.    Between September and December 1997, the Company effected a
                  private offering of its securities in the United States. In
                  the private offering, the Company issued 4,000,000 Ordinary
                  Shares of NIS 1 par value each in consideration of $ 1 per
                  ordinary share.

                  After the initial public offering and the private offering,
                  the Company has 10,880,000 Ordinary Shares of NIS 1 par value
                  each.

                  Following the initial public offering of the Company's shares
                  in October 1995, the Company issued 155,000 warrants to
                  Josephthal. These warrants are exercisable no later than
                  October 2000 into 155,000 Ordinary Shares of the Company at an
                  exercise price of $ 7.20 per share, or less than 155,000
                  Ordinary Shares of the Company if the cashless alternative
                  pursuant to the agreement has been chosen.

                  As part of the private offering, the Company issued warrants
                  to the placement agent, Josephthal, expiring in September 2002
                  to purchase 400,000 Ordinary Shares of the Company at an
                  exercise price of $ 1.00 per share or less than 400,000
                  Ordinary Shares of the Company if the cashless alternative
                  pursuant to the agreement has been chosen.


                                      F-27
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


            b. Earning (loss) per share:

                  The following table sets forth the computation of historical
                  basic and diluted earnings (loss) per share:

<TABLE>
<CAPTION>
                                                        1996            1997             1998
                                                    -------------   --------------   -------------
<S>                                                    <C>            <C>              <C>       
            Numerator:
              Net income (loss)                        $ (10,088)        $  485           $ 1,457
                                                    =============   ==============   =============
              Numerator for basic earnings
               (loss) per share - income
               (loss) available to
               ordinary shareholders                   $ (10,088)        $  485           $ 1,457
                                                    =============   ==============   =============
              Numerator for diluted earnings
              (loss) per share - income (loss)
              available to ordinary shareholders
              after assumed conversions                $ (10,088)        $  485           $ 1,457
                                                    =============   ==============   =============
            Denominator:
            Weighted average
            Ordinary shares outstanding                6,880,000      7,293,640        10,880,000
                                                    -------------   --------------   -------------
            Denominator:
              Denominator for basic earnings
               (loss) per share --
               weighted-average shares                 6,880,000      7,293,640        10,880,000
                                                    -------------   --------------   -------------
              Effect of dilutive securities*)
               Employee stock options                          -         72,527           571,389
                                                    -------------   --------------   -------------
              Denominator for diluted earnings
               (loss) per share-adjusted
               weighted-average shares and
               assumed conversions                     6,880,000      7,366,167        11,451,389
                                                    =============   ==============   =============
</TABLE>

            *)    The effect of the inclusion of these securities in 1996 would
                  be antidilutive.

            c.    Stock Option Plan:

                  In October 1995, the Company's Board of Directors adopted a
                  Flexible Stock Incentive Plan (the "Stock Incentive Plan").
                  The Stock Incentive Plan provides for grants of stock options
                  to the Company's employees and outside consultants. An
                  aggregate amount of not more than 500,000 stock options are
                  available for grant under the Stock Incentive Plan. Of such
                  amount, (i) not more than 414,768 options are available for
                  grant as stock options on the basis of future services
                  ("Service Options"), (ii) not more than 18,232 options may be
                  granted as stock options on the basis of performance
                  ("Performance Options") and (iii) not more than 67,000 options
                  may be granted as stock options to consultants on the basis of
                  service or performance in respect of the public offering
                  ("Consultant Options").


                                      F-28
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                  Compensation expenses, which comprise the excess of fair
                  market value of the Performance Options over the exercise
                  price at grant date, are charged to expenses over a vesting
                  period of ten years or on an accelerated basis, provided that
                  various performance targets are achieved (the only variable
                  component is the vesting period).

                  Compensation expenses, which comprise the excess of market
                  value of the Service Options over the exercise price at grant
                  date, are charged to expenses over the vesting period of four
                  years.

                  In October 1997, the Company adopted an additional stock
                  option plan. According to that option plan, 1,200,000 options
                  will be granted to Company's employees, directors and
                  consultants. In October 1998, the Company increased the number
                  of options available for grant by 500,000 options. During
                  1998, the Company granted 600,000 options (out of which 50,000
                  options were granted to the Company's CEO) at an exercise
                  price ranging between $ 1.00 to $ 3.00 per share with vesting
                  period between 0 and 3 years.

                  In December 1998, the Company's shareholders approved the
                  directors share option plan ("1998 plan") according to which
                  250,000 options are available for grant with an exercise price
                  of the average of the closing bid and sale price at the
                  issuance date. Each option is vested immediately and will
                  expire after 10 years. During 1998, the Company granted 40,000
                  options to directors (including the Chairman of the Board of
                  Directors).

                 The balance of the options at December 31, 1998 is as follows:

<TABLE>
<CAPTION>
                                                                           Options outstanding
                                                                  --------------------------------------
                                                                                               Weighted
                                                      Available      Number      Exercise       average
                                                      for grant    of options      price     exercise price
                                                     -----------  -----------  ------------  --------------
<S>                                                    <C>          <C>          <C>              <C> 
                 Balance as of January 1, 1996         310,474      189,526      0.3-4.8          2.32
                    Options granted (1 employee)       (18,232)      18,232        1.3            1.30
                    Options expired                     87,987      (87,987)     1.3-4.8          2.37
                                                     -----------  -----------  ------------   ------------
                                                    
                 Balance as of December 31, 1996       380,229      119,771     0.3-1.75          1.34
                    Additional stock options plan    1,200,000            -         -               -
                    Options granted (25 employee                                                 
                     and a vendor)                    (325,600)     325,600     0.3-1.75          1.33
                    Options granted (2 employees                                                 
                     and 3 directors)                 (825,000)     825,000        1-3            1.46
                                                     -----------  -----------  ------------   ------------
                                                    
                 Balance as of December 31, 1997       429,629    1,270,371       0.3-3           1.3
                    Additional stock options plan      750,000            -         -               -
                    Options granted (46 employee,                                                
                     4 directors and 1 consultant)    (655,000)     655,000       1 - 3           2
                    Options expired                    150,332     (150,332)     1.4 - 2          1.4
                                                     -----------  -----------  ------------   ------------
                                                                                                 
                 Balance as of December 31, 1998       674,961    1,775,039      0.3 - 3          1.62
                                                     ===========  ===========  ============   ============
</TABLE>                                          

                  The number of options exercisable as of December 31, 1996,
                  1997 and 1998 was 54,771, 849,921 and 1,308,622, respectively.

                  The weighted average exercise price of options exercisable as
                  of December 31, 1996, 1997 and 1998 is $ 1.06, $ 1.3 and $
                  1.28, respectively.


                                      F-29
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                  The options outstanding as of December 31, 1998 have been
                  separated into ranges of exercise price, as follows:

<TABLE>
<CAPTION>
                                                 Options            Weighted
                                             outstanding as          average             Weighted
                                             of December 31,        remaining             average
                  Exercise price                  1998           contractual life     exercise price
                  --------------             ----------------    ----------------    ----------------
                  <S>                           <C>                    <C>               <C> 
                  $ 0.3 - 1.75                   359,539                3                 1.33
                  $ 1 - 1.5                      912,000                4                 1.27
                  $ 2 - 3                        463,500                8                 2.54
                  $ 2.75                          40,000               10                 2.75
                                             ----------------                        ----------------
                                                1,775,039                                 1.62
                                             ================                        ================
</TABLE>

            d.    The Company has elected to follow Accounting Principles Board
                  Opinion 25, "Accounting for Stock Issued to Employees" (APB
                  25) and related interpretations for its employee stock
                  options. As discussed below, the alternative fair value
                  provided for under FASB Statement No. 123, "Accounting for
                  Stock-Based Compensation" (FASB 123), requires the use of
                  option valuation models that were not developed for use in
                  valuating employee stock options. Where the exercise price
                  equals the market price of the underlying stock on the grant
                  date, no compensation expense is recognized under APB 25.

            e.    In September 1998, the Company granted to its counsel an
                  option to purchase 15,000 shares at an exercise price of $
                  2.25 per share with an immediate vesting. The fair market
                  value of these options was estimated according to FASB-123 at
                  the grant date using Black-Scholes option valuation pricing
                  model. The aggregate amount of compensation related to the
                  above options was $ 10,530 and was accounted for as
                  compensation expense in the year ended December 31, 1998.

            f.    Pro-forma information regarding net income and earnings per
                  share is required by FASB 123, and has been determined as if
                  the Company has accounted for its employee stock options under
                  the fair value method of that Statement. The fair value for
                  these options was estimated at the grant date using the
                  Black-Scholes option valuation pricing model with the
                  following weighted-average assumptions for 1996, 1997 and
                  1998: risk-free interest rates of 7%, 6.3% and 5%,
                  respectively, dividend yields of 0% volatility factors of the
                  expected market price of the Company's Ordinary Shares of $
                  1.75, $ 1.25 and $ 0.46, respectively, and a weighted average
                  expected life of the option of 5 years.


                                      F-30
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                  The Black-Scholes model was developed for use in estimating
                  the fair value of traded options which have no vesting
                  restrictions and are fully transferable. In addition, option
                  valuation models require the input of highly subjective
                  assumptions including the expected share price volatility.
                  Because the Company's employee stock options have
                  characteristics significantly different from those of traded
                  options, and because changes in the subjective input
                  assumptions can materially affect the fair value estimate, in
                  management's opinion, the existing models do not necessarily
                  provide a reliable single measure of the value of its employee
                  stock options. For purposes of pro-forma disclosures, the
                  estimated fair value of the options is amortized to expense
                  over the options vesting period.

                  For purposes of pro forma disclosure, the estimated fair value
                  of the options is amortized to expense over the options
                  vesting period. The Company's Pro-forma information is as
                  follows:

<TABLE>
<CAPTION>
                                                                 Year ended December 31,
                                                    -------------------------------------------------
                                                          1996              1997              1998
                                                    ----------------   ---------------   --------------
                                                    U. S. dollars in thousands, except per share amount
                                                    ---------------------------------------------------
<S>                                                    <C>                   <C>              <C>  
                Net income (loss), as reported         (10,088)              485              1,457
                                                    ===============   ===============    =============
                Pro forma net income (loss)            (10,142)              129              1,251
                                                    ===============   ===============    =============
                Pro forma basic earnings
                  (loss) per share                       (1.47)             0.02               0.11
                                                    ===============   ===============    =============
                Pro forma diluted earnings
                  (loss) per share                       (1.46)             0.02               0.11
                                                    ===============   ===============    =============
</TABLE>

                  The total compensation expense included in the statements of
                  operations for 1996, 1997 and 1998 is $ 49 thousand, $ 91
                  thousand and $ 121 thousand, respectively.

                  The weighted average fair value of the options at their grant
                  dates in 1996, 1997 and 1998 was $ 0.86, $ 0.42 and $ 1.4,
                  respectively.

                  Weighted average exercise price and weighted average fair
                  value of options granted during the year was as follows:

                  2.75 and 1.29, respectively, for options granted at an
                  exercise price equal to the market price of the stock on the
                  grant date.

                  1.91 and 1.07, respectively, for options granted at an
                  exercise price that exceeds the market price of the stock on
                  the grant date.

                  1.82 and 1.61, respectively, for options granted at an
                  exercise price that is less than the market price of the stock
                  on the grant date.

            g.    Dividends:

                  Dividends if any, will be paid in NIS. Dividends paid to
                  shareholders outside Israel will be converted into U.S.
                  dollars on the basis of the exchange rate prevailing at the
                  date of payment.


                                      F-31
<PAGE>
                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 20:-   TAXES ON INCOME

            a.    Tax benefits under the Law for the Encouragement of Capital
                  Investments, 1959 (the "law"):

                  Certain of the Company's production facilities have been
                  granted the status of "approved enterprise" under the law,
                  under two separate investment plans.

                  The implementation of the investments under the first plan was
                  finalized in 1993. The implementation of the second plan is
                  expected to be finalized in 1999.

                  According to the provisions of this law, the Company chose to
                  enjoy "alternative benefits" which provide tax exemption in
                  exchange for waiver of grants. Accordingly, the Company's
                  income from the approved enterprise will be tax-exempt for a
                  period of two and four years for the first and second plan,
                  respectively, commencing with the year it first earns taxable
                  income, and subject to corporate tax at the rate of 25%, for
                  additional periods of five and three years, for the first and
                  second plan, respectively.

                  The period of tax benefits detailed above is subject to limits
                  of 12 years from the commencement of production, or 14 years
                  from receiving the approval, whichever is earlier. Given the
                  abovementioned conditions, the period of benefits for the
                  first plan commenced in 1994 and will terminate in 2000. The
                  period of benefits for the second plan has not yet commenced.

                  The tax-exempt profits earned by the Company's "approved
                  enterprise" can be distributed to shareholders without
                  subjecting the Company to taxes only upon the complete
                  liquidation of the Company. The retained tax-exempt profits as
                  of December 31, 1998 are $ 1,660 thousand. If these retained
                  tax-exempt profits are distributed in a manner other than upon
                  the complete liquidation of the Company, they would be taxed
                  at the corporate tax rate applicable to such profits as if the
                  Company had not chosen the alternative tax benefits (currently
                  - 25% for an "approved enterprise") and an income tax
                  liability of approximately $ 415 would be incurred.

                  Income from sources other than the "approved enterprise"
                  during the periods of benefits, will be taxable at regular tax
                  rate of 36%.

                  The law also entitles the Company to claim accelerated rates
                  of depreciation on equipment used by the "approved enterprise"
                  during five tax years.

            b.    Measurement of results for tax purposes:

                  Results for tax purposes are measured in terms of earnings in
                  NIS after certain adjustments for increases in the Israeli
                  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 difference between taxable income and the income
                  before taxes shown in the financial statements.


                                      F-32
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


            c.    Tax benefits under the Law for the Encouragement of Industry
                  (Taxation), 1969:

                  The Company is an "industrial company" under the above law and
                  as such is entitled to claim accelerated rates of
                  depreciation, in accordance with regulations published under
                  the inflationary adjustments law.

                  The Company is also entitled to deduct the offering expenses
                  from its taxable income in three equal annual installments.

            d.    A reconciliation of the theoretical tax expense, assuming all
                  income is taxed at the regular statutory rate applied to
                  corporations in Israel up to December 31, 1998, and the actual
                  tax expense, is as follows:

<TABLE>
<CAPTION>
                                                                               Year ended December 31,
                                                                        --------------------------------------
                                                                          1996          1997          1998
                                                                        ----------    ----------   -----------
                                                                              U.S. dollars in thousands
                                                                        --------------------------------------
<S>                                                                      <C>              <C>          <C>
                Theoretical tax expense computed at the rate of 36%      (3,624)          208          635
                Increase (decrease) in taxes:                           
                Effect of certain adjustments on                        
                  the results for tax purposes and the Israeli CPI           49            61           91
                Carryforward loss for which a valuation                 
                  allowance was provided                                  3,975             -            -
                  Utilization of operating carryforward tax losses            -          (202)        (462)
                                                                        ----------    ----------   -----------
                Actual tax expense                                          400            67          264
                                                                        ==========    ==========   ===========
                                                                        
            e.  The provision for taxes is comprised as follows:
                Deferred taxes                                              400           (27)         (34)
                Current taxes                                                 -            94          298
                                                                        -----------   ----------    ----------
                                                                        
                                                                            400            67          264
                                                                        ===========   ==========    ==========
</TABLE>


                                      F-33
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

            f.    Deferred taxes:

<TABLE>
<CAPTION>
                                                                         Year ended December 31,
                                                                  --------------------------------------
                                                                     1996          1997         1998
                                                                  ------------   ----------   ---------
                                                                        U.S. dollars in thousands
                                                                  --------------------------------------
<S>                                                                  <C>            <C>         <C>  
                 Deferred tax assets (liabilities)
                    are comprised of the following:
                 Provisions for severance pay                           76             34          34
                 Deductible public offering expenses                   195              -           -
                 Others (mainly capitalized royalties)                 326            120          92
                 Net operating loss carryforward                     3,539          3,337       3,195
                                                                  ------------   -----------   ---------
                 Gross deferred tax assets                           4,136          3,491       3,321
                                                                  ------------   -----------   ---------
                 Fixed assets                                          (52)           (64)        (82)
                 Inventories                                             -            (12)        (20)
                                                                  ------------   -----------   ---------
                 Gross deferred tax liabilities                        (52)           (76)       (102)
                                                                  ------------   -----------   ---------
                 Valuation allowance (1)                            (4,103)        (3,407)     (3,177)
                                                                  ------------   -----------   ---------
                 Net deferred tax assets (liabilities)                 (19)             8          42
                                                                  ============   ===========   =========
                 Presented as follows:
                 Current assets                                          -              8          42
                 Current liabilities                                   (19)             -           -
                                                                  ------------   -----------   ---------
                                                                       (19)             8          42
                                                                  ============   ===========   =========
</TABLE>

                  (1)  The company has provided valuation allowances against the
                       deferred tax assets in respect of tax loss carryforward
                       and other temporary differences due to history of losses
                       and current uncertainty concerning its ability to realize
                       these deferred tax assets in the future.

            g.    Income tax assessments, losses and deductions carried forward
                  to future years:

                  At December 31, 1998, the Company had available carryforward
                  losses (excluding capital losses totaling $ 2,363 thousand)
                  and deductions aggregating $ 5,751 thousand. Carryforward
                  losses for tax purposes in the Company are not limited in
                  time.

                  Nur America, Nur Media Solutions and Nur Europe had available
                  carryforward losses aggregating $1,372 thousand, $150
                  thousand and $165 thousand for the years in the period ended
                  December 31, 1998, respectively.


                                      F-34
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

               h. Income (loss) before income taxes consisted of the following:

<TABLE>
<CAPTION>
                                                                Year ended December 31,
                                                ---------------------------------------------------
                                                     1996               1997              1998
                                                ---------------    ---------------    -------------
                                                               U.S. dollars in thousands
                                                ---------------------------------------------------
                      <S>                             <C>                <C>               <C>  
                      Domestic                        (8,947)            1,156             2,535
                      Foreign                           (741)             (578)             (771)
                                                 ---------------   ---------------   --------------
                                                      (9,688)              578             1,764
                                                 ===============   ===============   ==============
</TABLE>


NOTE 21:-   SELECTED STATEMENTS OF OPERATIONS DATA

            a.  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. The Company's business is divided into three main
                geographic areas: Middle-East, Asia and Africa, America and
                Europe. Total revenues are attributed to geographic areas based
                on location of customers.

                This data is presented in accordance with SFAS 131 "Disclosures
                about Segments of an Enterprise and Related Information", which
                the Company has retroactively adopted for all periods presented.

                The following presents total revenues for the year ended
                December 31, 1996, 1997 and 1998 and Long-lived assets of
                December 31, 1997 and 1998:

<TABLE>
<CAPTION>
                                              1996                    1997                    1998
                                       ------------------     --------------------     ------------------
                                                   Long-                    Long-                   Long-
                                         Total     lived       Total        lived       Total       lived
                                       revenues    assets     revenues      assets     revenues    assets
                                       ------------------     --------------------     ------------------
                                                            U.S. dollars in thousands
                                      ----------------------------------------------------------------------
                <S>                   <C>         <C>         <C>         <C>         <C>          <C>    
                Middle-East, Asia and
                Africa                $  7,724    $ 1,009     $  3,049    $    975    $   5,564    $ 1,109
                America                  1,540          9        7,061         166       14,640        977
                Europe                   7,373        192       11,849       1,392       16,241      1,747
                                      --------    -------     --------    --------    ---------    -------
                                      $ 16,637    $ 1,210     $ 21,959    $  2,533    $  36,445    $ 3,833
                                      ========    =======     ========    ========    =========    =======
</TABLE>


                                      F-35
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

            Total revenues are divided by the following products:

<TABLE>
<CAPTION>
                                                                  Year ended December 31,
                                                       ----------------------------------------------
                                                            1996            1997            1998
                                                       ---------------   ------------   -------------
                                                                 U.S. dollars in thousands
                                                       ----------------------------------------------
<S>                                                       <C>            <C>            <C>   
            Printers                                         9,317          12,023         19,052
            Ink                                              2,495           4,571          8,619
            Printed Materials                                2,998           3,085          4,540
            Others                                           1,827           2,280          4,234
                                                       ---------------   ------------   -------------
                                                          $ 16,637        $ 21,959       $ 36,445
                                                       ===============   ============   =============

            b. Major customer data:
                 Sales to customer A                         7,665           2,455          3,861
                                                       ===============   ============   =============
                 Percentage of total sales                    46.1%          11.18%          10.6%
                                                       ===============   ============   =============

            c.   Sales from Israel classified by geographical destinations:

                 Local:
                     Israel                                    780             679          1,631
                 Export (1):
                     Europe                                  3,957           1,325              -
                     America                                 2,325             907              -
                     Others (1)                                662             138          3,933
                                                       ---------------   ------------    ------------
                                                             7,724           3,049          5,564
                                                       ===============   ============    ============
</TABLE>

                  (1)  Including indirect export sales to distributor which are
                       presented in accordance with the geographical location of
                       the end customer.

<TABLE>
<CAPTION>
                                                                Year ended December 31,
                                                   --------------------------------------------------
                                                         1996              1997             1998
                                                   ------------------   ------------    -------------
                                                               U.S. dollars in thousands
                                                   --------------------------------------------------
<S>                                                       <C>                <C>               <C>  
            d.   Selling and marketing expenses, net:

                 Selling and marketing expenses           4,823              4,820             6,361
                 Less - participation of the
                  Fund for the Encouragement
                  of Marketing Activity                       -                200               250
                                                   ------------------   ------------    -------------
                                                          4,823              4,620             6,111
                                                   ==================   ============    =============
</TABLE>

                                      F-36
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                     Year ended December 31,
                                                            ------------------------------------------
                                                                1996            1997          1998
                                                            --------------    ----------   -----------
                                                                    U.S. dollars in thousands
                                                            ------------------------------------------
<S>                                                                <C>            <C>           <C>
            e. Financial expenses, net:

                Expenses:
                 Interest
                  On short-term credit                             682            390           342
                  On long-term loans                                72            193            67
                 Loss arising from foreign
                  currency transactions                            154              -           151
                                                           --------------    ----------    -----------
                                                                   908            583           560
                                                           --------------    ----------    -----------
                Income:
                 Interest                                          319            234            59
                 Gain arising from foreign
                  currency transactions                              -             29             -
                                                           --------------    ----------    -----------
                                                                   319            263            59
                                                           --------------    ----------    -----------
                                                                   589            320           501
                                                           ==============    ==========    ===========
</TABLE>

             f. Write-off of debts of related parties:

                In March 1997, three companies in which Moshe Nur - a former
                shareholder has holdings in various percentages, experienced
                financial difficulties (see also Note 18a). The debts stem from
                the purchases of printers, spare parts and ink and cash
                transfers from the Company.

                As a result, management of the Company decided to write-off the
                debts of these related companies, totaling $ 3,757 thousand,
                comprised as follows:

<TABLE>
<CAPTION>
                                                                                       Year ended
                                                                                   December 31, 1996
                                                                                   -------------------
                                                                                      U.S. dollars
                                                                                      in thousands
                                                                                   -------------------
<S>                                                                                        <C>  
                Nur Outdoor Advertising (Manufacturing and Production) Ltd.                  994
                Nur Focus Assets and Investments Ltd.                                      2,117
                Nur Focus Production (1995) Ltd.                                             646
                                                                                   -------------------

                                                                                           3,757
                                                                                   ===================
</TABLE>


                                      F-37
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 22:-   INVESTEES

<TABLE>
<CAPTION>
                                                                            Percentage of (1)
                                                                      ------------------------------
            Name of the Company                                        Ownership         Control
            -------------------------------------------------------   -------------   --------------
                                                                                    %
                                                                      ------------------------------
<S>                                                                       <C>               <C>
            a.   Subsidiaries outside Israel:

                 Active:
                 -------

                 Nur Media Solutions S.A                                  100               100

                 Nur Advanced Technologies (Europe) S.A.                  100               100

                 Nur America Inc.                                         100               100

                 M. Nur Marketing & Communication GmbH                     84                84

                 Inactive:
                 ---------

                 Nur Hungaria KFT  (1)                                    100               100

                 Good-Lux S.A (1)                                         100               100

            b.   Subsidiaries in Israel:

                 Inactive:
                 ---------

                 M.B.T. (Nur) Industries Ltd                              100               100

                 Nur Print Technologies (1993) Ltd.                       100               100

                 N.A.T. Holdings and Investments (1997) Ltd.              100               100
</TABLE>


                 (1)     Represents the percentages of ownership of Nur Media
                         Solutions (formerly "Nur International") in these
                         subsidiaries. The shares of some of these subsidiaries
                         are held in custody by the Company.


                                      F-38
<PAGE>

                                                          NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 23:-   SUBSEQUENT EVENTS

            a.    On February 24, 1999 the Company registered 9,119,483 Ordinary
                  Shares.

                  Following this registration, the Company issued to its
                  qualified independent underwriter warrants to purchase 25,000
                  Ordinary shares of the Company at an exercise price of $ 4.5
                  per share. These warrants are exercisable for a period of four
                  years commencing February 24, 2000, and are not to be sold,
                  transferred, assigned or hypothecated until February 2000,
                  (except for permitted transferees).

            b.    In February 1999 Idanit and a wholly-owned subsidiary of
                  Idanit filed a suit against the Company and Nur America
                  according to which Nur America hired a former employee of
                  Idanit and thus interfered with non-competition and
                  confidentiality agreements between Idanit and its former
                  employee.

                  The Company and Nur America plan to defend themselves
                  vigorously in the action.




                            - - - - - - - - - - - - -



                                      F-39

<PAGE>

                                EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number      Description
------      -----------
<S>   <C>                                                                      
 3.1  Memorandum of Association of the Registrant, in Hebrew with a translation
      to English.(1)

 3.2  Articles of Association of the Registrant.(1)

 3.3  Certificate of Name Change.(2)

 4.4  Specimen Certificate for Ordinary Shares.(1)

 4.5  Representative's Warrant Agreement dated October 12, 1995.(1)

 4.6  Form of Representative's Warrant Certificate.(1)

 4.4  Forms of Placement Agent's Warrant Agreement and Certificate.(3)

 4.5  Forms of Qualified Independent Underwriter's Warrant Agreement and
      Certificate.(3)

10.1  1995 Stock Option / Stock Purchase Plan.(1)

10.2  Amendment to the 1995 Stock Option / Stock Purchase Plan.(3)

10.3  1997 Stock Option Plan.(4)

10.4  1998 Non-Employee Director Share Option Plan.(5)

10.5  Lease Agreement between the Registrant and Mr. Moshe Nur dated October 4,
      1993, as amended on May 29, 1995, in Hebrew with a translation to
      English.(1)

10.6  Lease Agreement for office space in Brussels, Belgium between Nivellease,
      S.A. and the Registrant dated November 25, 1996.(3)

10.7  Lease Agreement for office space in Newton Centre, Massachusetts between
      WHTR Real Estate Limited Partnership and the Registrant dated July 10,
      1998.(3)

10.8  Qualified Independent Underwriting Agreement.(3)

10.9  Distribution Agreement between Imaje S.A. and the Registrant dated June
      26, 1995.(1)

10.10 Settlement Agreements relating to Moshe Nur and his affiliated
      companies.(3)

10.16 Bank Hapoalin revolving loan agreement.(3)

10.17 Agreement between I.T.S. Machinery Development Ltd. and the Registrant
      dated February 10, 1997.(3)

10.18 Form of confidentiality agreement.(3)

10.19 Agreement dated September 13, 1998 between "Meital" Electronic Technology
      Ltd. and Markowitz Yaakov and NUR Macroprinters Ltd.(3)

21    List of Subsidiaries of the Registrant.
</TABLE>

<PAGE>

<TABLE>
<S>   <C>                                                                      
27.1  Financial Data Schedule as of and for the year ended December 31, 1995.(4)

27.2  Financial Data Schedule as of and for the year ended December 31, 1996.(4)

27.3  Financial Data Schedule as of and for the year ended December 31, 1997.(4)

27.5  Financial Data Schedule as of and for the year ended December 31, 1998.
</TABLE>

--------------
(1) Previously filed with the Company's Registration Statement (File No.
    33-93160) on Form F-1 and incorporated by reference herein.
(2) Previously filed with the Company's Form 6-K dated January 7, 1998 and
    incorporated by reference herein.
(3) Previously filed with the Company's Form F-1 (File No. 333-66103) and
    incorporated by reference herein.
(4) Previously filed with the Company's Form 20-F for the year ended December
    31, 1997 and incorporated by reference herein.
(5) Previously filed with the Company's Form 6-K dated November 13, 1998 and
    incorporated by reference herein.
(6) Filed in summary form. Original filed in paper format pursuant to Form SE.